ARI SHAPIRO, HOST:
Republicans often point to health insurance companies to help make their case for replacing the Affordable Care Act. Some big insurers, like Aetna and Humana, have scaled back their participation in the Obamacare marketplaces. They say it's too financially risky. Now, let's hear another perspective. The small insurer Molina Healthcare saw success during the early years of the exchanges. To find out why, KQED's April Dembosky talked to the CEO, Mario Molina.
APRIL DEMBOSKY, BYLINE: Molina's father, David, started the company in 1994. Before that, he was a doctor in Long Beach who focused on low-income patients. If they couldn't pay, sometimes they'd give him items from their homes instead - a glass decanter, a pipe organ, even a dog. He applied a similar philosophy to his health insurance company, serving customers with Medicaid - government coverage for the poor. So when the Affordable Care Act came along, Mario Molina was ready. Most people who signed up for Obamacare plans are low income.
MARIO MOLINA: It's a different population than most insurance companies have been interested in.
DEMBOSKY: For example, Molina knows that transportation is an issue for their customers. They often take the bus to medical appointments. So he says they'd much rather see a doctor close to home, not someone at a fancy academic hospital two hours across town.
MOLINA: We don't contract with every hospital and every doctor. It's not everyone, but it's enough so that you can find a doctor and the hospital and the services that you need.
DEMBOSKY: While some criticized narrow networks for not offering consumers enough choice, having fewer doctors means lower costs for customers and for Molina. And that means the company was able to earn some modest profits in the first couple years of Obamacare. Big-name commercial insurers are used to creating health plans for employers who often want more doctors and more benefits to attract better employees. Molina says plans like that cost more.
MOLINA: They're looking at things sort of from the top down, and we're looking at things from the bottom up.
DEMBOSKY: In other words, Molina is used to running a low-cost, low-margin business. Those big guys aren't. Industry analysts say that's why several of them lost money with Obamacare. Josh Weisbrod is a health care consultant with Bain & Company.
JOSH WEISBROD: For an insurer that is used to selling employer plans with rich benefit designs and broad networks, it is difficult for them to transition that to a narrower network of lower cost providers.
DEMBOSKY: But Molina has a serious complaint. There's a provision of the Affordable Care Act that requires companies with fewer sick patients to pay some of their revenues to the companies that have more as a way to spread out the risk. Molina says it was a fine idea, but it didn't work.
MOLINA: Currently, Molina Healthcare is returning 25 percent of our premiums to the government, which are then distributed to our competitors. So we are really subsidizing our competitors and helping them rather than forcing them to compete.
DEMBOSKY: He says the formula lawmakers came up with seems to punish efficiency rather than help those who had some bad luck.
MOLINA: It was done by well-meaning people who had a theoretical knowledge but not a practical knowledge of insurance.
DEMBOSKY: Molina operates in 12 states and Puerto Rico. He's hoping Congress will tap into his experience as it debates the future of the Affordable Care Act.
MOLINA: It doesn't need to be scrapped and replaced. It needs a tune-up.
DEMBOSKY: He says if lawmakers need guidance on how to fix Obamacare, they should look at one state that really got it right - California.
MOLINA: I think there's been more stability in the marketplace.
DEMBOSKY: There's also more predictability. California has a lot of rules, but Molina says that's created a level playing field.
MOLINA: We can plan from year to year. We understand the rules. Imagine if you're trying to play a game and the rules change at every quarter.
DEMBOSKY: He's hoping the newly elected rule makers take this to heart. For NPR News, I'm April Dembosky.
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SHAPIRO: And that story is part of a partnership with NPR, KQED and Kaiser Health News.
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