Best’s News & Research Service - August 28, 2020 11:59 AM (EDT)
AM Best Removes From Under Review and Upgrades Credit Ratings of Moda Health Plan, Inc. and Oregon Dental Service
- August 28, 2020 11:59 AM (EDT)
Oldwick //BestWire// - AM Best has removed from under review with positive implications and upgraded the Financial Strength Rating (FSR) to B++ (Good) from B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb” from “bb” of Moda Health Plan, Inc. (Moda Health). Concurrently, AM Best has removed from under review with positive implications and upgraded the FSR to B++ (Good) from B (Fair) and the Long-Term ICR to “bbb+” from “bb” of Oregon Dental Service (ODS). Both companies are domiciled in Portland, OR. The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings of Moda Health reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its marginal operating performance, limited business profile, appropriate ERM and support of its owners.
The rating upgrades for Moda Health reflects the improvement in absolute capital during the third quarter of 2020 and in its estimated Best’s Capital Adequacy Ratio (BCAR). In April 2020, the U.S. Supreme Court ruled that the federal government is required to pay health insurers for the amounts owed under the Patient Protection and Affordable Care Act’s Risk Corridors program. Moda Health had been party to a lawsuit suing the federal government and recently recovered payment of $248.9 million for damages incurred during 2014-2016. Furthermore, with the increased level of capital, AM Best expects Moda’s debt leverage and financial flexibility to substantially improve. Moda Health had issued external surplus notes, which previously comprised a sizable portion of the company’s capital and surplus.
The ratings of ODS reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The rating upgrades for ODS reflect the improvement in its estimated Best’s Capital Adequacy Ratio (BCAR) as well as the improvement in the financial flexibility and fungibility of capital within the ODS organization, driven by the sizeable payment from the federal government to Moda Health. ODS maintains a 50.5% ownership in its subsidiary, Moda Health, following its sale of its remaining shares of common stock to Delta Dental of California (DDC) and formation of its strategic partnership that closed in 2019.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.