Molina Healthcare Q3 Earnings Call Highlights

Key Points

• Molina reaffirmed its 2026 outlook, maintaining expectations for about $42 billion in premium revenue and adjusted EPS of at least $5.25, despite elevated medical costs and a 92.9% consolidated medical care ratio in Q3.
• The company’s preliminary 2027 earnings framework exceeds $9.50 per share, supported by roughly 6% Medicaid rate increases, the maturation of new contracts, reduced Marketplace losses and the planned exit from its unprofitable MAPD business.
• Molina expects 2027 Medicaid membership to decline about 6% because of work requirements and eligibility reviews, while the new Florida CMS contract is expected to weigh on 2026 earnings by approximately $1.50 per share before reaching breakeven or better in 2027.

Molina Healthcare NYSE: MOH reaffirmed its full-year 2026 adjusted earnings outlook while outlining preliminary 2027 earnings building blocks exceeding $9.50 per share, supported by anticipated rate increases, the maturation of new contracts and the planned exit from its Medicare Advantage prescription drug business.

Speaking on the company’s third-quarter earnings call, President and CEO Joe Zubretsky said Molina generated $10.5 billion in premium revenue and adjusted earnings per share of $0.89 during the quarter. The company reported a consolidated medical care ratio, or MCR, of 92.9%, an adjusted general and administrative expense ratio of 6.3%, and an adjusted pretax margin of 0.6%.

Zubretsky said third-quarter results reflected “solid operating performance” amid a challenging medical cost environment. Molina maintained its full-year premium revenue forecast of about $42 billion and its adjusted EPS guidance of at least $5.25.

Medicaid rates and medical-cost trends

Molina’s Medicaid MCR was 93% in the third quarter, in line with management’s expectations as rate updates largely offset higher medical costs. The company raised its outlook for full-year Medicaid rate increases to 4.5%, from a prior range of 4% to 4.5%, while also increasing its medical-cost trend assumption to 5.5%, from 5% to 5.5%.

Management cited elevated utilization in several care categories and a modest shift in member acuity. Long-term services and supports and behavioral health trends remained elevated but stable, while outpatient costs and high-cost drugs rose somewhat, CFO Mark Keim said.

The company expects its legacy Medicaid business to produce a 1.6% pretax margin for 2026. Zubretsky said the business is at what management views as the low point of a multiyear margin cycle, as state rate-setting increasingly incorporates periods of elevated cost trends into the baseline used for pricing.

For 2027, Molina’s preliminary outlook calls for Medicaid rates to rise about 6%, while medical-cost trend is projected at 5.5% to 6%. The company said it knows draft rates for 80% of its Jan. 1 renewal cohort, representing 55% of full-year premium, and those rates average about 7%.

Management said the early outlook assumes legacy Medicaid MCRs will remain at least flat year over year. Any improvement would represent upside to its preliminary earnings view. Keim said every 100 basis points of improvement in the Medicaid MCR would be worth approximately $5 per share.

Work requirements and membership outlook

Molina expects federal work requirements and more frequent eligibility reverifications to reduce membership gradually. The company’s preliminary assumptions include a 6% membership decline in 2027, after anticipating a 6% decline in 2026 before the addition of members from the Florida CMS contract.

Zubretsky said early experience in Nebraska, an early adopter of work requirements, has been more moderate than some observers expected. He said states covering about 80% of Molina’s markets appear to be adopting interpretations that favor continued enrollment, including medical-frailty exemptions, ex parte reviews and self-attestation policies.

Keim said Nebraska reported that 90% of renewing members had been reenrolled, including 20% through frailty exemptions. Molina nevertheless continues to include an expected acuity shift in its cost-trend assumptions. Management estimated that 4.5% of its 2027 medical-cost trend projection reflects core trend and roughly 1% to 1.5% reflects acuity changes associated with membership attrition.

Florida contract and segment performance

Molina began its Florida CMS contract during the third quarter, taking on 115,000 members with an annualized revenue run rate of about $6 billion. Zubretsky characterized the first 22 days of implementation as nearly flawless operationally and clinically, though he said the company remains cautious because it is a new, high-acuity program.

The contract is expected to create a $1.50-per-share earnings drag in 2026, including approximately $1 in the fourth quarter. Keim said Molina expects the Florida business to have a roughly 99% MCR and a 5% pretax loss in the fourth quarter, before improving to breakeven or better in 2027. A portion of the initial loss reflects one-time reserve requirements associated with new revenue, he said.

In Medicare, Molina reported a third-quarter MCR of 93%. Its dual-eligible products continued to perform well and are expected to contribute $1.25 per share in 2026, while its Medicare Advantage prescription drug, or MAPD, business is projected to lose $1 per share before Molina exits that product line in 2027.

Marketplace MCR was 92.5% during the quarter. Molina expects the segment to lose about $0.75 per share in 2026 but said the loss is not expected to recur after the company reduces its Marketplace footprint to seven states and adjusts pricing for 2027.

2027 outlook and contract pipeline

Molina now expects at least $45 billion in premium revenue for 2027, down from an earlier outlook of $46.5 billion. The reduction reflects delayed implementation of Medicaid contracts in Georgia and Texas, which together account for $1.3 billion of premium revenue. The awards are being evaluated in state court, though management said it remains confident the awards will be upheld and commence later in 2027 or in 2028.

The company’s preliminary earnings building blocks for 2027 start with at least $5.25 per share of 2026 adjusted EPS and add about $4 per share from known embedded earnings. Those contributions include eliminating losses on the Florida CMS and MAPD businesses, as well as operating leverage from higher revenue. Molina also expects Marketplace to reach at least breakeven, adding about $0.75 per share.

Molina highlighted additional bidding activity in Texas, Missouri, Arizona and Indiana. Those opportunities represent about $26 billion of the $90 billion RFP opportunity discussed at its Investor Day, Zubretsky said.

About Molina Healthcare (NYSE:MOH)

Molina Healthcare, Inc is a managed-care company that provides health insurance and related services primarily through government-sponsored programs. Its offerings include Medicaid, Medicare, Medicare-Medicaid dual-eligible plans and health plans sold through government marketplaces under the Affordable Care Act.

The company's services generally include medical care coordination, behavioral health support, pharmacy benefits and, depending on the plan and state, dental and vision benefits.

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