Cutbacks lead to nixed plans in San Pedro
By Terelle Jerricks, Managing Editor
No one outside of the Fortune 500 company could have foreseen its rapid retrenchment after Molina Healthcare announced it would be moving one of its business units into the 100,000 square foot digs in San Pedro’s Topaz building in March 2017.
Molina Healthcare Inc.’s board of directors unceremoniously fired Dr. J. Mario Molina and John C. Molina in May 2017. The men had served as the organization’s top two executives for more than 20 years. Their father, Dr. C. David Molina, founded the company in 1980 to address the special needs of low-income patients. Mario Molina steered the company when the elder Molina died in 1996. John Molina guided the company when it went public in 2003.
The company released a statement saying the firings were due to “poor financial results.”
At the time, the Los Angeles Times reported that analysts had long viewed the local health insurer as a potential acquisition target of a larger insurer. Removing the brothers could make such a deal easier.
“The board never gave me an explanation. I had an employment agreement that says I can be terminated without cause and that’s what they did,” Mario Molina said. “And they terminated me and my brother. It was clear the company was no longer interested in operating the clinics.”
Molina noted he already owned a medical group (Golden Shore Medical Group) and that there was a clause in his contract that said if Molina Healthcare wanted to close or get rid of the medical clinics, he had the right to buy the assets.
“So I simply exercised that right,” Molina said. “The clinics are valuable community assets. They are in low-income communities and they serve people in need of that care who would probably have a difficult time getting that care if it wasn’t for those facilities.”
Molina insures 765,000 people, and until Jan. 1, it operated its own clinics around the state. The company has MediCare programs and has served more than one million customers who purchased a plan with a marketplace exchange created by the Affordable Care Act.
In September 2017, the company announced plans for a reorganization that includes the elimination of some 1,500 positions nationwide — almost 600 of those in Long Beach. As part of the reorganization, the company also withdrew from a lease of space at the Topaz building in San Pedro and moved out of its headquarters in the World Trade Center in Long Beach.
“They laid people off so they just don’t need the space anymore,” Molina said. “The easiest and fastest way to cut costs is to cut staff and that’s what they did. Think about it, if you’re an insurance company, you’re paying claims for people for when they get sick, you don’t have a lot of control over that. You can decide how many employees you want and lay people off tomorrow.
“I think that Molina Healthcare, like all the other large insurance companies, especially those that have participated in Medicaid in the Affordable Care Act marketplaces, are concerned by the uncertainty over what the future holds,” Molina said, alluding to the attacks on the Affordable Care Act by the Donald Trump administration and Republican-controlled Congress.
“There was a tremendous effort by the Republicans in congress to repeal the law,” Molina said. “They failed, but they continued trying to undermine the law and I’m sure that was a concern to a company like Molina, which has a substantial portion of its membership covered through Medicaid and have a large marketplace presence. Businesses hate uncertainty. [If] it’s hard to plan, it’s hard to budget.
“If you look at Certene, Molina Healthcare and even United and Anthem, they all saw growth in the Medicaid side of their business because of the expansion of the Medicaid program. So, for many of the insurance companies, they saw more membership and more revenue. Molina was not unique in this.”
Molina wouldn’t speak on the particulars of Molina Healthcare’s case, but he singled out the Customer Sharing Reduction payment issue as an example of how the health care for the neediest is being used as political football.
As the Golden Shore Medical Group founder explained it, if Mr. Jones, a health consumer on a the Silver Plan, goes to the doctor and has a $50 copayment, his health insurer would halve the cost so that Mr. Jones only has to pay $25. The health insurer would then bill the federal government, saying “You know, we paid half of Mr. Jones copay, we need you to pay us $25.”
“But the Trump administration stopped paying those, then the insurance companies raised their premium rates. So that was one of the things that came out of all of this and so people in the marketplace saw higher premiums,” Dr. Molina said.
“For most people in the market place who are getting federal subsidies, it didn’t impact them very much. For the people not getting subsidies, the 15 percent or so not subsidized, it meant a huge increase in their insurance premiums. So, that’s one of the big things that happened in the past year.”
Molina said he believes it’s the same challenge that all doctors face, especially in California where reimbursements for physician services are especially low.
“California ranks down at the bottom in what they pay doctors to take care of MediCal patients,” Molina said. “That’s obviously something that concerns us.”
He said he’s worried about people who have insurance right now in Covered California and those on Medicaid in California.
“I would hate to see people go back to being uninsured,” Molina said. “Before the Affordable Care Act, we used to see people who were uninsured who would pay us cash for their care. That was fine. We could do that.”
“Where we would have difficulty was if they didn’t have insurance to cover prescriptions or they didn’t have insurance to cover hospitalization. There is only so much we can do for them and that’s what I worry about with all of the discussion in Washington about further cuts to the Affordable Care Act.”
Molina noted that the Trump administration is now talking about allowing people to buy association health plans that would be exempt from some of the rules and terms of the benefits are covered.
“You might have insurance and find out that chemotherapy is not covered,” Molina said. “Nobody plans to get to sick. Nobody plans to get cancer and sometimes people don’t think about what is covered under their plan.”
The doctor noted that because of Affordable Care Act’s 10 essential benefits the Covered California marketplace has very comprehensive insurance policies.
“But you could end up, if you’re a small employer or self-employed getting one of those association plans and find out when you’re really sick, the services are not covered. It’s a real danger,” he said.
Molina said there are two things citizens need to focus their attention on:
- Congressional attempts to use budget gap caused by the Trump administration’s tax cut to cut Medicaid
- And the further undermining of the Affordable Care Act through the rulemaking process.
“The tax cut is going to increase the deficit,” Molina said. “Some Republicans are fine with that, but not all of them. [But] I think people like congressional House Speaker Paul Ryan are going to try to cut Medicaid … to close that budget gap.”
The doctor said that was especially a problem here in California because we’ve expanded Medicaid to cover people who are not insured.
We could also see the roll out of a lot skimpy insurance plans. People might buy those plans thinking they are getting coverage at a lower cost. This is a situation in which these particular health consumers would find that the treatment they need may not be covered.
“That’s a real danger and that’s something I think is going to fly under the radar screen,” Molina said. “A lot of people don’t understand or don’t realize, or they’re just not involved.”
With the change of ownership over Molina Healthcare’s clinics, Molina said patients should expect the same quality of care going forward.
“We accept MediCal patients and MediCare patients and Covered California patients and that will remain in effect,” Molina said. “Really, what’s changing is the name. The locations are the same.”
The doctor noted that about 90 percent of Molina Healthcare staff who worked under the old ownership have accepted offers of employment.
“For the next few months we’ll be changing the signs and changing the name,” the doctor said. “It’s going to be the same people providing the same services [patients] were used to in the past.”
What will possibly change under Molina’s Golden Shore Medical group is the number of insurance carriers with which they have contracts.
“Right now it’s primarily Molina Healthcare,” Molina said. “In the future, we would like to have contracts with other insurance plans as well.”