Thursday, February 18, 2016

Cheap and narrow Molina gains market share in Covered California

Yesterday, Covered California released some selected health insurers' sales data. The press release emphasized the fact that insurers that cut their prices in 2016 gained market share. 

As I've been tracking the offerings performance of Medicaid managed care providers (MCOs) that are selling on the ACA exchanges, I was interested in the snippets about Molina, an MCO that fields narrow networks on the exchanges and probably pays providers something close to Medicaid rates. Here's what CoveredCA had to say about Molina in CA in 2016:
Molina Healthcare lowered its rates for 2016 and ended up enrolling more than 50,000 new consumers during open enrollment, which, when added to the more than 37,000 who selected Molina in renewal, means it has more than 88,000 enrolled, the fifth-largest total statewide...

In Los Angeles, which consists of rating regions 15 and 16, Molina saw its total plan selections jump from 22,299 in 2015 to 88,170 in 2016, nearly a 400 percent increase.
This makes sense. In Los Angeles, it's almost entirely in Region 16 that Molina made its play and gained its share. Molina put up both the cheapest silver and the  cheapest bronze plans in that region -- massively undercutting the benchmark silver plan, and thus offering buyers a major discount on the Cost Sharing Reduction (CSR) subsidies available only with silver. For a 40 year-old earning $23,000, a shared under 200% of the Federal Poverty Level (FPL), Molina silver is just $74 per month in Region 16 in  2016, vs. the benchmark silver's $119 (Health Net).  Molina's bronze plan at that age and income level is just $1 per month, vs. $55 for the nearest competitor.

Molina accordingly grabbed the largest share of new enrollees in that region 28.5%, or 21.010. Given the price spread, it's perhaps surprising that Molina's share wasn't even bigger. There were, however, six competitors. In the much smaller Region 13, comprising Mono, Inyo and Imperial Counties, Molina got 78.3% of new enrollees (3,580). There, in much of the region -- i.e., most or all of Imperial County, by far the largest of the three counties -- Molina put up an insanely cheap silver plan, fully $136 per month cheaper than the benchmark for a 40 year-old, rendering it essentially free ($1 per month, as CA does not allow 0-premium plans) for our $23k earner. Its bronze plan was the same $1 per month for that customer.

In San Diego too (Region 19), Molina put up both cheapest silver and cheapest bronze, and won 24.5% of new enrollees (10,080). For a 40 year-old $23k earner, Molina silver was $109 per month, a $10 discount from the benchmark, and Molina bronze was $54. Here, though, an interesting contrast emerged.  Sharp Health Plan won 22.7% of new enrollees (9,350), despite the fact that its silver plan would cost our 40 year-old $23k earner $151, and its bronze plan, $67.

Why is that? CoveredCA assigns each plan an "overall quality" rating, "based on members’ reported experiences as captured by 10 questions on the Consumer Assessment of Healthcare Providers and Systems survey from 2011,"* according to a July 2015 report from Third Way. Molina gets the lowest quality rating -- 1 star. Sharp in San Diego has a 4-star rating. Third place (among new enrollees) Kaiser, priced within a dollar or two of Sharp, also gets 4 stars.

Price isn't everything in the marketplace. But it's the biggest thing. And the MCOs -- at least, those that act like MCOs -- are competing effectively there.


* [Updated] The CAHPS survey asks plan members about their experience

  • Getting needed care
  • Getting care quickly
  • How well doctors communicate
  • Health plan information and customer service
  • How people rated their health plan


  1. I think the quality ratings for Covered CA plans are compiled based on consumer feedback, using the Consumer Assessment of Healthcare Providers and Systems. It covers a whole range of metrics that indicate overall consumer satisfaction - here are more details:

  2. Thanks, Louise. Comment crossed with an update to that effect..

  3. The interesting and pro consumer thing is Covered CA active buyer model did not let Molina spam the exchanges. People had reasonable choices instead of being effectively locked into a Molina policy

  4. I would add two cautions to this article:

    a. we do not really know if Molina is paying Medicaid rates to doctors and hospitals. Actually it is not easy for a layman to find out what Medicaid rates really are.

    b. In a number of states, including my own state of MN, some insurers did have very low premiums and so grabbed a large market share. But they did not do this by paying lower rates to doctors. They did it by just hoping that high volumes would make up for high claims, and by expecting the risk adjustment funds of the federal government to pay off in full.
    We know what has happened to co-ops which did this, and to Preferred One here in MN. They left the market.

    I have been arguing aince 2009 against the idea that paying low rates will alone solve our insurance dilemmas. This argument surfaced during the public option debates. If an insurance company gets a lot of bad risks, then .paying lower rates to providers will not save it