Molina Healthcare may stop offering health insurance through government-sponsored plans offered through the Affordable Care Act at the end of this year, concluding that aspects of the government program have cost the company hundreds of millions of dollars, officials said Wednesday.
“Recognizing that we are one of the nation’s largest marketplace providers, we believe there are simply too many unknowns with the marketplace program to commit to our participation beyond 2017,” Chief Executive Mario Molina said during a Wednesday conference call with investors. “We will wait and see how the new administration and Congress adjust the program, and we plan to evaluate our participation on a state-by-state basis.”
Molina Healthcare provides marketplace plans in nine states, including California, Washington, Texas and Florida. A company executive said during Wednesday’s investor call that Molina’s marketplace offerings in Texas have performed relatively well, while those in California and Florida have been “hanging in there.”
Executives with Molina, which specializes in offering health care plans to customers receiving government benefits like Medicare and Medicaid, blamed problems related to the Affordable Care Act’s administration for a substantial decline in the firm’s profits.
Covered California spokesman James Scullary said in an email that officials are aware of Molina Healthcare’s position, but declined further comment.
Profits and challenges
Overall, Molina Healthcare reported an $8 million profit for the 2016 calendar year. That’s down from $143 million in 2015, despite a nearly 25 percent increase in the firm’s revenues from 2015 to 2016. Molina Healthcare’s total revenue last year totaled to $17.7 billion, but its risk transfer payments added up to $325 million more than what the company projected when setting its 2016 pricing levels.
The Affordable Care Act contains mechanisms designed to mitigate insurance providers’ risks, since the law forbids insurers from denying coverage or hiking premiums on the basis of preexisting conditions, an August briefing from the Kaiser Family Health Foundation explains.
Those mechanisms involve methods of redistributing insurance company revenues amongst each other. One of those mechanisms, called the “risk corridors,” requires officials with the U.S. Department of Health and Human Services to collect money from insurers whose claims fall below projected levels and hand those dollars over to other firms with claims exceeding expectations.
All insurers offering plans through Affordable Care Act marketplaces, sometimes called exchanges, are required to participate in the risk corridors program.
Molina Healthcare, however, has alleged the government has collected millions of dollars more than what the company should have paid. The company reports that it filed a lawsuit in January seeking to recover roughly $52 million in risk corridors payments made in 2015.
Molina Healthcare further contends the government owes the firm some $90 million in overpaid risk corridors transfers made last year.
Wednesday, Molina leaders declared plans to lobby Washington to accelerate planned changes to its method of calculating risk transfer payments. If proposed reforms had already been in place in 2016, the company estimates a pre-tax income increase of about $70 million would have been realized last year.
The overall future of the Affordable Care Act, also known as Obamacare, is highly uncertain given Republicans’ pledges to repeal the controversial law, which has required Americans to pay a tax penalty if they do not have health insurance.
On Wednesday, the Trump administration took steps intended to calm insurance companies and make tax compliance with former President Barack Obama’s health law less burdensome for some people.
Health and Human Services Department and the IRS separately announced moves falling short of sweeping changes to the Affordable Care Act. In Congress, majority Republicans are struggling to reach consensus over how to deliver on their promise to repeal and replace the health law.
House Speaker Paul Ryan is expected to present elements of a plan to GOP lawmakers Thursday morning.
The changes announced Wednesday could lead to policies with higher annual deductibles, according to the administration’s own proposal. That seems to undercut President Donald Trump’s assurance in a recent Washington Post interview that his plan would mean “lower numbers, much lower deductibles.”
Recently confirmed HHS Secretary Tom Price called them “initial steps in advance of a broader effort to reverse the harmful effects of Obamacare.” Premiums are up sharply this year, while many communities were left with just one insurer.
For consumers, the proposed HHS rules mean tighter scrutiny of anyone trying to sign up for coverage outside of open enrollment by claiming a “special enrollment period” due to a change in life circumstances such as the birth of a child, marriage, or the loss of job-based insurance. Also, sign-up season will be 45 days, shortened from three months currently.
Curbing special enrollments could be a boon to insurers. The industry claimed that some consumers were gaming the system by signing up when they needed expensive treatments, only to drop out later.
Insurers would also gain more flexibility to design low-premium plans tailored to younger people. But that flexibility could lead to higher deductibles, according to HHS.
“The proposed change … could reduce the value of coverage for consumers,” the administration proposal said. “However, in the longer run, providing (insurers) with additional flexibility could help stabilize premiums.”
The Associated Press contributed to this report.
Long Beach’s Molina Healthcare may stop offering Obamacare health plans after next year