Los Angeles Business Journal

Molina Healthcare Withdraws Guidance Over Texas Concerns

By Deborah Crowe Originally published June 7, 2012 at 2:57 p.m., updated June 7, 2012 at 6:27 p.m.

Shares of Molina Healthcare Inc. plunged more than 30 percent on Thursday after the Medicaid managed care provider withdrew its full-year earnings forecast because costs in its large Texas market were exceeding premiums.

Shares recovered somewhat in after-hours trading after the company announced it had won an appeal to continue as a carrier in Ohio, also one of its largest markets.

The Long Beach company said in a regulatory filing that member claims in some recently entered markets for Molina Healthcare of Texas, particularly Hidalgo and El Paso, had substantially exceeded its estimates. Molina Healthcare of Texas has more than doubled the number of people enrolled in its plans to an estimated 300,000 people over the past year.

"Utilization of long-term care services, including personal attendant services and adult day health care services, is currently far exceeding the utilization of those services elsewhere in the state," Molina said in the filing.

New premium rates for the Texas health plan are scheduled to take effect on Sept. 1, and Molina said it will ask the state to re-examine those rates based on what the company has experienced. The Texas plan also has implemented new medical cost controls in order to improve its profitability. The company also could eventually withdraw from the high-cost markets.

Molina said that its profit estimates for its flagship California and other markets are not expected to change. The company plans to provide more information in July when it reports second quarter financial results.

An hour after the markets closed, Molina announced that the Ohio Department of Job and Family Service had upheld the company's protest of losing its contract with the state to Aetna Inc. starting next year. Ohio had awarded Aetna the contract in April, but Molina and another carrier, Centene Corp., successfully challenged the scoring criteria.

Shares closed down $7.99, or 31 percent, to $17.77 on the New York Stock Exchange, but rose $3.21, or 18 percent to $20.98 in after-hours trading.