What Happened?
Shares of healthcare insurance company Molina Healthcare (NYSE: MOH) fell 7.3% in the afternoon session after the U.S. government proposed a significantly smaller-than-expected increase in payments for private Medicare Advantage plans for 2027.
The Centers for Medicare & Medicaid Services (CMS) outlined a proposal that would result in a net payment increase of only 0.09%. This news disappointed investors, as reports indicated Wall Street had anticipated a rate increase between 4% and 6%. The smaller-than-forecasted government payment rates raised concerns about future profitability for insurers that manage these plans. The announcement triggered a broad sell-off across the health insurance sector, affecting not just Molina but also its peers, including Humana and UnitedHealth Group.
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What Is The Market Telling Us
Molina Healthcare’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 20.8% on the news that the company reported third-quarter earnings that missed Wall Street's expectations and cut its full-year profit forecast.
The health insurer's adjusted earnings of $1.84 per share were 52.7% below analyst projections of $3.89. The sharp drop in profitability overshadowed a bright spot in revenue, which grew 11% year over year to $11.48 billion, beating estimates. The company's profitability issues were reflected in its operating margin, which fell to 1.2% from 4.5% in the same quarter last year, indicating that its expenses grew faster than its revenue. In response, Molina lowered its full-year 2025 adjusted earnings guidance to a midpoint of $14 per share, a 26.3% decrease from its previous outlook, signaling that profitability challenges may persist.
Molina Healthcare is up 4.6% since the beginning of the year, but at $186.75 per share, it is still trading 47.1% below its 52-week high of $353.24 from April 2025. Investors who bought $1,000 worth of Molina Healthcare’s shares 5 years ago would now be looking at an investment worth $860.89.
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