Medicaid rate hikes boost Molina Healthcare

Molina Healthcare will pocket $350 million in additional revenue in the second half of 2024 because states agreed to increase Medicaid payments, CEO Joe Zubretsky told investor analysts Thursday.

The Medicaid rate hike will mitigate headwinds in that line of Molina Healthcare's business, which has seen higher costs since the eligibility redeterminations process all but concluded earlier this year. Medical cost trend reached 6% for Medicaid in the third quarter, twice what the company projected, Chief Financial Officer Mark Keim said.

Related: 5 things to know about Medicaid trends for 2025

The Medicaid medical loss ratio, which measures the share of payments spent on care, was 90.5% and the company expects it to be 90% for the year, 0.7 percentage points higher than previously projected.

Molina Healthcare, like other Medicaid managed care contractors, pleaded with state officials to bump up capitation payments to compensate for sicker and costlier memberships after more than 25 million people lost benefits in 2023 and 2024. Most states agreed, but Molina Healthcare hit a roadblock in California, which instead retroactively cut Medi-Cal rates this year.

“We are working with the state to understand its methodology and actuarial support for this adjustment, both of which remain unclear,” Zubretsky said.

Molina Healthcare reported various costs pressures in its Medicaid operations, such as prescriptions for Ozempic and other glucagon-like peptide-1 agonists, nursing home stays, home healthcare, and mental healthcare, Keim said.

For the third quarter, Molina Healthcare net income rose 33.1% to $326 million and revenue increased 21% to $10.3 billion. The medical loss ratio climbed from 88.7% to 89.2%. Membership grew 12.1% to 5.6 million, driven by Medicaid enrollment in New Mexico and other states where the company expanded its presence.

Molina Healthcare is no longer offering Medicare Advantage with prescription drug benefits in 13 states that previously generated $200 million in revenue. The company instead is focused on Dual-Eligible Special Needs Plans for people with both Medicare and Medicaid and is selling those products in more markets for the 2025 plan year.

“We’re very bullish on the D-SNP population,” Zubretsky said. "It’s a profitable book of business for us.”

Molina Healthcare shares opened at $325 on the New York Stock Exchange on Thursday, up 18.2% from the previous day’s closing price.