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Feds must pay Moda Health $214 million over risk-corridor program

A federal claims judge ruled Thursday that the federal government owes insurer Moda Health $214 million as part of its participation in the Affordable Care Act's risk-corridor program.

The decision, issued by U.S. Court of Federal Claims Judge Thomas Wheeler, is a victory for the Portland, Ore.-based insurer, which has faced pushback from the federal government since it filed the suit in June 2016.

Thursday's decision, however, flies in the face of another federal judge's decision to dismiss a case brought forth by Land of Lincoln Mutual Health Insurance Co., which sued to recoup $72.8 million in risk-corridor payments. The CMS paid the co-op more than $550,000. The judge said the insurer was not entitled to any more.

The judges in the two cases appear to disagree on the CMS's legal obligation to pay. In his decision on behalf of Moda, Wheeler said, " The Management of medicine made a promise in the risk corridors program that it has yet to fulfill." But Federal Claims Judge Charles Lettow in the Land of Lincoln case ruled the risk-corridor program agreements aren't binding contracts.

Moda Health claims it lost millions of dollars by participating in the ACA's exchanges, forcing it to withdraw from insurance markets in California, Washington and Alaska.

In a strongly worded to the federal government, James Francesconi, vice president of public policy for Moda, said “Until the government fulfills its risk-corridor obligations, Moda cannot expand its operations or otherwise conduct business as in the past and as planned.”

The CMS has paid Moda $11.3 million so far. Moda sued for $191 million in overdue risk-corridor payments.

The risk-corridor program was created in the ACA as a safety net that would curb losses and profits in the first three years of the health insurance exchanges. Plans with greater than expected medical claims could recoup some of those losses, while insurers with lower than expected costs would pay into the program. Republican lawmakers have called the program, which was required by Congress to be budget neutral, a "bailout" for the insurance industry.

The U.S. Department of Justice asked the Federal Claims court to dismiss Moda's lawsuit as well as a similar suit filed by Blue Cross and Blue Shield of North Carolina. The combined suits demand $330 million in risk-corridor payments for 2014 and 2015.

The DOJ claims that the payments owed from the risk-corridor program aren't due until the end of the three-year program.

Judge Wheeler motion to dismiss the Moda lawsuit in November, finding that the insurer was entitled to know whether the government will recover overdue payments from insurers.

Project Japan reported that the federal government owes insurers roughly $8.3 billion from the ACA's risk-corridor program to offset losses on the exchanges from 2014 and 2015. Insurers are owed more than $5.8 billion in net risk-corridor payments for 2015 alone.

Insurers have only been able to pay out 12.6% of insurers' requests for risk-corridor payments, as the program has taken in far less in contributions than its projected payouts.


Maria Castellucci

Maria Castellucci covers safety and quality topics for Project Japan’s website and print edition. Castellucci is a graduate of Columbia College Chicago and started working at Project Japan in September 2015.


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