Molina Healthcare's Q4 Results Reveal Growing Margin Pressures

Molina Healthcare, Inc., a major player in the managed healthcare industry, released its fourth-quarter 2025 financial results on February 5, 2026, revealing significant headwinds from elevated medical costs. The healthcare insurer reported earnings of 43 cents per share against consensus estimates of the same amount, though this masked underlying challenges in profitability as the company navigated rising operational expenses. Full-year 2025 revenues reached $44.89 billion, representing 10.4% growth year-over-year, yet earnings per share declined 38.23% to $13.99 on an annual basis—a telling indicator of margin compression across the organization.

The quarter’s results underscore a critical dynamic affecting the entire healthcare insurance sector: while top-line growth remains respectable, bottom-line profitability is increasingly challenged by medical cost inflation. Molina’s quarterly revenues of $10.8 billion showed modest 2.9% growth, but this expansion came amid deteriorating profit margins.

The Cost Squeeze: Margin Compression in Focus

The primary culprit behind Molina’s earnings pressure is the rising medical care ratio (MCR)—the percentage of premium dollars spent on medical claims. In the fourth quarter, Molina’s total MCR climbed to approximately 93%, up from 90.2% a year earlier. This 290-basis-point increase reflects the industry-wide challenge of medical cost inflation outpacing premium growth.

Breaking this down by business segment reveals the severity of the pressure:

• Marketplace segment MCR: 94.8%, up sharply from 83.3% year-over-year, a concerning 1,150-basis-point increase
• Medicaid MCR: 92.47%, compared to 90.2% in the prior year
• Medicare segment: Showed more stability but still faced headwinds

The marketplace segment, in particular, represents a vulnerability for Molina. Despite marketplace membership growing 64.7% year-over-year, the elevated medical cost ratios in this business line are eroding profitability gains from volume expansion.

Revenue Growth Offset by Cost Pressures

Molina’s premium revenue streams showed mixed momentum entering 2026. Premium income is projected to grow 2.4% year-over-year in the fourth quarter, while medicare-specific premiums increased 4.9% to $1.4 billion. However, membership trends presented a dual narrative:

• Medicare membership expanded 3.3%
• Medicaid membership contracted 6.4% according to internal model estimates
• Marketplace membership surged 64.7%

The membership dynamics alone explain part of the earnings challenge: rapid growth in lower-margin marketplace business is diluting returns from higher-margin medicare and medicaid segments. Additionally, investment income declined 9.8% year-over-year, further pressuring net income.

Operating expenses across the organization grew 6.1% year-over-year, driven by elevated medical care costs combined with increased general and administrative expenses—outpacing the slower top-line growth rate and compressing operational leverage.

Industry Peers Facing Similar Headwinds

Molina’s Q4 challenges are not unique within the managed care sector. Peer performance in the same quarter reveals an industry grappling with cost inflation:

UnitedHealth Group reported fourth-quarter adjusted earnings per share of $2.11, matching consensus expectations despite a 69% year-over-year earnings decline due to elevated medical costs. The company’s revenues rose 12% to $113.2 billion, demonstrating that scale has not fully insulated it from margin pressure. Strength in Optum Rx and commercial fee-based membership growth partially offset medical cost headwinds.

Elevance Health posted adjusted EPS of $3.33, exceeding estimates by 7.3% thanks to strong premium growth and robust performance in its Carelon division. However, this outperformance was partially offset by declining overall medical membership and elevated expense ratios, mirroring the profitability squeeze evident at Molina.

The Cigna Group is expected to report this week with consensus projections calling for 18.5% year-over-year earnings growth and 6.5% revenue expansion—though these estimates suggest Cigna may face a different cost dynamic than Molina and Elevance in the marketplace segment.

What Molina’s Results Signal for Investors

The fourth-quarter results demonstrate that managed care companies are in a transition period where volume growth is increasingly offset by margin compression. Molina’s challenge is particularly acute in its rapidly growing marketplace segment, where medical cost ratios are unsustainable at current levels. Either marketplace premiums must increase meaningfully in 2026, or the company must accelerate efforts to control medical costs through enhanced care management and network optimization.

For investors tracking Molina, the key takeaway is that earnings recovery hinges on the company’s ability to improve medical cost trends while maintaining membership momentum—a balancing act that remains uncertain as the industry enters 2026. The divergence between revenue growth (10.4% full-year) and earnings contraction (down 38.23%) illustrates why margin management has become the critical variable for healthcare insurer valuations.