Skip to main content

Moda Wins Supreme Court Case

The Moda Tower in downtown Portland. | LYNNE TERRY/THE LUND REPORT
April 27, 2020

Portland-based Moda Health Plan, battered in recent years by uncertain finances, stands to gain a substantial infusion of cash as a result of a U.S. Supreme Court decision that bolstered part of the Affordable Care Act.

The court’s 8-1 ruling on Monday held that insurers can collect the $12 billion spent on so-called “risk corridors,” which were created to reimburse companies for money lost in the first three years after Congress approved the sweeping act.

Several health care experts said the effect of the decision will benefit companies, such as Moda, that remained in the federal health insurance marketplace long after others, citing lack of adequate payments, dropped out.

“Moda is among the companies that will definitely benefit from the Supreme Court’s decision,” said Michael Arrigo, managing partner in California-based No World Borders, which specializes in health care data, regulations and economics. “There is obviously a lot of money at stake here.”

Justice Sonia Sotomayer, who wrote the majority opinion, said it relies on a “principal as old as the nation itself: the government should honor its obligations.”

The ACA, passed by Congress and signed into law by then-President Barack Obama in 2010, guaranteed participating insurance companies that they would be protected, Sotomayer wrote, Congress’ later decision to withdraw money for risk corridors notwithstanding.

In a lone dissent, Justice Samuel Alito said the decision amounts to a massive bailout “for insurance companies that took a calculated risk and lost. These companies chose to participate in an Affordable Care Act program that they thought would be profitable.”

In a brief seeking Supreme Court review of a lower-court ruling that had gone against them, 

Moda and another insurer wrote they had been the victims of “a bait-and-switch of staggering dimensions in which the government has paid insurers $12 billion less than what was promised.”

In a statement, Robert Gootee, president of CEO of Moda, said the company was pleased with the ruling. He added that it validated the company’s decision to take the financial risk of participating in the Affordable Care Act and providing health care coverage for people in Oregon, Washington and Alaska.

“This represents the welcome end of a long road for Moda, one in which we were forced to face the fallout from the government’s action,” Gootee said.

He said Moda will use the money to shore up the company’s finances.

“We intend to use the money restored to us to replenish our reserves, retire debt and restore growth initiates we were forced to abandon in 2016,” Gootee said. “While this will not fully compensate us for the damages we incurred, it will create new jobs and lasting opportunities for our employees.”

Insurers joining Moda in its lawsuit to recover lost risk-corridor payments included Maine Community Health Options, Blue Cross and Blue Shield of North Carolina and Illinois’ now inactive Land of Lincoln Mutual Health Insurance Company.

Problems facing Moda and other insurers can be traced to 2014, when the newly reformed individual health insurance market first opened, Arrigo said. Those insurers lacked the experience needed to accurately determine how much money they would need to cover the ACA’s millions of newly insured.

Risk corridors were established so that participating companies could recover the money that premiums ended up not covering. And the losses were substantial.

Moda, for instance, covered more than 121,000 people through the exchange in Oregon, Washington and Alaska in 2014. Since the Republican-led Congress had by then added appropriation riders that appeared to end the need for the government to cover those costs, Moda and other insurers racked up significant shortfalls. By the end of 2015, with the federal government not making good on initial promises, Moda reported it had not received $210 million in risk-corridor payments.

After Moda lost $227 million in 2018, it was placed under the supervision of Oregon’s Department of Consumer Business Services. The company then had to raise $165 million in additional private capital just to be deemed able to operate on its own.

Some much-needed good news came in 2018, when Delta Dental of California announced it was investing $155 million in Moda, putting the insurer on solid financial footing for the first time in several years.

Moda has since reported positive earnings in each of the past two years, according to financial filings.