Molina Healthcare's stock price took a nosedive Thursday after the insurer posted a third-quarter earnings miss amid cost pressures in the individual market.
Per Yahoo Finance, analysts expected $3.89 in earnings per share in the third quarter, while the company ultimately reported $1.84 in EPS, missing projections by 52.7%. Molina's shares were down 21% at about noon, with the results dragging down other marketplace-heavy insurers, too. Centene's stock price was down by 7.5% and Oscar Health's by 8%.
Molina reported $742 million in net income and $44.5 billion in revenue for the quarter, with the latter figure surpassing Wall Street's expectations.
CEO Joseph Zubretsky said during the company's earnings call Thursday morning that it is operating in a "very complicated cost environment."
"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 still producing strong margins," Zubretsky said.
He called the cost spike in the individual market business "unprecedented."
Given the cost pressures, Molina slashed its guidance yet again and now expects 2025 earnings per share of about $14. The company started the year projecting at least $24.50 in EPS, before cutting that projection in the second quarter down to between $21.50 and $22.50 per share.
Zubretsky said the company is projecting a 89.7% medical loss ratio that generates a negative pretax margin, and it's expecting the utilization trends to continue into the future with little risk adjustment revenue to offset that spike in costs.
"Our marketplace business has significantly underperformed our expectations, but its performance appears consistent with industry-wide trends," he said.
He said that the marketplace segment was initially estimated to contribute about $3 in earnings per share and is now projected to generate a $2 loss. He added that the company expects the Affordable Care Act and Medicare businesses to contribute losses in the fourth quarter, with Medicaid performance offsetting them.
While the marketplace business is experiencing the most dramatic headwinds, Zubretsky said that rising medical costs were felt in the Medicaid space, too, which makes up about 75% of Molina's premium revenue. The company's medical loss ratio in Medicaid was 92% in the third quarter, he said.
Elevated Medicaid utilization was driven in large part by behavioral healthcare, pharmacy, long-term care and inpatient services, Zubretsky said. Trends have been consistent through much of the year, he said.
Molina did see some positive momentum around rate updates, but that was not enough to offset the ongoing spike in utilization, he said.
"While our Medicaid performance did not meet our expectations for the quarter, many would characterize these results as best in class in this environment," Zubretsky said.