With Billions At Stake, Moda Faces The Supreme Court

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After three years of legal victories, setbacks and appeals, Moda Health and other insurers are finally facing off with the federal government at the U.S. Supreme Court.

Oral arguments begin Tuesday in Moda Health Plan v. United States, a lawsuit initially joined by nearly a dozen other insurers who argue the government reneged on billions of dollars in federal reimbursements that were promised to insurers who covered sick patients under the Affordable Care Act.

The funds, known as risk corridor payments, were meant to offset projected losses to insurers enrolling patients they otherwise would have rejected before the Affordable Care Act was passed due to preexisting conditions or other expensive health care needs.

Republicans in Congress moved to cancel the risk corridor program after taking control of the Senate in 2014. It was one of several moves Republicans have taken to undermine former President Barack Obama’s signature health care legislation. They frequently referred to the risk corridor payments as a government bailout.

But Moda and other insurers who took on those high-risk patients have argued the repeal of the payments amounts to a broken promise by the government. The total risk corridor pool swelled to $12 billion in unpaid commitments by the end of 2016.

Portland-based Moda said the impact of congressional Republicans’ funding cutoff has been profound. It tied the $227 million in losses it incurred last year to the frozen risk corridor payments. The insurer struggled for years under the ACA. In 2016, the state of Oregon even considered taking over the company. Moda fended that off by raising money then last year it forged an alliance with Delta Dental of California. Earlier this year, insurance officials approved the deal. Delta Dental invested $152 million in Moda and in return got a 49.5 percent stake in the company.

The impact of that infusion has been muted, however: Moda has posted more than $7 million in operating losses this year, according to state filings, making it the only insurer in the state operating at a loss.

Moda, which has called the cancellation of risk corridor payments “a massive government bait-and-switch,” declined to comment on the Supreme Court case.

Moda and nearly a dozen other insurers initially filed lawsuits in 2016. A federal claims court in 2017 ruled in favor of the insurers, awarding them billions of dollars. It gave Moda alone $214 million in risk corridor commitments. But last year the U.S. Court of Appeals reversed that ruling. Moda and other insurers appealed that decision to the Supreme Court, setting up this week’s hearing.

In its brief filed late last month, Moda wrote that the Appeals Court ruling against insurers “embraces the remarkable proposition that Congress may quietly renege on clear statutory promises after inducing private parties to perform simply by cutting off one funding source to fulfill its obligation.”

In legal briefs, attorneys for Moda and the other insurer plaintiffs – Maine Community Health Options, Blue Cross Blue Shield of North Carolina and the defunct Land of Lincoln Mutual Health Insurance – argued that risk corridor payments appropriated by the U.S. Department of Health and Human Services amounted to a clear statutory promise to compensate health insurers for losses they had already incurred. Attorneys representing each of the firms didn’t return messages seeking comment.

Health insurance industry trade groups like the National Association of Insurance Commissioners and America’s Health Insurance Plans have been closely following the years-long legal case.

Responding to questions from The Lund Report, a spokeswoman for America’s Health Insurance Plans referred to a brief the organization filed on behalf of the insurers, saying that a ruling against the insurers would jeopardize “ongoing and future public-private partnerships that are critically important to the nation’s health care system.” 

“If the federal government can walk away from statutory obligations made to encourage private-sector participation in new programs, at least without repealing those obligations openly and clearly, partnering with the federal government becomes a venture fraught with intolerable risk,” the statement said. “And then everyone – the government, private partners and citizens alike – loses.”

A decision is expected by June.

You can reach Elon Glucklich at [email protected].

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