Despite Financial Losses, Molina CEO Argues For ACA Tuneup Instead of Repeal, Replace

What Obamacare giveth, Obamacare taketh away. But it doesn’t have to be that way, argues J. Mario Molina of Molina Healthcare. The insurer serves mostly Medicaid beneficiaries and that’s why it made a profit on the exchanges in the first couple of years.

Molina told the Hill last September that, “In the Medicaid environment, we don’t have the ability to raise prices or raise premiums. We have to learn to live within a budget, and that’s very different than on the commercial side.”

The 4 million-member company expected to rake in $16 billion by the end of 2016. “The thing that surprised us is that we actually exceeded our growth expectations,” Molina told the Hill last September.

That was then. In February, Molina showed a net loss of $91 million. That’s $1.64 per share, compared to a $30 million profit for 2015.

Molina tells Kaiser Health News that the loss is due to what he sees as a structural flaw in the ACA known as risk transfer. It’s one of the subsidies accorded insurance companies who wind up losing money for servicing a sicker, poorer population. Except this subsidy doesn’t come from the government but from other insurers who don’t have as many sicker, poorer patients.

Molina likes the idea but says the formula used to carry it out is flawed, according to Kaiser Health News. It punishes efficiency rather than helps companies that have had some bad luck in the risk pool.

“Let’s put it this way. Currently Molina Healthcare is returning 25% of our premiums to the government, which are then distributed to our competitors. So we are really subsidizing our competitors and helping them, rather than forcing them to compete.”

Molina remains a fan of the ACA despite the recent disappointing financial performance. Obamacare needs neither repealing nor replacing, just a tuneup. Going against the grain of some large insurers (Aetna, UnitedHealthcare, and Humana) who’ve either exited or are planning to exit the ACA exchanges, Molina Healthcare intends to stay in the exchanges.

The Aetnas, Humanas, and UnitedHealthcares of the industry are used to creating extensive insurance benefit packages for large employers, Molina tells Kaiser. Molina Healthcare has narrow physician networks and does not contract with every hospital in a region and that has helped the company do well on the exchanges.

Josh Weisbrod, a health care consultant with Bain & Company, tells Kaiser Health News that, “It’s easier to work up from a low-cost position than it is to work down from a higher-cost position. For an insurer that is used to selling employer plans with rich benefit designs and broad networks, it is difficult for them to transition that to a narrow network of lower-cost providers.”

Source: Kaiser Health News