Molina (MOH) to Buy AgeWell's Medicaid Long Term Care Business

Molina Healthcare, Inc. MOH recently announced that it agreed to purchase Medicaid Managed Long Term Care business of AgeWell New York.

AgeWell is a specialty managed care organization that caters to long-term medical care at home or for individuals with chronic illnesses or disability in The Bronx, NY, Queens, Kings (Brooklyn), Nassau, Westchester and Suffolk counties.

Subject to certain closing conditions, the deal is expected to close by the third quarter of 2022. The acquisition is expected to be immediately accretive to the company’s adjusted earnings per share and Molina expects to fund it with cash on hand.

The purchase price for the deal is around $110 million, net of certain tax benefits and the company’s target allocation of required regulatory capital. This was a strategic move to further solidify its Medicaid business.

As of Aug 31, 2021, AgeWell catered to around 13,000 managed long-term services and supported (MLTSS) members. The company reported approximately $700 million of premium revenues last year. The addition of AgeWell’s Medicaid business will help Molina penetrate further in New York as well as be complementary to its current MLTSS business.

The acquisition, synergistic to Molina’s current Senior Whole Health of New York MLTSS business, provides an opportunity to leverage the health insurer’s fixed cost base.

The company is on a buying spree to build its core business. Earlier this year, the health insurance company bought Cigna Corporation’s CI Medicaid business in Texas for $60 million in cash. This deal is expected to fortify Molina’s footprint by 48000 Medicaid members and 2000 dual Medicaid-Medicare enrollees.

The company is expected to steadily gain from its Medicaid business, which is evident from a series of contract wins.

In August, its Nevada health plan subsidiary won a Medicaid-managed care contract from the Nevada Department of Health and Human Services — Division of Health Care Financing and Policy (DHCFP). We expect such moves to boost the company’s revenues from its Medicaid line of business in the days ahead.

Other industry players like Anthem Inc. ANTM and Humana Inc. HUM will also gain from their respective Medicaid businesses as demand for the same is high.

The entire United States is grappling with financial woes brought about by the COVID-19 pandemic.

At a time when unemployment levels are persistently 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.

Other factors, such as its cost-cutting measures, ability to engage in inorganic growth initiatives and capital deployment poise the company well for growth.

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