Molina Healthcare (MOH) Acquires to Boost Medicaid Business

Molina Healthcare, Inc. MOH recently acquired certain assets of YourCare Health Plan, Inc., a not-for-profit unit of Monroe Plan for Medical Care.

As part of this deal, the company will serve around 47,000 Medicaid members across seven counties in the Western New York and Finger Lakes regions. Monroe and its unit MP CareSolutions will provide certain post-closing management and administrative services related to member care and provider relations.

Rationale Behind the Deal

The buyout will help the company cater better healthcare to members.
Molina Healthcare constantly made efforts to expand its presence in the Medicaid market and this move is in line with the same strategy. In October 2019, it purchased certain assets of YourCare Health Plan in a $40-million transaction.

Meanwhile, the whole of United States is grappling with financial woes, emanating from the COVID-19 pandemic. At a time when unemployment levels are alarmingly high, Molina’s Medicaid business is likely to witness increased membership. This is because Medicaid health plans generally provide coverage to low-income groups across the United States.

Also, the Health Maintenance Organization industry, to which Molina Healthcare belongs, remains well-poised to benefit from strong demand for health insurance products owing to a high percentage of aging population in the United States.

Various other initiatives, such as contract wins and acquisitions bode well for the company's Medicaid line of business. Last month, its Kentucky health plan subsidiary was awarded a new Medicaid managed care contract. The new agreement is likely to benefit enrollees under the company’s Medicaid programs in Kentucky. The healthcare provider inked a deal worth $820 million this April to acquire Magellan Complete Care (MCC), which is yet another managed care organization. With this addition, the company is expected to build a stronger portfolio and gain an enhanced geographic diversity, etc., which will allow it to launch Medicare and Marketplace in new Medicaid regions.

In 2019, the company’s Medicaid business contributed to 77% of its total premium revenues.  We expect such moves to boost contribution of Medicaid line of business to the total revenues.

Zacks Rank and Price Performance

Shares of this Zacks Rank #2 (Buy) company have gained 25.7% in a year’s time, outperforming its industry’s growth of 12.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other companies in the same space, such as Humana Inc. HUM, UnitedHealth Group Incorporated UNH and Centene Corporation CNC have also rallied 50.3%, 23.4% and 27.4%, respectively, in the same time frame. While both Humana and UnitedHealth Group currently carry a Zacks Rank #3 (Hold), Centene carries the same Zacks Rank as Molina at present.

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