In a surprise move, Molina Healthcare executives expect to significantly scale back enrollment in one of the company's key offerings, Affordable Care Act marketplace plans.
After ballooning in 2021, Molina's marketplace enrollment for 2022 is expected to plummet by as much as 66%, executives told investors last week, as the company looks to improve the product's profit margin after an unfavorable year. The reduction will result in fewer premium dollars of $1.2 billion.
"All told, our marketplace performance has been a disappointment," CEO Joe Zubretsky said during last week's call with investors.
Zubretsky blamed adverse selection, explaining that the carrier picked up sicker members during the special enrollment period, which allowed shoppers to buy an insurance plan on the exchanges outside of the traditional open enrollment period.
Policymakers initiated the special enrollment period as a way to ensure Americans had access to insurance coverage during the COVID-19 pandemic, a time when many were at risk of losing their job-based coverage.
Some analysts said they were surprised by Molina's marketplace expectations for the year, and questioned leaders about the long-term strategy for the marketplace business.
"We never intended to have 728,000 [marketplace] members. That was a function of the special enrollment period, which not only grew membership beyond what anybody expected, but added a significant element of adverse selection," Zubretsky said.
Molina's marketplace membership spiked in 2021 due to the special enrollment period
In fact, Zubretsky said that the members picked up during the special enrollment period weighed on the margin due to their acuity levels. The medical care ratio was exceptionally high for these members, 105% in the fourth quarter and 100% for the full year. The medical care ratio is a measure of how much an insurer is spending on care compared to the premiums it brings in.
Adverse selection is one reason why consumers can only enroll in a plan during a specific time of the year. If consumers could enroll whenever they wanted, many would likely wait until they needed medical services to buy a plan.
Molina's key focus is Medicaid, it's flagship business. "This is an adjunct to Medicaid," Zubretsky said of marketplace plans. The strategy is to catch Medicaid members — who are no longer eligible — in a marketplace plan that is partially or fully subsidized.
To curb enrollment, Zubretsky said they stopped selling just about all of their bronze products, leaving in place silver plans that are more financially favorable to the company.
Leaders said the company started the year off with 320,000 members, a number that is expected to recede to 250,000 by the end of the year.
Although the effects of the pandemic led to historic job losses in the early days of the pandemic, it did result in a spike in the uninsured rate in the U.S.
While there were modest declines in employer coverage, enrollment in other safety-net programs swelled, including Medicaid. Enrollment in Medicaid ballooned as states were barred from kicking people off the program during the duration of the public health emergency, even if they may no longer be eligible for the coverage.
In addition to Medicaid, more people signed up for coverage on the exchanges as federal dollars made coverage more affordable throughout the pandemic. A total of 2.8 million people signed up for marketplace coverage during the 2021 special enrollment period.
It's unclear how many Medicaid members will buy a exchange plan when states begin redetermining whether those members are still eligible for Medicaid. Insurers like Molina are poised to pick up those members should they churn off the program.