Dive Brief:
- Molina expects to retain fewer Medicaid members after states finish checking eligibility for the safety-net program, but bring in the same expected premiums for 2024 thanks in part to recent contract wins.
- The California-based insurer now expects a member retention rate of 40% once Medicaid redeterminations are completed, down from its previous expectation of 50%, executives said Wednesday morning on a call with investors.
- However, Molina’s forecast of $38 billion in premium revenue next year — representing about 19% growth over this year — is unchanged.
Dive Insight:
Molina posted third quarter results aftermarket on Wednesday, beating Wall Street expectations for revenue with a $8.5 billion topline. The insurer’s profit was $245 million, up 7% year over year.
Molina’s medical loss ratio, or MLR — a marker of how much it spent on patient care — was 88.7% in the quarter. Spending on Medicaid beneficiaries and members in Affordable Care Act exchange plans was lower than analysts expected, while Molina’s Medicare Advantage spending was higher.
Molina leadership attributed the higher MA spend on seniors utilizing more outpatient and in-home services, a trend that emerged earlier this year. CEO Joe Zubretsky said the payer “appropriately addressed” the higher spend in its MA bids for 2024.
“Net-net, we view MLR as acceptable,” Jefferies analyst David Windley wrote in a note on the results, adding that Molina’s Medicaid spend has been “amazingly consistent” this year despite redeterminations.
States resumed checking Medicaid members’ eligibility in the safety-net program in the spring, a process that disproportionately affects insurers with a large share of Medicaid members. Molina focuses on plans for low-income people, and brings in almost nine-tenths of its revenue from Medicaid.
About 200,000 of Molina’s Medicaid members were terminated from the program because of redeterminations in the third quarter, bringing the payer’s redeterminations losses to 300,000 to date.
Molina now expects to retain fewer existing Medicaid members once redeterminations are done, according to executives.
“While many uncertainties remain on the ultimate impact of redeterminations, we now believe it prudent to lower our retention assumption from 50% to 40%,” Zubretsky said.
However, Molina’s overall Medicaid membership remained flat sequentially. That’s due to an influx of new members from the start of a new Medicaid contract in Iowa and an acquisition of a Wisconsin Medicaid plan, Zubretsky said.
Molina expects recent Medicaid contract wins in Iowa, California, New Mexico and Nebraska to collectively add billions in annual premium revenue, and offset the worst of member losses from Medicaid redeterminations.
CFO Mark Keim said 70% of Medicaid members who have lost coverage to date were terminated due to procedural reasons, like missing paperwork, as opposed to actual ineligibility.
Given the high level of procedural terminations — and recent regulatory actions to stop administrative errors — Molina is seeing its rate of “reconnects,” or members who rejoin Medicaid quickly after being terminated, increase to nearly 30%, according to Keim.
“We expect those numbers to grow,” Keim said, noting Molina is also seeing “an increasing rate” of former Medicaid members — both Molina’s and its competitors’ — transfer to its ACA marketplace plans.
Like other payers, Molina said it was cheered by states taking actions to revise rates to reflect Medicaid members’ shifting acuity as redeterminations continue. Through the end of September, 10 of Molina’s 12 Medicaid states have draft or final rates with an acuity adjustment, while several are considering retroactive or mid-cycle adjustments, Keim said.
Rates impacting the majority of its 2024 Medicaid premium revenue are still unknown.
But “we are confident that the principle of actuarial soundness will prevail, including appropriate acuity adjustments for redeterminations,” Keim said. “Rates that are finalized to date have been generally satisfactory.”
Molina’s stock fell 5% in Wednesday morning trading following the earnings and investor call.
