Long Beach managed health care services provider Molina Healthcare Inc. landed $117 million worth of Medicare Advantage accounts from national health insurers Aetna Inc. and Humana Inc. last week.
Aetna and Humana sold the Medicare accounts as part of an effort to scale down in the hopes that federal regulators will approve their proposed $37 billion merger. The Department of Justice filed an antitrust suit against the health insurers on July 21.
The transaction is the largest to date for Molina and would more than double the number of states where the company operates and add almost 300,000 members to its 4.3 million base. Molina ranked No. 33 on the Business Journal’s 2016 list of the largest public companies in Los Angeles, with a market capitalization of more than $2.8 million. The firm generated more than $14 billion in revenue last year.
The deal made Molina one of the biggest gainers on the LABJ Stock Index for the week ended Aug. 3. The company’s shares rose 16 percent to close at nearly $59 on the New York Stock Exchange. (See page 26.)
“We view this as an exceptional opportunity to significantly expand our health plan product portfolio in new and existing geographies, while maintaining our commitment to government-sponsored programs,” Dr. J. Mario Molina, chief executive of Molina, said in a statement.
Unlike traditional Medicare plans, Medicare Advantage plans are offered by private employers.
The transaction, which depends on the favorable resolution of the Department of Justice’s lawsuit against Aetna and Humana, would put Molina into 16 additional states, bringing its total to 28 along with Puerto Rico.
The firm also completed the acquisition of Medicare health benefits provider Universal American’s Total Care Medicaid health plan in New York on Aug. 1, which gave Molina an entry into that state’s Medicaid market.
“With the completion of this acquisition, Molina now operates health plans in the five largest Medicaid markets in the country,” CEO Molina said in the statement.
The rally in the company’s share price follows a plummet in May when the company announced its first-quarter earnings had fallen short of Wall Street expectations.
Molina said in a conference call at the time that the problems had been resolved and that Medicaid reimbursement rates had failed to keep up with rising medical costs.
Some analysts also blamed a buying spree that included Molina’s acquisition of two mental health subsidiaries of Providence Service Corp. for about $200 million in November.
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