Molina primarily sells Medicaid plans to low-income Americans and also offers coverage under the Affordable Care Act, commonly known as Obamacare.
Molina expects a $1.50 per share loss this year from the start of a new Florida Medicaid contract in the fourth quarter and a $1 per share loss tied to the planned Medicare Advantage exit in 2027.
The company kept its full-year premium revenue forecast unchanged at about $42 billion.
Profit forecast raised after second-quarter beat
Molina Healthcare raised its annual profit forecast on Wednesday after posting second-quarter profit and revenue that beat Wall Street estimates, helped by stronger-than-expected performance in its Medicaid and Medicare businesses.
The health insurer now expects annual adjusted earnings to be at least $5.25 per share, up from at least $5.00 previously.
However, shares of the Long Beach, California-based company fell over 9% in extended trading as investors focused on the modest size of the forecast increase and ongoing pressures in some businesses.
For the reported quarter, Molina earned an adjusted profit of $1.51 per share, beating analysts' estimate of $1.39. Revenue fell 4.9% to $10.87 billion from $11.43 billion a year earlier, but was still ahead of analysts' estimate of $10.79 billion, according to data compiled by LSEG.
Its medical cost ratio, or the percentage of premiums spent on medical services for the quarter, was 92.2%, compared with its estimate of 92.37%.
Medicaid stabilizes as Marketplace pressure continues
The insurer said its Marketplace business came under pressure during the quarter because a larger share of enrollees required costly medical care than it had anticipated.
CEO Joseph Zubretsky said the imbalance between Medicaid rates and medical cost trends appears to have stabilized and should improve as states implement future rate increases.
Bernstein's Lance Wilkes said the results support the view that Medicaid is stabilizing in 2026, though the limited increase in Molina's guidance suggests a gradual recovery rather than a sharp improvement in margins.
Wilkes added that investors will likely focus on membership growth and the company's ability to control administrative costs.
Larger insurance peers including UnitedHealth and Elevance Health have reported strong second-quarter earnings, indicating easing medical costs after years of pressure from an uptick in expenses.
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