Molina Healthcare increased its full-year earnings expectations during the second quarter despite states finding thousands of its Medicaid members are no longer eligible for coverage after resuming redeterminations.
The insurer reported a 24.6% rise in net income to $309 million, or $5.35 earnings per share, on a 3.4% boost in revenue to $8.3 billion compared with the year-ago quarter, driven by an increase in investment earnings and Medicaid and Medicare premiums. Higher interest rates led Molina’s investment income to jump from $22 million to $97 million during the period, President and CEO Joseph Zubretsky said during the company's second-quarter earnings call Thursday. Molina increased its full-year adjusted earnings guidance by 50 cents to at least $20.75 per share.
Medicaid comprises the vast majority, or 91.6%, of Molina’s 5.2 million members. The company anticipates losing approximately 400,000 Medicaid enrollees as states resume eligibility checks after pausing redeterminations during the COVID-19 public health emergency. The majority of Molina’s Medicaid enrollees who have lost coverage so far have been removed because states lacked updated contact information, Zubretsky said. The company anticipates recapturing a significant number of members during the next quarter as enrollees schedule medical appointments and realize they no longer have health insurance, he said.
“At least two-thirds of terminations have been procedural, which then means the number of members reconnecting to the process during the 90- to 120-day grace period is actually expected to be quite high since the procedural termination rate was quite high,” Zubretsky said.
Those losing Medicaid coverage tend to be healthier than individuals who remain enrolled, and all of the states where Molina operates managed-care plans have committed to increasing their payment rates if there is a significant shift in acuity, Zubretsky said. Unlike the company’s Medicare Advantage arm, utilization among its Medicaid members remains below pre-pandemic levels, he said. “Why one is behaving slightly hotter, or more warm, than the other is hard to tell,” he said.
Like other insurers, Molina’s 166,000 Medicare Advantage enrollees are scheduling more outpatient surgical and preventive care visits than they were a year ago. UnitedHealthcare and Humana said the unexpected spike in Medicare Advantage utilization reflects pent-up demand. Elevance Health said it had appropriately factored Medicare Advantage members’ projected costs in its bids for the year. Molina anticipates higher Medicare Advantage utilization to continue into next year and factored the trend into its 2024 bids to regulators.
“I wouldn’t call it pent-up demand, but returning to the normal surgeries Medicare enrollees normally get,” Zubretsky said.
Molina’s $600 million proposed acquisition of Bright Health’s California Medicare Advantage business represents its first deal to acquire a private Medicare plan, Zubretsky said. The deal is expected to close during the first quarter of 2024 and depends on Bright Health's parent company remaining solvent through the year. Molina reviewed Bright Health’s Medicare Advantage bids for 2024 to ensure the company appropriately priced its products, Zubretsky said.
“Our due diligence allows us visibility into their bids through an independent third party and we are confident that their bid was rational and included all trend factors that should be included,” Zubretsky said. “Their profit improvement plan is going to be the key factor.”
