Molina Healthcare is planning to further reduce its involvement in the Affordable Care Act (ACA) marketplace in 2027. This strategy comes in response to a significant drop in membership as many Americans have moved away from insurance exchanges, especially after the expiration of more generous subsidies that had drawn them in during the pandemic.
The company saw its ACA membership drop from 655,000 at the end of 2025 to 283,000 by the second quarter of 2026. This shift followed a substantial increase, roughly 30%, in premiums by insurers aimed at stabilizing their costs and reducing their exposure to the exchanges.
Interestingly, Molina has ended up with a higher number of high-cost members than initially anticipated, including those requiring expensive treatments for severe conditions like HIV and cancer. These individuals don’t necessarily benefit from a system that redistributes funds from healthier members, leading to an imbalance. CEO Joe Zubretsky acknowledged that they had not accurately priced for these realities, admitting, “We underestimated it,” during a conference call with investors.
Molina is looking to further cut its ACA membership in 2027, which could lead to around $1 billion less in ACA premiums. The company’s focus will narrow to just six states, down from the current 14. Zubretsky explained, “Our philosophy is that until we are confident that the risk pool is stable, we will allocate less capital to that market.”
Historically, ACA enrollment had surged, reaching a record high that lasted four years, but with subsidies ending in late 2025, around 3 million Americans have already left the exchanges. This trend is likely to continue as more people opt out of paying increased premiums.
Insurers with a significant presence in states experiencing sharp enrollment declines, like Molina, are facing a more drastic loss of members. As losses mount, there’s a greater risk that the remaining members’ healthcare costs could take up a larger slice of what they’re contributing through premiums. This concern was evident for Molina in the second quarter.
Analyst David Windley wrote in a note that there are rising questions about whether the ACA remains viable for Molina. Their medical loss ratio (MLR), which gauges spending on patient care, hit 88.9% for the second quarter, up 3.5 percentage points from the year before—far exceeding what analysts had expected.
Along with unfavorable premium structures, Molina’s MLR has increased because the company faced unexpectedly high risk adjustments. These pressures may stem in part from regulatory challenges during the previous administration regarding financial aid revocations for ineligible students.
In contrast, Molina’s Medicaid sector, which has 4.9 million members and generates most of its $10.2 billion in premiums, seems to be stabilizing thanks to states boosting payment rates to manage high medical costs.
On a more positive note, the company has seen its Medicare Advantage program outperform expectations, which Windley described as a “positive sign” for insurers during the quarter.
Overall, Molina’s MLR for the second quarter was 92.2%, slightly above analyst predictions but an increase from 90.4% the previous year, primarily because of trends in ACA costs. As a result, Molina’s profits took a hit, with a 76% drop in net income down to $60 million. Total revenue fell about 5% to $10.9 billion, yet their performance still surpassed analyst forecasts, prompting the company to raise its expectations for adjusted earnings for the year.
Now, Molina anticipates adjusted earnings of at least $5.25 per share, up from a previous estimate of $5.00. If it weren’t for challenges tied to the ACA, they believe it could have been higher, around $6.75.
Heading into the second quarter, expectations for insurers were high. Although many managed to meet or surpass those expectations, the market remains unforgiving for those that don’t. Following the earnings results, Molina’s shares dipped more than 9% in premarket trading.
A significant issue raised by analysts is that Molina’s ACA performance is not aligning with other insurers. For instance, Elevance and UnitedHealth reported that their ACA segments performed better than expected in the same quarter.
Nonetheless, many insurers are scaling back their ACA presence due to ongoing market volatility. Cigna plans to exit the ACA after this year, while Centene, Elevance, CareSource, and Medica have all announced their intentions to withdraw from certain ACA markets in various states.
