Post 2Q, Medicaid MCOs Proceed With Caution

Earnings posted by publicly traded insurers for the second quarter of 2020 reflect the continued impact of the COVID-19 pandemic that began in March, with low medical loss ratios (MLRs) driven by depressed utilization that only began to pick back up in June. But some managed care organizations, especially those with Medicaid business in states that are feeling the financial crunch of the pandemic, indicated during recent earnings calls that they are approaching the balance of the year with caution given unknowns about medical costs and potential rate adjustments.

Reporting second quarter earnings on July 30, Molina Healthcare, Inc. estimated that COVID-19 drove an increase in earnings per share of about $1.10 to $1.65, for overall EPS of $4.65. Premium revenue rose 8% from the prior-year quarter to reach nearly $4.4 billion as membership experienced sequential growth of 151,000 (4%), primarily in Medicaid. Specifically, Medicaid membership jumped 5% from the first quarter to 3.1 million, but Molina believes this was due to the suspension of redeterminations and that enrollment stemming from unemployment has yet to fully materialize in managed Medicaid, stated President and CEO Joseph Zubretsky during a July 31 conference call to discuss second quarter earnings.

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