Radar on Medicare Advantage

✦ Molina Healthcare, Inc. on April 30 said it entered into a definitive agreement to purchase Magellan Complete Care (MCC) for approximately $820 million, net of certain tax benefits. MCC is the managed care arm of Magellan Health, Inc. serving approximately 155,000 members in six states, including dual-eligible and managed long-term care individuals, according to a press release from Molina. Jefferies analysts David Styblo and David Windley said the move was unexpected and “dramatically changes” Magellan’s business mix, as the company will shed its Medicaid/duals assets to focus on growing its behavioral health, specialty pharmacy and pharmacy benefits holdings. With the addition of MCC, Molina will serve more than 3.6 million members in government-sponsored health care programs in 18 states and expects to achieve annual revenue of $20 billion. The deal is subject to federal and state approvals, among other closing conditions. Contact Styblo at dstyblo@jefferies.com. Go to https://bit.ly/2Wx1RzD.

✦ Although first-quarter 2020 results exceeded the company’s expectations, Molina Healthcare, Inc. saw its net income decline from $198 million, or $2.99 per diluted share, a year ago to $178 million, or $2.92 per share. The company in an April 30 press release attributed those results to medical cost pressure in its Medicaid line of business early in the quarter stemming from a slightly higher-than-normal flu season, compared with “early, but largely undetected COVID-19 costs diagnosed as severe respiratory illness and pneumonia.” Its Medicaid medical loss ratio rose from 88.5% in the year-ago quarter to 88.9%, while its Medicare MLR improved from 84.7% in the first quarter of 2019 to 81.7%. Molina reaffirmed its full year earnings guidance range of $11.20 to $11.79 per share, which does not include membership increases stemming from COVID-19-related unemployment or acquisitions that have not yet closed. Visit https://bit.ly/2z7leqZ

As Medicare Advantage plans seek ways to address isolated members’ social determinants of health during the COVID-19 pandemic (see story, p. 1), new guidance from CMS allowing midyear benefit changes and other flexibilities may be a big help.

“Given the unprecedented nature of the COVID-19 emergency, these flexibilities, in general, make a lot of sense,” Michael Adelberg, a principal with Faegre Drinker Consulting and a former CMS official, says of the 10-page document issued to MA and Part D sponsors on April 21.

As seniors during the coronavirus pandemic face issues such as loneliness, social isolation and food insecurity, an added source of stress for some may be trying to enroll in Medicare, especially if they or their spouses have lost employer-based insurance. And Medicare Advantage plans are uniquely positioned to educate people over the age of 65 who may qualify for a Medicare special enrollment period (SEP).

When the Medicare program was established in 1965, most people turning 65 were automatically enrolled in Part A and Part B because they began receiving Social Security benefits. Now, with many Americans working longer and delaying their Social Security benefits, the average age of those enrolling in Medicare is closer to 67 and a half, according to a recent Gorman Health Group webinar. And once Medicare-eligible individuals are beyond their Initial Enrollment Period (IEP), a seven-month window that opens three months before a person turns 65, they face a different set of rules and processes that could lead to lifetime financial penalties for enrolling late in Part B, according to the nonprofit organization Medicare Rights Center.

Insurers’ responses to the COVID-19 outbreak dominated recent first-quarter 2020 earnings calls, as did expected declines in utilization this quarter followed by a likely ramp-up of services later in the year, and waning commercial enrollment offset by increases in Medicaid and exchange membership. This anticipated volatility led some insurers to revise their full year earnings guidance, while some — including the two leading Medicare Advantage insurers — maintained their 2020 forecasts.

For the quarter ending March 31, Humana Inc. reported better-than-expected adjusted earnings per share (EPS) of $5.40 and an improved medical loss ratio (MLR) of 85.1%. This was largely due to the reinstatement of the Affordable Care Act health insurer fee in 2020 and the continued shift in Medicare member mix as its standalone Part D membership (which carries higher MLRs in the first quarter) dropped while MA membership rose, summed up securities analyst A.J. Rice in an April 29 note from Credit Suisse.