Medicaid expansion sends insurers' profits higher

The Affordable Care Act's Medicaid expansion has been particularly beneficial for insurers, especially those operating in California or Michigan, where they're likely to see continued rising profits.

Millions of new consumers have signed up for coverage through states' expanded Medicaid programs, driving revenue for many insurers, reported the Motley Fool.

Molina Healthcare and UnitedHealthcare, for example, could see such growth in California and Michigan. One reason is that California, which enrolled almost 2 million new members in Medi-Cal, still has more than 900,000 applications pending. As state officials work through the application backlog, there will be thousands of additional Medicaid members and millions of new revenue for insurers.

And in Michigan, more than 230,000 consumers have signed up for Medicaid coverage. Molina already covers more than 218,000 Michigan residents through the state's Medicaid program and it will likely add many new consumers to its Michigan membership base in the next few months.

UnitedHealth also will see a boost in enrollment from Michigan's Medicaid expansion. It already has enrolled 250,000 new members in the state, increasing its sales by 17 percent to $5.2 billion in the first quarter of this year.

Additionally, roughly 2.9 million people have signed up for Medicaid coverage but haven't been enrolled because the program hasn't processed their applications yet, FierceHealthPayer previously reported. Once state officials process those applications, insurers will drastically increase their membership.

The problem, however, is an increase in Medicaid members comes with higher prices and thinner profit margins because the population tends to suffer from more expensive, chronic health conditions. Plus, new high-priced drugs, including the hepatitis C drug Sovali that costs $1,000 per pill, will challenge thin margins even more.

To learn more:
- read the Motley Fool article

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