Molina Healthcare (MOH) Buys

Molina Healthcare, Inc. (MOH Free Report) completed its pending buyout of Cigna’s Texas Medicaid contracts. The transaction, declared in April 2021, was completed on Jan 1, 2022.

Rationale Behind the Deal

With this deal, the leading health insurer will be able to expand its presence in the Texas area. As of Nov 30, 2021, Cigna’s Texas Medicaid business served around 50,000 members.

As announced in April last year, Molina Healthcare expects to gain around $1 billion of new annual revenues with this prudent move. MOH will be able to meet the requirements of additional Medicaid and MMP members in Texas. With the COVID-19 pandemic taking a toll on our lives, more people are enrolling in Medicaid.

The recent move is well-timed as ample prospects are prevalent in the Medicaid market, primarily targeting the low-income groups. The latest economic downturn, which rendered people jobless and reduced their income made them more eligible for Medicaid coverage.

Continuous program expansions across several states can be cited as one of the primary drivers for the Medicaid market.

Molina Healthcare’s Medicaid business has been contributing to its overall growth for a while. MOH ended 2020 with 3.6 million Medicaid members.

Acquisition Story

Acquisitions have been a major component of MOH’s growth strategy. MOH is keen on venturing on its core capabilities like Medicaid and Medicare and leaves no stone unturned to expand its portfolio.

The currently Zacks Rank #2 (Buy) player completed the buyout of Magellan Complete Care (MCC) line of business of Magellan Health in 2020, which helped it acquire 3.6 million members across 18 states. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MOH also closed other buyouts, such as YourCare and Passport in 2020, which led to membership increase. Molina Healthcare also acquired AgeWell’s managed lonwg-term care business in New York.

Shares of MOH have gained 46.5% in a year’s time, outperforming its industry’s growth of 38.8%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Other healthcare providers boasting a strong Medicaid business across the United States include Humana Inc. (HUM Free Report) , Centene Corporation (CNC Free Report) and Anthem, Inc (ANTM Free Report) .

Humana’s Medicaid business has also been contributing to its top line for years now. Revenues from Medicaid and other businesses increased 6.7% year over year in the first nine months of 2021. The South Carolina plan is also on track, which is expected to go live in 2022.

Centene’s Medicaid business is also poised well for growth owing to contract wins and membership growth. CNC’s 2020 buyout of WellCare diversified its business by strengthening its scale and adding more than 12 million Medicaid members.

Anthem recently entered into an agreement to buy Integra Managed Care from a wholly-owned indirect unit of Personal Touch Holding Corporation to bolster its Medicaid business portfolio. The acquisitions of Missouri and Nebraska Medicaid plans of WellCare Health in January 2020 also added around 300,000 Medicaid members under its coverage.

Shares of HUM, CNC and ANTM have gained 12.9%, 33.1% and 45.9% each in a year’s time.


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