Long Beach-based Molina Healthcare Inc. was founded in 1980 as a single clinic in that city. It eventually pivoted to focus on coverage for those enrolled in government-sponsored health plans, including Medicaid, Medicare and – more recently – the state-run Obamacare exchanges. As it grew, Molina honed the managed care model, focusing on ways to improve health outcomes while keeping costs in check.
Molina’s timing was impeccable as the government-sponsored health plans themselves turned to managed care to control costs. Molina over the decades grew into a powerhouse managed care insurer for these government programs. Last year, Molina posted $34 billion in revenue, making it the second-largest publicly traded company in Los Angeles County by revenue, behind Walt Disney Co.
Yet until this year, Molina was not a major Medicaid player in its own backyard of Los Angeles County. In late 2022, Molina scored a coup in the state contracting process, winning the right to cover an additional 600,000 low-income Angelenos through the state’s Medicaid program, known as Medi-Cal, effectively doubling its previous total. Many of those had been taken away from HealthNet of California, a subsidiary of St. Louis-based Centene Corp. These additional enrollees were onboarded in January after Molina spent months preparing for the transition. As a result, Molina now insures through its Medi-Cal managed care program nearly one out of every eight Angelenos.
But this major contract win was partially offset by another trend: the nationwide purging of Medicaid rolls by state officials after the pandemic-era loosening of eligibility restrictions ended. Molina estimated late last year that it had lost roughly half-a-million Medicaid members nationwide through this culling process. While the company did not break down those losses by state, the losses in California were expected to be proportionately less because the state has not been among the most aggressive in purging its Medicaid rolls.
Companywide, Molina’s focus is now on the huge number of Medicaid contracts coming up for renewal in states across the nation. Chief Executive Joe Zubretsky noted in a recent earnings call that over the next three years, Medicaid contracts representing roughly $20 billion of Molina’s $26 billion in Medicaid program revenue will be coming up for re-procurement.
Molina is also under increasing pressure to keep a lid on costs. On April 1, President Joe Biden’s administration announced that 2025 payment rates to health care insurers underwriting Medicare Advantage plans would be lower than insurance companies anticipated, according to a news report from Bloomberg.
This announcement put a further squeeze on Medicare insurers, who are already dealing with rising medical costs and demands from health care providers for higher payments.
