California-based Delta Dental is selling back its share in Moda Health two years after buying a large stake in the Portland-based for-profit health care insurer. Moda is buying back the equity stake investment it sold to Delta Dental of California for $152.4 million in 2019. At the time, the deal gave Delta Dental a 49.5% share in Moda.
The two companies announced the buy-back on Monday, but didn’t disclose the terms. The Portland Business Journal first reported the deal.
In statements, both company leaders said the deal fit within the strategies of both firms.
In 2019, Moda needed the cash. The company was locked in a legal fight with the federal government about Medicaid payments and had posted $227 million in losses in 2018, which it blamed on payments it had expected due to changes in the federal Affordable Care Act.
The 2019 deal with Delta Dental gave Moda a much-needed cash infusion.
Robert Gootee, president and CEO of Moda, said the two companies will work together in the future as the health care industry evolves.
“We greatly appreciate the long-term partnership we have shared with our friends and colleagues at Delta Dental of California,” Gootee said. “Their strategic investment of a few years ago helped us sustain and expand our diverse strategies at a critical time. The continuing evolution of the healthcare landscape surely will afford us many fresh strategic opportunities for continued collaboration going forward, while at the same time allowing each of us to focus on our primary initiatives in our strategic markets.”
Moda has 330,000 members in its medical plans and more than one million members in its stand-alone pharmacy segment.
Delta Dental praised the deal in a statement.
“As a way of accelerating innovation to benefit our 38 million customers, we are always looking for short and long-term partnership and investment opportunities in promising established and startup businesses in the oral health care sector,” said Mike Castro, president and CEO of Delta Dental of California. “The Moda investment met our strategic objectives, and we are grateful for the partnership Moda provided.”
Moda has been flush with cash, a little more than a year after it won a nearly $250 million judgement after a legal fight with the federal government over so-called “risk corridor” Medicaid payments.
Moda and insurers in Maine, North Carolina and Illinois had sued the federal government in 2016, arguing they were unlawfully deprived of billions of dollars in federal reimbursements promised to insurers who covered sick patients newly insured by the Affordable Care Act expansion of Medicaid.
Risk corridor payments under the ACA were designed to help insurers offset losses they were likely to face by covering patients with costly medical needs.
Congressional Republicans cancelled the risk corridor program after retaking the U.S. Senate in 2014, calling the payments a government bailout as they tried to weaken President Barack Obama’s health care reforms under the ACA.
The move cost insurers millions of dollars, and pushed investor-owned Moda Health to the brink of insolvency. Moda’s companies include Moda Health, Moda Assurance Company, ODS Community Dental, Eastern Oregon Coordinated Care Organization, Summit Health, OHSU Health IDS, Ardon Health, BenefitHelp Solutions, Astra Practice Partners, Dental Commerce Corporation, Arrow Dental and Emerging Health.
You can reach Ben Botkin at [email protected] or via Twitter @BenBotkin1.
