Moda Health, which has been wringing its hands after learning that the federal government wouldn’t pay back $89.5 million from its risk corridor program in 2014, may have found a guardian angel. . .
Oregon Health & Science University announced that they have placed a $16.5 million valuation reserve on the note. This is not a write off of the loan. It is the CFO’s fair estimate of the discounted present value of what he expects to receive based on the situation. Because Moda is in a greater risk position than a year ago, he has discounted the value of the loan.
At the same time, another unknown looms in the horizon – whether Moda will receive what it’s owed from the risk corridor program in 2015 and 2016.
But Moda officials must have felt comforted listening to the words of OHSU’s president Dr. Joe Robertson at yesterday’s board meeting.
Robertson said Moda “stepped boldly” into the health insurance exchange and the Eastern Oregon Coordinated Care Organization, adding that the partnership between OHSU and Moda was an effort “to create value in every step of the value chain.”
Earlier, OHSU invested $50 million in Moda through a 10-year surplus note to help capitalize its healthcare efforts. That note pays 4 percent interest and matures in 2024.
Moda has the largest share in Oregon’s individual insurance market with 101,000 members after offering the lowest individual rates under the insurance exchange last fall. This year those numbers could start tumbling with Moda hiking its premiums considerably by 25.6 percent with the average rate increase raising from $245 to $307 per month.
Moda, OHSU and Salem Health also have strong ties, evidenced by a new partnership between the parties, which gives them the ability to have an integrated healthcare system and compete more boldly with Kaiser Permanente and Providence Health Plans.
Moda Leaves Washington
The Washington health insurance market won’t be seeing much of Moda Health next year following an announcement the company plans to cease all sales and renewals in
the individual, small group and large group marketplace. It’s had 47,000 members in that state.
But Moda officials did tell the Washington Insurance Commissioner they intend to fulfill all contracts signed before Oct. 31. Its decision means Moda cannot re-enter the Washington market for five years.
With Moda's departure, only one Washington plan -- UnitedHealthcare -- is able to offer the SHOP option for small businesses across the state, which has been one of the lagging areas of exchange activity, according to State of Reform. It also reported that a psrtnership with Associated Industries represented the majority of Moda's business in Washington -- 22,000 members from 800 member companies.
An original press memo indicated that Moda would remain in Alaska and Oregon, but the health plan is also intending to serve clients in California, Jonathan Nicholas told The Lund Report.
Recently, Moda also received distressing news from the leading insurance rating and information source – A.M. Best – which placed the insurer “under review with negative implications” follows the announcement by the Centers for Medicare & Medicaid Services to not pay back millions of dollars under the risk corridor program. Up until now, Oregon Dental Service, the parent company of Moda, had a financial rating of B++ (Good), including its other subsidiaries Dentists Benefits Insurance Company (DBIC) and Northwest Dentists Insurance Company.
According to A.M. Best, which is considered the world’s oldest and most authoritative insurance rating and information source, “The under review status for the Oregon Dental Service and its subsidiaries reflects the considerable capital strain that the potential write down of Moda Health’s risk corridors receivable will likely have on the organization. The company also has a receivable booked for the 2015 risk corridors program. In addition, Moda Health has reported net losses through the first half of 2015. Given these factors, A.M. Best has concerns regarding the 2016 pricing for these products, as well as maintenance of adequate risk-adjusted capital for the organization.
“The ratings of Oregon Dental Service and its subsidiaries will remain under review pending discussions with the company’s management regarding any adjustments to the risk corridors receivables, 2016 product pricing and risk- adjusted capital levels at the insurance companies.”
Diane can be reached at [email protected].
This story has been corrected to say that Oregon Health & Science University announced that they have placed a $16.5 million valuation reserve on the note to help Moda, and may even raise that dollar amount depending on whether the federal government steps in and reverses course. We apologize for the error.