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The health care company focuses on reducing the cost and improving the quality of health insurance, as well as insuring clients through programs like Medicare and Medicaid. Molina Healthcare offers Medicaid plans in 18 states.

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Molina Healthcare provides managed health care services through the Medicare and Medicaid programs and state insurance marketplaces to low-income Americans. Founded in 1980, the company now serves over 5 million people across 21 states.

Q2 2026

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Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

Molina Healthcare (MOH): Company Profile, Stock Price, News, Rankings

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Molina Healthcare

molina healthcare

Good day, and welcome to the Molina Healthcare fourth quarter 2025 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Jeff Geyer, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Molina Healthcare's fourth quarter and full year 2025 earnings call. Joining me today are Molina's President and CEO, Joe Zubretsky, and our CFO, Mark Keim. A press release announcing our fourth quarter and full year 2025 earnings was distributed after the market closed yesterday and is available on our investor relations website. Shortly after the conclusion of this call, a replay will be available for 30 days. The numbers to access the replay are in the earnings release. For those of you who listen to the rebroadcast of this presentation, we remind you that all of the remarks are made as of today, Friday, February 6, 2026, and have not been updated subsequent to the initial earnings call. On this call, we will refer to certain non-GAAP measures.

A reconciliation of these measures with the most directly comparable GAAP measures can be found in the fourth quarter and full year 2025 earnings release. During the call, we will be making certain forward-looking statements, including, but not limited to, statements regarding our 2026 guidance, the medical cost trend, and our projected MCRs, Medicaid rate adjustments and updates, our recent Florida CMS RFP win and contract inception, our M&A pipeline and deal activity, upcoming RFPs, our expected future growth, Medicaid, Medicare, and Marketplace membership levels, earnings seasonality, the transition to Medicaid, Medicare integrated product designs, our G&A costs, our credit facility, and the estimated amount of our embedded earnings power. Listeners are cautioned that all of our forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from our current expectations.

We advise listeners to review the risk factors discussed in our Form 10-K annual report filed with the SEC, as well as our risk factors listed in our Form 10-Q and Form 8-K filings with the SEC. After the completion of our prepared remarks, we will open the call to take your questions. I will now turn the call over to our Chief Executive Officer, Joe Zubretsky. Joe?

Thank you, Jeff, and good morning. Today, we will provide you with updates on our reported financial results for the fourth quarter and full year 2025, our top-line growth initiatives, and our full year 2026 premium revenue and earnings guidance. Let me start with our fourth quarter performance. Last night, we reported an adjusted loss per share of $2.75 on $10.7 billion of premium revenue. Our fourth quarter results fell well below our expectations due to continued strong trend pressure in Medicare and Marketplace, and two retroactive items in Medicaid, which totaled $2 per share. While disappointed in the performance for the quarter, we continue to remain confident in our durable and sustainable operating platform as the rate environment returns to equilibrium.

In Medicaid, the MCR for the quarter was 93.5% and was impacted by unfavorable and unexpected retroactive premium rate actions taken by the state of California. Adjusting for these retroactive items, we produced a 2% pretax margin, and the MCR was favorable to our prior guidance, even as we continued to experience higher utilization of professional office visits, behavioral health services, LTSS, and high-cost drugs. In Medicare, the MCR for the quarter was 97.5%. We continued to experience elevated utilization for LTSS and high-cost drugs and slower than expected margin improvement in our MAPD product. Finally, in Marketplace, the MCR was 99%, which was impacted by elevated utilization and several prior period provider claim settlements. For the full year 2025, we reported premium revenue of $43 billion, representing 11% year-over-year growth.

Adjusted earnings per share were $11.03, and our pretax margin was 1.6%, which is below our long-term target range. 2025 was clearly a tale of two halves, as the company earned over $11 per share in the first half, largely tracking expectations. Trend pressure worked against us in each of the third and fourth quarters. Our fourth quarter performance resulted in our full year performance falling below our most recent guidance. As we compare our initial 2025 EPS guidance of $24.50 to our final result of $11.03, nearly half of the underperformance for the year was attributable to the unprecedented trend in increased acuity in our Marketplace segment, a very disproportionate outcome, given that the segment is just 10% of our total premium.

The rate in trend and balance in Medicaid accounted for approximately 1/3 of the underperformance, while the remainder was due to persistent higher utilization in Medicare. In Medicaid, our flagship business, representing 75% of our total premium revenue, we reported an MCR of 91.8% and pre-tax margin of 2.8%. Rates increased from 4.5% in our initial guidance to 6% for the year, but medical cost trend continually increased from 4.5% in initial guidance to 7.5%, an unprecedented inflection in such a short period of time. 250 basis points of this 7.5% trend is attributable to the acuity shift from membership declines related to the final stages of redeterminations.

While we are disappointed in our fourth quarter and full year results, many published reports indicate our Medicaid performance is industry-leading by 300-400 basis points in pre-tax margin. We believe the medical cost trend in 2025 was an aberration, an anomaly by historical standards. The important point, which I will get to in a moment, is what all of this means for 2026 and the longer-term outlook for the business. But first, turning to our growth initiatives. Despite the short-term margin challenges, 2025 was another extraordinary year for securing future growth for our flagship Medicaid business. We continued our successful track record of winning renewal and new RFPs. During the quarter, Molina secured a historic RFP win in Florida, where the state awarded Molina the sole Children’s Medical Services, or CMS, contract.

This contract is expected to yield $6 billion in annual run rate premium and is expected to go live late 2026. This award in Florida complements our previously announced contract win in Wisconsin, where we renewed our Wisconsin My Choice LTSS contract in Regions Two and Seven. The significant win in Florida and our previously announced Georgia and Texas STAR & CHIP wins represent over $9 billion of Medicaid premium and significantly contribute to our embedded earnings. Since we embarked on this growth strategy, we have achieved an RFP win rate of 90% on renewal contracts, representing $14 billion in retained revenue and 80% on new contracts, representing $20 billion of new revenue. We are engaged in active RFPs in several states and have an active pipeline of $50 billion of new opportunities over the next few years.

On the M&A side, our acquisition pipeline contains a number of actionable opportunities. The current challenging operating environment is a catalyst for many smaller and less diverse health plans to consider their strategic options. We remain opportunistic about deploying capital to accretive acquisitions. In this temporary period of rate and trended balance, we will work to acquire as much Medicaid revenue as possible, and as we have done in the past, manage it to target margins. Turning now to our 2026 guidance. We project 2026 premium revenue of approximately $42 billion, which is slightly lower than 2025. The premium growth from the new Florida CMS contract in Medicaid and higher revenues in our Medicare segment are more than offset by the planned reduction in the Marketplace segment. Our 2026 adjusted earnings per share guidance is at least $5.

This guidance is burdened by $1.50 of new contract performance of the landmark Florida CMS contract and $1 due to the underperformance of our traditional MAPD product. We have determined that the MAPD product does not align with our strategic shift to focus exclusively on dual-eligible members in Medicare, and we will exit the traditional MAPD product for 2027. After adjusting for these two items, our 2026 guidance produces underlying earnings of approximately $7.50 per share. There are three aspects of the business that represent significant upside to our guidance. First, our view on Medicaid cost trend could moderate from our initial estimates. Second, Medicaid rates may develop favorably due to on- and off-cycle adjustments, as they did in 2025.

Recall that every 100 basis points on the Medicaid MCR from this current rate and trend relationship is worth nearly $5 per share. Finally, Medicare and Marketplace are both going through transformations for very different reasons. Our guidance assumes these segments combine for a headwind of $1 per share in 2026, but both contain significant upside as we priced conservatively. Mark will take you through the detailed 2026 earnings guidance build in a few minutes, but let me highlight the major assumptions underlying our $5 per share guidance. In Medicaid, 2026 rates are expected to average approximately 4% and will not offset medical cost trend projected at 5%. This trend outlook for 2026 is comparable to the 2025 trend, without the 250 basis point impact of the redetermination-related acuity shift.

In Medicare, members are transitioning to new integrated product designs, which we expect to produce lower margins in their first year before reaching their full margin potential. Finally, in Marketplace, we made the conscious decision to reduce our exposure and stabilize margins in this highly volatile risk pool, which we expect to yield a 50% decline in our annual Marketplace premium. Early enrollment results drove a larger mix of renewal members, which we expect will improve the stability and predictability of our member acuity profile. In summary, our 2025 results did not meet our expectations, but I am pleased with our team's focus on managing through these industry headwinds and producing, in the fourth quarter, a normalized pre-tax margin in Medicaid of 2%. There is little question that Medicaid rates and medical cost trends are imbalanced.

We believe our 2026 forecast for Medicaid is the trough for managed Medicaid margins. In this margin trough, we expect that Molina Medicaid will produce a low single-digit margin, not losses, and that the market is underfunded by 300-400 basis points. We are confident in the outlook for this business and that rates and trend will eventually reach equilibrium. Even at this low point in the cycle, we remain optimistic about the future earnings trajectory of the enterprise, which is a function of anticipated rate restoration and future embedded earnings. Of note, we anticipate that actuarial soundness will ultimately prevail as Medicaid rates are restored by state actuarial processes, and that will allow us to achieve target margins. This potential is significant, as every 100 basis points on the Medicaid MCR is worth nearly $5 per share.

Then, our existing new store embedded earnings, which represent future contract revenue at average target margins, are additive to the earnings accretion implied by the rate restoration cycle. Embedded earnings are now greater than $11 per share. The intrinsic value of our businesses remains unchanged. Modest capital requirements, mid-single-digit pre-tax target margins, robust parent company cash flow, and ample organic and inorganic growth opportunities will combine to yield significant shareholder value. The cycle will turn, and these underlying valuation parameters will again become apparent. Finally, we look forward to updating you on our outlook for sustaining profitable growth at an Investor Day event on Friday, May 8th. We will provide you with our long-term goals, as well as the detailed playbook for achieving our growth rates and maintaining industry-leading margins. With that, I will turn the call over to Mark for some additional color on the financials. Mark?

Thanks, Joe, and good morning, everyone. Today, I'll discuss some additional details on our fourth quarter and full year performance, the balance sheet and our 2026 guidance. Beginning with our fourth quarter results. For the quarter, we reported approximately $10.7 billion of premium revenue, with an adjusted loss of $2.75 per share. Adjusted earnings were approximately $3 below our expectations, with approximately $2 driven by unexpected retroactive premium items in California Medicaid, and the remainder due to continued trend pressure in Medicare and Marketplace. In Medicaid, our fourth quarter MCR was 93.5%. As Joe mentioned, this result includes both a retroactive risk corridor and a retro rate reduction in California, totaling 160 basis points. Both were driven by new and unforeseen state actions impacting the full year, but introduced late in the fourth quarter.

Adjusting for these retroactive items, our reported MCR restates to 92.3%, and our pre-tax margin was 2%, both better than our expectation for the quarter. For the full year, the reported Medicaid MCR was 91.8%, and pre-tax margin was 2.8%. We take some comfort that even in this unprecedented medical cost trend environment, the stat filings continue to show our Medicaid margins remain best in class. Simply put, rates have not kept up with trend over the past six quarters. Looking at the stat filings for all MCOs in our markets, we believe Medicaid plans are underfunded by 300-400 basis points. In Medicare, our fourth quarter MCR was 97.5%, and our full year MCR was 92.4%. Our results for the year reflected elevated utilization of LTSS and high-cost drugs among our high acuity dual populations.

Margin recovery in the MAPD product was slower than we expected. In Marketplace, our fourth quarter reported MCR was 99%, and our full year MCR was 90.6%. In the quarter, the MCR reflected elevated utilization across nearly all services, particularly behavioral health, high-cost drugs, and professional outpatient visits, and several prior period claim settlements with providers. The adjusted G&A ratio for the quarter was 6.9%, and our full year was 6.5%. Our cost management remains disciplined, and we continue to harvest fixed cost leverage as we grow. Recall, the full-year G&A ratio reflects added expense for implementation costs in the new integrated duals products, offset by a reduction in management incentive compensation expense. Turning to the balance sheet. Our capital foundation remains strong. Positive full-year earnings continue to add to our capital base and drive parent company cash via dividends.

In the quarter, we harvested approximately $337 million of subsidiary dividends, and our parent company cash balance was approximately $223 million at the end of the year. RBC ratios, which test the level of capital at the subsidiary level compared to regulatory requirements, are 305% in aggregate, more than 50% above state minimums. In November, we closed a bond offering of $850 million of senior notes due 2031. The proceeds were used to repay the outstanding term loans and general corporate purposes. Debt at the end of the year was 3.7x trailing twelve-month EBITDA, and our debt-to-cap ratio was about 49%. Based on our current guidance, we took action to address any issues with our debt covenants. We have secured an agreement with our bank syndicate to appropriately amend these metrics.

Our operating cash flow for the full year 2025 was an outflow of $535 million due to the settlement of Medicaid risk corridors, the timing of tax payments, and lower operating performance in the second half of the year. Turning to reserves, days in claims payable at the end of the quarter was 47. We remain confident in the strength and consistency of our actuarial process and our reserve position, even in this period of sustaining high trend. Moving to guidance, we project 2026 premium revenue of approximately $42 billion, a 0.8% pre-tax margin, and adjusted EPS of at least $5. Our guidance is lower than the $14 per share initial outlook we provided on the third quarter call due to a number of factors. First, in Medicaid, our full year 2026 MCR guidance is 92.9%.

That's 140 basis points higher than previously expected, driving $6.50 of the shortfall. The higher MCR results from several items. The fourth quarter retro revenue items in California, which resulted in $2 per share impact, will continue in 2026, yielding 40 basis points of margin pressure across the year. Our Florida CMS contract, incepting in the fourth quarter, will add 30 basis points of full-year pressure, as that initial quarter will run significantly higher before reaching target margins, as new stores typically do. Expected rates for 2026 are approximately 50 basis points lower than our initial outlook. We previously projected rates exceeding expected trend to improve MCR by 50 basis points off the second half of 2025.

While our initial discussions with states were encouraging, particularly in the presence of demonstrated underfunding across most of our markets, the rates we finally received fell short, now matching expected trend off second half with no benefit to the MCR. Second, in the items driving our lower EPS guidance, underlying performance in our Medicare business deteriorated by $1 per share, largely due to the MAPD product. Finally, G&A efficiencies only partly offset a higher effective tax rate, interest expense, and lower volumes, resulting in a headwind of $1.50 per share. As Joe mentioned, upside components to this guidance include moderation in Medicaid cost trend, off-cycle, and late 2026 rate adjustments as we saw in 2025, and Medicare and Marketplace performance. Now, some additional details on our 2026 guidance, beginning with membership.

In Medicaid, we expect year-end membership of approximately 4.6 million members to be flat compared with 2025. We expect modest contraction in our current footprint as some states continue to review membership eligibility to be offset by the implementation of the new Florida CMS contract, incepting October 2026. In Medicare, we expect to begin and end 2026 with approximately 230,000 members, based on open enrollment and transitions to our integrated Duals products. In Marketplace, we expect approximately 280,000 members at the end of the first quarter, down more than 50% from the end of 2025. Recall that we sought to stabilize margins in 2026 and reduce our exposure to this shifting risk pool caused by the expiration of enhanced subsidies and new program integrity initiatives.

Our average pricing increased 30% and ranged from 15%-45% across our footprint. Renewing members now represent 70% of our current book, and retention through the grace periods is less certain than in prior years. We expect to end the year with 220,000 members. Our 2026 premium revenue guidance is approximately $42 billion. The small decline versus 2025 is driven by several items. Medicaid is up $1.1 billion due to the new Florida CMS contract and the modest rate cycle, partially offset by the Virginia contract loss in 2025 and slight market contraction in our current footprint. Medicare is up $300 million due to the product mix shift in our Medicare portfolio as members transition to new integrated products, which have a higher average PMPM. This is partly offset by a decline in our MAPD product.

Finally, Marketplace premium declines $2.3 billion pursuant to the plan to reduce exposure to that segment. Our 2026 premium guidance does not include the Georgia Medicaid and Texas STAR CHIP contracts, which are now expected to go live in 2027. Turning to earnings guidance within our segments. In Medicaid, we expect a pre-tax margin of 1.2% on $33.4 billion of premium. The MCR of 92.9% includes a 30 basis point headwind due to the new Florida CMS contract. I'll remind you that our Medicaid MCR guidance assumes year-over-year rates of approximately 4% and trend of 5%. In Medicare, we expect $6.6 billion of premium revenue, with the MCR at 94% and pre-tax margin of -1.7%.

Excluding the MAPD product, which we will exit for 2027, the pre-tax margin is closer to breakeven. Within the segment, margin improvements in the legacy products in the new rate cycle are offset by MMP members transitioning to new integrated products. These integrated products are expected to achieve lower margins in their first year before reaching their full margin potential in years two and three. In Marketplace, we project a 1.7% pre-tax margin on $2.2 billion of premium revenue. The MCR of 85.5% reflects continued conservatism, given market volatility and risk pool acuity shifts resulting from the expiration of enhanced subsidies. We expect the adjusted G&A ratio at 6.4%.

This is slightly lower than 2025, as the tailwind from duals contract implementation costs, cost management discipline, and mix within our business is partly offset by the Florida CMS contract implementation costs and the return of management incentive compensation. Rounding out the other guidance metrics, we expect the effective tax rate at 30% and weighted average share count of 51.1 million shares. Our earnings seasonality is expected to be much more front-end loaded this year, with 2/3 of earnings in the first half of the year, reflecting the Medicaid rate cycle and the implementation of Florida CMS in the second half. Our Medicare and Marketplace segments are expected to follow normal seasonal patterns. Turning to embedded earnings. At the end of 2025, we reported $8.65 of new store embedded earnings.

Our 2026 guidance harvests $0.60 from Medicare duals implementation costs net of the Virginia contract loss. Updates include the addition of the new Florida CMS contract of $4.50 and a reduction for the MAPD exit. Embedded earnings now exceed $11 per share and form a compelling view of long-term future earnings power on top of our legacy business rate recovery. We will outline the components and expected realization timeline at our May Investor Day. This concludes our prepared remarks. Operator, we are now ready to take questions.

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. In the interest of time, we ask that you please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question comes from Joshua Raskin with Nephron Research. Please go ahead.

Hi. Thanks. Good morning. Sort of a two-parter on the Medicaid side. Is there a large variance that remains across your states with regard to Medicaid margins? And are you at the point in any state where you're contemplating a potential exit? And sort of part B would be: What were the drivers of the negative retro adjustments in California? That seems incongruous with, you know, what you were seeing in terms of rate increases and margins. Is California just a market that happened to be running higher than average margins? Thanks.

Josh, on part A of your question, no. Rates are generally underfunded, across the universe of our portfolio, and there is no state where the regulatory environment is so unfriendly to managed care and the rating environment that we are contemplating an exit. We believe, as we said in our prepared remarks, that these will come back into equilibrium over time for many, many reasons, which I'll cover in a moment. To your second question, the two issues in California were very situational. They were event driven. The undocumented population, which we serve, I think, 180,000 members, for a lot of reasons, which are pretty obvious, did not use services, during the year, that were priced to, and therefore, the state decided to, I'll call it, clawback, due to the introduction of a retroactive corridor.

In L.A. County, separately in L.A. County, there was a dramatic shift, a churn in the membership rolls during the year, which caused a disequilibrium and a risk profile amongst the various carriers. They did a risk adjustment update at the end of the year, moved money around, and we had to pay it back. Mark, anything to add on those two items?

No, Joe, I think that's well summarized. Josh, it's about $135 million between those two items. That's the $2 per share, and they're both pretty unusual in nature. On the corridor for the undocumented immigration status, normally, CMS has a rule that they can't put retro corridors in place. That rule went back in place during the pandemic. However, since this undocumented program in California is state-funded, it doesn't, the CMS restriction doesn't apply, so they were able to put that restriction in place on the corridor on that population. So I don't know of another state where that could happen. On the risk adjustment, risk adjustment data refreshes are common. We have them all the time. Normally, they're de minimis, up or down.

In this case, there was enough change in the population in L.A., as Joe mentioned, that it was material to us.

One final point, Josh, you didn't ask, but, inherent in the movement from our $14 per share outlook and $5 per share guidance, we pulled through that California effect to 2026, because we believe those same situations will apply to the 2026 operation. We pulled it through out of conservatism.

The next question comes from A.J. Rice with UBS. Please go ahead.

Hi, everybody. Just want to think a little bit more about what you're seeing on, in the Medicaid book. We've heard some of the other companies talk about states working with them to allow them to make adjustments to benefit design, in addition to just absolutely hoping for a better rate update. Are you seeing any of that play out? And you're saying you're gonna bottom in Medicaid in 2026 and recover. Obviously, some of the Big, Beautiful Bill, work rules, et cetera, kick in in 2027. Does that you're confident you can overcome that and still show margin improvement in 2027 and beyond?

A.J., let me answer the second question first, and I'll come back to benefit design. But the context is, even in what we consider to be a trough environment in Medicaid, we are operating at low single-digit margins, 2% in the fourth quarter, 1.6% adjusted for Florida Kids in 2026. By analysis of the regulatory filings and other public company reports, the market appears to be 300-400 basis points underfunded. If we get even partially way there, we're back flirting with our target margins in Medicaid, number one. Number two, don't forget that last year, we got 150 basis points of mid-cycle updates. Now, it wasn't enough to offset a 300 basis point increase in trend during the year, but states are recognizing that aspects of this program are underfunded.

Next point on rates. Generally speaking, the states are using a 2024 cost baseline. That baseline does not include the full impact of what we're calling the, the great inflection here over the last two years. When the 2025 cost baseline, fully developed, begins to be used as the baseline off of which to trend, rates will become stronger. Next point, discrete rating factors, LTSS benefits, pharmacy benefits, and behavioral, all trending up, and those are very discrete rating components, very transparent. Actuaries can debate and have clinical and actuarial debates over how those costs are being burned into rates in a very transparent way. Lastly, in 2025, we were experiencing the tail end of the redetermination acuity shift, 250 basis points to our estimation. That will not recur in 2026.

To your point, in 2027, 2028, and 2029, we will begin to see the emergence of perhaps a small acuity shift related to OB3. Mark, do you want to take that part?

I think that's well covered. Across the next three years, we see any place between 2% and 4% annual impact on One Big, Beautiful bill. But that's also before any influx of new members, as you've typically had in the past, or even a recessionary impact as jobs are lost to AI and who knows what else? So the outlook, I think, if there's membership decline over the next three years, is rather small. And as Joe always says, the small changes in membership or cohorts don't really get you because, they sort of even out with everything else going on, and rates do adequately reflect them. It's the big jumps in population that are problematic, like the 20% decline we had in the pandemic, with redetermination.

I don't really see a meaningful impact on membership here going forward, either in magnitude or impact on acuity.

A.J., to the first part, part A of your question was about benefit design. We're seeing some of that. During the pandemic, states really loosened the utilization control requirements on things like behavioral health. They required us to pay for GLP-1s for weight loss and not accompanied by a diabetes, diabetes diagnosis. Those things are starting to close up. States are reintroducing our ability to have tighter utilization controls over behavioral. And most of our states, I think 12 out of 15, now, have a diagnosis requirement, diabetes diagnosis requirement for GLP-1s. There's things like that, but I wouldn't say there's a wholesale shift to benefit design. It's on the margin, and it's sporadic from geography to geography.

The next question comes from Justin Lake with Wolfe Research. Please go ahead.

Thanks. Good morning. Wanted to ask Joe about your attrition assumption in 2026. Looks like you're assuming down about 2% membership attrition, and that's offset by, what, I think, 100,000 members in Florida coming on. Let me know if I'm wrong on that, but 2% versus what it appears some of your peers are talking about of, you know, mid to high single digits. I mean, it looks like you had, you know, some pretty significant attrition just in the last quarter. Why are you assuming that that attrition is gonna be so modest next year relative to what you're seeing just in the last quarter or two and what some of your peers are talking about?

And then maybe you could talk about if you do see attrition higher, would we assume that that would impact risk pool and cost trend? Thanks.

Sure. Going back a little bit, historical here, historical data. The industry and Molina, on a same store basis, not counting our new store growth, lost 20% membership organically over the past number of years, with 13% in 2024, 4% in 2025, and now we're projecting it to be 2%. We believe that the redetermination effects are largely over. We're feeling the tail end of that. And now it's just about program integrity. It's about tightening up on before OB3 kicks in. That'll kick in for 2027 and 2028, so we're talking about 2026. Due to just more rigor around the enrollment process, the redetermination process, we believe that 4% we experienced in 2025, which is exact, that's the exact number, will fall to 2% next year.

Now, if we're wrong, and it ends up being a little higher, Mark, I'll kick it to Mark here in a minute. We've done an exhaustive analysis of low users, and it depends on what your definition is, over what period of time, what's a lower-than-average loss ratio? Everybody doesn't use services at 90% of premium. Some use a lot more; some use a lot less. And so your question you asked me is, if we're wrong about it, is there an acuity shift coming? And we don't think so. Mark, do you want to take that?

Joe, that's well summarized across the board. So Justin, to your framing question, yeah, we're 4.6 million, roughly flat across the beginning of the year to the end of the year. That's a 2% decline organically, offset by Florida, so you got that exactly right. And then to Joe's point, the market's down about 20% since the start of redetermination. We've done exhaustive cohort analysis of who were the joiners, who were the leavers, and it's really interesting. Of the people that left, since the start of redetermination, we estimate about 5% fewer people in our population are low users or no users.

So if you looked at any given quarter, how many folks didn't use at all or used very low, say, $200 PMPM, something like that, that population is now 5% smaller within our current population than it was two years ago. That's not the only impact. Many of the cohorts changed around, but that's the one that kind of grabs your attention. So that's a lot of what's driving trend over the last two years as that mix shift happens. I think Joe referred to it in his prepared remarks. So going forward, most of those people are out now as a result of that. The low users and no users that were on there when redetermination was suspended, mostly are gone now. So on a go-forward basis, we're estimating 2%, attrition across the year organically, which is a relatively small number.

Even if it's a little bit bigger, the big driver of acuity shift or trend is those low users and no users, and those are mostly out of the system now.

The next question comes from Stephen Baxter with Wells Fargo. Please go ahead.

Yeah. Hi, thanks. I was hoping that you could update us on the size of your Medicaid expansion enrollment, both, I guess, enrollment and premiums would be great. Then as we think about dimensioning the attrition that you saw throughout the course of 2025, how much of that came from Medicaid expansion versus other sources, other program types? Thank you.

Just sizing Medicaid expansion, Mark will correct me, but I'll go from memory here. Medicaid expansion population is about 1.3 million members and about $8 billion of the $32 billion of premium. Now, when we're talking about OB3 work requirements, semiannual redetermination, semiannual redeterminations, et cetera, we still predict losing about 15%-20% at the high end of that population, which is only 25% of the total Medicaid book. And as Mark said, when you're trying to calculate or estimate whether that causes a huge acuity shift, the fact that that cohort is operating closer to the mean of portfolio average is a meaningful statistic. Mark, do you want to talk about the attrition in that population?

Sure. We definitely see more people coming out of expansion, due to the OBB, just because that's where the policies are aimed, but that's also where you have more volatility in the population. As Joe mentioned, if you lose 15%-20% of the folks in expansion, one, it's a quarter of our overall Medicaid population, and two, if it happens over three years, it's even smaller as an impact on the overall book. So could be an impact there over time, but annually, I don't think it's meaningful. And again, if all folks are more gathered around the average MLR, the impact shouldn't be meaningful.

The next question comes from Kevin Fischbeck with Bank of America. Please go ahead.

Great, thanks. Just trying to understand a couple of things. First, I guess in your commentary around 2026 guidance, you listed a number of positive potential levers to upside. There were no negative dynamics that you're thinking of. Obviously, things have been difficult the last couple of years to predict. I was wondering if there was anything that you would highlight as, you know, something you were watching? And then just, just if you could just follow up on the commentary around risk pool shifts. Obviously, you said last year was 250 basis points of pressure on 4% membership, and now you're saying 2% membership is zero. So if you could just kind of square that a little bit better, thanks.

On the last point, yes, we've, we've been asked that before. It's not linear, and it's not proportional. And the reason is, as Mark just described, it matters how many low and no users you actually have in your population. So if, if your supposition is if 4% created 250 basis points of pressure, why doesn't 2% create 125 basis points of pressure? Because largely speaking, not largely speaking, the low and no user population, as we define it, is down 5%. So people are operating closer to the mean MLR rather than the skews. On the 2026 guide, I mean, suffice it to say, anything that is potentially upside is potentially downside. But we believe rates, the, the rates at 4% are a floor.

We got 150 basis points of relief last year, mid-year, so we don't think there's downside to rates. We think it's all upside. Now, medical costs trend at 5%. Medical costs are up 20% over the last three-year period, baseline medical costs, and now we're trending in 2026, comparable to 2025 without the acuity shift. Same trend number, 5%. Is there a downside? Sure, you could be wrong about it, but we believe that we have a reasonable, a reasonably conservative trend assumption. The 4% rate or floor. It's all upside from there on mid-year, on- and off-cycle, rate increases. The reason we say there's upside to Marketplace and Medicare is because we were priced more conservatively than we're guiding to.

Our pricing targets are low single-digit margins, and as Mark said, we're expecting a 1.7% negative margin in Medicaid, and I think a positive 1.7% margin in Marketplace. Those could end up being higher, but could they be lower? Sure. Mark, anything to add there?

Just to be clear, the 1.7% was Medicare, not Medicaid.

The only other thing, Kevin, which might have been obvious to you, but the impact on the cohorts of the low users and no users coming out isn't when they come out, it's the subsequent period, right? So if they come out in 2024, you'll feel that in your trends in 2025, because it's the year-over-year impact, it's not the day they come out. So if you're putting that all together, Joe mentioned it was 4% membership decline in 2025, but the much bigger decline in 2024 of 13% is what put the pressure on 2025. So now that only 4% came out in 2025, the implied rollover to 2026 is much lower. More to the point, a lot of the low users, no users, are already out of the system, so it's really a declining impact.

The next question comes from Ann Hynes with Mizuho. Please go ahead.

Thanks. I just want to follow up on your trend assumptions. You know, obviously, trend's been very difficult, up 7.5% this year, but why do you have confidence in trend only increasing 5%? Is it the large numbers? Is there a certain area that you already see decreasing? Is it more utilization management? I just from our seats, you know, this industry has underwritten all businesses wrong for three years. So when I just see a 5% trend going forward, you know, for me personally, I would like more than just saying, like, you know, trend has to come down at some point. That doesn't make sense to me. So if I could, you know, if we could have some more detail on specific state actions, that utilization management. I would, I personally just would like more detail on why you think the rates, the trend will only grow 5%.

Well, thanks for the question. And of course, it is a key assumption in our outlook for 2026. Context, we had a 7.5% trend in 2025 off of 2024. With perfect hindsight, 2.5 percentage points of that was related to the redetermination-related acuity shift, as we've just been describing in a couple of the questions that were asked. So core trend is 5%. Core trend includes every impact. Supply, it's a supply and demand economy. It includes the higher acuity of the American population that we serve. It includes any quote-unquote, upcoding or aggressive billing from providers. 5% is what we experienced in 2025. And again, it's off a cost base that's increased 20% over the past three years. It's 50% higher than historical averages.

Medicaid trend over the last 10, 15 years has been 2%-3%. We're seeing BH, behavioral health services, now nearly 20% prevalence. A BH diagnosis is now 20% prevalent in our population, up from 17%-18% three years ago. Why is that important? It's trending at 9%, and the BH services themselves are trending at 18%. Our pharmacy trend, 13%. Top 10 therapeutic classes, trending at 36%. These are in the 5% number. LTSS hours, SNF admits, professional office visits up 16%. And the number of services, the number of procedures per office visit is dramatically higher this year than it was in the last two.

So we believe that the 2025 5% number includes a lot of the phenomenon that industry pundits and commentators talk about, and we believe that's a good number off of which to project. Are we seeing signs of, I don't call it aggressive billing, but upcoding? You know, level threes becoming level four and level five, service intensity, psychiatric hours going from, you know, 30-minute visits to 60-minute visits? Sure. But that's in the 2025 trend, and that's why we think the 2026 number is fully loaded for all the supply and demand dynamics that are being experienced in the market.

The next question comes from Andrew Mok with Barclays. Please go ahead.

Thanks. I'll shift focus to the ACA. Wanted to ask how January open enrollment tracked relative to expectations, and what's embedded in your membership assumption for non-effectuations and attrition this year? And if possible, it would be great to share how year-to-date effectuations are tracking now versus this time last year. Thanks.

Sure. And we're in, we're in real time. I'll give you a global answer, and I'll kick it to Mark, 'cause we're right in the middle of that process now. But as you recall, we ended the year with 650,000 members. We priced up 30% on average, ranging from 15%-45%. Consciously reduced our number one and number two position from 50% of our counties to 15% and reduced our footprint by 20%. A conscious effort, as we will not allocate capital to an unstable risk pool. Our speculation or our forecast at the time was we would come down into the 200,000 zone, 200,000-300,000, and reduce our revenue to $2.2 billion.

As we're right in the middle of that story right now, I'll hand it to Mark to give you the latest tale of tape, what we're forecasting, and what's likely to happen with retention and effectuation. Mark?

Hey, Andrew. This year, forecasting Marketplace members is a little more difficult than in past years. Big picture, to get right to the answer to your question, I'm looking for about 280, at the 280,000 at the end of the first quarter, which will decline down to 220 at the end. The reason it's a little harder this year is new members are real obvious and clear. It's the renewals that are the wild card. Now, there's some confusion, I think, in the media. They're saying, "Gee, Marketplace members are still quite high. Everyone thought they were gonna come down." And what I think some of the media misses is that they're assuming the renewals all stick.

Now, as partly or fully subsidized people see what their new premium is in January and February, a lot of passive renewals will not renew. They'll go into grace period, not pay, and they'll eventually fall off. That'll be much bigger in past years, just given the price dynamics in the market. So right now, I think I'm at 280 in the first quarter. As Joe mentioned, we're about 70% renewal, about 30% new members. And I think the stats you're looking for is on the new members, the effectuation rate, I think it's 60%. Everything's telling me it's about 60%. Historically, I would've thought 70%-80%, so effectuation much lower, but remember, that's new members. On renewal, I think my renewal tension's more like 30%, whereas in the past I would've expected more like 60%.

That goes right to the dynamic of people passively renewing, seeing their new premium, if they're not fully subsidized, which almost no one is, and probably not going through the grace period of making the payments and falling off at some point in the first quarter, which is why I give you a March estimate, not a current estimate.

The next question comes from Sarah James with Cantor Fitzgerald. Please go ahead.

Thanks. Sticking on the ACA MCR, can you help clarify what went on in fourth quarter? Was there a pull forward of utilization or any category that was running high? And then how do you think about the slope of the MCR curve for 2026, given the attrition and effectuation that you're assuming? Should we think that the peak to trough swing widens, maybe by a few hundred basis points on what you've experienced historically? Thanks.

Hey, Sarah, it's Mark. A couple of things there. What you're calling pull forward, we don't see it, and I've gotten that question a lot. Just for everyone's benefit, the concept of pull forward might be if subsidies are declining and people might drop or lose their coverage in January, would they increase utilization in the fourth quarter in anticipation of that? We're just not seeing it. If you look at my MLRs, I'm only slightly up Q4 versus Q3, part of which is normal seasonality, and a little bit of which is, we talked about the out-of-period provider settlements. So you're just not seeing it in the MCR, and I'm not seeing it in the utilization.

Now, on next year's seasonality, we're gonna have to see exactly what the membership content looks like when it all settles in March, but I would expect fairly normal seasonality as we've seen in the past. The only thing that might be a little bit different there is metallic mixes are shifting. In past years, we were more 70% silver. This year, we're more 50% silver. So with deductibles, co-pays, things like that, you might see some changes based on metallic mix, but I wouldn't think you'll see something much different seasonality than we normally have.

The only other point I would make is, in 2026, we're projecting a much lower special enrollment period addition for the three quarters. As you know, special enrollment is an invitation to buy insurance when you need it. They usually come in with very high MLRs until they settle down, and the SEP enrollment during the 2026 is forecasted to be much lower than it was in 2025 and prior.

The next question comes from Scott Fidel with Goldman Sachs. Please go ahead.

Hi, thanks. Good morning. Just interested in how you're thinking about, let's call it maybe sort of underwriting or around new business development. And I'm putting it that way because that would maybe, you know, include both, sort of new contracts organically and then also M&A, and, just around, you know, the downturn and sort of the pressures we're seeing that, you know, just maybe curious around... You know, I'm thinking about Florida, for example, you know, your thoughts on pursuing that contract. And then maybe also just talk about how, the overall book of M&A you've built up over the last couple of years, how has that performed, would you say, within the overall enterprise relative to, let's say, more of the ongoing operations? Thanks.

Scott, first, on new business, we are still actively pursuing new contracts. Our win rate is 80%, $20 billion of run rate revenue over the past number of years, including the Florida Kids contract, which we believe is a very valuable contract. We have proven over time that we expertly handle high acuity, low-income lives, and these are very high acuity situations for young adults, young children, in the state of Florida. So we've worked hard for this contract. We believe it's accretive. We wouldn't have put, you know, $3 of ultimate run rate into our embedded earnings if that wasn't the case. And I want to clarify the startup here. The fact that there's a $1.50 drag on 2026, the reason is you have to spend money before any revenue ever shows up.

You got to hire people, number one. Number two, new programs, whether it's Nebraska, Iowa, or Florida Kids, a new program, or a new entrant always runs higher as people get used to systems and business processes, et cetera. And third, as Mark would like to talk about, there's a financial implication of building reserves in the early years. So that $1.50 drag is not symptomatic or emblematic of the power, the earnings power of that business. We added a $3 run rate to our embedded earnings for the ultimate attainment of a target margin. Mark, anything to add on Florida?

Joe, I think there's some important distinctions there that you point out. One, the MOR always runs hot on a new property, and typically, we say it's a two-year path to target margins. We have one quarter of performance of Florida, which means these margins we put on top of our normal picks, which are one-time items, really exaggerate the performance in the first quarter. So, Florida will run a hot MOR in its first quarter, but a lot of it is new property getting everything settled, and these margins we put on day one, which are part of our normal actuarial policy. The other part of the $150 is the business doesn't just start on the fourth quarter. We've got two, three quarters here of prep, where we're hiring people in advance of revenue, incurring expenses.

Obviously, that's not part of the run rate. So the $1.50 isn't meant to be. This is an extrapolation of how it is. It's kind of an anomaly of one quarter of new business and a lot of G&A prep.

It's $6 billion of revenue, which to us is, you know, you're adding 15% of revenue with one contract. We never measure our acquisitions or our contracts on contribution margin, but in this case, it's entirely appropriate. The contribution margin in this contract is going to be significant. To your question on M&A, this is the perfect environment to be exploring M&A, and we have. Our pipeline has actionable opportunities in it. Many of them are what I'll call challenging situations for single state, single geography payers who are in the same rate environment that everybody else is in, and they're eroding capital.

Without naming names or states, we've tried to action two or three of these in the past six months, and they were so troubled, they had to kind of seek other alternatives rather than to be acquired. But this is a great time to acquire revenue. At the heyday of margin attainment, we are still acquiring things at just over 20% of revenue, which means very little goodwill value. You're mostly exchanging cash for regulatory capital. Now, in this environment, Mark and I say, "You know, give me, give me a property at book value, and I'm good to go, and we'll get it to target margins in our two to three-year period." So this is the perfect time.

We believe long-term in the veracity of this business and its margin potential, and this is the perfect time to responsibly purchase long-dated revenue streams with stable membership in states where we want to do business, either states that we're already in and are underrepresented in market share, or states that we're not in and want to create a foothold.

The next question comes from Ryan Langston with TD Cowen. Please go ahead.

Hi, good morning. Maybe within the cost trend assumption of 5%, maybe give us a little sense on some of the components within that assumption. Maybe cost categories you assumed higher, lower, and maybe any sort of swing factors, you know, with the widest range as positive or negative. Thanks.

Sure. Sure, Ryan. I covered a few of these before. Behavioral health services are the cohort of Medicaid patients with a behavioral condition trends at 9%. We didn't reduce that at all. And the behavioral services themselves are trending at 18%, not only due to the prevalence of behavioral conditions, but let's face it, providers are, you know, using their judgment on diagnosis and treatment protocols. The pharmacy trend globally is 13%. The top 10 therapeutic classes are trending at 35%. Antiretrovirals, antipsoriatics, GLP-1s, all the things you read about. Cancer diagnoses are prevalent. We did not soften any of the current trends that we're experiencing in 2025, as I said, now that the baseline, the cost baseline, is 20% higher today than it was three years ago.

LTSS, skilled nursing facility admits are up. LTSS hours, home service hours are creeping up. Didn't reduce any of our trend assumptions there. And professional office visits is the one that doesn't get a lot of airtime, but that's trending at—it trended at 16% in 2025, off 2024. And one of the reason, it's not that the number of office visits is necessarily up per 1,000, but the number of procedures per diagnosis per visit is up significantly. One diagnosis code, three, CPT codes in the past, maybe there's now, you know, four CPT codes. So we didn't soften any of what we experienced in 2025, and 2025 was, again, a year of medical cost inflection off of 2024, and we kept all those trends rolling through the 2026 numbers.

There's probably others that I'm missing, but those are the big ones. Mark, did I miss anything?

No, I think that's good. So once the acuity shift is behind us, the 7.5% is now 5% in our projections. Joe, you hit the big ones. Pharmacy, professional office visits, and BH continued to be high, but considered within our 5% outlook.

The next question comes from Michael Ha with Baird. Please go ahead.

Thank you. I appreciate your exhaustive cohort analysis commentary. But what assumption is currently embedded in your 2026 guide relating to possible risks if more and more states who are facing these mounting budgetary pressures enact, you know, more stringent eligibility requirements? And if this prompts a spike in sort of procedural disenrollment, is there a range of outcomes embedded in your guide? And because there are states we actively track, where we're seeing pretty alarming procedural disenrollment rates, some up to 90%, and a lot of those trends are beginning to spike in more recent months, which if impact is felt typically next year, it concerns us. I know they might not be 0% utilizers, but I know these lives are typically healthier overall.

So stepping back, I know you're very confident, given the much lower prevalence of overall, overall lower utilizers in your book, but just want to ask again, how should we think about the achievability of your guide if more states were to tighten eligibility?

Molina Healthcare (MOH) Q4 2025 Earnings Call Transcript

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