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Moda Obtains Nearly $250 Million In Judgment With U.S.

The judgment settles the Portland insurer's four year battle against the federal government over risk corridor payments under the Affordable Care Act.
The Moda Tower in downtown Portland. | LYNNE TERRY/THE LUND REPORT
July 8, 2020

Moda Health’s four-year legal fight against the federal government has finally ended with a judgment of nearly $250 million.

The judgment was handed down early this month this month between the Portland insurer and the U.S. Department of Justice over so-called “risk corridor” payments that Moda was entitled to under the Affordable Care Act.

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 ACA.

Moda declined to comment on the judgment.

After years of legal rulings from federal claims courts to the U.S. Court of Appeals, the U.S. Supreme Court in April ruled 8-1 in the insurers’ favor in the Maine Community Health Options v. United States case, which wrapped in Moda’s and other insurers’ complaints. Justices writing the majority opinion said the government “should honor its obligations” under the ACA.

The Department of Justice has since been settling the insurer plaintiffs’ claims individually.

“The parties agree that the Supreme Court’s decision in Maine Community Health Options entitles Moda to receive payment of damages from the United States,” the Department of Justice’s July 2 judgment says. “The parties further agree that this payment resolves entirely the Amended Complaint for all risk corridors counts seeking damages.”

The judgment entitles Moda to the full $248,945,078.91 it argued it was owed in risk corridor payments in 2014, 2015 and 2016.

Risk corridor payments under the ACA were designed to help insurers offset losses they were likely to incur by covering patients with more costly medical needs than they had previously insured.

But congressional Republicans cancelled the risk corridor program after retaking the U.S. Senate in 2014, calling the payments a government bailout as they sought to chip away at President Barack Obama’s health care legislation.

The move cost insurers millions of dollars, and pushed Moda Health to the brink of insolvency. Moda posted $227 million in losses in 2018, which it blamed on the frozen payments. Moda had previously fought an effort by Oregon regulators to put the company under state supervision. It got a desperately needed $152 million cash infusion last year when Delta Dental of California acquired a 49.5 percent stake.

A federal claims court in 2017 had sided with the insurers in their suit. But the U.S. Court of Appeals reversed that ruling the following year.

The insurers appealed to the Supreme Court, which heard arguments in December. Moda’s legal briefs asserted that risk corridor payments appropriated by the U.S. Department of Health and Human Services were a clear statutory promise to compensate health insurers for losses they had already incurred. 

Moda says the Centers for Medicare and Medicaid Services pledged to Moda $57.7 million in 2014, $89.4 million in 2015 and $101.8 million in 2016.

The Appeals Court ruling against the insurers, Moda argued in Supreme Court briefs, “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.”

You can reach Elon Glucklich at [email protected].