By Sneha S K
(Reuters) -Molina Healthcare shares fell 18% in premarket trading on Thursday, a day after the insurer cut its annual profit forecast for the third time this year, driven by higher medical costs on its government-backed plans.
The results also dragged down shares of Centene and Oscar Health — with large businesses focused on Affordable Care Act plans — between 3% and 7%.
Larger rivals UnitedHealth and Elevance also fell about 1.5% premarket.
Molina’s new annual adjusted profit forecast of about $14 per share, down sharply from at least $19 per share, was disproportionately affected by “unprecedented” medical costs in its Marketplace plans that serve individuals under the Affordable Care Act, it said. The company expects the costs to remain high until the end of the year.
Increasing medical costs in plans provided through the Affordable Care Act, or Obamacare, have hit health insurers in recent months. These government-subsidized plans based on income include a risk adjustment pool that reimburses insurers who cover a disproportionate share of sicker members.
Companies have said they are seeing membership in Obamacare plans shift to patients who require more care, increasing medical costs.
Earlier in the week, larger peer Elevance Health also flagged higher costs in the fourth quarter in its Obamacare plans and said it expects high medical costs in its Medicaid business to persist into the next year.
In contrast, Molina said its Medicaid plans for low income people are performing well despite high level of utilization.
Analyst at Baird, however, said attrition in Molina’s Medicaid plans was 6% in the quarter from a year ago.
Although Molina sees potential to improve its margins next year, analysts remained skeptical whether the company has priced in all the headwinds.
(Reporting by Sneha S K in Bengaluru; Editing by Sahal Muhammed)
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