By Shares of Molina Healthcare fell nearly 20% in premarket trading on Thursday after the US health insurer once again reduced its full-year profit forecast, citing surging medical costs in its government-backed insurance plans.
The Long Beach, California-based company said it now expects adjusted earnings of about $14 per share for 2025, down from a previous projection of at least $19.
It marks the third downward revision this year as Molina struggles to manage a sharp rise in expenses tied to its Affordable Care Act (ACA) and Medicare plans.
The company warned that the higher costs, which it described as “unprecedented,” would likely continue through the end of the year, weighing on profitability.
Profit plunges despite higher revenue
For the third quarter, Molina reported a steep drop in net income to $79 million, or $1.51 per share, compared with $326 million, or $5.65 per share, a year earlier.
Adjusted earnings came in at $1.84 a share, well below Wall Street’s expectation of $3.90, according to FactSet.
Revenue, meanwhile, rose 11% to $11.48 billion, driven by higher premiums and growth in membership.
However, the increase failed to offset escalating claims costs as more members sought medical care.
“The headline for the quarter is that approximately half of our underperformance is driven by the Marketplace business, and that Medicaid, while experiencing some pressure, is producing strong margins,” said President and Chief Executive Joseph Zubretsky, in a statement.
Analysts call results disappointing
Mizuho analysts described the third-quarter report as a “disappointment,” noting that rising medical cost trends were evident across all three of Molina’s business segments.
“The miss and guidance reduction reflects elevated medical cost trends in all three of its business lines, but underperformance in its (Affordable Care Act) marketplace business was a main driver of the miss,” the analysts noted, maintaining its Outperform rating with a $228 price target.
TD Cowen analysts cited Molina’s conviction that margin challenges would be temporary, adding that the company was “encouraged by the margin improvement potential in 2026.”
It continues to rate the stock Hold with a $203 target, after downgrading it earlier this month.
Rising medical costs hit health insurers
Molina’s troubles reflect a broader industry challenge.
US health insurers have reported mounting expenses under Obamacare-linked plans, where more enrollees require costly treatments.
The structure of the ACA marketplace—where insurers are reimbursed for covering sicker members through a risk adjustment pool—has amplified the impact.
The report also weighed on shares of other ACA-focused insurers.
Centene and Oscar Health fell between 3% and 7%, while larger peers UnitedHealth and Elevance Health dropped around 1.5% in premarket trading.
Earlier this week, Elevance warned that higher medical costs in its Obamacare and Medicaid plans would continue into next year.
Molina, by contrast, said its Medicaid segment was holding up better, though utilization levels remained high.
Still, analysts at Baird noted a 6% decline in Molina’s Medicaid membership from a year earlier, reflecting some attrition as states reassess eligibility for low-income programs.
Outlook hinges on cost control and pricing
Molina executives said they expect margin improvement beginning next year and reiterated that the company’s preliminary 2026 profit outlook would be roughly in line with 2025.
However, analysts remain skeptical.
“Given the choppiness in both Medicaid and Marketplace, Molina will need to clearly outline the margin drivers supporting its 2026 profit expectations,” JP Morgan analysts said.
The company had already trimmed its outlook twice in July, anticipating continued cost pressures.
With this latest revision, investors are questioning whether the insurer has fully accounted for the headwinds.
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