(Bloomberg) -- Molina Healthcare Inc. is cutting costs, shrinking its headcount and exiting some Obamacare markets after the health insurer posted a steep second-quarter loss, three months after pushing out the brothers who'd led the firm their father founded.
The company said it's eliminating about 1,500 jobs as part of a restructuring plan that it hopes will save $300 million to $400 million by late next year. In the meantime, Molina withdrew its 2017 earnings outlook. The company also said that it will exit money-losing Affordable Care Act markets in Utah and Wisconsin for next year and increase rates sharply elsewhere.
Molina, a major player in Medicaid health plans and the ACA, fired Chief Executive Officer Mario Molina and Chief Financial Officer John Molina in May. The company is still searching for a permanent leader as interim CEO Joseph White, who is also the finance chief, takes action to improve results. White told investors the company failed to properly prepare for an influx of customers over the past several years fueled by the Affordable Care Act.
“We were doubling down on existing processes, existing methods of doing things, when we actually needed to just strip down to the fundamentals and rebuild the chassis of the business,” he said.
White said the job cuts are targeted at Molina's managerial ranks as the company seeks to broaden the responsibilities of remaining managers. The insurer is also redoing contracts with doctors and hospitals and updating its payments and claims processes, he said.
“We should have conducted the full redesign of our business that we are doing now,” he said.
Molina is still searching for a new CEO, and White said he couldn't say when a new executive would be announced.
The second-quarter loss was $230 million, or $4.10 a share. The company said it increased the amount of funds set aside to cover losses in ACA plans to $100 million, as performance in those markets deteriorated. Molina said it will exit other states “as may be necessary.”
In addition to its departure from Utah and Wisconsin, Molina said it will scale back its presence in Washington state's Obamacare market, without giving details. White said the company is keeping a close eye on other states where it's losing money, such as Florida, and could still decided to quit additional areas. Molina said it is increasing rates by 55 percent on average in its remaining Obamacare markets.
The shares fell 11.8 percent to $58.40 at 5:58 p.m. in New York.
To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net.
To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Timothy Annett, John Lauerman
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