Molina Healthcare plans to cut 1,400 jobs over the next few months following significant financial losses related to its Affordable Care Act plans.
Reuters obtained a copy of an internal memo sent to Molina staff by interim CEO and Chief Financial Officer Joe White, who said the job reductions should contribute savings by 2018. The cuts include 10% of Molina’s 6,400 corporate employees and 10% of its 7,700 health plan employees, according to the memo.
"Moving forward, we must be exceptionally strategic in doing more with less," White wrote.
Molina’s Pathways business, which is focused on behavioral health and employs about 5,500 people, is not included in the cuts, according to the memo.
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Molina had thrived in the ACA exchanges prior to posting a fourth-quarter loss last year, which it blamed on risk-adjustment issues. Molina lost $110 million on its ACA plans during the last quarter of fiscal year 2016, while it had expected to make $60 million.
Molina said it had to pay $325 million more into the risk-adjustment program than it anticipated, as medical costs were $120 million lower than expected.
The company then fired its CEO, J. Mario Molina, and its CFO, John Molina. The company's former CEO later suggested that his ouster may have also had something to do with his political beliefs; he was an outspoken critic of the Republicans’ plans to replace the ACA. He remains on the company’s board.
In the first quarter of 2017, Molina seemed to be on the rebound financially, as it posted earnings that beat analysts' estimates. The company is expected to announce its second-quarter earnings and hold a call with investors on Aug. 2.