Molina Healthcare (MOH $18.23 -7.53) disclosed last night that based upon its current analysis of actual claims payment and member utilization activity in the Hidalgo and El Paso service areas, it now believes that the premium revenue associated with the STAR+PLUS contracts in those service areas is not adequate to cover the medical costs associated with serving members under existing conditions. Utilization of long term care services, including personal attendent services and adult day health care services, is currently far exceeding the utilization of those services elsewhere in the state, and also far exceeding the utilization assumptions used in the development, and our evaluation, of the premium rates. Co estimates that the medical care ratio (medical costs as a percentage of premium revenue) for the STAR+PLUS membership in the Hidalgo and El Paso service areas is running at approximately 120%. The overall medical care ratio of the entire Texas health plan is running at approximately 100%. Excluding the STAR+PLUS membership in the Hidalgo and El Paso service areas, we estimate that the medical care ratio of the Texas plan is running at approximately 93%. New premium rates for the Texas health plan will be implemented effective September 1, 2012.
Because of the uncertainties surrounding the co's medical costs in Texas and the prospect for success of the efforts it has undertaken to address those cost issues, the co is withdrawing those fiscal year 2012 guidance elements related to or derived from medical costs, including its earnings guidance. Co believes that the financial performance of the remainder of its health plans and its Molina Medicaid Solutions business remains consistent with its earlier provided 2012 guidance.






