AJOC EDITORIAL: Moda’s big Obamacare bet goes bust

Moda Health went all in on Obamacare, and it is now short-stacked and heading for the rail.

On Jan. 29, the Alaska Division of Insurance followed suit of its counterpart in Oregon by suspending Moda from operating in the state due to its rapidly deteriorating financial condition caused by massive losses incurred operating in the health insurance exchanges created by the ill-named Affordable Care Act commonly known as Obamacare.

Moda’s suspension leaves Alaska with only Premera Blue Cross Blue Shield offering individual health insurance policies.

The Oregonian reported this past October on Portland-based Moda pulling out of the insurance markets in Washington and California after the company announced it would receive only $11 million of the $90 million it was expecting from the federal government to cover its losses from the exchanges.

As the company sought a 25 percent premium increase in Oregon, it had also asked for and received a 39.6 percent increase for its Alaska policies. Premera received approval for a similarly large increase of 38.7 percent for 2016, citing losses from the policies sold in the state.

In 2014, Premera lost $9 million serving the individual Alaska policyholders, and a similar loss of $9 million was projected for 2015 based on claims cost data in the first three months.

“The bottom line is that we see another year of significant losses,” Premera spokeswoman Melanie Coon told the Journal last August. “It’s not getting any better.”

Insurers across the country are warning they will consider pulling out of the insurance exchanges next year if the situation does not improve. The nation’s largest, UnitedHealth Group, is among those, and Aetna recently reported that it lost $100 million last year from its exchange business.

Herbert Stein’s Law states: “That which cannot continue, won’t.” Insurers are not going to sit back and continue to lose hundreds of millions of dollars, which should be of grave concern in a state with one company that is currently losing money in the Obamacare exchanges.

So what’s going on here?

It starts with the way the Obama administration got insurance companies to buy in to the law in the first place. The ACA created a “risk corridor” by which the companies agreed to pay the government for profits in excess of their estimates for the year and if they lost money, the government would bail them out.

Remember, Obamacare was sold as deficit-neutral at worst, and a deficit-reducer at best. Over and over we heard the pitch that it was going to save the country money (part of those “savings” came from the government taking over the student loan business, but that’s a whole ‘nother column).

Well, Republicans in Congress led by presidential candidate Sen. Marco Rubio inserted language into the 2015 and 2016 spending bills that prohibited the Department of Health and Human Services from using discretionary funds to bail out insurance company losses from the exchanges.

In other words, they held the Obama administration to its pledge that the ACA would not add to the deficit.

Here’s how the Fiscal Times reported the results in December: “Last year, the insurance companies paid just $362 million into risk corridor program while submitting $2.87 billion in claims for reimbursement … The fiscal 2015 budget package approved last year specified that payments made to insurers under the risk corridors could not exceed collections. That is why the (DHHS’s) payouts this year were equivalent to just 12.6 percent of the claims.”

President Barack Obama signed every bill with these spending restrictions, so while he may have vetoed the bill to repeal his namesake law, he did sign the bills that may have started its death spiral.

Moda entered the Oregon market with the lowest premiums in 2014, betting on getting its losses covered by the federal government and gaining 100,000 customers in the process. It even signed a 10-year, $40 million naming rights deal for the basketball arena in Portland just a couple years after only clearing $10.4 million in net income.

Barely two years later its bet went bust.

Moda may be one of the biggest losers so far to gamble on Obamacare, but it will surely not be the last.

Andrew Jensen can be reached at andrew.jensen@alaskajournal.com.

Updated: 
02/03/2016 - 3:15pm

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