Molina beats financial expectations on higher premium revenue
Short-term disparity between rates and medical cost trend may have reached its widest point in Q3, CEO says.
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Unlike Q3 earnings reports from insurers more heavily in the Medicare Advantage market, Medicaid-based Molina Healthcare on Thursday released third quarter financials that beat expectations.
Molina shares rallied 23% Thursday, according to Seeking Alpha.
California-based Molina reported an 18% increase in revenue year-over-year, according to the earnings report. States have been reporting rate increases for Medicaid, according to a KFF report.
Adjusted net income was $6.01 per diluted share for the third quarter of 2024, an increase of 19% year over year.
"In Medicaid, the business produced a third quarter MCR (medical cost ratio) of 90.5%, above our long-term target range. This result included a premium rate reduction in our California business that was retroactive to the beginning of the year. We are working with the state to understand its methodology and actuarial support for this adjustment, both of which remain unclear," said CEO Joe Zubretsky.
WHY THIS MATTERS
Molina reported higher than expected medical costs, which other insurers have also cited in their earnings reports.
Zubretsky said, "The quarter reflects higher than expected medical costs, elevated by the impact of redetermination related to acuity shifts and higher utilization among our continuing population, particularly for (long-term care pharmacy) LTSS, pharmacy, and behavioral health services."
The trend has been offset by three dynamics, he said, including improving margins for new store additions, rate adjustments that went into effect during the quarter and the risk corridors program that has acted as a financial buffer against elevated medical cost trends.
"The short-term disparity between rates and medical cost trend may have reached its widest point in the third quarter," Zubretsky said.
Medicaid redeterminations have produced a mismatch between acuity levels and rates, according to several insurers.
Molina's CEO said he is encouraged by the draft rates he's seen from states for 2025.
Growth initiatives include a continued contract in Florida and one in Michigan serving dual-eligible special needs populations in six service regions, including Detroit. Molina is awaiting the announcement of a statewide contract in Georgia.
Medical cost pressure, elevated pharmacy costs and higher outpatient utilization affected Molina's Medicare business in the third quarter, as it has for other insurers.
THE LARGER TREND
Shares of several of Molina's peers also gained ground Thursday, according to the Seeking Alpha report.
Centene shares climbed 5% and Elevance Health shares rose 3%, while shares of Cigna and Humana edged up 1%. Shares of CVS Health and UnitedHealth Group were largely flat in midday trading.
Email the writer: SMorse@himss.org
