Molina Healthcare will benefit from new federal rules that aim to make coverage more seamless for individuals enrolled in Medicare and Medicaid, executives said Thursday during the company's first-quarter earnings call.
If an insurance company operates both a Medicaid and Medicare Advantage plan in a single state, all new Dual Special Needs Plan enrollment must be limited to the same carrier by 2027, the Centers for Medicare and Medicaid Services said in a final rule this month. In other words, dually eligible members must get Medicare and Medicaid coverage from the same parent company. By 2030, all D-SNP enrollment, not just new enrollment, will be limited to the parent company, the rule said. CMS also expanded the sign-up period for D-SNP eligible enrollees.
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Molina CEO Joe Zubretsky said during the call the rule will help expand the company's Medicare footprint. He noted Molina's margin target for Medicare over the next few years is higher than competitor Humana's. Humana executives said Wednesday they anticipated long-term Medicare Advantage profit margins of at least 3%.
“We’re still targeting mid-single-digit after-tax margins in Medicare,” Zubretsky said. “We like the D-SNP business, not only because it can produce excellent profits, but monetizing our Medicaid footprint for dual-eligible share over time is going to be a significant growth catalyst for us.”
New regulations governing D-SNPs have not altered the company’s acquisition strategy, Chief Financial Officer Mark Keim said during the call. The insurer is looking to acquire Medicaid, Medicare Advantage or exchange plans, he said.
“We're out selling the Molina story, which is very appealing to many nonprofits," Keim said. "If we could wave our wand and get timing where we wanted it, you might have seen [an acquisition] this quarter.”
Molina reported net income of $334 million, or $5.17 per share, in the first quarter, a 0.9% decrease compared with the same period last year. Revenue increased 21.2% to $9.9 billion. The company's full-year guidance of adjusted earnings of at least $23.50 per share is unchanged from last quarter.
Molina shares opened at $339.21 on the New York Stock Exchange, down 7.7% from Wednesday’s close.
The insurer reported a medical loss ratio of 88.5%, up from the 87.1% reported this time last year. The metric represents medical costs as a percentage of premium revenue. Higher utilization of long-term support services and pharmacy costs in Medicare and new membership gains in Medicaid drove the increase, Keim said. The company anticipates Medicare and Medicaid costs to come down and exchange costs to increase as the year progresses.
Membership in the first quarter rose 8.8% to 5.7 million enrollees fueled by its acquisition of NeueHealth — formerly Bright Health’s — Medicare Advantage plans.
The bump in Medicare Advantage members balanced out a 50,000-person decrease in Medicaid membership during the first quarter. The company anticipates dropping another 50,000 in the second quarter, due in part to states continuing to unwind their Medicaid rolls.
Zubretsky said he anticipates losing 600,000 enrollees, an increase from his February estimate of 500,000. He did not say why he was updating enrollment assumptions but has noted on previous calls procedural losses have surpassed company projections. About 30% of Medicaid enrollees who lose coverage are re-enrolled in Molina marketplace plans, Zubretsky said.
Recent state Medicaid contract losses in Florida and Virginia will cost the company $500 million in revenue this year, which Molina will offset through general and administrative expenses, Keim said. Molina is protesting decisions in both states.
