Molina Healthcare is seeing sustained pressure as the insurer released its second-quarter financial results.
For the full year, the company anticipates a floor of $16.90 per diluted share and adjusted earnings to be at least $19 per diluted share. Earlier this month, the insurer warned medical cost pressures would affect adjusted earnings, lowering its target to between $21.50 and $22.50 per share.
Molina’s stock has dipped about 4% in after-hours trading. The stock is down a combined 14% as of Thursday.
“The current earnings pressure we are experiencing results from what we believe to be a temporary dislocation between premium rates and medical cost trend which has recently accelerated.,” said CEO and President Joseph Zubretsky in a statement. “We are still performing near our long-term target ranges, and nothing has changed our outlook for the long-term performance of the business.”
During the quarterly earnings call Thursday, Zubretsky said the "magnitude and persistence of these medical cost increases are unprecedented." In Medicaid, those cost pressures include increased behavioral health costs, higher script volumes and expensive therapies for conditions like cancer and HIV. There was also increased inpatient and outpatient utilization, where primary care visits led to specialist visits.
"I think the industry generally doesn't have their arms around the 'why,'" he added, when asked for the underlying reason utilization remains elevated across all lines of business for the fourth straight quarter. He pointed to reduced stigma around mental health conditions for older populations, an increased desire for care following the pandemic and a sustained push from states to insurers to widen networks as a few possible options.
Adjusted net income for the quarter is $5.48 per diluted share, similar to its preview from early July, for a decrease of 6% year over year.
Molina is hardly the only insurer facing flashing warning signs. Yesterday, Oscar Health cut guidance by slashing its outlook by about half a billion dollars. Elevance Health also lowered guidance, as did UnitedHealth Group. Aetna announced the company would pull itself off the individual markets next year.
The Affordable Care Act marketplace exchanges are in a perilous position, as premiums are expected to increase and the fate of enhanced premium subsidies looks uncertain at best.
Impacts from Trump's budget bill are still being evaluated and may manifest after 2028, said Zubretsky, though impacts to Medicaid will be "modest and gradual." The company is expecting its Medicaid expansion population of 1.3 million people to be reduced by 15% to 20% as a result of work requirements. Two-thirds of its Medicaid members do work in some capacity.
Molina gained 167,000 members in the second quarter and pulled in $10.9 billion in revenue. Its full-year revenue estimate of $42 billion was reaffirmed Wednesday.
The company’s medical care ratio was 90.4% and 91.3% for the Medicaid side of the business. Molina says its marketplace medical care ratio, 85.4%, was above expectations when excluding the impact of past year member reconciliations and the ConnectiCare acquisition.
Updated: July 24 at 2:14 p.m. ET