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Molina Hit by Public Exchanges, Failed Aetna-Humana Merger
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Molina Healthcare Inc. (MOH - Free Report) continues to suffer from ongoing issues related to the Affordable Care Act's insurance Marketplace. This business underperformed in 2016, significantly denting fourth-quarter results, posting an operating loss of 85 cents against operating earnings per share of 92 cents in the year-ago quarter.
The loss incurred in this business was due to normal membership attrition; the addition of higher cost members through the special enrollment process; higher cost, as members reach the limits of the cost-sharing provisions of their coverage; and increasing utilization, as members get more engaged with its care networks. The company recorded a $30 million premium deficiency reserve in the fourth quarter owing to these.
The company has, however, identified the Marketplace challenges and remains focused on taking action to address them quickly and efficiently. To this effect, it has increased its Marketplace premium rates between 6% and 37% across all of its markets, resulting in an average of about 15%. Molina will continue to advocate policies that stabilize the marketplace.
The company is adopting a wait-and-see approach for the continuation of this business beyond 2018. Many other players in the industry like UnitedHealth Group Inc. (UNH - Free Report) , Aetna Inc. , Anthem Inc. and others have suffered loss from this business and scaled back their participation on the online exchange market.
The company has also suffered from the blockage of the merger between Aetna and Humana, which consequently terminated the transfer of Medicare assets to Molina by Aetna. Receipt of Medicare businesses from Aetna would have expanded the company’s Medicare business, which holds huge potential to grow owing to high demand from the baby boomers population. Also, the company’s Medicaid and Medicare programs were under considerable stress as a result of declining Medicaid expansion margins, and disappointing results from the Ohio, Texas and Puerto Rico health plans.
These developments have not been well received by the analysts as evident by a 26.8% decline in share price since the fourth-quarter earnings release compared with the Health Maintenance Organization (HMO) industry’s gain of 1.2%. Also, the Zacks Consensus Estimate for 2017 decreased by 44% over the past 60 days to earnings of $2.089 per share. This also represents a year-over-year decline of 22%.
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Molina Hit by Public Exchanges, Failed Aetna-Humana Merger
Molina Healthcare Inc. (MOH - Free Report) continues to suffer from ongoing issues related to the Affordable Care Act's insurance Marketplace. This business underperformed in 2016, significantly denting fourth-quarter results, posting an operating loss of 85 cents against operating earnings per share of 92 cents in the year-ago quarter.
The loss incurred in this business was due to normal membership attrition; the addition of higher cost members through the special enrollment process; higher cost, as members reach the limits of the cost-sharing provisions of their coverage; and increasing utilization, as members get more engaged with its care networks. The company recorded a $30 million premium deficiency reserve in the fourth quarter owing to these.
The company has, however, identified the Marketplace challenges and remains focused on taking action to address them quickly and efficiently. To this effect, it has increased its Marketplace premium rates between 6% and 37% across all of its markets, resulting in an average of about 15%. Molina will continue to advocate policies that stabilize the marketplace.
The company is adopting a wait-and-see approach for the continuation of this business beyond 2018. Many other players in the industry like UnitedHealth Group Inc. (UNH - Free Report) , Aetna Inc. , Anthem Inc. and others have suffered loss from this business and scaled back their participation on the online exchange market.
The company has also suffered from the blockage of the merger between Aetna and Humana, which consequently terminated the transfer of Medicare assets to Molina by Aetna. Receipt of Medicare businesses from Aetna would have expanded the company’s Medicare business, which holds huge potential to grow owing to high demand from the baby boomers population.
Also, the company’s Medicaid and Medicare programs were under considerable stress as a result of declining Medicaid expansion margins, and disappointing results from the Ohio, Texas and Puerto Rico health plans.
These developments have not been well received by the analysts as evident by a 26.8% decline in share price since the fourth-quarter earnings release compared with the Health Maintenance Organization (HMO) industry’s gain of 1.2%. Also, the Zacks Consensus Estimate for 2017 decreased by 44% over the past 60 days to earnings of $2.089 per share. This also represents a year-over-year decline of 22%.
The stock carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>