Moda Health has been stung with yet another downgrade of its credit rating by A.M. Best. This is the second time in the last several months that Moda’s taken a smacking from the world’s most authoritative insurance rating and information source. The rating also impacts Moda’s subsidiaries – Dentists Benefits Insurance Company and Northwest Dentists Insurance Co.
But Moda doesn’t appear bothered by the downgrade. Dave Evans, chief financial officer of Moda, told The Lund Report, “We had anticipated this decision from A.M. Best. As we have been saying from the start, we knew that this business of healthcare transformation would be turbulent. And it’s proving to be exactly that. Still, we remain confident that, once the Affordable Care Act is fully implemented, our ratings with AM Best will return to their historically high levels.”
A.M. Best took the action after Moda reported its third-quarter results, which showed a significant decline in both absolute and risk-adjusted capital. That came after the Centers for Medicare and Medicaid Services refused to repay the health plan for 12.6 percent of its losses from the risk corridor program, approximately $89.5 million.
According to the press release issued by A.M. Best, ”The risk corridors program was one of three programs established through the Affordable Care Act to provide stability to the individual and small group markets since market reforms and health insurance exchanges began in 2014. The program was expected to be budget neutral or self-funded.
“The revised business strategy includes the shrinking of Moda Health’s geographic footprint by exiting Washington’s individual and group markets, as well as an expectation of a decline in individual enrollment in its core markets. Additional losses or higher enrollment than projected could further strain risk-adjusted capital.” During the third quarter, Moda had a negative cash balance of $30.2 million. Despite that dismal figure and continued net losses quarter after quarter, the health plan’s cash position actually improved from the previous year where it stood at negative $47.1 million.
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.
When asked if Moda expected to see lower enrollment after substantially raising its premiums, Jonathan Nicholas, vice president of strategic communications, told The Lund Report,
“The ACA marketplace in Oregon is doing exactly what we thought it would do . . . settling in around narrower price points from a broad range of carriers. We think we’ve provided products that have value, that deliver broad access and promise good outcomes, products that reflect what our members tell us they are looking for in a health plan.”
Moda’s financial picture should definitely turn around after Oregon Health & Science University acquires a 25 percent interest in the health plan. On Nov. 11, the two parties signed a letter of intent.
Once that deal is completed, Moda is not expected to pay back the $50 million surplus note from OHSU, which was intended to help capitalize its healthcare efforts.
The strategic alignment gives Moda the opportunity to compete vigorously with the likes of Kaiser, Providence and the new joint venture announced by Legacy Health and PacificSource Health Plans. With a cadre of hospitals and physicians from across the state, the partners have a distinct advantage over non-integrated health insurers such as Regence BlueCross BlueShield and Health Net, which has been acquired by Centene Corp.
"We want to make sure a health plan sees the world like we do, that covering more Oregonians is a good thing, that has a strategic alignment and has the capital that Moda needs to grow,” Lawrence Furnstahl, chief financial officer at OHSU told The Lund Report earlier. “For the past three years we’ve been talking about how to increase our strategic alignment.
Diane can be reached at [email protected].
Greetings!
In the article above, there is a correction to the information needed. You state, "A.M. Best took the action after Moda reported its third-quarter results, which showed a significant decline in both absolute and risk-adjusted capital. That came after the Centers for Medicare and Medicaid Services refused to repay the health plan for 12.6 percent of its losses from the risk corridor program, approximately $89.5 million,"
In actuality, Moda, along with other plans, received 12.6% of the payment expected under the risk corridor program. CMS refused to pay the other 87.4%. For MODA that meant they only got 12.6% of the $89.5 million they expected ($11.3 million).
According to AM Best's article, "Centers for Medicare & Medicaid Services (CMS) announced that payments to insurers will be prorated to 12.6% of submission." Site source: http://www3.ambest.com/ambv/bestnews/presscontent.aspx?AltSrc=28&refnum=23383
Thanks! Trisha Brown