Most insurance industry executives have been circumspect about the repeal of the Affordable Care Act and its proposed replacement, the American Health Care Act. Mario Molina is an exception.
“I think this bill is terrible,” Molina, the CEO of Molina Healthcare, told The Huffington Post in a lengthy interview Friday.
The company covers more than 4 million people scattered across 13 states ― including California, where it’s headquartered, as well as Florida, Michigan, New York and Texas. That makes it the 10th-largest health insurance company in the U.S., according to a 2015 government survey.
Molina’s main argument against the bill is the same one critics have been making for months ― that the measure would expose millions of lower-income Americans to crippling medical bills, by taking away their Medicaid coverage or the federal tax credits that make it possible for them to buy private insurance.
These warnings are consistent with the findings of multiple independent analysts, including the Congressional Budget Office, which last week predicted that the Republican proposal would drive up the number of uninsured Americans by 14 million within a year and 24 million within a decade. Among those taking the hardest hits, the CBO said, would be poor Americans who now rely on Medicaid and older consumers whose premiums would skyrocket because the bill would allow insurers to charge them much more than they can today.
Even those who held onto coverage could expect that it would be less generous than it is today, the CBO noted, as the combination of looser regulations and redirected financial assistance shifted the market toward policies with higher out-of-pocket expenses.
“You can’t say this is not my problem. ... This is your problem. You just don’t know it yet.”
- Mario Molina, CEO of Molina Healthcare
Molina, a physician, has an up-close perspective on what this would mean, making his commentary more valuable, less reliable or both ― depending on your perspective.
Molina’s father, also a physician, established the company in 1980 to serve low-income people in Southern California. And it has never strayed far from its roots. Its business consists mostly of insuring people on Medicaid (states contract with Molina to provide coverage) or selling plans to people who buy on the Obamacare exchanges and, because of their low incomes, qualify for extensive subsidies.
The Republican bill would likely deal a significant blow to Molina Healthcare’s revenue and the skeptical take on its CEO’s perspective is that he’s simply trying to protect his company’s bottom line. But precisely because Molina Healthcare has a long history of working with lower-income consumers, it may understand the Obamacare private insurance markets better than many of the larger, nationwide carriers that make headlines in the national media.
Molina is accustomed to managing care aggressively, by nudging newly insured patients into the primary care system quickly ― something of particular importance when it comes to insuring people who have gone months or years without coverage, and without ongoing care for chronic conditions. Molina also has a history of tough negotiation with doctors and hospitals, and limiting networks to only those who will agree to lower reimbursement ― thereby allowing the company to keep premiums low.
As a general rule, the big companies with the names that everybody recognizes focus on other lines of insurance, such as administering employer plans or offering private Medicare Advantage plans, in which the market dynamics are very different. The people who buy those plans care a lot more about having big networks and aren’t as sensitive on prices.
Those companies have tended to struggle more trying to sell individual coverage ― in particular, they have struggled to attract enough young and healthy people, whose premiums insurers require to offset the cost of paying bills for people with serious medical problems. Critics of the law say the skewed risk pool represents a structural problem with the law, because the coverage insurers are selling just isn’t very attractive to consumers unless it comes with huge subsidies that discount it deeply for the near-poor.
This year the CEO of one of those big national companies, Aetna’s Mark Bertolini, declared that the program was actually in a “death spiral” ― the line that President Donald Trump, House Speaker Paul Ryan (R-Wis.) and other GOP leaders have cited over and over again as a rationale for repealing the law as quickly as possible.
But analysts at the CBO and the Brookings Institution, among others, have disputed that verdict, arguing that insurers simply under-priced premiums for the first two years and are finally catching up.
And just like Molina Healthcare has its own self-interest, Aetna does too. Specifically, it has been fighting to win federal approval for a controversial merger with Humana. Documents that surfaced in recent litigation over that merger led a federal judge to conclude the company has been trying to “leverage its participation in the exchanges for favorable treatment” from federal regulators.
Aetna has denied this. Molina is not convinced. “There’s a lot of politics going on between Aetna and the administration, so you have to take that with a grain of salt,” Molina said.
As for the state of the Affordable Care Act overall, Molina acknowledges some problems with the private insurance markets. But he thinks they are largely isolated to states such as Arizona and Tennessee ― and amenable to minor fixes rather than an overhaul. “You can think of it almost like a patchwork quilt,” Molina said, noting that states like California and Michigan have stable marketplaces. “In some states it’s working well and in other states it’s not.”
Molina Healthcare itself posted a small loss in the last quarter of 2016, after posting small profits during the law’s first two years. But the CEO said that was only because it was required to pay into a “risk adjustment” scheme, designed to protect insurers from losses, under a flawed formula. The company had been complaining about this for years and the regulation has since been fixed, Molina said.
“We added about half a million members this year,” Molina said. “Some plans grew a lot, and some plans probably got smaller, and they probably got smaller deliberately because they raised their premiums intentionally. So I don’t think it’s imploding right now.”
Molina was careful to say that the current political environment has introduced a new element of uncertainty ― in part because, quite apart from the question of repeal, there’s the question of whether the federal government will continue to pay for special subsidies that low-income consumers get to defray out-of-pocket costs. Those subsidies are in limbo, thanks to a court ruling last year, and neither the administration nor Congress have indicated clearly whether they will act to make sure the money continues to flow.
The lack of clarity, Molina said, means that even his company, which has been among the Affordable Care Act’s most enthusiastic proponents, is not sure what it will do in 2018 ― or beyond.
Molina warned that if the GOP bill or something like it passes, and many millions of Americans end up losing coverage, the effects will eventually spread. He said the loss of payments would eventually hit the hospital sector, forcing closures particularly in rural areas, while eroding the quality of coverage available to everybody.
“You can’t say this is not my problem ― I have insurance, this is not my problem,” Molina said. “This is your problem. You just don’t know it yet.”