IPO Nearing, Health Insurer Fights Bill That Could Threaten Growth

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IPO Nearing, Health Insurer Fights Bill That Could Threaten Growth

By LAURENCE DARMIENTO

Staff Reporter

Opposition to a bill that would extend health coverage to some uninsured adults is coming from a seemingly unlikely source Molina Healthcare Inc., the Long Beach-based health insurer that specializes in serving the poor.

Molina, which plans a $102 million initial public offering this week, is opposing a bill that would allow local public agencies that provide health insurance to draw down federal matching dollars to expand the state’s Healthy Families program.

The program now covers only children whose parents are working but make too much money to qualify for Medi-Cal. The bill, sponsored by Assemblyman Keith Richman, R-Northridge, would allow local dollars as a match, expanding the program to cover parents. It is sponsored by a state coalition of public, non-profit health insurers that serve the Medi-Cal and Healthy Families market.

The bill, AB 1524, passed into the Senate this month without opposition from big for-profit insurers such as WellPoint Health Networks Inc. and Health Net Inc. that also serve the market, but Molina has come out strongly against it.

The company contends it would give an unfair advantage to public agencies by not requiring them to subcontract with private insurers to offer the coverage. Under the complex health insurance system that covers the poor, for-profit and non-profit insurers compete against each other for members. Some for-profits also subcontract with the public agencies for members.

“It’s really a matter of subscriber choice,” said Joe Parra, Molina’s director of governmental affairs. “In the Healthy Families program (now) choice is an essential element. The bill as it is currently worded does not ensure that choice.”

However, proponents of the bill say that what Molina is really asking for is a guarantee it will get a piece of the action, something that could give it an advantage as it negotiates a subcontracting agreement that determines its profit margins.

“This bill does not exclude Molina from participating, but nothing can be guaranteed if you want this thing to be truly competitive,” said Jim Gross, a lobbyist for the public health agencies.

The family-run company has 511,000 members in California, Washington, Utah and Michigan. It has shown strong growth in the past, and has its eyes on further expansion. The funds raised from the IPO are expected to fuel that growth. The deal was delayed earlier this year because of waning enthusiasm for health care stocks in the market.

Net income for 2002 rose slightly to $30.5 million from $30.1 million in 2001, as revenues increase more than 25 percent, to $639.3 million from $499.5 million.

Richman said he is hopeful that Molina’s objections to the legislation can be worked, saying he believes the bill would allow the company to expand its membership.

Molina started 22 years ago as an operator of medical clinics for Medi-Cal recipients but began its real growth in 1994 when it was given state approval to operate an insurance branch. It still operates health plans statewide.

Dr. J. Mario Molina is the company’s president and chairman. He is the son of founder Dr. David Molina, who died in 1996.

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