Centene (NYSE: CNC), Molina (NYSE: MOH) jump on Ohio Medicare reversal

Palm Beach, FL 6/8/12 (StreetBeat) – Shares of Centene (NYSE: CNC) and Molina Healthcare (NYSE: MOH) surged Friday after Ohio reversed an earlier Medicaid contract award on their appeal after finding the process was faulty.

Centene's Buckeye Community Health Plan and Molina Healthcare of Ohio both received contracts to do business throughout the state. Molina said the new contract is a significant expansion of its business in Ohio, expanding it into 38 counties where it did not previously operate. The contract begins in January.

Shares of Molina Healthcare Inc. jumped 23 percent, or $4.18, to $21.95 in morning trading. Centene Corp. shares rose $2.83, or 8.6 percent, to $35.67.

The Ohio Department of Job and Family Services made its initial decision on the contracts in April. Centene, Molina, and three other companies that did not receive contracts filed a protest, saying the review of the applications was flawed. After a review, the department changed the way it scored the applications.

As a result, Centene and Molina received contracts and Aetna Better Health and Meridian Health Plan did not.

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Health Insurer Molina (NYSE: MOH) Plunges on Ohio Medicaid Contract Loss

Shawshank, VA 4/9/12 (StreetBeat) -- Molina Healthcare Inc. (NYSE: MOH) fell the most in almost seven years yesterday after saying its contract to manage 1.5 million patients in Ohio’s Medicaid program won’t be renewed.

Molina plunged 24 percent to $26.53 yesterday at 10:01 a.m. New York time, after dropping 25 percent in its biggest intraday decline since July 2005. Amerigroup Corp. (NYSE: AGP) and Centene Corp. (NYSE: CNC), which also will lose contracts with the state, fell.

Ohio told Molina’s local health plan on April 6 that it was no longer in the running to administer the federal-state program for the poor after the current contract runs out at the end of the year, the Long Beach, California-based company said in an April 6 filing. Ohio was responsible for 22 percent of Molina’s premium revenue and 30 percent of profit, Chris Rigg, an analyst with Susquehanna Financial Group, said in a note to clients.

Centene, based in St. Louis, declined 12 percent to $44.71, while Amerigroup, based in Virginia Beach, Virginia, fell 4.7 percent to $64.29.

Companies like Molina are paid by states to manage benefits for patients, steering them into cheaper services and helping coordinate their care.

Ohio plans to merge eight managed-care regions within the state into three, part of changes that will save taxpayers $1.5 billion, the Job and Family Services Department said in a statement on April 6. Aetna Inc. (NYSE: AET) and UnitedHealth Group Inc. (NYSE: UNH) are among the companies selected to help administer the programs starting next year.

The losing plans are expected to protest the decision, Rigg said in his note.

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