Even with company's recent losses, Molina CEO takes sunny view of ACA exchanges

Document titled "Patient Protection and Affordable Care Act"
The Affordable Care Act's marketplaces may be in flux, but Molina Healthcare has largely done well in that business. Image: Getty/designer491

Despite Molina Healthcare’s recent troubles with the risk adjustment program, the company has enjoyed greater success than its larger competitors on the public exchanges—and that gives its CEO hope about the Affordable Care Act's future.

Unlike major insurers Aetna, Humana and UnitedHealth, which have all pulled back from the exchanges, Molina is used to running a low-cost, low-margin business, reported Northern California radio state KQED. It accomplishes that in part by offering insurance products with narrow networks, a strategy popular with other exchange players, including the startup Oscar.

Molina also has a leg up because it has long served Medicaid-eligible populations, giving it the experience necessary to serve the mainly low-income individuals who have signed up for plans on the ACA marketplaces.

J. Mario Molina

"It's a different population most insurance companies haven't been interested in," J. Mario Molina, the company’s CEO, told the news outlet.

Thus, in the first few years of the Affordable Care Act, the company earned a roughly 1% profit.

RELATED: Molina CEO: ACA business beats expectations

Yet during Molina’s most recent earnings report, it estimated it lost $110 million on its ACA exchange business last year, while it had been expecting to make $60 million. On a call with investors, its CEO blamed the fact that the company had to pay $325 million more into the risk adjustment program than it had anticipated.

The government’s methodology for the program, he said, is flawed because it “penalizes low-cost and low-premium health insurers like Molina.” Given the company’s recent losses and the uncertainty about the ACA’s future, it won’t yet commit to the exchanges beyond 2017, FierceHealthcare reported.  

In his interview with KQED, though, Molina indicated that he thinks the ACA just needs a “tuneup” rather than the repeal-and-replacement plans being touted by Republicans.

He also thinks policymakers should look to California if they want pointers on how to fix the healthcare law, noting that the state’s stringent—but consistent—regulators have led to more stability in the marketplace for insurers.