Molina Healthcare Q3 2025: Rising Medical Costs Squeeze Profits Despite Revenue Growth

Molina Healthcare (NYSE: MOH), a major provider of government-sponsored healthcare plans, recently released its financial results for the third quarter of 2025. By examining their latest 10-Q filing with the SEC, we can get a clearer picture of the company's performance and the challenges it faces. The headline numbers reveal a company successfully growing its revenue but struggling with rising costs, which has put significant pressure on its profitability.

From Revenue to Profit

For the three months ending September 30, 2025, Molina's total revenue grew to an impressive $11.5 billion. To understand where that money came from and where it went, the flow diagram below visualizes the company's quarterly income statement.

As the diagram shows, the vast majority of revenue is generated by the company's primary business segments. The "Unallocated" revenue stream, totaling $615 million, consists of items not assigned to a specific business line, such as premium tax revenue collected and passed through to states, as well as income from the company's investment portfolio.

The Margin Squeeze

While revenue growth is strong, the bottom line tells a different story. Molina's net income for the quarter was $79 million, a steep decline from the $326 million reported in the same period last year. Operating income also fell sharply to $137 million from $467 million.

The primary reason for this profit squeeze is a jump in medical expenses. A key metric for any health insurer is the Medical Care Ratio (MCR), which measures how much of its premium revenue is spent on medical services for its members. A higher MCR indicates lower profitability. In Q3 2025, Molina's MCR rose to 92.6%, up significantly from 89.2% in the prior-year quarter. This means that for every dollar collected in premiums, the company spent 92.6 cents on healthcare costs, leaving very little to cover administrative expenses and generate profit.

Segment Performance Highlights

Breaking down the business reveals the sheer scale of Molina's government-focused operations:

• Medicaid: This remains the core of Molina's business, generating over $8 billion in revenue with an operating margin of 8.0%. It serves as the foundation of the company's financial performance.
• Medicare: The segment brought in $1.61 billion in revenue, contributing $103 million in operating income.
• Marketplace: This segment, which offers plans on the Affordable Care Act exchanges, produced nearly $1.2 billion in revenue but faced significant cost pressures, resulting in a tighter operating margin of just 4.4%.

The Path Forward

Molina Healthcare is in a challenging position. The company is effectively growing its top line through acquisitions and expansion, demonstrating its ability to capture market share in the government healthcare space. However, this growth is being overshadowed by the rising tide of medical costs. The central task for management will be to control these expenses and negotiate adequate reimbursement rates with its state partners. For investors and observers, the key indicator of future success will be whether Molina can bring its Medical Care Ratio back down to more profitable levels.