The future of Moda Health is up in the air after two states clamped down on the floundering health insurer.
Alaska and Oregon have mandated that Moda stop selling health plans in their states, where Moda has a big presence in the employer and individual markets. Last week, insurance ratings agency A.M. Best also downgraded Moda's credit rating to “under regulatory supervision,” a designation reserved for companies that are “impaired” and could be nearing insolvency.
The timing of the sanctions coincides with the end of the Affordable Care Act's third open-enrollment period, and raises red flags about health insurers that have struggled to incorporate the new individual and small-group exchanges into their business models.
“I don't think (Moda) is in danger of collapse, but it is in danger of reconfiguring how people get insurance in the state,” said Jim Moore, a political science professor at Pacific University in Oregon who has followed the ACA rollout.
Oregon's insurance department placed Moda under supervision (PDF) because of its “hazardous” financial condition. Similarly, Alaska insurance officials issued an order of impairment (PDF), which basically freezes Moda's business in the state. Consequently, Moda has exited the ACA's insurance marketplaces.
Moda lost almost $31 million in the first nine months of 2015, and its capital reserve deteriorated to $53 million, according to Oregon's regulatory documents. Because Moda's loss was more than 50% of its reserves, officials believed policyholders faced risks to their coverage.
The ACA's exchanges have weighed heavily on Moda's bottom line and have affected other insurers. Many flocked to the exchanges in the first two years with illnesses and healthcare needs that were far more severe than expected. The collected premiums, therefore, have not been sufficient to pay all medical claims.
“Bringing tens of thousands of people into the ACA marketplace, many of them with acute healthcare needs, has been a difficult process to manage,” Moda CEO Robert Gootee said in a statement. “The cost of providing this level of care, with all its attendant uncertainties, has put an unprecedented financial strain upon our health plan.”
The plan did not comment further about its future.
The law established three programs to help insurers weather the first few years of the new marketplaces, but two of those adversely affected Moda. The company received only $11.3 million in risk-corridor payments, but it was owed $89.4 million. The CMS could only pay out 12.6% of requested risk corridors. Moda also had to pay $36.9 million into the ACA's risk-adjustment program.
Moda did, however, receive $132.1 million from the feds for the temporary reinsurance program, which helps plans with high-cost members.
Moda, formerly known as ODS before undergoing a massive rebranding campaign in 2013, has a large presence on the West Coast, particularly in Oregon. It paid for the naming rights of the Moda Center, the basketball arena for the NBA's Portland Trail Blazers, and Moda provides benefits to large swaths of public employees.
Because many of Oregon's public unions rely on Moda for their healthcare, Moore doesn't believe Moda will wither on the vine. But he does think its trouble could be a politically charged issue that would put the Democratic-controlled state on its heels.
“If there is something of an implosion of Moda, or a huge cutback in membership, that could play politically into the November elections,” Moore said. “The cutbacks of a company like this in the middle of this radical rethink of healthcare could give Republicans something to work with.”