Molina Healthcare SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

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Threat

1. Isolationism policies in the American economy: The current government ruled by Donald Trump promoted isolationism as a beneficial policy for employment guarantee to natives but it is not a healthy signal for business houses and the result was evident as stock exchange put its worst performance after the elections in Jan 2017 just after the government released the news of implementing it by banning natives from 7 countries. This would not only affect the globalization process leading to healthy relationships among countries but also affect the diversity and quality of workforce. The customer base to which Molina Healthcare is serving will also be seriously affected by this policy leading to both loss in skilled and talented employees as well as revenue generation. It would also affect the big American brands, tourism as well as service industries like Molina Healthcare. A trade war will start leading to uncertainties in the ecosystem. It would affect the work culture and hence related issues can also arise leading to difficult situations to handle which would affect the core business of Molina Healthcare.

2. Lack of skilled work force: The US healthcare industry is projected to grow at the rate of 18.1% from 2016 to 2026 and a forecast is that a 3.5 million healthcare workers will be needed to fill new jobs in the U.S. from 2016-26.The additional healthcare workers needed to replace workers who will leave the occupation or retire during that time period is 8.1 million. The labor data suggests more than 37,000 physicians; nurse practitioners and physician assistants will be needed in coming decade. The home care and ambulatory care settings are the healthcare sectors are expected to see the fastest growth during this period. A total of 700,000 jobs will be added by 2026 in the Hospital sector job. Over 14 % jobs out of total in US employment are in the healthcare sector or in healthcare occupations. The number of hospital jobs that consisted out of total healthcare employment decreased from 41 percent in 2006 to 39 percent in 2016 and it will be further decreased to 35% by 2026. But the real problem is to get the desired skilled workforce in such humongous numbers. So there should be initiatives from government to train people so as to fulfill this rapidly growing requirement. By already cutting 10% of its workforce in July 2017, Molina Healthcare is running behind the required number of employees to capitalize this rapidly growing healthcare industry. So number of skilled force needed is high in the organization and it need to find human resource as they are the one who create the difference.

3. Intense competition in healthcare segment: The major competitors of Molina Healthcare are United Healthcare, Well Care, Humana, Medi Assist, Centene, Magellan Health and Aetna. The large number of service providers leads to intense battle for customer acquiring as well as retention. The product and service differentiation among the offerings and price are decision factors along with the need of customers. There is not only direct competition in terms of customer’s acquisition but also for resources, technologies, human resources and funding. One solution to this can be merger and acquisitions leading to enhanced core competencies and improved capabilities. Other solutions can be leveraging technologies, diversifying the product portfolio, strengthening the relationships with not only customer but also with intermediaries.

4. Uncertainty regarding the Affordable Care Act (ACA): The terms of the ACA have undergone numerous changes with reduced funding being the most significant. The continuity of several programs under the ACA have thus come under threat. Molina has been directly affected as a planned reduction in Molina's Affordable Care Act exchange enrolment led to a fall of 14.2% memberships over 2017 to reach 3.8 million by the end of December 2018. The changes in the ACA have been a result of a ruling made by a federal judge in Texas in a case in December 2018 involving the state of Texas and nineteen other states, which deemed the ACA’s individual mandate as unconstitutional and therefore the ACA as being unconstitutional. Molina is likely to see adverse effects resulting from the ACA being deemed unconstitutional.

Political

1. Bureaucracy and interference by government: The history indicates that the medical cost inflation and government interference in health care markets appears to support the underlying assumption that prices were set by the laws of supply and demand in the USA. The previous government’s policy of Obamacare was expected to expand coverage by about 22 million people with subsidies and another 17 million through Medicaid and because of it the demand will likely skyrocket without increasing supply proportionately. This will lead to higher prices and costs and/or lower quality that will result in calls for nationalization by Democrats while the Republicans counter it with private insurance and tort reforms. Single-payer health-care helps keep costs down for two reasons- It means that the government can regulate and negotiate the price of drugs and medical services, and it eliminates the need for a vast private health-insurance bureaucracy. The Congress did eliminate the requirement that everyone buy insurance or face a tax. That could reduce the number of people with insurance. Health care costs will rise faster over time as the uninsured return to using emergency rooms as primary care physicians. Trump's health care plan has found many ways to weaken the Affordable Care Act considerably. Owing to the current situation there lies a huge un-served market for Molina Healthcare; the only problem is Trumps policies can lead to higher premium rates which can be an issue to tackle.

2. Pricing, taxation regulations and incentives: Presently, the private health insurance market comprises more than 1,250 commercial carriers like Molina Healthcare, 70 Blue Cross plans, and 69 Blue Shield plans. The private insurance is regulated mostly at the state level. Multiple tax subsidies are available to many buyers and sellers of health insurance. These subsidies have the potential of creating excess demand for health insurance, which in turn can create excess demand for health services. This is favorable for Molina Healthcare in creating its presence across states and expansion. If the government does not raise reimbursement levels to meet those of the private sector, access to care is limited for Medicaid patients, and Medicare patients have increased out-of-pocket costs. If it does raise the reimbursement levels, the outlay of funds for Federal programs increases. The present tax subsidies may be increasing the demand for health care which could be the cause of rising prices in the private. Three states are being reported in plans to add new taxes in FY 2018. Thirteen states reported increases to one or more provider taxes in FY 2018, compared to only five states reporting provider tax decreases market. Under federal law and regulations, a state’s ability to use provider-specific taxes to fund their state share of Medicaid expenditures has limits and those taxes cannot generally exceed 25% of the state share of Medicaid expenditures, and the state cannot provide a guarantee to the providers that the taxes will be returned to them. Despite these federal limitations, many states are now using or considering use of provider taxes, sometimes to supplement static or declining provider reimbursement rates. If planned wisely Molina Healthcare can take advantage of these federal plans and tax rebates and initiatives provided by state government.

3. Legislative pressure on Medicaid funding: The Medicaid program in the USA may see reduced federal and state spending in the near future owing to a number of different legislative proposals under consideration. These proposals seek to review federal role in healthcare and if put into effect is likely to cause negative effects upon Molina’s revenues. The ACA has already seen several changes being applied to its terms and this includes reduced funding. Molina is thus unable to make long term business plans because of the uncertainties surrounding the ACA and its programs.

Economic

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Social

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Technological

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Legal

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Environmental

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