Health insurance takes another hit with Molina Healthcare
US health insurance stocks have been going through a turbulent time for several quarters now. After a recent lull, marked by a rebound from the sector leader UnitedHealth (whose stock remains well down over the past year), Molina Healthcare is now faltering. The group, which, although smaller, still generates nearly $45bn in revenue, is falling sharply.
Molina derives most of its revenue from the Medicaid program, which is aimed at low-income households. The rest comes from Medicare, which covers people over the age of 65 and people with disabilities.
With a market capitalization now below $10bn, Molina's stock price has halved in value this year. The entire sector has been shaken by a series of events: criticism of the excessive profitability of health insurance in the US following the murder of Brian Thompson in December last year, alleged Medicare fraud at UnitedHealth, the sudden departure of its CEO, mixed results from competitors Cigna, Humana, Elevance Health, and CVS Health, not to mention difficult negotiations with the federal government over reimbursement terms.
Molina is now reducing its forecasts due to rising medical costs. The situation remains tense and is unlikely to improve before the end of the year. The group points the finger at its Marketplace business, which includes insurance sold on public platforms under the Affordable Care Act (ACA). This program, also known as Obamacare, offers income-based subsidized coverage and is aimed at people who are too wealthy to qualify for Medicaid but who do not have corporate insurance. Molina now forecasts adjusted EPS of around $14 for 2025, down from at least $19 previously.
Molina Healthcare, Inc. is a provider of managed healthcare services under the Medicaid and Medicare programs, and through the state insurance marketplaces. The Company operates through four segments: Medicaid, Medicare, Marketplace and Other. The Medicaid, Medicare, and Marketplace segments represent the government-funded or sponsored programs under which it offers managed healthcare services. Medicaid provides healthcare and long-term services and support to low-income Americans. Medicare is a federal program that provides eligible persons aged 65 and over, and some disabled persons, with a variety of hospital, medical insurance, and prescription drug benefits. The Marketplace insurance exchanges allow individuals and small groups to purchase federally subsidized health insurance. It arranges healthcare services for its members through contracts with a network of providers, including independent physicians and physician groups, hospitals, ancillary providers, and pharmacies.
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