MODA Tower

Moda Health Plans, which works out of the Moda Tower in downtown Portland, is taking on the federal government. It blames its significant recent financial problems on the U.S. government's failure to deliver $180 million in promised financial assistance.

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Moda Health Plans on Wednesday became the third insurer in the country to sue the federal government, saying the company could have averted nearly-fatal fiscal problems if the government delivered $180 million in financial assistance it had promised.

The Portland insurer filed the complaint in the U.S. Court of Claims in Washington, DC, arguing it was counting on the $180 million as part of the Affordable Care Act.

Two weeks ago, Highmark Inc. of Pittsburgh filed a similar suit seeking $233 million in unpaid Risk Corridor money. In February, Health Republic, a health insurance co-op based in Oregon, filed its own complaint blaming the company's demise on the federal government's broken promises.

Robert Gootee, Moda's chief executive, said his company never would have jumped so aggressively into the new markets created by the Affordable Care Act if it knew the federal government was going to renege on its obligations.

Moda's parent company was forced this spring to sell off assets and borrow additional funds in order to replenish its depleted capital reserves. Oregon's Department of Consumer and Business Services took Moda into supervision in January.

Moda staved off being put into receivership only after raising more than $165 million this spring.

The lawsuits over the Risk Corridor payments raise more questions about the Affordable Care Act. The law has successfully gotten insurance coverage and health care for millions of Americans formerly locked out due to pre-existing conditions. But it has also led to enormous losses for some insurance companies and double-digit rate hikes for many consumers.

Unlike some of its competitors, Moda embraced the Affordable Care Act. It moved aggressively into the new markets created by the controversial law and enrolled more Oregonians -- in excess of 121,000 at the peak -- than any other insurance company in the state.

Gootee said his company knew it was entering dangerous territory. As it said in its complaint, insurers lacked sufficient information to accurately set rates.

Government officials devised the Risk Corridor program as a way to encourage insurance industry participation despite the unknowns. Moda says the Centers for Medicare and Medicaid Services pledged to Moda $89.4 million for 2015 and $101.8 million in 2016.

Midway through 2015, it became apparent to Moda officials they had a problem. Their new customers, many of whom had been uninsured for years due to pre-existing conditions, proved far sicker and more expensive than Moda had anticipated. The high claims volume led to punishing financial losses in 2015.

But Moda's issues were just beginning.

Executives didn't realize until October that Congressional Republicans had managed to quietly kill off the Risk Corridor program. They inserted a provision into a 2014 spending bill that ended up limiting the payments.

Sen. Marco Rubio helped kill the federal financial assistance Moda was counting on. (AP Photo/Paul Sancya, File)

Led by Sen. Marco Rubio, the Republicans claimed credit for averting a $2.5 billion taxpayer bailout of the insurance industry and pounding a stake into the heart of the Affordable Care Act.

Instead of the $191 million it was counting on, Moda received just $11.2 million.

"We would have been fine if that money had shown up," Gootee said. "We wouldn't have gone through any of what we went through over the past six months."

Mitch Greenlick, an influential state legislator, said Moda fell victim to partisan politics. "I just can't believe what Rubio instigated and the federal government did -- essentially reneging on those promises," said OGreenlick, D-Portland, who was briefed on the complaint. "The insurance companies were left holding the bag. It just about put Moda out of business."

Moda is a much smaller company in the wake of its financial crisis. It has pulled out of Washington and California and has stopped offering individual policies in Alaska. In Oregon, has limited enrollment and cut back its provider network, which the company says will likely result in enrollment plunging from around 100,000 in 2015 to an estimated 30,000 in 2017.

Despite this 70 percent net enrollment decline, Moda will carry on, Gootee vowed. "This is a strong corporation," he said. "Moda impacts hundreds of thousands of people in Oregon. And it will continue to have a significant role in health care in this state."

-- Jeff Manning

503-294-7606, jmanning@oregonian.com