Molina Reports Lower Net Income

Medicaid managed care firm Molina Healthcare reported significantly lower net income for the third quarter ending September 30, as the company continues a brisk expansion while facing ongoing rate cuts.

The Long Beach-based Molina reported net income of $3.4 million for the quarter on revenue of $1.54 billion. That compares to net income of $19 million for the third quarter of 2011, a drop of more than 82%. Revenue was up significantly from the $1.18 billion reported during the third quarter of 2011, an increase of 32%.

Molina Chief Executive Officer J. Mario Molina, M.D., attributed the growth in revenue primarily to an expansion of its role caring for Medicaid beneficiaries in Washington State. Overall enrollment there increased from 350,000 to 411,000 in the past year, making it the state where Molina cares for the largest number of lives. Moreover, revenue from Washington grew by 30%, offsetting revenue declines from the Missouri cancellation and an enrollment decrease in Texas, which dropped to 291,000 from 301,000 at the end of the second quarter of 2012.

“The developments in Washington are an example of the growth that is happening in our industry even without the impetus of federal legislation,” Molina said. He added that the Washington expansion could be considered a replacement for a contract in Missouri that was not renewed. The health plan covered 79,000 lives in the Show Me State. termed a replacement for a contract in Missouri that was not renewed.

Total enrollment for Molina at the end of the quarter stood at 1.83 million, in nine states, up from 1.68 million a year ago, but down slightly from the second quarter of 2012. Aged, blind and disabled program enrollees reached 264,900, up from 192,800 from a year ago, while the Medicare Advantage rolls totaled 34,100, up from 31,000 a year ago.

However, costs for some segments went up significantly. The medical loss ratio in California stood at 96.1% for the quarter, up from 88.1% a year ago. California is the second largest state where Molina does business, with 346,000 enrollees.

The company noted in a statement that the increases in premiums have not kept pace with the additional costs for providing medical care.

Despite the lower net income and higher cost trends, Molina’s stock rose about 10% in New York Stock Exchange trading in the days after it released its earnings last week.