Dive Brief:
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In its fourth-quarter earnings report, Molina Healthcare reported a loss before an income tax benefit of $316 million in 4Q of 2017, as well as a $269 million operating loss in the quarter compared to a year ago. Molina lost $555 million in operating income for the year compared to 2016.
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The insurer, which offers plans in Medicare, Medicaid and the Affordable Care Act exchanges, said the company’s performance of "core operations and overall administrative cost efficiency" improved in the fourth quarter despite the loss.
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Molina Healthcare said President Donald Trump’s decision to end cost-sharing reduction (CSR) payments last year increased loss before income tax benefit by about $73 million. Molina said it is "legally entitled to these federal payments and will pursue all available means to collect them."
Dive Insight:
Molina Healthcare faced $356 million in impairment losses, restructuring and separation costs and loss on debt extinguishment in 4Q, including about $73 million connected to restructuring.
Molina Healthcare went through major changes in 2017. In spring 2017, the company abruptly removed President and CEO Dr. J. Mario Molina and CFO John Molina because of "disappointing financial performance" and "in order to drive profitability through operational improvements." At the time, the company said the changes looked to "enhance the company’s focus and improve its competitive position within the healthcare industry."
The dismissal of the brothers was not just removing a president/CEO and CFO. They were the sons of the company’s founder, C. David Molina.
Despite the company losing at least $110 million before income taxes in 2016 in the ACA marketplace, J. Mario Molina was an outspoken supporter of the exchanges and a critic of Republican efforts to repeal the ACA.
Then, in July, Reuters reported that Molina was looking to cut 1,400 jobs, which was about 10% of its workforce. "Moving forward, we must be exceptionally strategic in doing more with less," interim CEO and CFO Joe White wrote in a memo at the time.
In October, the company named Joseph Zubretsky its president and CEO. Zubretsky is a former Aetna official and was president and CEO of The Hanover Insurance Group.
This week, Zubretsky said the fourth quarter’s tough results are "emblematic of the significant transition Molina is undertaking." Zubretsky said the company experienced contract losses "and related goodwill charges," restructuring costs and "unacceptable" ACA marketplace results in 2017. However, those problems are in the past, he said.
"Looking forward, the core business results showed improvement quarter over quarter, and we took steps to strengthen the quality of the balance sheet, all of which serve as a solid platform to achieve our margin recovery and sustainability plan we outlined for investors last month. Medical cost control, administrative cost discipline and capital strength remain at the fore of our plan," he said.
Looking ahead, Molina is giving preliminary guidance of $3 to $3.50 net income per diluted share and $3.23 to $3.73 adjusted net income per diluted share. The company said it’s looking conservatively at medical cost trends, ACA marketplace pricing adequacy and "the ultimate outcome of numerous profit improvement initiatives." Molina will review 1Q 2018 earnings and provide further insight for the coming year.