Health insurer Molina Healthcare Inc. has a big opportunity to grow revenue thanks to a push in several states to improve care coordination for people eligible for both Medicare and Medicaid programs, according to a Citi analyst.
Federal and state governments are looking to place so-called dual eligible people into managed care to improve coverage and cut down on wasteful spending and duplicate tests for a population that generates a lot of medical claims. The push combines what state and federal governments spend on that population and then lets health insurers manage the care.
Medicare is the federal program that provides health coverage for the elderly and disabled, while Medicaid is a state-federal program that covers the aged, blind, needy and disabled. States hire private health insurers to run their Medicaid programs.
THE OPINION: Analyst Carl McDonald said Molina, based in Long Beach, Calif., could add about $3.8 billion in revenue if it just maintains its Medicaid market share in Michigan, California and Ohio, as dual eligible people in those states convert.
"So even if Molina's ultimate share of the dual opportunity turns out to be a lot lower, it would still have a big impact on the company's earnings trajectory over the next couple years," McDonald noted.
McDonald raised his target price on the stock to $55 from $36 and said it could "legitimately" become a $70 stock in a couple of years.
THE STOCK: Up 70 cents, or 2.2 percent, to $32.28 in afternoon trading, while the Standard & Poor's 500 index rose less than 1 percent.
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