Long Beach-Based Molina Healthcare Ousts 2 Top Execs

LONG BEACH, CA — In a surprise shake-up, Molina Healthcare Inc. — a major player in Obamacare health insurance markets — ousted its two top executives, both sons of the firm's founder, on grounds of poor financial results, it was reported Wednesday.

The growing Long Beach-based health insurer has nearly 5 million customers in 12 states and Puerto Rico, most of them insured through Medicaid, the government program for the poor, according to the Los Angeles Times.

In California, Molina insures 765,000 people and operates its own clinics around the state. The company also has Medicare programs, and more than 1 million customers who purchased a plan on one of the marketplace exchanges created by the Affordable Care Act, or Obamacare.

The company's shares soared as much as 20 percent on Tuesday after it said that J. Mario Molina, the company's chief executive and an outspoken critic of Republican efforts to repeal the ACA, and his brother John C. Molina, the chief financial officer, had been fired, according to The Times.

Analysts have long viewed Molina as a potential acquisition target of a larger insurer. Removing the brothers could make such a deal easier, analysts told The Times.

In remarks reported in Long Beach by the Press-Telegram, John Molina said he and his brother were not provided an official reason for their ouster.

"The resolution just said that we were terminated without cause," he said.

The two brothers will be replaced by Joseph White, currently the company's chief accounting officer. White will serve as chief financial officer and interim chief executive while the board seeks a replacement for the top post. The board also named Dale Wolf, a director, as the company's new chairman.

"In light of the company’s disappointing financial performance, the board has determined to change leadership in order to drive profitability through operational improvements," Wolf said in a statement.

"The board is committed to achieving operational excellence and improving the company's financial performance on behalf of our shareholders, more than 20,000 employees and our over 4 million members," he said.

The brothers will remain on Molina's board, the company said.

On a conference call Tuesday afternoon, analysts asked Wolf why the board had removed the executives so abruptly. One analyst asked if the company had found signs of fraud or illegal activity. Wolf told them that was not the case.

On Tuesday, the company reported its first-quarter results, showing that its total number of insured members jumped by more than 500,000 people to 4,766,000. In the first three months of the year, the company earned $77 million in net income from $4.6 billion in revenue, for a net profit margin of 1.6 percent.

The company's stock closed at $59.75 on Tuesday, up $8.95, or 17.6 percent.

— City News Service, photo courtesy of Molina Healthcare