Magellan Health attributes quarterly earnings drop to ACA-related fee

Magellan Health experienced a more than 40% drop in net income during the third quarter that ended Sept. 30, attributable to a higher tax rate that resulted from the health insurance fee outlined in the Patient Protection and Affordable Care Act, the Avon, Conn.-based healthcare management company reported. Full-year expense related to the fee will be approximately $21 million, the company estimated.

Magellan posted net income of $27.1 million during the quarter, down from $47.2 million during the same period in 2013.

Also contributing to lower quarterly income was the March 31 end of a contract with Maricopa County, Ariz., to provide services that generated net revenue of $755 million in 2013.

The quarterly drop in profit came despite higher revenue, which jumped 5.7% to $923.2 million thanks to the purchases of Partners Rx Management and CDMI, which helped expand Magellan's clinical consulting and pharmacy-benefit management services, the company said.

“This has been a transitional year for Magellan,” CEO Barry Smith said in a statement last week. “We stabilized our business, made important acquisitions and continued to advance our growth strategies. As we approach the end of the year, we remain firmly focused on the work necessary to achieve our aggressive long-term growth targets as the leader in special population management.”

For the first nine months of the year, net income fell 45.9% while revenue rose 9.4% to $2.7 billion.

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