Molina Health’s impressive recovery continued in the third quarter with the insurer raising its 2018 guidance after adding nearly $300 million in profits compared to last year.
The insurer reported $197 million in net income, down slightly from the $202 million it reported last quarter, but a significant jump from the $97 million loss it took during the third quarter last year. Molina expects 2018 profits to come in between $585 million and $600 million. That’s coming off 2017 where the company lost $582 million.
Although Molina is still primarily a Medicaid insurer, a big driver behind that turnaround is a “better than expected performance” on the Affordable Care Act exchanges, according to CEO Joseph Zubretsky.
“Clearly the marketplace has outperformed our expectations this year, without question,” he said during an earnings call on Thursday.
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Although Obamacare membership is down significantly compared to 2017 after the insurer exited several state exchanges, medical margins for marketplace plans have nearly doubled, totaling $610 million through the first nine months of 2018 compared to $366 million over the same time frame last year.
While the company’s medical loss ratio (MLR) is 57.5% this year—well below the ACA’s 80% minimum threshold —CEO Jeff Z said higher MLRs in previous years means the company will only pay rebates in New Mexico.
“Measured off of any starting place we could choose from, the marketplace is a significant part of this overall recovery story,” Zubretsky said, adding that stability in 2019 led to a 4% overall rate increase.
After refiling in Utah and Wisconsin, Molina will sell plans in nine states in 2019. Zubretsky told investors the insurer is considering further expansion in 2020 into South Carolina, New York and Illinois, where it already sells Medicaid plans.
Beyond its marketplace success, Zubretsky credited the financial about-face to the insurers focus on re-contracting with high-cost providers and improving utilization controls that have reduced hospital admissions, ER visits and length of stay. Molina has also beefed up its claims integrity program and slimmed down administrative costs.
Zubretsky hinted that more partnerships are in the works in the fourth quarter with “world-class vendors” focusing on high acuity management, pharmaceuticals and outsourcing IT operations.