Add To Favorites
Health insurer Molina cuts profit targets as medical costs surge across industry
- 7/7/2025
(Reuters) -Molina Healthcare on Monday cut its annual profit forecast and warned of weaker-than-expected quarterly earnings, joining a growing list of health insurers grappling with a spike in medical costs.
Major health insurers including UnitedHealth and Centene have seen a wave of higher-than-anticipated medical claims over the past two years.
Increased demand for healthcare under government-backed Medicare plans for older adults and those with disabilities, as well as changes in Medicaid eligibility, which has left insurers with a bigger chunck of sick patients, have inflated costs for insurers.
Last week, Centene withdrew its 2025 earnings forecast after fresh industry data showed a sharp drop in expected revenue for the company. In May, UnitedHealth suspended its annual forecast, citing pressures from higher medical care utilization.
Molina -- which manages Medicaid coverage for low-income populations, Medicare plans as well as marketplace plans -- expects second-quarter adjusted earnings of about $5.50 per share, below analysts' estimate of $6.21, according to data compiled by LSEG.
"The short-term earnings pressure we are experiencing results from what we believe to be a temporary dislocation between premium rates and medical cost trend," CEO Joseph Zubretsky said.
Despite the near-term headwinds, Zubretsky emphasized that Molina does not expect the Trump administration's proposed changes in the federal budget affecting Medicaid to undermine its long-term growth.
For the full year, Molina cut its adjusted profit forecast to $21.50 to $22.50 per share from at least $24.50 expected previously. The company also warned that medical costs are likely to stay elevated in the second half of 2025.
J.P. Morgan analyst John Stansel noted that investors were already braced for weaker results, given Molina's sizable exposure to Medicaid and Obamacare plans. Shares of the company were up about 1% in early trading.
Molina expects to report its quarterly results on July 23.
(Reporting by Sriparna Roy in Bengaluru; Editing by Shinjini Ganguli and Leroy Leo)