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Sector Snap: Managed care stocks

NEW YORK (AP) — A Wedbush analyst says the managed care companies that won a group of coveted contracts with the state of Ohio want to do business in the most profitable areas of the state, not necessarily the biggest ones.

Molina Healthcare Inc., Aetna Inc., Centene Corp., UnitedHealth Group Inc. and a Humana/CareSource alliance will handle medical care for people who are covered by both Medicare and Medicaid. The two programs operate independently, and the small numbers of patients who participate in both programs are responsible for large numbers of medical claims and high costs. States have been working to better coordinate their care to Improve efficiency and reduce costs.

The Ohio Department of Jobs and Family Services divided the state into seven regions and allowed each health insurer who submitted a successful bid to operate in up to three of them.

Molina Healthcare said it will operate in the Cincinnati, Dayton, and Columbus markets, while Centene will do business around Cleveland and Dayton. Aetna will participate in the Columbus, Cincinnati, and Toledo markets.

Wedbush analyst Sarah James said Molina and Aetna were given first choice of regions, because their plans received the highest scores from the state. She said Molina and Aetna picked the most densely populated regions rather than the largest.

"Both Molina and Aetna selected the densely populated regions (Southwest and Central) which were not the largest, but due to the inclusion of some of the larger cities, including Cincinnati and Columbus, have more members in a compact urban setting to leverage networks," she wrote.

The analyst estimated that the contract could add up to 22 cents to Molina's annual earnings per share and up to 18 cents to Centene's annual earnings per share.

Molina expects to start enrolling patients on April 1 and Centene said it expects to open enrollment in the second quarter of next year.

Molina shares lost 9 cents to close at $24.37. Centene rose 6 cents to close at $40.76 and Aetna lost 47 cents to close at $38.53. UnitedHealth fell 28 cents to close at $54.33 and Humana fell 11 cents to end at $69.91.

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