Molina Healthcare: Updating Our Estimates: Items to Watch for 2H and CNC Read-Across

研报英文原文证据摘录

Molina Healthcare: Updating Our Estimates: Items to Watch for 2H and CNC Read-Across

f $10.00–$11.00 in 2027+ will

come disproportionately from Medicaid. To that end, while it appears that Quarterly Forecasts (FYE Dec)

trend may have slightly increased in 2Q (slightly below 5% to slightly Adj. EPS ($)

above 5%), we think a major question coming out of the quarter was “...is 2025A 2026E 2027E

there rate upside or does state budget pressure mean margin improvement Q1 6.08 2.35A

Q2 5.48 1.51A

requires trend normalization?” Said differently, we had initially read the Q3 1.84 0.76

2026 ~4% Medicaid rate update guidance as conservatism from MOH: Q4 (2.75) 0.62

similar to last year, when MOH revised its Medicaid rate expectations FY 11.04 5.25 10.44

upward by ~150bp throughout 2025, beginning at 4.5% as part of 4Q24

Style Exposure

guidance and ending at ~6%. Unlike 2025, where MOH had already

increased expectations for Medicaid rates to slightly above 5% by 2Q25

(see note here), year-to-date in 2026 MOH has not seen favorable rate

development in Medicaid, with >55% of its book already receiving 2026

rate updates. Given MOH’s commentary at its investor day that Medicaid

historically sees a 3% to 4% trend (see investor day deck here), receiving

a 4% composite rate update implies that margin expansion requires

normalization of trend (vs ~5% trend embedded in MOH’s 2026 guidance),

rather than rates increasing above trend. We do not dispute that the industry

remains underfunded (see our analysis of smaller health plans here), and

that actuarial soundness requirements should support rate updates in the

coming quarters/years as states incrementally update the lagging data to

include 2025+ completed claims, but 2024 trends were also elevated (6.5%

total, 4% ex-acuity per MOH).