MM Curator summary
[ MM Curator Summary]: Molina completes another acquisition, this time adding 50,000 lives.
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Dive Brief:
- Molina has completed its acquisition of rival health insurer Cigna’s Medicaid contracts in Texas, the California-based payer said Monday, as it continues to invest heavily in the safety-net insurance program.
- The purchase price for the transaction was approximately $60 million in cash, according to a recent filing with the SEC.
- Though Molina was already active in Texas, nabbing Cigna’s beneficiaries is a significant add: As of November, Cigna covered approximately 50,000 Medicaid beneficiaries in the state. Molina closed out 2020 with 357,000 members in Texas.
Dive Insight:
Molina covers some 4.8 million people in the U.S., but Medicaid is the payer’s flagship business, representing more than three-fourths of its members (and premiums). The program has grown because of the pandemic, causing some players in Medicaid markets to ratchet up their investments and others to jump in for the first time.
Molina is known for being acquisitive, but has been on a tear as it looks to capitalize on this growth. Currently, the payer offers Medicaid plans in 18 states, with the greatest scale and revenues stemming from health plans in California, Ohio, Washington and Texas.
Moving to nab Cigna’s Medicaid contracts in Texas, first announced in April, is one such recent deal that should yield significant financial returns for Molina: Cigna’s some 50,000 Medicaid members in the state represent approximately $1 billion in annual premium revenue.
Along with recent contract wins in Nevada and Ohio, Molina also in October announced it had closed its acquisition of New York Medicaid health plan Affinity Health for approximately $380 million, and that it had entered into a definitive agreement to acquire AgeWell’s New York’s Medicaid managed long-term care business for approximately $110 million.
The AgeWell deal, which will add about 13,000 members to Molina’s rolls representing about $700 million in premium revenue, is expected to close by the third quarter this year.
Like most other major payers, COVID-19 ushered Molina to high profits in 2020, but more recently has negatively impacted the insurer’s finances. Molina’s net income in the third quarter of $143 million was down 23% year over year as the payer shelled out more for patient care than in the prior-year quarter.
Despite COVID-19’s volatility, Molina has been managing well in the markets, outperforming the S&P 500 last year. But the stability of the Medicaid rolls it’s so dependent on is a key area of interest for market watchers, as the longevity of the public health emergency will determine if and when a restart of Medicaid redeterminations will impact managed care organizations this year.
The Families First Coronavirus Act, passed in March 2020, gave states a temporary bump to their federal match funds in the Medicaid program as long as they ensured eligible beneficiaries stayed enrolled during the national emergency. That continuous coverage requirement contributed to Medicaid becoming the largest single source of insurance coverage in the U.S.
But when the emergency ends, states can resume redeterminations, potentially kicking millions off the safety-net insurance due to a change in income or other factors.
Molina said along with its third quarter financial release it expects the public health emergency to run at least through mid-January.
The payer’s Medicaid enrollment has ballooned to about 4 million members at the end of the third quarter, due primarily to the continuing suspension of redeterminations. Molina estimates that’s resulted in an increase of more than 700,000 Medicaid members since the beginning of the pandemic.
However, CEO Joe Zubretsky told investors in October the insurer expects to keep only half of those new Medicaid members gained during the pandemic after redeterminations are resumed nationwide.
Clipped from: https://www.healthcaredive.com/news/molina-closes-60m-acquisition-of-cignas-medicaid-contracts-in-texas/616674/