Headlines have been screaming for months about big insurers such as Aetna (AET), United Healthcare (UNH) and Humana (HUM) pulling out of the Obamacare marketplaces because they couldn't make the exchange business profitable. As a result, dozens of counties throughout the country have been left with only one or no insurance choice on their exchange.
Against that backdrop, two smaller insurers that focus primarily on the Medicaid market -- Molina Healthcare (MOH) and Centene (CNC) -- were frequently noted as companies that can successfully navigate the uncertain and complicated exchange business. Many states looked to them and small regional or local insurers to help fill the increasing gaps the big names were leaving behind.
So it came as a bit of shock when Molina announced on Aug. 2 it would exit the exchanges in Wisconsin and Utah, scale back its exchange business in Washington state and leave the door open to pull out of other exchanges in the near future.
What's more, in marketplaces where it will continue to operate, Molina has submitted an average 55 percent premium increase to state regulators, partly due to the uncertainty over the future of federal cost sharing payments.
The news came amid Molina's report of a steep second-quarter earnings loss of $4.10 a share, compared to a 58 cent per share gain during the same period a year earlier. It also followed the ouster in May of Chief Executive Mario Molina and Chief Financial Officer John Molina, brothers who are sons of company founder David Molina. In the earnings report, Molina also announced a major restructuring, which includes about 1,500 layoffs, approximately 7 percent of its workforce.
Until all this bad news broke, Molina was one of the prime examples of an insurer that could actually make the exchanges work. (Centene still does and is expanding its exchange business.) Major insurers like Aetna and United Health, accustomed to the more stable employer-sponsored health insurance market, racked up losses in the exchange business in part because they were surprised by the large number of high-cost patients who signed up.
Molina's business focuseson administering Medicaid health plans for low-income and disabled patients. As a result, the company has experience with managing narrow networks of lower-cost health care providers. "The idea is to arbitrage low-reimbursement providers into exchanges where the competition is paying a lot more," explained Robert Laszewski, president of consulting firm Health Policy and Strategy Associates. "There's an opportunity for profit there."
Molina found it could compete for the no-frills end of the exchange market and enjoy a robust volumne of patient sign-ups. According to Laszewski's estimates, Molina had a track record of enrolling as much as 70 percent of eligible participants in the various markets it participated in. A pool that big offers enough healthy individuals to help stabilize risk, he added.
What went wrong?
According to Joseph White, interim CEO of Molina, the company became overwhelmed with its ACA business, including unexpected increases in medical costs and claims. "We did not adjust for growth in the ACA marketplace," White told analysts in a conference call last week. He explained that the company focused resources on existing processes and technologies instead of a full redesign that would have helped it better deal with ACA growth.
"That was a mistake," said White. "The marketplace shares fundamentals of the Medicaid market, but it's also very different," he added.
In addition, speculated Laszewski, as Molina expanded into new markets and became a more dominant player in others, it may have strayed from its core base of low-income customers, adding costs and risks it couldn't deal with.
"Every company has to analyze every market to make sure they're making money in every market," said Dan Mendelson, chief executive of Avalere Health. Say a plan with bad risk drops out of the market, he added. "You may get saddled with that risk as you pick up those customers."
Molina's bad news leaves exchange consumers with even less choice and more uncertainty than they were already facing in light of failed GOP efforts to repeal and replace Obamacare and the Trump administration's threats to discontinue support for the system.
As commitment deadlines for insurers approach, state insurance commissioners are working hard to convince them to stay in the exchanges and keep at least a bare minimum of coverage. In addition, small, local, often nonprofit players such as L.A. Care Health Plan are trying to fill gaps where they can, while heeding the lessons from Molina's recent mess.
Will these efforts be enough? Consumers may have to wait until open enrollment begins on Nov. 1 to find out.
More here:
Anatomy of a suddenly sick Obamacare insurer - CBS News
- Anatomy of a Fly - SIFF 2009 Fly Documentary - Video - January 14th, 2013 [January 14th, 2013]
- Grey's Anatomy Sneak Peek 9.11 - The End is the Beginning is the End (6) - Video - January 15th, 2013 [January 15th, 2013]
- Anatomy of the sangeet! - Video - January 18th, 2013 [January 18th, 2013]
- Go Anatomy for iPad - Video - January 19th, 2013 [January 19th, 2013]
- Grey's Anatomy - Callie and Arizona "We don't have to move yet" 9x16 - Video - February 22nd, 2013 [February 22nd, 2013]
- Imaging of Petrous bone anatomy (Sep 2013) - Dr Mamdouh Mahfouz (In Arabic) - Video - January 14th, 2014 [January 14th, 2014]
- Anatomy in the Yahoo! Directory - January 21st, 2014 [January 21st, 2014]
- Let's Play Minecraft - Episode 87 - Geoff's Anatomy - Video - January 26th, 2014 [January 26th, 2014]
- Cat Anatomy Pg. 25 Lab Notes - Video - February 2nd, 2014 [February 2nd, 2014]
- Spinal Pathways Tracts Part 1 Introduction Anatomy Tutorial - Video - February 9th, 2014 [February 9th, 2014]
- Galway health app firm joins US academy - April 9th, 2014 [April 9th, 2014]
- Greys Anatomy season 10 episode 18 airs tonight: Power through - April 9th, 2014 [April 9th, 2014]
- Greys Anatomy Recap: A Vicious Viral Infection Puts Everyone At Risk - April 9th, 2014 [April 9th, 2014]
- Grey's Anatomy Recap: "You Be Illin'" - April 9th, 2014 [April 9th, 2014]
- Greys Anatomy season 10, episode 19 stills show Cristinas big moment - April 9th, 2014 [April 9th, 2014]
- Review: 'Your Inner Fish' on PBS imparts smart human anatomy lesson - April 9th, 2014 [April 9th, 2014]
- Fantastically Creepy Images and Tales From The Morbid Anatomy Anthology - April 9th, 2014 [April 9th, 2014]
- Step Brothers- Anatomy Movements - Video - April 9th, 2014 [April 9th, 2014]
- Matt Lloyd: Anatomy of a $315k / Month Business - Video - April 9th, 2014 [April 9th, 2014]
- Guitar Anatomy | Minute Music School - Video - April 9th, 2014 [April 9th, 2014]
- Anatomy Mnemonics - Chapter 3 : Nervous System - DoctorKC - Video - April 9th, 2014 [April 9th, 2014]
- Bates Motel: Anatomy of a Scene: Bradley Shoots Gil (S2) - Video - April 9th, 2014 [April 9th, 2014]
- Innovation at Stanford Anatomy - Video - April 9th, 2014 [April 9th, 2014]
- The science of anatomy is undergoing a revival - April 10th, 2014 [April 10th, 2014]
- Grey's Anatomy: Will Alex Really Leave Grey Sloan Memorial? - April 10th, 2014 [April 10th, 2014]
- Greys Anatomy season 10 episode 19 airs tonight: A major award - April 10th, 2014 [April 10th, 2014]
- Anatomy - Wikipedia, the free encyclopedia - April 10th, 2014 [April 10th, 2014]
- anatomy man 3d visual effects - Video - April 10th, 2014 [April 10th, 2014]
- Talk about human anatomy - part 1 - Video - April 10th, 2014 [April 10th, 2014]
- Bootstraps - I Wanna Dance With Somebody - Video - April 10th, 2014 [April 10th, 2014]
- Greys Anatomy Recap: Cristinas Career Hits A Major Milestone - April 15th, 2014 [April 15th, 2014]
- Greys Anatomy season 10, episode 20 stills, synopsis: Trouble in paradise? - April 15th, 2014 [April 15th, 2014]
- Anatomy - New World Encyclopedia - Info:Main Page - New ... - April 15th, 2014 [April 15th, 2014]
- anatomy (biology) -- Encyclopedia Britannica - April 15th, 2014 [April 15th, 2014]
- Jean Sives ITEC Anatomy and Physiology Testimonial - Video - April 15th, 2014 [April 15th, 2014]
- Grey Text Anatomy - Video - April 15th, 2014 [April 15th, 2014]
- The Devil Wears Prada - Anatomy (HD GUITAR COVER) - Video - April 15th, 2014 [April 15th, 2014]
- 'Joe' | Anatomy of a Scene w/ Director David Gordon Green | The New York Times - Video - April 15th, 2014 [April 15th, 2014]
- 'Fame' by Mree (Grey's Anatomy 10x19) - Video - April 15th, 2014 [April 15th, 2014]
- Tessa Ferrer Joins the Cast of Extant! Grey's Anatomy Cast-Off Books New Gig on CBS' Summer Series - Video - April 15th, 2014 [April 15th, 2014]
- Brain anatomy differences between deaf, hearing depend on first language learned - April 15th, 2014 [April 15th, 2014]
- Captain America Winter Soldier | Anatomy of a Movie - Video - April 15th, 2014 [April 15th, 2014]
- Grey's Anatomy After Show Season 1 Episode 13 "I'm Winning" | AfterBuzz TV - Video - April 15th, 2014 [April 15th, 2014]
- Spoiler Chat: Scoop on Grey's Anatomy, Orphan Black, The Mindy Project, The Blacklist and More - April 16th, 2014 [April 16th, 2014]
- Anatomy of a recall - April 16th, 2014 [April 16th, 2014]
- NBME Shelf Exam - Case Files Series App - Anatomy - Video - April 16th, 2014 [April 16th, 2014]
- Radius and ulna - Anatomy tutorial (Preview) | Kenhub - Video - April 16th, 2014 [April 16th, 2014]
- Greys Anatomy Season 10 Spoilers: Finale Teases Traumatic Ending; Will Cristina Yang Be Killed Off In Episode 24? - April 17th, 2014 [April 17th, 2014]
- Greys Anatomy season 10, episode 20 airs tonight: Having faith - April 17th, 2014 [April 17th, 2014]
- (WARNING: CONTAINS SPOILERS) Game of Thrones Season 4: Anatomy of a Scene - The Royal Wedding (HBO) - Video - April 17th, 2014 [April 17th, 2014]
- Heart anatomy - Video - April 17th, 2014 [April 17th, 2014]
- Heart anatomy 3 Left & Right pulmonary veins, ascending aorta, left common carotid - Video - April 17th, 2014 [April 17th, 2014]
- Heart anatomy 2 tricuspid valve, bicuspid valve - Video - April 17th, 2014 [April 17th, 2014]
- Flash Brain Anatomy Review - Video - April 17th, 2014 [April 17th, 2014]
- Anatomy of the 2014 Birdathon - April 18th, 2014 [April 18th, 2014]
- Greys Anatomy Season 10 Spoilers: Episode 23 And 24 Titles Leaked Online; Song-Based Titles Gives Fans Clues Of ... - April 18th, 2014 [April 18th, 2014]
- Greys Anatomy Recap: Does Cristina Yang Win The Harper-Avery Award? - April 18th, 2014 [April 18th, 2014]
- Greys Anatomy season 10, episode 20 recap: Making mistakes - April 18th, 2014 [April 18th, 2014]
- Grey's Anatomy Recap: "Go It Alone" - April 18th, 2014 [April 18th, 2014]
- Greys Anatomy: April & Jackson Need To Make Their Marriage Work - April 18th, 2014 [April 18th, 2014]
- Grey's Anatomy Music Season 10x20 Aron Wright Everybody Wants To Rule The World - Video - April 18th, 2014 [April 18th, 2014]
- Grey's Anatomy Cast - How To Save A Life - Video - April 19th, 2014 [April 19th, 2014]
- ReVamp - The Anatomy Of A Nervous Breakdown: On The Sideline - Philly 2014 - Video - April 19th, 2014 [April 19th, 2014]
- Twisted Mind Anatomy - Don't Run Away EP - Video - April 19th, 2014 [April 19th, 2014]
- Anatomy of a Landscape trailer - Video - April 19th, 2014 [April 19th, 2014]
- Advanced Anatomy - Video - April 19th, 2014 [April 19th, 2014]
- anatomy study - Video - April 21st, 2014 [April 21st, 2014]
- |An anatomy of a Rabbit - Video - April 21st, 2014 [April 21st, 2014]
- Grey's Anatomy 10x21 "Change Of Heart" - Farewell to Cristina - ABC HD promo #1 - Video - April 21st, 2014 [April 21st, 2014]
- Anatomy of Cosplay: LIVE Q&A (with Sam & Mae!) - Video - April 21st, 2014 [April 21st, 2014]
- DJ Tennis - Anatomy (North Lake Remix) - Video - April 21st, 2014 [April 21st, 2014]
- ITEC Anatomy & Physiology Testimonial by Kerry Howard - Video - April 21st, 2014 [April 21st, 2014]
- The anatomy of a sexuality class - April 22nd, 2014 [April 22nd, 2014]
- Human body - Wikipedia, the free encyclopedia - April 22nd, 2014 [April 22nd, 2014]
- 'Fading Gigolo' | Anatomy of a Scene w/ Director John Turturro | The New York Times - Video - April 22nd, 2014 [April 22nd, 2014]
- Guitar Anatomy - Part 1 - Video - April 22nd, 2014 [April 22nd, 2014]
- Anatomy Scan At 19Weeks 3Days - Video - April 22nd, 2014 [April 22nd, 2014]
- Grey's Anatomy After Show Season 10 Episode 20 "Go It Alone" | AfterBuzz TV - Video - April 22nd, 2014 [April 22nd, 2014]
- Grey's Anatomy 10x21 Promo | Grey's Anatomy Season 10 Episode 21 Promo| Grey's Anatomy S10E21 Promo - Video - April 22nd, 2014 [April 22nd, 2014]
- Greys Anatomy Season 10 Spoilers: Cristina Yang To Make A Life Or Death Decision In Episode 21; Who Will She Save ... - April 24th, 2014 [April 24th, 2014]