Dive Brief:
- Molina has closed its $350 million acquisition of ConnectiCare, the health insurer announced Tuesday.
- The deal adds $1.4 billion in annual premiums to Molina’s topline and 140,000 additional Medicare, Affordable Care Act marketplace and commercial members to the insurer’s rolls.
- The acquisition, which was announced last summer, also brings Molina into the state of Connecticut for the first time. ConnectiCare was previously a subsidiary of New York-based nonprofit health plan EmblemHealth.
Dive Insight:
Recently, Molina has focused on growing its ACA and Medicare footprints in the 18 states where it already offers Medicaid coverage — the insurer’s bread and butter — as that allows Molina to lean on its existing infrastructure to drive growth.
However, that wasn’t an option for Connecticut, which is a fee-for-service Medicaid state, Molina CEO Joe Zubretsky said during a call with investors in July.
Molina was attracted to ConnectiCare due to the plan’s stable revenue and opportunity to improve margins, according to the CEO. Molina plans to curb medical spending in ConnectiCare’s marketplace and Medicare plans while lowering its operational costs to increase the business’ profitability, Zebretsky said.
Once that’s done, the acquisition is expected to add $1 to Molina’s earnings per share over time.
ConnectiCare is the second of two purchases for California-based Molina over the past year. Last January, the payer closed its deal to buy Bright Health’s Medicare Advantage plans in California for roughly $425 million.
As of September, Molina had more than 4.9 million members in Medicaid, compared to 247,000 in Medicare and 410,000 in ACA plans.
Like other Medicaid insurers, Molina has struggled with a disparity in states’ payment rates and the acuity of beneficiaries in the safety-net insurance program.
However, in the third quarter Molina beat Wall Street expectations for earnings and revenue, thanks in part to higher premiums.
Molina is scheduled to report fourth-quarter results on Thursday.
