Q3 2025 is the first quarter of a new chapter in the Medicaid managed care narrative. At the beginning of the quarter, H.R. 1 was enacted. As explained by our colleagues Edwin Park and Sabrina Corlette, the new law will upend Medicaid enrollment and financing for years to come, cutting federal payments to states by an estimated $990 billion over the next decade. These policy changes, including work reporting requirements and 6-month redeterminations for Medicaid expansion adults, will disrupt the Medicaid managed care market in most states. How that narrative plays out for the five national companies that dominate half of the market—Centene, CVSHealth/Aetna, Elevance Health, Molina Healthcare, and UnitedHealth Group—will be the focus of this and subsequent blogs summarizing the companies’ quarterly earnings reports and looking forward.
For the past several years, the enrollment narrative has been about COVID-19: continuous eligibility followed by the unwinding of that policy. Figure 1 tells the tale. Total Medicaid enrollment for the “Big Five” climbed from 30.1 million at the start of the pandemic to 44.2 million at the start of the unwinding, from where it dropped to 37.1 million in Q2 2024 and plateaued at around 36 million through Q2 2025. (These numbers reflect the net of current and new enrollments offset by new disenrollments). At the end of Q3, total enrollment dipped slightly (1%) to 35.8 million, still higher than pre-pandemic levels. This pattern roughly parallels the rise and fall of total national Medicaid enrollment, both managed care and fee-for-service, from 64.5 million at the start of continuous eligibility in February 2020 to a pre-unwinding high of 87.4 million in April 2023 to 70.5 million in June 2025.
The quarterly Medicaid enrollment experience specific to each of the “Big Five” tends to vary, with some reporting net increases and others net decreases. As shown in Table 1, however, each of the “Big Five” reported modest enrollment declines in Q3 from Q2. Molina had the largest percentage decline (2.8%), UnitedHealth Group the smallest (0.4%). Molina reported “lower membership due to redeterminations that continued into the second half of 2024.” Elevance attributed “ongoing Medicaid membership losses” to “eligibility reverifications.” Centene stated that “redeterminations are the primary driver of our Medicaid membership decline.”
Until this quarter, only Centene, Molina and UnitedHealth Group reported revenues from their Medicaid lines of business. In a welcome victory for transparency, Elevance Health has for the first time reported its Medicaid revenues as well. (For bonus points, it could also provide its Medicaid medical loss ratio, as Centene and Molina do). The reported amounts are shown in Table 2. Centene and UnitedHealth Group each accounted for over $23 billion in Medicaid revenues for the quarter, or two thirds (68%) of the total Medicaid revenues of $69.2 billion for all four companies.
Looking Forward
At the “Big Five” Q3 earnings calls, the financial analysts were interested in both the companies’ performance for the quarter and the implications of the Medicaid cuts in H.R. 1 going forward. Although all of the management teams seemed to agree that current payment rates generally do not adequately reflect the acuity of the medical needs of their MCO enrollees or keep pace with the cost of medical care, there was less agreement about the potential impact of H.R. 1. Only one company—Molina—has quantified its expected enrollment losses due to H.R. 1 in its Form 10-Q: “We currently estimate the reduction in enrollment will be in the range of 15% to 20% on 1.3 million members in our Expansion population, and any acuity shifts should be modest and gradual.”
What follows is a sampling of the exchanges between analysts and management, edited for conciseness. The companies are in order of their Medicaid enrollment in Q3, from largest to smallest.
Centene (10/29/25)
Q: Kevin Fischbeck, Bank of America: “I was wondering if you could talk a little bit about Medicaid margins. Obviously flat next year. Are you guys expecting that 2026 is going to be basically more of a trough year and that you should be expecting to build on that in ‘27? It sounds like you’re assuming work requirements more of an issue in ’27. Is that enough of a risk pool shift to offset the catch-up of prior rates? Or is it clear from this point that probably ’26 is where you think that the low point will be?”
A: Sarah London, CEO: “It’s a fair question. And as we look out over the next couple of years, our goal continues to be to drive back to more normalized Medicaid margins. … 2027 and 2028, to your point, is where we will start to see the real introduction of impacts of OB3 and what that means for work requirements within the expansion population. There is a lot, as I mentioned, a lot still there to play out, including how much of that programmatic change actually takes root and how it manifests state by state. And so the way that we’re approaching that is really leveraging lessons learned from the redeterminations process, leaning into state conversations. We’ve got a formal team that has already been organized around this over the last 6 months and starting to plan at the enterprise level, coordinating with each one of our boots-on-the-ground health plan teams to understand how the states are thinking about this, where we can step in and leverage the data that we have as an MCO and the expertise to help make sure that every member who is eligible and who is contributing to their community and who is working has access to coverage. So, we feel like we are preparing very well for that.
We also feel like we have the precedent now of states incorporating more recent data and also understanding that as there are seminal program shifts, they need to make different decisions in terms of how the risk pools are going to shift prospectively. … So, we obviously can’t guarantee that states are going to perfectly nail the rate relative to what that shift will be, and so we’re thinking about how that will play through in ’27 and ’28, but doing everything we can to set up the organization to continue to drive consistent margin improvement over the next couple of years to get to a place where we’re back at long term margins in Medicaid.”
Elevance (10/21/25)
Q: Dave Windley, Jefferies: “I wanted to come back to Medicaid and try to understand a little bit of progression. Understand that you’re highlighting some reverification activity that is ongoing in your markets, it seems that OB3 will trigger another round of acuity shift maybe starting as early as late ’26. And our assumptions are, or our understanding is, that that could be fairly significant. And so I’m trying to marry that with your expectations for sequential improvement in Medicaid margin through ’27, when you are facing what seems like another acuity shift ahead of rate catch-up situation from late 26 through 27. Thank you.”
A: Mark Kaye, CFO: “So let me do a little bit of a progression here. As we think about 2026, that evenly splits two key drivers: rates continue to lag higher acuity and then persistently elevated cost trends. On that first driver of rates continue to lag higher acuity: that’s really compounded by those state reverification processes, those program changes that we’ve spoken about, and that’s really where those high disenrollments are raising the acuity. On the persistently elevated cost trends: this is simply utilization remaining above historical norms across several categories that we continue to monitor that I spoke about a little bit ago. 2026, or at least our view is, 2026 will be the low point for us in Medicaid margins.
And we’re going to see sequential improvements in 2027. And there are really four concrete drivers that underline our view. First, tightened medical cost management—that means expanding behavioral health interventions, that means strengthening specialty drug management, that means optimizing sites of care. And you heard from Felicia we’re actively working with the states on that rate alignment and program refinement. These programs are in flight and they are really designed to bend that cost of care curve as 2026 progresses into 2027.
Second is the budget reconciliation bill provisions. Those are phased and manageable. Clearly, we know that several changes under the bill are going to be staggered primarily effective in 2027 and 2028, so that’s going to allow us time to plan and collaborate with the states, and importantly that pacing then reduces execution risk and supports a more steady transition of the risk poll.
The third one is rates, right? Rates are going to continue to catch up to trend and reverification impact. States are starting to incorporate more recent experience into base rates, albeit with lags. And so, as 2025 and 26 experience rolls into the state cycles, we expect further alignment and progress. And so finally I would say our 2026 outlook is intentionally prudent and therefore a credible base off of which to build.”
UnitedHealth Group (10/28/25)
Q: Ann Hynes, Mizuho Securities: “My question is focused on Medicaid. … And just looking with the One Big Beautiful Bill, is there anything that would prevent a path to Medicaid margin recovery in 2027 and 2028?
A: Mike Cotton, CEO. Medicaid: …As we think about 2026, we expect some margin degradation due to the continued dislocation of premium funding and what we’re seeing in terms of elevated medical cost trends. But we do see 2026 as the trough for that performance. Our elevated trends are driven, as the industry has, by specialty pharmacy, behavioral health, and also as we look at home health services. We think over time the One Big Beautiful Bill there’ll be some transformation and work as we collaborate with states, but we see over time of about an 18-24 month period we’ll be able to return to rated margins of around 2%.”
Molina (10/23/25)
Q: John Stansel, J.P. Morgan:“On the M&A pipeline, since investor day last year you’ve spent a fair amount of time talking about the opportunities you see with smaller and regional players, and I think we’ve heard a fair amount of commentary across the space about potentially negative margins in Medicaid. And to contrast that with the significant share repurchase done in the quarter, can you just talk through how you’re thinking about capital allocation priorities from here, capacity, and how developed that pipeline is in the coming quarters?”
A: Joseph Zubretsky, CEO of Molina Healthcare (00:52:17) “Sure, our capital priorities have not changed. The order of priority—organic growth, inorganic growth, and returning capital to shareholders for share repurchase—they haven’t changed. And we have ample capital, as Mark said. We’re still producing earnings. You throw leverage on top of earnings, we’re producing a billion and a half of capital capacity a year, even at these compressed margins. On the M&A pipeline, if you look at our history of purchasing…we’ve barely paid any goodwill value for the acquisitions.
In this period of cyclically low margins, we’re going to be very disciplined about prices paid for revenue streams. If you can buy a revenue stream from a struggling local health plan at or about book value, it’s just as good as winning a new contract. No goodwill capital, all the capital is hard cap on the regulatory capital. So, the number of local, not-for-profit health plans in Medicaid that have experienced prolonged operating difficulties—and therefore profitability and capital problems—have been a catalyst for the pipeline being replenished in very full, very full of actionable opportunities. And if you can action them at or around book value, it’s as good or even better than winning a new contract. “