Molina Healthcare Faces Challenges with Profit Forecast and Medicare Withdrawal
Molina Healthcare has announced a significant reduction in its 2026 profit forecast, contributing to a nearly 28% decrease in its share value during premarket trading. This adjustment arises from increasing medical expenses impacting its government-supported health plans, prompting the insurer to project earnings that fall well below Wall Street's expectations.
Strategic Realignment with Medicare Withdrawal
Molina Healthcare is also set to discontinue its Medicare Advantage prescription drug plans by 2027, citing underperformance. This strategic retreat from the Medicare Advantage Part D program, which currently generates around $1 billion annually in premiums, reflects a focused shift as the company addresses operational and regulatory compliance requirements.
Industry Pressures and Risk Management
The persistent rise in healthcare costs has led Molina to revise its earnings forecasts multiple times over the past year. Molina CEO Joseph Zubretsky noted the pressure on the industry, indicating that 2026 may represent a low point for Medicaid industry margins due to the lack of alignment between rates and healthcare trends.
Analysts are closely monitoring Molina's situation. According to Lance Wilkes of Bernstein, Molina's rapid growth and smaller scale compared to its peers could amplify its financial vulnerabilities in risk management. The company, primarily operating in the Medicaid sector, offers plans for individuals with low incomes along with additional coverage options under the Affordable Care Act, structured with a risk-adjustment pool to balance costs for insurers with high-risk members.
The forecast reduction impacts Molina's earnings projection, with an expected adjusted profit per share of $5.00, significantly lower than the $13.76 projected by analysts surveyed by LSEG. Michael Ha from Baird emphasized Molina's earnings sensitivity to potential pressures on Medicaid margins as a factor contributing to lowered expectations.
Further affecting its financial outlook is the introduction of a new Medicaid contract in Florida, expected to reduce earnings by an additional $1.50 per share. The combination of these factors underscores ongoing challenges within the Medicaid market, as Wilkes pointed out, with reimbursement rates not fully compensating for the growing demand for medical care.