Molina announced Tuesday it is acquiring New York Medicaid managed care plan provider Affinity Health Plan for $380 million, another in a string of acquisitions to shore up its core business.
The move will add 284,000 Medicaid members for Molina, a significant increase as the payer climbs the ranks in the important managed care market currently dominated by rival Centene.
The transaction is expected to close in the second quarter of next year, subject to regulatory approvals. Molina said it will be funded with cash on hand.
Molina is continuing to double down on its bread and butter of Medicaid managed care, snapping up plans in key markets. The Affinity buy follows the July acquisition of YourCare Health Plan, which doubled Molina’s Medicaid footprint in New York to 66,000 members.
At the beginning of September, the payer also closed the acquisition of Kentucky’s second-largest Medicaid plan. And in April, Molina agreed to buy Magellan Complete Care, which has 155,000 members across six states.That transaction is expected to close in the first quarter of next year.
Molina CEO Joseph Zubretsky outlined the plan in January, saying the company was looking at building up its current core competencies, not looking for new plays. In a statement Tuesday, Zubretsky described the latest buy as “a perfect product line and geographic fit.”
SVB Leerink analysts said in a note Tuesday morning that Molina is uniquely positioned to capitalize on the acquisition and has “already proven its ability to execute margin turnarounds of underperforming plans.” They added the payer has potential to become “the next great Medicaid managed care consolidator.”
The YourCare acquisition brought the number of counties Molina covered in New York from four to 11. The Affinity deal adds another five.
The expansions come as Medicaid rolls are set for potential growth in the face of the COVID-19 recession. About 4.3 million people gained Medicaid coverage from February to August, according to Families USA, which said states could see even more growth in the coming months.
However, those economic headwinds are also hitting states hard. A handful have already announced plans to cut managed care rates, a setback for Molina and Centene.
Along with other commercial payers benefiting from lower provider volumes during the coronavirus crisis, Molina saw its profit jump 40% in the second quarter of this year. The company will report its third quarter results Oct. 28.