Insurers Posted Huge Financial Gains
California's three major health insurers are reaping significant financial benefits from the Affordable Care Act.
Two of those insurers, the publicly-traded Molina Healthcare and Health Net, reported big gains in enrollment and revenue for the fourth quarter ending Dec. 31. The not-for-profit Kaiser Permanente also reported significant gains.
The Oakland-based Kaiser Permanente, which is by far the largest of the health plans based in California, reported a loss of $68 million for the fourth quarter of 2014. However, it reported a 5.4% gain in revenue for the quarter, reaching $14.2 billion, compared to $13.5 billion during the fourth quarter of 2014.
For all of 2014, Kaiser reported net income of $3.1 billion, up 15% from the $2.7 billion reported in 2013, with operating income up by 22%. Revenue grew by 6.1%, to $56.4 billion from $53.1 billion.
Membership also grew by 500,000 in 2014, reaching 9.6 million, an increase of more than 6%.
“Today we provide health coverage and care to just under 10 million Americans, thanks to our tremendous membership growth in 2014,” said Kaiser Chief Executive Officer Bernard J. Tyson. “This affirms that our focus on quality, service and affordability is resonating with America.” Tyson added that the surge in enrollment and bottom line performance allowed Kaiser to reduce its health plan premiums increases in 2015, although it did not offer specifics. Kaiser did cut some 2015 premiums for enrollees in Covered California a few percentage points.
Long Beach-based Molina Healthcare, which focuses on Medi-Cal and Medicaid managed care enrollees, reported a dramatic rise in both net income and revenue. Its net income for the fourth quarter ending Dec. 31 was $33.8 million, compared to a loss of $9.1 million for the fourth quarter of 2013. Revenue was $2.6 billion, up 66% from the $1.7 billion reported during the same quarter last year. Nationwide enrollment zoomed 692,000 to 2.62 million, an increase of 36%.
For calendar year 2014, Molina reported net income of $62.2 million, up 18% from the $52.9 million reported for calendar 2013. Revenue was $9.7 billion, up 46% from the $6.6 billion reported in 2013.
“2014 was a year of great growth and accomplishment for Molina Healthcare. We added almost 700,000 members to our health plans; we launched our Medicare Medicaid dual eligible plans in California, Illinois, and Ohio; and we began operations at our South Carolina health plan,” said J. Mario Molina, M.D., Molina's chief executive officer. He added that Molina is expected to expand into Puerto Rico and its dual-eligible business during 2015.
Woodland Hills-based Health Net also reported significant growth in 2014. For the quarter ending Dec. 31, it reported net income of $4.9 million on revenue of $3.6 billion. That compares to net income of $19.8 million on revenue of $2.7 billion. Although revenue was up by one-third, the company incurred $72.1 million in pretax expenses related to a master services agreement with a wholly owned subsidiary of Cognizant Technology Solutions Corp. The company entered into a multi-year agreement with the company last August to assist in claims management, membership and benefits configuration, information technology and other services.
“We are pleased that 2014’s strong momentum continued in the fourth quarter of 2014. This profitable revenue growth in 2014, we believe, sets the stage for further gains in 2015,” said Jay Gellert, Health Net’s chief executive officer. “We look forward to 2015 and the expected implementation of our agreement with Cognizant following receipt of required regulatory approval. We believe this agreement will position Health Net for expanded product development and service capabilities that will support and provide scale for incremental growth in the years ahead.”
Total enrollment at Health Net reached
3.16 million at the end of 2014, up from 2.45 million at the end of 2013, a nearly 30% increase. Medicaid enrollments increased 50% during that period, to 1.7 million members.
Although officials with both Health Net and Molina have discussed some pressures managing their Medicaid books of business, particularly in terms of delayed payments, their stocks are both up more than 70% over the past year.
And while Kaiser’s capital spending was $2.8 billion in 2014, down from $3.3 billion in the previous year, the company announced it would continue to invest heavily in renewable resources. Kaiser said this week it would purchase half the energy it uses in California from renewable sources by funding wind and solar power initiatives and would cut its greenhouse gas emissions nationwide by 30%.
“The health impacts of a changing climate can be felt today in the form of increasing rates of asthma and other respiratory ailments, spread of infectious diseases, heat stress and injuries from severe weather events,” said Kathy Gerwig, Kaiser’s environmental stewardship officer. By addressing climate change for the future, we are improving the health of communities today.”
