The Texas Health and
Human Services Commission (HHSC) on Oct. 29 delivered the highly anticipated
results of its latest managed Medicaid procurement, revealing its intent to
award contracts to Aetna Inc., Anthem, Inc., El Paso Health Plan, Molina
Healthcare, Inc., Centene Corp.'s Superior Health Plan and UnitedHealthcare to
serve approximately 525,000 high-acuity enrollees through the STAR+PLUS
program. The news came as a disappointment to Molina, which had been banking on
reprocuring its existing business in six regions instead of renewing just one
service area and picking up a new zone.
Molina at its May
investor day provided 2020 premium guidance that was above Wall Street
consensus and a long-term earnings per-share (EPS) growth target in the range
of 12% to 15%. Specifically, the company for 2020 forecast annual premiums of
$17.0 billion to $17.3 billion, or 7% to 9% growth, before factoring in the
return of the Affordable Care Act health insurer fee.
But that growth included
the status quo in Texas, and executives during its latest quarterly earnings
call acknowledged that the insurer will have to adjust its expectations for
2020 on account of an anticipated four-month revenue shortfall.
Molina currently serves
86,000 STAR+PLUS members in the Bexar, Dallas, El Paso, Harris, Hidalgo and
Jefferson service areas. For the contract starting in 2020, it will retain only
the Hidalgo area and add the North East region. The change, if finalized, would
mean an annual revenue loss of approximately $930 million.
Jefferies securities
analyst David Windley in an Oct. 30 research note wrote that this latest
setback "is likely destabilizing" with a negative EPS impact of
roughly 4% to 5%.
But Molina CEO Joseph
Zubretsky during the earnings call emphasized that Texas is a short-term blip
that can be overcome.
For the quarter ending
Sept. 30, Molina reported EPS of $2.75 and an improved medical loss ratio of
86.3%. Premium revenue for the recent quarter was $4.1 billion.
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