COVID-19 Now Hurts Younger Insureds More: Molina CEO

The summer COVID-19 surge may have hit working-age people harder than Medicare or Medicaid enrollees, partly because working-age people were less likely to be vaccinated against the virus that causes the disease.

Joseph Zubretsky, CEO of Molina Healthcare, talked about that observation Thursday on a conference call the company held to go over earnings for the third quarter with securities analysts.

The Surge Quarter

The third quarter began July 1 and ended Sept. 30.

Molina manages health coverage for about 4 million people with Medicaid coverage, 138,000 people with Medicare coverage and 719,000 people get individual commercial major medical coverage from the Affordable Care Act health insurance exchange program. Even many of the ACA plan enrollees are low-income, but they are in households with income above the federal poverty level.

In the third quarter, the COVID-19 surge was the one factor that pushed the ratio of medical costs to revenue up to 91.3% for exchange plan enrollees, up from 81.6% in the third quarter of 2020.

The ratio increased to 89.6%, from 86.4%, for Medicaid enrollees, and to 86.8%, from 82.4%, for Medicare enrollees.

The impact of the surge was bigger for exchange plan enrollees, partly because Molina has many exchange plan enrollees in California, Florida, Texas and Washington state, where the COVID-19 delta variant hit hard, Zubretsky said.

But the surge hit exchange plan enrollees harder because exchange plan enrollees tend to be younger, he added.

The cost of caring for a younger person who has COVID-19 tends to be a bit lower than the cost for an older person, “but the infection rate is high, and the younger population tends to be unvaccinated,” Zubretsky said.

Zubretsky noted that COVID-19 surges tend to crowd out spending on ordinary care, and that drops on spending on ordinary care tend to offset increases in COVID-19 treatment costs.

Drew Asher, the chief financial office at Centene, a Molina competitor, said Centene saw a spike in demand for COVID-19 treatment in August, and that the peak was higher than during the severe January surge.

But claims fell in September and are still falling this month, Asher said.

At Centene, he said, the effects of the surge were tougher on the ACA exchange plan business than on the company’s Medicare Advantage plan business, “because of the high vaccination rate of seniors.”

The Enrollment Calendar

Zubretsky and executives from Centene also talked about the effects of changes in individual major medical insurance rules on the health risk level of new individual major medical insureds.

In recent years, states have handled the ACA ban on medical underwriting in the individual market by making it easy for individuals to buy health coverage during the limited “open enrollment period” that began around Nov. 1 and ended around Dec. 15 in most states.

Individuals had to show they had what the government considered a good reason to qualify for a “special enrollment period,” or SEP, at other times of the year.

The theory is that the limited open enrollment period pushes younger, healthier people to pay premiums even when they feel healthy, to avoid the risk of needing expensive care at a time when buying coverage is difficult.

This year, because of concerns about the COVID-19 pandemic, the administration of President Joe Biden added a long special enrollment period. People in most states could sign up for health coverage up until August.

Few health insurers said much about the long special enrollment period, raising the possibility that health insurers might be open to scrapping limits on when people can buy individual coverage.

But Zubretsky and Asher said the enrollment period changes did affect enrollee health risk.

At Molina, the influx of special enrollment period enrollees “was another headwind this year,” Zubretsky said.

Now, the government is making a special enrollment period available only to people with income below 150% of the federal poverty level, and that should help reduce Molina’s exposure to SEP enrollees by reducing the number of them, he said.

Molina has tried to raise 2022 prices enough to reflect that it might continue to get more SEP enrollees than usual, to reflect that some of the expensive-to-cover 2021 SEP enrollees will renew their coverage, Zubretsky added.

Asher did not give details on SEP enrollee costs, but he said Centene is tracking medical costs for ordinary SEP enrollees, enrollees who came in under the new SEP rules and ordinary new enrollees separately.

The Earnings

Molina reported $143 million in net income on $7 billion in revenue for the third quarter, compared with $185 million in net income on $5 billion in revenue for the third quarter of 2020.

The Long Beach, California-based company ended the quarter providing or administering major medical coverage for 4.8 million people, up from 4 million people a year earlier.

Centene — a Clayton, Missouri-based health insurer that focuses on serving low- and moderate-income people and Medicare enrollees — reported $581 million in net income for the third quarter on $32 billion in revenue, compared with $565 million in net income on $28 billion in revenue for the third quarter of 2020.

Centene ended the quarter providing or administering health coverage for 27 million people, up from 25 million a year earlier.

Joseph Zubretsky (Photo: Daniel Acker/Bloomberg)