Dive Brief:
- Molina executives said it will likely experience a “significant” increase of Medicaid and exchange members as the pandemic continues to wash over the country and forces more out of work and job-based coverage, according to comments made during Friday’s first quarter earnings call.
- The company reaffirmed its 2020 earnings outlook with “enhanced confidence” given the “net-positive” effects likely to stem from the impact of novel coronavirus, as executives noted a steep decline in elective procedures and utilization very late in March and the limited impact COVID-19 has had on costs so far.
- Overall for the first quarter, Molina beat Wall Street expectations on earnings per share and revenue which increased to $4.5 billion. Yet, it was only one of two managed care organizations to miss on medical loss ratio targets, which increased to 86.3% due to higher costs in its marketplace business.
Dive Insight:
Another 3.8 million Americans filed for unemployment last week, bringing the total of out-of-work Americans to more than 30 million since the outbreak unfolded.
That presents an opportunity for insurers like Molina that are primarily positioned in Medicaid and Affordable Care Act exchange lines of business. Medicaid coverage is based on income and reserved for low-income Americans and the marketplace, or exchanges, tie coverage to income and financial help for those with incomes below a certain threshold.
Although its membership is likely to swell due to current economic conditions, Molina CEO Joe Zubretsky cautioned investors Friday by saying, “by how much we do not yet know.”
Zubretsky said Medicaid has proven it’s a stress-tested model that works in both robust economies and those in a recession.
So far, through April 27, 950 of Molina’s members have been hospitalized with COVID-19, a small fraction of Molina’s 3.4 million membership base. The average length of stay was about 10 days for these members, but they have not been able to assess the costs per episode yet, executives said Friday.
Its plans in Washington, California and Michigan were most affected. However, its Michigan plans have experienced the highest number of cases.
By business line, Medicare members have experienced the highest percentage of COVID-19 diagnoses followed by Medicaid and marketplace members, in line with reports of the disease disproportionately affecting older Americans.
Molina also said it had entered into a definitive agreement to acquire Magellan Complete Care for $820 million in cash. The deal is expected to close in the first quarter of 2021. The deal gives Molina about 155,000 more members. Last year, Magellan generated more than $2.7 billion in revenue, according to Molina.
Magellan operates in six states, three of which would be new for Molina, including Arizona, Virginia and Massachusetts.