Around this time last year, Molina Healthcare had just ousted its two top executives, cut 1,400 jobs and announced it was pulling out of two state marketplace exchanges following a quarter in which it seemed to be burning money on the boardroom floor.
By the end of 2017, Molina would report a net loss of $512 million with earnings per share dropping by $4.59.
Cut to this year, and the story has shifted dramatically. Molina blew the doors off of Wall Street’s second-quarter expectations, reporting a net income of $202 million, nearly doubling its first-quarter profits. The company reported earnings per share of $3.02 and raised its full-year guidance by $3.00 to $7.15-$7.35 per share.
Their success has come from paring down operating and medical costs and raising premiums, particularly in the exchanges. While total revenues for the first half of the year came in $384 million less than the first half of 2017, the company slashed operating costs across the board, including a 12% drop in medical care costs and an 18.6% decline in administrative expenses.
Affordable Care Act premium increases have been a significant driver. In the first half of this year, per-member per-month premiums shot up 41%. Meanwhile, medical costs declined, leading to a 54.4% medical loss ratio, which could be problematic given the 80% threshold required under the ACA.
CEO Joseph Zubretsky attributed the rebound to better use of utilization controls and “tiering out high-cost providers.”
“This company had inconsistent processes,” he said on last week’s earnings call. “It had, in some cases, poor execution in some of our local health plans and by a rigorous performance management process, leading indicators that identify the number of authorizations that are going in, so that we can head off high acuity inpatient trends that are emerging, all of these are contributing to the very favorable medical care ratios that we're experiencing in the first half.”
The upswing has prompted the company to consider re-entering the ACA exchanges in Utah and Wisconsin after pulling out last year. The company has filed rates in both states but still has time to make a final decision.
“I’m inclined to say that we would re-enter, but we don't have to make a decision until the end of the summer,” Zubretsky said. “We're going to watch every bit of data emerge on 2018 to make sure we have this right and then we'll make the call at that point.”
But the CEO certainly sounded as though his mind is made up and views the ACA marketplace as a source of long-term growth.
“Our outlook for 2019 Marketplace should be maximize margin, hold onto membership and let's see what happens, so that we can perhaps grow this business more aggressively in 2020,” he said.