By Sneha S K
(Reuters) -Molina Healthcare shares fell 20% on Thursday, a day after the insurer cut its annual profit forecast for the third time this year, underscoring the strain of surging medical costs across government-backed health plans.
The warning deepened investor worries around insurance plans related to the Affordable Care Act, also known as Obamacare, dragging down shares of Centene and Oscar Health about 7%.
Larger rivals UnitedHealth and Cigna also fell about 1%.
Molina’s decision to lower its annual adjusted profit forecast to about $14 per share, from at least $19 per share, was disproportionately influenced by “unprecedented” medical costs in its Marketplace plans that serve individuals under the ACA, it said. The company expects the costs to remain high until the end of the year.
“Our marketplace business has significantly underperformed our expectations, but its performance appears consistent with industry wide trends,” said CEO Joseph Zubretsky in a call with analysts on Thursday.
In recent months, insurers have struggled with increasing medical costs in ACA-related plans. 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 a higher proportion of patients in Obamacare plans who need more care, and are not getting adequately reimbursed for the care.
Earlier this week, larger peer Elevance Health also flagged higher costs in the fourth quarter in its Obamacare plans.
Molina sees potential for higher margins next year, but analysts have questioned whether the company has priced in all headwinds.
(Reporting by Sneha S K in Bengaluru; Editing by Sahal Muhammed)
