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SEC filingMolina Healthcare's Q2 2025 net income fell to $255M on higher medical costs, with MCR rising 180 bps to 90.4% and premium revenue growing 15% to $10.9B.
Molina Healthcare reported net income of $255 million for the second quarter of 2025, down 15.3% from $301 million in the same period last year. Diluted EPS fell to $4.75 from $5.17. The decline was driven by a lower operating income of $373 million (down 14.1%) and higher interest expense of $48 million versus $28 million. Total revenue grew 15.7% to $11.427 billion, supported by premium revenue of $10.868 billion (+15% YoY) from new contract wins, acquisitions, and rate increases. However, medical care costs rose faster (+17.5%) to $9.829 billion, pushing the consolidated MCR to 90.4% from 88.6% a year ago. The medical margin (premium revenue less medical costs) fell to $1.039 billion from $1.078 billion, reflecting a challenging medical cost environment.
As of June 30, 2025, total assets were $16.209 billion, up from $15.630 billion at December 31, 2024, driven by a $566 million increase in receivables (largely government receivables) and a $230 million increase in goodwill and intangible assets from the ConnectiCare acquisition. Cash and cash equivalents declined to $4.499 billion from $4.662 billion. Total liabilities increased to $11.606 billion from $11.134 billion, including a $452 million net increase in long-term debt (new term loan and credit facility borrowings). Stockholders' equity rose to $4.603 billion from $4.496 billion, bolstered by net income partially offset by $500 million in share repurchases. Working capital stood at $5.236 billion, up from $4.877 billion at year-end 2024.
Operating cash flow for the first six months of 2025 was negative $112 million, compared to negative $5 million in the prior year period, mainly due to timing differences in government agency settlements and higher working capital needs. Net investing cash flow was $5 million (versus -$435 million) as proceeds from investment sales outpaced purchases, partially offset by $245 million in business combination payments. Financing activities used $42 million, including $500 million in share repurchases partially offset by $650 million in borrowings. Capital expenditures totaled $64 million, resulting in free cash flow of -$176 million for the six-month period.
Management attributed the MCR increase to higher-than-expected medical costs from acuity shifts, product mix changes, and increased utilization across inpatient, outpatient, pharmacy, and behavioral health services. The Medicaid MCR rose 50 bps to 91.3%, Medicare rose 510 bps to 90.0%, and Marketplace rose 1,380 bps to 85.4%. The G&A ratio improved to 6.2% from 7.0% due to reduced incentive compensation and operating leverage. Interest expense increased due to new borrowings. No forward numerical guidance was provided, but management highlighted the impact of the recently enacted One Big Beautiful Bill Act, which is expected to reduce Medicaid expansion enrollment by 15-20% over time, and noted new contract wins in Mississippi, Nevada, Illinois, and Florida as growth drivers. The company also completed the ConnectiCare acquisition and announced a new $1 billion share repurchase authorization.
Segment performance showed a mixed picture: Medicaid revenue grew 9% but medical margin only rose 2% as MCR increased; Medicare revenue grew 12% but medical margin fell 26% due to high MCR; Marketplace revenue surged 91% (including ConnectiCare) but medical margin declined modestly. Prior year reserve development was favorable at $201 million for the six months, primarily in Medicaid, but was mostly absorbed by minimum MLR and medical cost corridor provisions. The effective tax rate decreased to 21.5% from 25.8% due to increased tax credits and lower nondeductible expenses. Goodwill from the ConnectiCare acquisition was $222 million, assigned to the Marketplace segment. The company maintained compliance with all debt covenants and had $1.25 billion available under its revolving credit facility as of June 30, 2025.