Molina’s rate outlook improves, but membership losses and contract delays weigh on 2027 guidance

Third-quarter results beat expectations, so why do operating pressures persist?

Molina’s third-quarter adjusted earnings per share were 0.89 dollars, 13% above Bernstein’s forecast but down approximately 52% from 1.84 dollars a year earlier. The medical loss ratio was 92.9%, in line with market consensus but up 0.3 percentage points year over year, meaning a greater share of premiums was used to pay medical expenses.
Premium revenue was 10.46 billion dollars, 1.9% above market consensus but down 3.5% year over year. Lower membership was the main reason, particularly in Medicaid and Marketplace, with rate increases offsetting only part of the impact.
Total membership fell 1.3% quarter over quarter to 4.86 million at quarter-end. Medicaid membership fell to 4.37 million, while Marketplace membership fell to 267 thousand, down 5.7% quarter over quarter. The company maintained its 2026 guidance for premium revenue of approximately 42 billion dollars and adjusted earnings per share of at least 5.25 dollars.

The company raised its forecast for 2026 Medicaid rate growth from 4% to 4.5%, but its expected full-year medical cost trend also rose from 5% to 5.5%. Bernstein said rate growth below the cost trend was the reason margins in the business were under pressure in 2026.
The higher cost forecast reflects slightly greater use of medical services and a revised estimate of changes in the severity of members’ conditions. Management said the adjustment included a reassessment of the first half, rather than an acceleration of costs in the second half; the company expects a cost trend of 5.5%–6% in 2027.
For contracts renewing in January 2027, known preliminary rates have risen by approximately 7% on average; these known rates correspond to approximately 44% of annual premiums. Including increases at the end of 2026 that carry into the following year, the company now has visibility into rates for approximately 70% of 2027 premiums and preliminarily expects overall rate growth of approximately 6%.
Bernstein’s model assumes core business rate growth of approximately 0.5 percentage points above the cost trend, yielding an approximately 0.4 percentage-point improvement in the loss ratio. The firm believes the result could be better if current rate and cost trends continue.

Management preliminarily expects Medicaid membership to decline 6% in 2027; based on the timing of exits, the impact on that year’s revenue would be roughly equivalent to half a year. Work requirements and eligibility redeterminations every six months are expected to cause cumulative membership losses of approximately 9%–10% over several years, with some exits continuing into 2028–2029.
The Georgia and Texas STAR/CHIP contracts are expected to start later in 2027 or in 2028, delaying approximately 1.3 billion dollars in premiums originally scheduled for 2027; both contracts are currently under review by state courts.
The company lowered its 2027 premium revenue outlook from at least 46.5 billion dollars to at least 45 billion dollars. The full-year effect of the Florida contract and growth in the dual-eligible business, among other factors, add approximately 6 billion dollars, but the exit from traditional MA-PD, reduced Marketplace coverage and California’s termination of its coverage program for undocumented immigrants together offset approximately 3 billion dollars.

The company lowered its 2027 adjusted earnings-per-share outlook from at least 10 dollars to more than 9.50 dollars. Starting from its 2026 guidance of at least 5.25 dollars, management expects the elimination of losses on the Florida contract, the MA-PD exit and operating leverage to contribute approximately 4 dollars combined; at least breaking even in Marketplace could add approximately 0.75 dollars, partly offset by the exit from the California program.
This management framework does not include improvements in the loss ratios of the existing Medicaid business and the continuing dual-eligible Medicare business. Marketplace reaching break-even depends on the business mix after scaling back to seven states and on 2027 pricing.
Bernstein raised its 2027 medical loss ratio forecast by 0.2 percentage points and lowered its adjusted earnings-per-share forecast by approximately 6% to 10.01 dollars, approximately 91% above its 2026 forecast. The firm maintained its outperform rating and 266-dollar price target, based on adjusted earnings per share of 14.21 dollars over the next 12 months and a price-to-earnings multiple of 18.75.