Molina closes $ 60 million acquisition of Cignas Medicaid contracts in Texas

Diving card:

  • Molina has completed its acquisition of rival health insurance company Cignas Medicaid in Texas, the California payer said Monday as it continues to invest heavily in the safety net insurance program.
  • The purchase price for the transaction was approximately $ 60 million in cash, according to a recent application to the SEC.
  • Although Molina was already active in Texas, getting hold of Cigna’s recipients is a significant addition: In November, Cigna covered approximately 50,000 Medicaid recipients in the state. Molina closed in 2020 with 357,000 members in Texas.

Diving insight:

Molina covers about 4.8 million people in the United States, but Medicaid is the payer’s flagship, representing more than three-quarters of its members (and premiums). The program has grown due to the pandemic, which has caused some players in the Medicaid markets to increase their investments and others to jump in for the first time.

Molina is known to be acquiring, but has been on a tear as it appears to be taking advantage of this growth. Currently, the payer offers Medicaid plans in 18 states, with the largest scale and revenue coming from health plans in California, Ohio, Washington and Texas.

Moving to Cignas Medicaid contracts in Texas, first announced in April, is one such recent deal that should provide significant financial returns for Molina: Cignas’ approximately 50,000 Medicaid members in the state represent approximately $ 1 billion in annual premium income.

Along with recent contract wins in Nevada and Ohio, Molina also announced in October that it had closed its acquisition of New York Medicaid health plan Affinity Health for approximately $ 380 million and that it had entered into a final agreement to acquire AgeWell’s New York Medicaid administered long care business for about $ 110 million.

The AgeWell agreement, which will add about 13,000 members to Molina’s roles, representing about $ 700 million in premium revenue, is expected to close in the third quarter of this year.

Like most other major payers, COVID-19 initiated Molina to high profits in 2020, but has recently negatively impacted the insurance company’s finances. Molina’s third-quarter net income of $ 143 million fell 23% year-over-year as the payer paid more for patient care than in the previous quarter.

Despite the volatility of COVID-19, Molina has performed well in the markets and outperformed the S&P 500 last year. However, the stability of the Medicaid rolls on which it is so dependent is a key area of ‚Äč‚Äčinterest for market observers, as the duration of the public health crisis will determine whether and when a restart of Medicaid reforms will affect managed care organizations in year.

The Families First Coronavirus Act, passed in March 2020, provided states with a temporary boost to their federal fighting resources in the Medicaid program as long as they ensured that eligible recipients remained enrolled during the national emergency. The continuous coverage requirement contributed to Medicaid becoming the largest single source of insurance coverage in the United States

But when the emergency ends, states could resume regulations, potentially kicking off millions of safety net insurance due to a change in income or other factors.

Molina said in conjunction with its third-quarter financial release that it expects the public health emergency to run at least until mid-January.

The payer’s Medicaid enrollment has increased to about 4 million members by the end of the third quarter, primarily due to the continued suspension of nest provisions. Molina estimates that this has resulted in an increase of more than 700,000 Medicaid members since the beginning of the pandemic.

However, CEO Joe Zubretsky told investors in October that the insurance company expects to retain only half of the new Medicaid members gained during the pandemic after resumption of reinstatement has been resumed nationwide.

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