Molina secures Florida Medicaid contract after successful protest

After losing out on a lucrative Florida Medicaid contract earlier this year, Molina Healthcare successfully challenged the state's decision and won a contract to serve Medicaid members in two of the state's 11 regions, the Long Beach, Calif.-based insurer said Monday.

The Florida Agency for Health Care Administration awarded Molina a five-year contract worth $550 million in annual revenue to coordinate care for Medicaid beneficiaries beginning on Jan. 1, 2019. Molina already serves about 105,000 Medicaid members in the two regions, but had been shut out in April during the state's first procurement period since 2013.

"With these contract awards, we will not only continue to serve Medicaid members in regions 8 and 11, but we are positioned to maintain and grow our marketplace and Medicare businesses in Florida," Zubretsky said in the announcement.

The initial loss of the contract was a blow to Molina, which is in the midst of a company overhaul after ousting its longtime CEO Dr. J. Mario Molina in May 2017 and replacing him with former Aetna executive Joseph Zubretsky. Even though Molina had been losing money on its Florida Medicaid plan, securing a contract meant the insurer would have an opportunity to turn the operation around.

Analysts had wondered if Molina would have trouble winning Medicaid contracts after the leadership change in 2017. The insurer also recently lost its Medicaid contract in New Mexico.

But Molina wasn't about to let its Florida Medicaid contract go without a fight. It currently serves about 360,000 Medicaid members in eight of 11 regions throughout the state—a contract worth about $1.5 billion annually. It initially protested the contract awards in all regions, but said it won't go after the other regions after securing a contract in two.

Florida is a lucrative market for Medicaid plans since it is already a managed-care-heavy state with more than 3 million people enrolled in coordinated Medicaid plans. The market could grow even more if the state expands its Medicaid program.

Analysts viewed Molina's successful challenge in Florida as a good sign for how the insurer will fare in upcoming Medicaid contract procurements in Texas and Puerto Rico.

"Zubretsky is following through on his promise to focus the company around the most important (request-for-proposals) where the company has the greatest potential to grow revenue, and return net margins to profitability," Piper Jaffray analyst Sarah James said in a research note Monday.