Health and Healthcare

Did Molina Healthcare's Future Just Get Compromised?

Paul Ausick

Published: May 1, 2016 9:40 am

Last Updated: January 13, 2020 10:03 am

Molina Healthcare Inc. (NYSE: MOH) to a real beating on Thursday after reporting a bad miss on first-quarter earnings. The stock was down nearly 20% on Friday after the company said it missed the consensus earnings per share estimate by $0.27.

What happened? During the company’s conference call CEO Joseph Molina said that the big miss was the result of Medicaid reimbursement rates’ failure to keep up with rising medical costs. That failure cost the company $0.55 share in diluted earnings per share.

Revenues increased but that wasn’t enough to offset the rise in costs. Molina appears to have been caught in the same trap that ensnared many other insurers: in an effort to sign up new subscribers the insurers underestimated the number of sick people who would be signing up for coverage under Obamacare after years of being excluded from coverage on the basis of pre-existing conditions. Why insurers were surprised by this is anybody’s guess.

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