Moda’s Financial Downfall Began Months Ago
Moda Health’s spiral downward began long before the Oregon Insurance Division stepped into the picture earlier this week. The insurer actually started showing signs of distress last summer with mounting claims and few dollars to pay providers.
“Everyone was wondering when the Insurance Division was going to do something; these guys didn’t have any capital left. What’s going on now could close them down,” a confidential source told The Lund Report.
But it took a call from Alaska officials before the Insurance Division took a hard look at the troubled insurer. Alaska shut down Moda after its finances plunged, reporting a net loss of $58 million at the end of 2015.
In Oregon, Moda incurred a significant financial loss in the fourth quarter, which ended on Dec. 31, and had reduced capital and reserves below the regulatory threshold.
Now, while consumers wait for world on whether to transfer coverage to another insurer, Division officials are immersed in figuring out how Moda is going to be able to pay its providers.
Right now it’s way too early to speculate on what might happen. “Our intent is to take action quickly to preserve capital to pay those claims so providers are not at risk and consumers are protected,” Patrick Allen, director of the Department of Consumer and Business Services, told The Lund Report.
As part of the supervision order, his agency will approve all financial transactions by Moda, with any of its assets diverted to paying claims. “We will be on site to make sure claims are paid,” Allen said. “However, if for some reason there are not enough funds providers could potentially be at risk.”
Moda’s strategic alliance with OHSU, announced last fall, could also be at stake as the health insurer unravels. OHSU agreed to forego a $50 million surplus note for a 25 percent equity ownership in the insurer. As of yet, that deal hadn’t been inked.
“OHSU is concerned about Moda Health’s recent financial performance and the announcement from the Oregon Department of Consumer and Business Affairs. We are evaluating the situation as it relates to our relationship with Moda, but more immediately our focus will turn to working with the state to ensure that Oregonians continue to have access to OHSU,” according to Beth Heinrich, associate vice president of strategic communications.
She added, “OHSU takes its fiscal responsibility seriously. In October, OHSU placed a $16.5 million valuation reserve against the $50 million surplus note, recognizing the financial risk, and noted that further reserves could be required.
“While the news of Moda’s situation is disappointing, OHSU remains committed to its vision of building an Oregon-based healthcare system that will include partnerships with hospitals, provider groups and payers.
Other Moda Business
Moda definitely wants to get out of the individual market, but keep its other lines of business -- its employer coverage, Medicare Advantage, its Medicaid Coordinated Care Organization and its contracts with state employees and teachers. . There are 1,100 PEBB members and 42,000 OEBB members enrolled in Moda health plans.
As far as PEBB is concerned, Kathy Loretz, its director, told The Lund Report that her agency contracts with Moda Health as a fully-insured carrier for two health plans -- Summit in Eastern Oregon and Synergy in the Willamette Valley region.
"PEBB offers a choice of at least two health plans in every county in
the state," she said. "Should Moda not be available at some point during the
current plan year, members would have access to comparable coverage
through another plan."
Robert Gootee, CEO of Moda, Inc., issued the following statement about his company:
“Bringing tens of thousands of people into the ACA marketplace, many of them with acute healthcare needs, has been a difficult process to manag.
“The cost of providing this level of care, with all its attendant uncertainties, has put an unprecedented financial strain upon our health plan. So, at the direction of the Insurance Commissioners in both Oregon and Alaska, we have resolved to exit the Individual ACA marketplace in both states. We now look forward to working to make sure that all individuals in the ACA marketplace will have no interruption in coverage as they transition to new carriers.”
Rubio Sabotaged the ACA
The Republican Congress, led by Sen. Marco Rubio of Florida , successfully sabotaged the Affordable Care Act and undermined the work of health insurers like Moda Health by cutting off risk corridor payments, that Moda and others, like the now-defunct Health Republic, had counted on to offset the losses they would likely receive from taking many of the sickest patients, people who, pre-Obamacare, had been denied health insurance coverage because of pre-existing conditions like cancer or AIDS.
Insurers were promised they could tap into the risk corridor program to absorb losses for three years, but because of a provision that Rubio snuck into a giant spending bill, the Obama administration was only able to deliver on 13 percent of the promised risk corridor funds. The companies that had bet most heavily on the Affordable Care Act and insured the sickest patients would now prove the biggest losers.
Rubio's move particularly hurt the Oregon individual health insurance market, where the Cover Oregon debacle turned off young, healthy adults and created one of the riskiest individual health markets in the country. The renege of the risk corridor payments devastated Moda Health with a $73 million loss and shuttered about a dozen health co-operatives, including Oregon's own Health Republic.
The highly regulated, non-profit health co-operatives were the compromise Obama accepted when he gave up on the promised public option, and their demise allowed the shameless Rubio to crow that he was the only Republican leader to damage the Affordable Care Act despite dozens of attempts to repeal Obamacare, including an effort led by rival Sen. Ted Cruz of Texas to shut down the government.
Diane can be reached at [email protected].