Molina Healthcare’s decision to exit the Medicare Advantage market is the latest sign that the glory days have come to an end.
The health insurance company will not sell standard individual Medicare Advantage with prescription drug coverage plans in 2027 and focus instead on Dual Eligible Special Needs Plans, Molina Healthcare announced when it reported fourth-quarter earnings Thursday.
Like other insurers, Molina Healthcare has struggled to make the numbers work in recent years. The company estimates underperformance in the segment will cost it $1 in earnings per share this year.
Molina Healthcare’s bombshell dropped a week after the Centers for Medicare and Medicaid Services blindsided insurers by proposing a minuscule payment increase and a tighter risk-adjustment system in the latest blows to the sector.
The company’s strategic decision may well be the first of many as health insurance companies confront persistently high costs, unfavorable regulations, flat payments and lower quality bonuses, and there’s no sign that relief is on the way, said Jessica Muratore, founder and principal consultant at Muratore Advisory Services, a health insurance consulting firm.
“Plans are making really tough decisions in order to stay around. We know that these market exits are going to continue to happen,” Muratore said.
Already this year, insurers such as UnitedHealthcare parent company UnitedHealth Group and Elevance Health have warned they will continue to abandon unprofitable geographic areas and cut benefits if CMS finalizes the regulation.
Yet smaller competitors that lack the market leaders’ resources to weather the storm are the most likely to simply walk away from Medicare Advantage, said Katherine Hempstead, a senior policy advisor at the Robert Wood Johnson Foundation, a philanthropy that funds health research.
“With margins compressed in literally every segment of the business, smaller insurers may need to pick their spots and choose segments where they feel the most comfortable taking risk,” Hempstead said.
Compared with industry pacesetters UnitedHealthcare, Humana and CVS Health subsidiary Aetna, Molina Healthcare is a small player in the individual Medicare Advantage market.
Molina Healthcare had 99,100 individual Medicare Advantage members as of Dec. 1, according to CMS data. The business generated $1 billion in premium revenue in 2025, the company reported last week.
The insurer largely established its individual Medicare Advantage operation through acquisitions. Over the previous two years, the company spent $350 million to buy ConnectiCare and gave $425 million to NeueHealth (then known as Bright Health Group) for its Medicare Advantage plans in California.
The strategy doesn’t seem to have worked, said Ari Gottlieb, an independent healthcare consultant. “This is throwing the towel in on some acquired business. They’ve gotten outside of their competency, and we’re seeing the results of this,” he said.
Molina Healthcare was and remains primarily a Medicaid managed care contractor, and Medicaid represented two-thirds of the $43.1 billion in premium revenue it collected last year. On Friday, President and CEO Joe Zubretsky said the company plans to seek acquisitions to grow its Medicaid business.
That aligns with the new Medicare Advantage strategy, which is centered on D-SNPs for people who qualify for both Medicare and Medicaid. Rival CareSource is taking a similar approach, and companies such as Centene and Humana also aim to take advantage of a federal push to encourage integrated health plans for dually eligible beneficiaries.
Poor results in Medicare Advantage following the acquisitions don’t bode well for Molina Healthcare’s plan to buy smaller, struggling Medicaid managed care companies to strengthen its core business, said Glen Losev, a senior equity analyst at Bloomberg Intelligence.
“It’s all about Medicaid,” Losev said. “I don’t think this is a Medicare story.”