The health-management organization fell 31 percent to $17.77 at 4 p.m. New York time, the biggest one day decline since July 2005. Molina said yesterday in a regulatory filing that revenue generated in some markets in Texas isn’t enough to cover the costs of providing services.
Molina has been increasing its health plans in Texas, adding about 172,000 new members in the state between March 31, 2011 and April 30. The company said that use of long-term services, such as adult day care, in the Hidalgo and El Paso areas is much greater than in other parts of Texas, throwing off the company’s evaluation of the state’s premium rates.
“Worst case, with no favorable offsets, it’s possible the issue costs Molina $1.60 per share this year, erasing virtually all of their earnings,” said Carl McDonald, a Citigroup analyst in New York, in a note to clients. “That said, how often have we seen a troubled Medicaid market turn around in a couple of quarters?”
Molina said it will implement new premium rates for its Star+Plus contracts in Texas in September. The Star+Plus program is a Texas Medicaid program designed to provide acute and long- term health care through a managed-care system. Molina said it will give more information on its financial performance during a second-quarter earnings call on July 26.
Molina’s announcement sent down the shares of rivals who also do Medicaid business in Texas. Virginia Beach, Virginia- based Amerigroup Corp. (AGP) fell 2.9 percent to $61.21 and St. Louis- based Centene Corp. (CNC) declined 12 percent to $32.84.
Medicaid is the joint state-federal program for the poor.
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