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Molina Healthcare plans to further shrink its Affordable Care Act business in 2027 in a bid to eke out profits from the smaller and sicker insurance marketplace, after the expiration of more generous subsidies caused millions of Americans to flee the exchanges.
Molina’s ACA membership fell from 655,000 people at the end of 2025 to 283,000 people in the second quarter, after the insurer raised rates 30% on average to contain rising costs and reduce its exposure to the exchanges, according to results posted aftermarket Wednesday.
But Molina retained more high-acuity members than planned, especially members on high-cost drugs for conditions like HIV and cancer, which don’t always factor into the system used to redistribute funds from ACA insurers with healthier members to those with sicker members.
That’s creating an imbalance, according to CEO Joe Zubretsky.
“We priced for this phenomenon, as I said, coming into 2026. But that increase in pricing was not enough. We underestimated it,” Zubretsky said during a Thursday morning call with investors.
“It’s not a metallic tiering issue. It’s not our formularies are not designed properly. It literally is in a declining book of business, that acuity shift was underestimated in pricing. Pure and simple. Unfortunate, but pure and simple,” the CEO added.
Molina plans to reduce its ACA membership further next year, and bring in about $1 billion less in ACA premiums as a result. After, Molina’s ACA enrollees will be concentrated in six states, according to the CEO. Currently they’re fairly evenly distributed across 14 states.
“Our philosophy is: Until we’re convinced that the market, the risk pool is stable in that market, we’re going to allocate less capital to it,” Zubretsky said.
The ACA exchanges broke sign-up records for four years in a row prior to 2026, as more generous subsidies for coverage enacted during the coronavirus pandemic enticed Americans onto the plans. But those subsidies expired at the end of 2025, and roughly 3 million Americans have left the exchanges since, according to the most recent federal data. That exodus is expected to continue over 2026 as more beneficiaries elect not to pay higher premiums.
Membership contraction has been more drastic for insurance carriers with greater exposure to states with higher attrition in their ACA populations. Molina is one such carrier. And greater attrition comes with greater risk that the medical costs of remaining members could eat up a larger share of premiums — a fear that came true in Molina’s second quarter.
“Expect concerns to intensify about whether [the ACA] is viable market for [Molina],” Jefferies analyst David Windley wrote in Wednesday note on the results.
In the second quarter, Molina’s ACA business posted a medical loss ratio — a closely watched marker of spending on patient care — of 88.9%, up 3.5 percentage points year over year. That’s a major jump in medical costs, and well above analyst expectations.
Along with unfavorable member acuity mix, Molina’s marketplace MLR also rose because the insurer had a higher risk adjustment payment than anticipated.
The MLR was also pressured by the Trump administration more aggressively clawing back federal subsidies for enrollees later found to be ineligible for the financial aid, Molina said.
In comparison, Medicaid — Molina’s bread and butter, accounting for the lion’s share of its 4.9 million members and its $10.2 billion in premium revenue — is stabilizing, as states continue to increase their payment rates to make up for higher medical costs, executives said.
Meanwhile, Molina’s plans in the privatized Medicare Advantage program outperformed expectations: the “bright spot” for the insurer in the quarter, Windley said.
Overall, Molina posted an MLR of 92.2%, better than analysts had expected but up from 90.4% during the same time last year, largely due to the ACA cost trend.
That drove down Molina’s profit. The California-based insurer posted net income of $60 million, down 76% year over year, on $10.9 billion in revenue, down almost 5% year over year.
Still, Molina’s second quarter was still stronger than analysts had expected, and the insurer raised its 2026 earnings guidance on the results.
Molina now expects adjusted earnings of at least $5.25 a share this year, up from its previous guidance of $5.00 a share. Without the ACA headwinds, Molina said it would have hiked the guidance to $6.75 a share.
Expectations were high for insurers coming into the second quarter, and insurers largely appear to be delivering — though the market is still punishing companies that clear the bar.
Molina’s stock fell more than 9% before market open on Thursday following the results, despite its outperformance.
The biggest problem was likely how drastically the insurer’s ACA performance diverged from other insurers that have reported earnings, according to analysts. Elevance and UnitedHealth both told investors that their ACA businesses did better than expected in the second quarter in results posted last week.
Still, a number of insurers have announced plans to trim their presence in the ACA exchanges, turned off by the volatility.
Cigna said in April it would bow out of the ACA after this year. And in the past two months, Centene announced plans to leave its ACA business in New Hampshire, Elevance said it was exiting the small group exchanges in Ohio, CareSource said it would exit Indiana’s ACA marketplace and Medica said it was discontinuing individual ACA plans in three states.
