Despite high early disenrollment headlines, Molina reported Medicaid redeterminations are tracking with expectations so far in second quarter results released Wednesday.
States resumed checking Medicaid members’ eligibility in the safety-net program in the spring. The process is expected to boot millions of Americans off Medicaid coverage, according to an analysis from the Urban Institute. As such, analysts and investors are keeping a wary eye on operators with large books of Medicaid business like Centene and Molina, which brings in almost nine-tenths of its revenue from Medicaid, according to company leadership.
In the second quarter, all but four of Molina’s Medicaid states began disenrollments, with the remaining states kicking off the process at the beginning of July.
Medicaid members declined 93,000 in the quarter, which was within expectations, CEO Joe Zubretsky told investors on a Thursday morning call.
So far, the medical cost profile for members who have left Molina’s Medicaid rolls is more favorable than the overall portfolio average, but cost differences aren’t a major cause for concern at the moment, according to Molina executives.
“The medical cost impact of Medicaid redeterminations was negligible, although we are in the very early stages of that process,” Zubretsky said.
States have also pledged to make sure Medicaid rates reflect the impact of redeterminations, according to the payer.
Earlier this month, five states moved into new contracts with Molina. Half of the states gave the payer proactive rate concessions because of redeterminations, while the other half said they’d either change rates retroactively or make mid-cycle adjustments to keep rates actuarily sound, CFO Mark Keim said on the call.
Roughly two-thirds of Medicaid beneficiaries have been disenrolled for procedural reasons — many of whom have a high likelihood of reconnecting with the Medicaid program, according to Keim.
If members reenroll within 90 to 120 days, their Medicaid coverage is retroactive to the date of termination, meaning Molina could bring in months of premiums in the third and fourth quarters of this year.
The number of reconnects “is actually expected to be quite high,” Zubretsky said.
Molina is also working to transfer noneligible individuals to the payer’s plans in the Affordable Care Act marketplace, but it’s too early to tell how many members are transitioning, according to the payer.
“That monthly figure has not increased dramatically but we expect it will as this process gets more traction,” Zubretsky said.
Overall, of the 800,000 Medicaid members Molina gained since the start of the pandemic, the payer expects to retain about half at the end of the redeterminations process, Keim said. Molina expects the premium impact of disenrollments to be approximately $1.6 billion.
Medical costs, Bright earnings
Molina reported a medical loss ratio of 87.5% in the second quarter, beating analysts expectations. However, days claims payable declined by roughly 2.6 days sequentially, clouding “an otherwise impressive” quarter, commented Jefferies analyst David Windley.
Molina’s Medicaid and marketplace costs were better than analysts expected, while its Medicare MLR was pressured due to membership growth and higher outpatient utilization.
UnitedHealth and Humana both warned investors of higher-than-expected utilization coming into the quarter, though fears of skyrocketing medical costs have largely proved unfounded.
Molina did see growing outpatient utilization in its Medicare business in the quarter among ambulatory surgeries, primary care visits and routine preventive screenings. Zubretsky called it “a return to normal” after the pandemic.
Molina agreed to acquire insurer Bright Health’s Medicare Advantage business in California earlier this summer. The $510 million deal is expected to close in the first quarter of 2024, and will add $1.8 billion in premium revenue for Molina, according to management.
Bright’s plans are not expected to contribute any earnings in the first full year of Molina’s ownership. The segment’s eventual earnings contribution will depend on the success of Bright’s profit improvement plan before the deal closes, Zubretsky said.
“We’re still confident what’s delivered to us by time of closing, we’ll be able to get that to our target margins by the end of the second year,” Zubretsky said.
Molina reported $8.3 billion in revenue in the quarter, in line with analyst expectations, and profit of $309 million, up 25% year over year. The California-based payer raised its full-year adjusted earnings guidance on the results.
