Dozens of employees have been laid off from Moda Health and countless others are on tenterhooks as they await word from company officials and state regulators about their fate, according to insider accounts shared with The Lund Report.
Thousands of Moda members who previously signed up for the company’s individual health insurance plans – which debuted as among the cheapest available in Oregon two years ago – are also now scrambling to find replacement health coverage, as opportunistic scammers attempt to take advantage of the confusion surrounding Moda’s Jan. 27 supervision order from the state, and a similar order from Alaska regulators.
Those orders followed months of quiet speculation that Moda had over-extended itself: Its lowest-on-the-market 2014 individual insurance rates prompted a massive membership boom, which cut into the bottom line when new patients began to use their benefits at greater rates than Moda’s actuaries had anticipated. Every three months, the consequences of that move have become more clear, as capitol levels and cash reserves at Moda declined.
Moda reported $30.9 million net loss in the first nine months of 2015 – full-year figures are not expected out until March. The company lost $5.2 million in all of 2014. It started 2015 with $121.06 million in capitol and surplus, which had plummeted by Sept. 30 to $53.1 million. And in a rare and shocking financial disclosure for any Oregon insurer, Moda reported negative cash reserves on its books -- negative $30.2 million as of Sept. 30.
The final blow, as previously reported by The Lund Report, was a move in U.S. Congress that limited risk-corridor payments that would have offset the costs of taking on sicker patients. Without those funds, Oregon’s Health Republic shut down last year, and Moda – which had been anticipating $82.87 million in federal payments – instead received only $10.4 million.
Inside Moda, employees who asked not to be named in order to protect jobs they still have -- for now -- told The Lund Report that they blame management, not the federal government or politicians, for their employers’ financial woes.
“A complete lack of management has been with the company for several years now,” one employee said, noting that a number of well-regarded workers have left Moda for other health care organizations, including Providence, in recent years. This worker also said that the Moda plan for individuals – the one targeted by regulators – is in particular financial disarray, prompting hours of overtime by those employees who have not been laid off just to get the books in order.
In an email to The Lund Report, a former Moda employee – who left before the current financial turmoil – said he also questions the push to blame anti-Affordable Care Act maneuvering by Republicans who cut risk-corridor payments to Moda and others.
“Insurance is governed by the law of large numbers. Insurance companies earn money by investing premiums for the short term while claims are still being generated and processed. The second way an insurance company supports itself is by good underwriting and plan design. Underwriting is a study of the probable expenses incurred by a group of incurred individuals over time,” the former employee said.
Cuts to risk corridor payments may have hurt Moda’s odds of success, but the insurer also “may have had eyes bigger than its stomach in determining the initial premium amount and that probably contributed to the financial shortfall,” this person said.
Uncertainty about what’s next
Insurance brokers report mass confusion among Moda insurance members – especially because “Moda Inc.,” the corporation, is actually parent to multiple distinct subsidiaries. People insured by Moda through their jobs are not affected by the problems with the individual plans subsidiary. Those with individual coverage are now forced to again navigate a confusing marketplace to find replacement health insurance.
According to documents filed with the National Association of Insurance Commissioners, Moda had 85,871 people enrolled in its group health plans on Sept. 30 – and another 128,438 in the individual plans that are being shuttered now.
And at Moda, workers say they are not certain whether the push to “clean up” Moda’s individual plans book of business is driven by state demands, or by management, but one said that the work ahead is so substantial that it may take months of work to get the books in order.
In emails and on social media, Moda workers have also said they are uncertain of state regulators’ plans for their employer.
“The department is working with Moda on a plan to improve its financial condition. Once the plan is finalized, more information will be released,” the Oregon Department of Consumer and Business Services said in a statement. The agency says it has already started approving all financial transactions by Moda, with any of its assets diverted to paying claims – though if funds are inadequate, some providers may not be paid.
While Moda’s individual health plans are certainly in trouble, and regulators in Alaska have identified their own concerns in that state, it’s not clear how these troubles will affect the rest of the company.
A 10-year contract to re-name the Rose Garden Arena the Moda Center has drawn criticism in light of the company’s current financial struggles, but a Moda spokesman said that naming-rights money came from parent company Moda Inc. At a recent Portland Trailblazers basketball game, team officials loudly declared that the arena would keep its name.
Likewise, the building where Moda is headquartered should still keep its “Moda” sign – and the future of that building is not likely to be affected by the health plan’s turmoil, as the structure is owned by a separate company, with Moda renting space.
It’s not clear how other Moda Inc. – the parent company – and its other subsidiaries will be affected by the individual insurance turmoil. According to financial disclosures, in November 2015, the struggling individual insurance company issued a surplus note to Moda Inc. for $50 million at an interest rate of 4 percent – and it’s uncertain whether Moda Inc. is likely to ever see a return on the funds it loaned to its subsidiary
A business organizational chart for Moda shows the complexity of its corporate situation. Oregon Dental Service, doing business as Delta Dental Plan of Oregon, is the parent of Moda Inc. Moda Inc.'s subsidiaries are: Moda Health Plan, Dentists Management Corp., Dentists Benefit Corp., Healthy Crid LLC, Moda Healht Services LLC, Aarow Dental LLC, Dental Commerce Corp., Northwest Dentists Insurance Co., and PayLess Drug Stores Inc. Moda Health Plan, in turn, is the parent company of Dentists Benefits Insurance Co., ODS Community Health Inc (which holds a 28 percent interest in Eastern Oregon CCO), BenefitHelp Solutions, ODS Plaza Inc., and ODS Bend Property INc. (which has an interest in 360 Bond LLC). PayLess Drug Stores Inc. has a 70 percent ownership stake in PayLess Drug Pharmacy Group, which is parent of Care RX LLC, Ardon Health LLC, and MWMD Pharmacy Holdings, which does business as Signature Pharmacy Solutions.
In an email to supporters, OSPIRG policy director Jesse Ellis O’Brien summed up the situation:
“This does not necessarily mean that Moda is going out of business altogether. This is an intermediary step that insurance regulators take when they are concerned about the stability of a company but not enough to shut it down immediately. It’s possible that Moda can recover, but in the meantime it’s critical for affected consumers to know their options. This is going to create a lot of confusion and anxiety for Moda’s hundreds of thousands of members, and especially its tens of thousands of Individual market members.”
Complexity creates obfuscation.
An organizational chart like that suggests the possibility of funds going astray -- maybe from ignorance or incompetence, or maybe just from plain old cupidity.