According to the law firm press release, Molina Healthcare, Inc. ("Molina") is a managed care company, focused on 4.5 million members eligible for Medicaid, Medicare, and other government-sponsored healthcare programs. Molina’s health plans are operated by various wholly-owned subsidiaries, each of which is licensed as a health maintenance organization (HMO).
The Complaint alleges that during the Class Period, Molina misled investors regarding the scalability of its existing administrative infrastructure, falsely claiming that the Company’s existing administrative infrastructure could support rapid growth into existing Medicaid markets and new Patient Protection and Affordable Care Act health insurance marketplaces (“ACA Health Exchanges”) in a cost-effective manner. Molina later admitted that its existing administrative infrastructure was built for a “much smaller, simpler business” and was “never” designed to support the Company’s growth strategy.
The truth regarding Molina’s failed growth strategy and inadequate administrative infrastructure was revealed through a series of disappointing financial results, culminating on August 2, 2017, when the Company reported a net loss of $230 million for the quarter, termination of its ACA Health Exchange participation in Utah and Wisconsin, and a major restructuring plan. During the related earnings call, Molina revealed that its administrative infrastructure was never designed to sustain such rapid growth. On this news, Molina’s common stock price fell $3.92 per share, or 5.92 percent, to close at $62.32 per share on August 3, 2017.