Molina Healthcare closes ConnectiCare acquisition

Photo: Martin Barraud/Getty Images

Molina Healthcare has announced the closing of its acquisition of ConnectiCare Holding Company as of February 1. 

Molina, headquartered in Long Beach, California, announced the acquisition in July and said it expected to close during the first half of 2025. In July the purchase price was reported as $350 million, representing 25% of expected 2024 premium revenue of $1.4 billion. Molina said it intended to fund the purchase with cash on hand.

WHY THIS MATTERS

The acquisition represents a strategic fit for the managed care Fortune 500 company by adding an established government sponsored health plan and a new state to its portfolio. 

At closing, ConnectiCare, in Farmington, Connecticut, a subsidiary of EmblemHealth, served approximately 140,000 members across the Affordable Care Act marketplace, Medicare and certain commercial products.

Molina Healthcare plans serves approximately 5 million members in Medicaid, Medicare and state insurance marketplaces in 13 states and Puerto Rico.

The majority of its business is centered on Medicaid. An estimated 81% of Molina’s premiums are coming from Medicaid, compared to almost 13% from Medicare and only 6% from the marketplace, according to Seeking Alpha.

This dependence on the market has an element of uncertainty as Republicans have signaled their willingness to pursue spending cuts in the program for low-income Americans. 

However, on Friday, President Trump made comments that indicated he would protect the program, according to The Wall Street Journal.

Also challenging Medicaid performance is lower enrollment since the redetermination process in March 2023, though numbers are still higher than before the pandemic.

High Medical Cost Ratios have hit Medicaid plans, as they have for insurers in all lines of business.

As long as Medicaid MCR keeps increasing, the company will make less and less money, but the industry will trend steeply upward over the next decade because as the population ages, the demand for Medicare, Medicaid and healthcare services will only continue to rise, according to the Seeking Alpha report. Molina is pursuing growth, both organically and through acquisitions, with a strong balance sheet and liquidity.

Molina is expected to issue its earnings for the fourth quarter and year ending December 31, 2024, after the market closes on Wednesday, February 5, and will host a conference call and webcast to discuss the earnings release on Thursday, February 6, 2025, at 8 a.m. ET.

THE LARGER TREND

In 2017, Molina faced a restructuring after the board of directors fired brothers J. Mario Molina (CEO) and John Molina (CFO) over poor financial results in the ACA marketplace.

The company was founded by their physician father C. David Molina. The brothers had led the company for two decades.

Email the writer: SMorse@himss.org