Molina posts mixed Q4, says ACA shoppers not switching for savings

By | February 11, 2020

Dive Brief:

  • Molina reported net income for the fourth quarter of 2019 fell to $ 168 million compared with $ 201 million during the prior-year period.‚Äč However, net income for the full year increased to $ 737 million from $ 707 million in 2018.
  • Like its competitors, Molina reported an increase in its medical cost ratio to 86% during the fourth quarter, mainly due to its Affordable Care Act marketplace business.
  • The Long Beach, California-based insurer ended 2019 with 3.3 million members, less than the 3.8 million members it had at the end of 2018. The company’s premium revenue fell to $ 16.2 billion for the year and declined to $ 4.1 billion for the quarter. The drops in both periods are due to Medicaid membership losses in New Mexico and Florida.

Dive Insight:

Molina has been a steady participant in the ACA exchanges, even after struggling in 2016, and now boasts of “exceptional” margins of 10.3% on the business. The company and its competitors Centene and other Blues plans have found success in the marketplaces as other big players like Aetna and UnitedHealthcare exited after reporting loses on the line of business.

Executives said so far in 2020 Molina’s marketplace business has attracted 350,000 members, a 30% increase from the end of 2019.

In a bid to drive greater marketplace membership, Molina lowered its prices by 4% on average. Despite the dip in prices, it did not attract the membership growth the company had hoped for in 2020, particularly in Texas and Florida.

It appears consumers are getting less price sensitive. CEO Joseph Zubretsky said fewer members switched to Molina plans for the same price differentials that had swayed them in previous years. Previously, shoppers would switch plans that were $ 10 or $ 20 cheaper, he said. That wasn’t what Molina witnessed this year.

That’s not all bad news, though, he said, as analysts zeroed on whether competitive pricing with affect future growth and whether there is anything beyond pricing that can fuel growth in the marketplace business during their line of questioning on Tuesday’s call with investors.

“The favorable news in all of this is while fewer members moved it also means that more members are retained,” Zubretksy said. Molina now expects less attrition of members throughout the year.

“As members stay with you longer they’re probably more chronic and heavy users of healthcare services and less likely to move,” he said. Still, the line of business produced exceptional margins in 2019, he said.

Molina expects 9.2% revenue growth in its marketplace business for 2020 and an after tax margin to be at least 4.7%.

In its Medicaid book of business, Molina ended the year with 2.9 million members, slipping from about 3.4 million members the year prior, and generated less revenue.

Still, the Medicaid business improved its medical cost ratio to 88%, an important measure that compares the amount an insurer brings in from premiums to the amount it spends on care.

For 2020, the company expects Medicaid premium revenue growth of 6.4% and at least a 3.2% margin.

Molina is poised to grow its Medicaid footprint as it announced two acquisitions already this year, adding nearly 100,000 members.

For its Medicare book of business, the company’s smallest segment by enrollment, the company reported its medical cost ratio increased to 85.3% but it was able to increase premium growth to $ 2.2 billion during 2019. Molina is forecasting premium growth of 12% for 2020 and margins to be around 5.6%.

Molina’s competitors have also noted an uptick in medical cost ratios. Centene reported that the flu and increased utilization among its marketplace members were responsible for the bump in its medical cost ratio for the fourth quarter.

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