A federal judge ruled that Moda Health Plan is owed $214 million under the government’s “risk corridors” program.
Moda is one of about half a dozen health insurers to sue the government after the Department of Health and Human Services failed to pay insurers money owed under the Affordable Care Act program to help cover losses.
"The court finds that the government has unlawfully withheld risk corridors payments from Moda and is therefore liable,” Judge Thomas Wheeler wrote, who is a judge in the U.S. Court of Federal Claims.
The program was designed to encourage insurers like Moda to offer health insurance on the health exchanges. Moda undercut the competition with lower prices in 2014, but ended up losing money and hiking rates steeply over the past three years. Its membership in the individual market shrank to 23,000 this year, down from more than 100,000 at its peak.
The U.S. Department of Justice fought the suits, arguing the court lacks jurisdiction, since the payments aren’t “presently due,” since the government has until the end of 2017 to pay insurers in full.
The more profitable insurers had paid into a pool designed to cover losses from the less profitable. But there was an imbalance, leaving the program able to pay only pennies on the dollar. Meanwhile, Congress required the program to be budget neutral, so it couldn't appropriate other funds to cover the gap.
"Today’s decision is a validation of everything we have been saying,” said Moda President and CEO Robert Gootee. “All we ever were asking was for the federal government to do what it promised.”
The loss hit Moda especially hard. It nearly went into receivership a year ago, due in part to the loss of the risk corridors. It ended up taking loans from the parent company and selling assets, according to a plan approved by state insurance regulators.
"The court finds that the ACA requires annual payments to insurers, and that Congress did not design the risk corridors program to be budget-neutral," Wheeler wrote. "The government is therefore liable for Moda's full risk corridors payment under the ACA."
Elizabeth covers health care for the Portland Business Journal. Sign up for her free daily email to keep tabs on the rapidly changing industry.