This health insurer's stock tumbles again as Medicaid, Obamacare businesses worsen

By Tomi Kilgore

Molina blames higher medical costs for the earnings disappointment, but it's because more people than expected are making health-insurance claims

Molina Healthcare's stock was tumbling after a big profit miss, as medical costs keep rising because more people are making insurance claims.

Shares of Molina Healthcare Inc. took a dive Thursday as the health insurer said it continues to suffer from an environment of higher medical costs, which resulted in a big earnings miss.

But the higher costs stem from more people using the insurance services than the company had expected, particularly in its Affordable Care Act - known as Obamacare - business, but also in its Medicare and Medicaid businesses. While the company is still taking in more money in premiums than it is paying out in claims, that spread has narrowed more than expected.

The stock (MOH) plunged 21.6% in morning trading, enough to make it the S&P 500 index's SPX biggest decliner on the day. That puts it on track for the biggest one-day decline since it tumbled 22% on July 2, after a peer called out similar cost concerns.

The selloff was also affecting Molina's peers, as shares of Centene Corp. (CNC) fell 7.1%, UnitedHealth Group Inc.'s stock (UNH) lost 0.9% and Elevance Health Inc. shares (ELV) slipped 0.3%.

Molina earlier Thursday reported third-quarter net income that dropped 75.8% from a year ago to $79 million. And adjusted earnings per share, which excludes nonrecurring items, of $1.84 was well below the average analyst EPS estimate compiled by FactSet of $3.90. The margin of the bottom-line miss was the widest since the fourth quarter of 2020.

Molina said about half of the impact on earnings it is seeing from the higher-cost trend is from its Marketplace segment, which includes the ACA business, and represents just 10% of the overall business. Chief Executive Joe Zubretsky said on the post-earnings call with analysts that the company was dealing with the issue basically by covering fewer people.

"Marketplace is undergoing a rationalization, addition by subtraction, as we reduce our exposure while the risk pool stabilizes," Zubretsky said, according to a FactSet transcript.

For the quarter to Sept. 30, the company said the overall medical-care ratio - or the percentage of the insurance premiums it receives that is paid out in benefits, in which lower is better and less than 100% means it's profitable - rose to 92.6% from 89.2% a year ago. That was well above the average analyst estimate compiled by FactSet of 92.6% and the highest rate in at least five years, according to available FactSet data going back to October 2020.

Among its businesses, Marketplace MCR shot up to 95.6% from 73% a year ago, while Medicare MCR climbed to 93.6% from 89.6% and Medicaid MCR rose to 92% from 90.5%.

Zubretsky said the costs were higher because more people than expected used insurance to pay for services. In its flagship Medicaid business, which represented about 75% of total premiums collected, the higher costs were driven by utilization of behavioral-health, pharmacy, long-term support and inpatient hospital services.

In Medicare, where the company's customers are older and have more severe medical issues, the higher costs were particularly a result of long-term support services and high-cost drugs.

For 2025, the company raised its MCR guidance to 91.3% from 90.2%.

The company now expects full-year adjusted EPS of about $14, compared with guidance provided in July of no less than $19.

Meanwhile, Molina raised its guidance for total revenue to $44.5 billion from $44 billion. That's after the company reported third-quarter revenue that increased 11% from last year to $11.48 billion, which beat the FactSet consensus of $10.97 billion.

Molina's stock has dropped 47.5% in 2025, while the S&P 500 index SPX has advanced 14.3%.

-Tomi Kilgore

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10-23-25 1214ET