Molina Healthcare Withdraws from Medicare Advantage: Strategic Shift to Medicaid Focus

Molina Healthcare has announced its upcoming withdrawal from the Medicare Advantage market, forecasting an end to its standard individual plans with prescription drug coverage by 2027. This strategic pivot emphasizes the expansion of Dual Eligible Special Needs Plans (D-SNPs), a shift revealed during Molina's fourth-quarter earnings release.

Challenges within the Medicare Advantage sector may compress earnings, potentially reducing annual earnings per share by about $1. Recent proposals from the Centers for Medicare and Medicaid Services (CMS), including minimal payment increases and tighter risk adjustments, pose additional difficulties for insurers navigating this industry segment.

Industry Challenges and Strategic Shifts

Industry experts like Jessica Muratore, principal consultant at Muratore Advisory Services, highlight the pressures from high operational costs and stringent regulatory compliance requirements. These factors compel insurers to reevaluate market strategies. Companies such as UnitedHealth Group and Elevance Health have proposed service reduction in less profitable areas if regulatory changes proceed.

While Molina Healthcare is not a dominant player in the Medicare Advantage industry, compared to leaders like UnitedHealthcare, Humana, and Aetna, it retained 99,100 members in December 2025, generating $1 billion in revenue. Investments, including $350 million for ConnectiCare and $425 million for Medicare Advantage plans in California, did not achieve expected results. Healthcare consultant Ari Gottlieb notes that these acquisitions did not align with Molina's core competencies.

The Focus on Medicaid Expansion

Molina largely focuses on Medicaid, which constituted the bulk of its $43.1 billion premium revenue last year. Company leadership plans to enhance its Medicaid services, benefiting from potential acquisitions. This strategic adjustment towards D-SNPs aligns with other providers like CareSource, taking advantage of federal initiatives promoting integrated solutions for dual-eligible beneficiaries.

Analysts like Glen Losev of Bloomberg Intelligence assert that despite setbacks in its Medicare Advantage initiatives, Molina's strength and future likely lie within its Medicaid operations. This reinforces the notion that Molina's latest strategic moves aim not to abandon Medicare but rather to consolidate its dominant position in the Medicaid sector.