Molina has competitive advantage on ACA exchanges, but for how long?

Molina Healthcare has emerged as a notable exception to the string of insurers that have pulled back from the Affordable Care Act marketplaces, but now the company has a new obstacle: staying profitable while absorbing sicker, left-behind enrollees who had their plans discontinued.

The California-based healthcare services firm will be “tested” now that major insurers--such as Aetna, UnitedHealth and Humana--have scaled back their exchange offerings, James Sung, associate director with S&P Global Ratings, told the Wall Street Journal. The risk those companies took on now moves to remaining companies like Molina, he said.

Molina, which current has approximately 600,000 marketplace enrollees, projected that its margins will hover between its targeted range of 1.5 and 2 percent on marketplace products, according to the WSJ.

Molina has increased its revenue from $6 billion to a projected $16 billion for fiscal year 2016 since it started offering low-premium, narrow-network HMO plans on Affordable Care Act marketplaces.

But while sicker ACA exchange enrollees could compress Molina’s already razor-thin margins, Molina rarely pays for out-of-network coverage on HMO plans, and the firm owns its own clinics in most of its exchange states, the article notes. 

Indeed, on the exchanges, Molina is “attracting and managing a similar population to what we have managed for the last 36 years” with Medicaid plans, Molina senior vice president Lisa Rubino told the WSJ.

The growth in managed Medicaid enrollment has become a boon for private payers as Molina, WellCare and Centene. More than 75 million people enrolled in Medicaid in 2016, an uptick from 57.7 million in three years prior, and payers have an opportunity to thrive in this space if they are able to accelerate the transition to value-based payment models, FierceHealthPayer has reported.