Molina CEO Zubretsky Says Company Headed for More Growth This Year

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2023 results are providing a "solid jump point into 2024," says Zubretsky. Like other insurers, Molina reported higher-than-expected Medicare spending.

Despite disruption of Medicaid redetermination and higher than expected Medicare medical costs, Molina Healthcare executives are projecting a 17% growth in premium revenue next year to $38 million from and 13% growth in adjusted earnings per share.

In an earnings call last week, CEO Joseph Zubretsky ticked off list of the contracts the company won in 2023 and the acquisitions it has made as part of growth strategy. He said the company had submitted bids for contract renewals in Florida, Virginia and Michigan and was submitting bids for new contracts in Kansas and Georgia. Molina ended 2023 with 4,542,000 Medicaid members and is projecting that number will grow to 5.1 million this year, a 12.2% increase

“With our demonstrated capabilities and referenceable track record, we remain confident in our ability to continue to win new state contracts,” Zubretsky said during the call.

Investors were impressed with Molina (NYSE: MOH) last week.The price of company's shares increased 9.5% and were trading at $388 before the markets opened this morning.

Molina is of the “big five” Medicaid managed care companies that includes Centene (which is the largest in Medicaid membership), CVS Health, Elevance (formerly Anthem) and UnitedHealth Group. Approximately 81% ($26.3 billion of $32.5 billion) of Molina’s 2023premium revenue was from Medicaid.

“Our strategy is clear and simple,” Zubretsky said during the call. “We are in the business of providing access to high quality healthcare for individuals relying on government assistance.

The company’s performance in the fourth quarter 2023 was especially strong in net income, which was $216 million, four times the net come of the fourth quarter in 2023. It’s annual net income in 2023 was just over $1 billion, a 36% income the

During the COVID-19 public health emergency, people covered by Medicaid were continuously enrolled. Those enrollment rules ended last year and Medicaid programs, which are run at the state level, and the Medicaid managed care organizations they contract with, had to “redetermine” whether people eligible to receive health insurance through Medicaid. According to KFF (the new name for the Kaiser Family Foundation) more than 16 million Medicaid enrollees have been disenrolled as of February 1, 2024 as the end of continuous enrollment and unwinding.

Zubretsky said Thursday that the factors fueling premium growth projections for Molina had been partially offset by Medicaid redetermination and that “impact of acuity shifts is real but not significant” on margins.Molina’s medical cost ratio (MCR), which is ratio of percentage of the premium revenue that is used to pay for healthcare services, was 88.7% for its Medicaid business in 2023. Like many insurers, Molina saw an increase in healthcare expenditures relative to premiums brings its MCR for its Medicare members to 90.7%, an increase from 88.5% in 2022. Zubretsky said he was confident that adjustments to benefit design and “operational improvements” would return that segment to target margins. The MCR of Molina’s ACA marketplace plans was 75.3%. Molina’s overall MCR was 88.1% and the projection for 2024 is 88.2%.

Molina is a small company relative to behemoths such as UnitedHealth Group, which had $371 billion in revenue in 2023, and CVS Health, which had $357 billion. But it is major player in the Medicaid managed care market, which is complex and varied because of Medicaid’s state-by-state structure.

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