Centene vs. Molina Healthcare Q3 2026: both lost Medicaid margin; only Centene could offset it

Centene and Molina Healthcare earn most of their money the same way: states pay them a fixed amount per person to run Medicaid health coverage for low-income families. Both also sell ACA Marketplace plans and some Medicare plans, and both lost members this year. Their third quarters still went in opposite directions. Centene's adjusted earnings rose and it raised its guidance. Molina's profit halved and it only reaffirmed its targets. The difference is mostly not in Medicaid. Both companies' Medicaid margins got worse. What separated them is how much the rest of the business could make up for it.

Every figure below comes from our two Q3 2026 reports: Centene and Molina.

Side by side

The medical cost ratio is the share of each premium dollar paid back out as medical claims. Centene calls it the health benefits ratio (HBR) and Molina calls it the medical care ratio (MCR). At around 93%, about 7 cents per dollar is left to cover staff, systems, tax and profit. That is why a one-point move matters so much in this business. Centene's year-ago GAAP figures included a $6.7 billion goodwill write-down, so its GAAP percentage changes are not meaningful (n.m.).

The common problem: Medicaid

Both companies got higher rates from states in Medicaid, and at both, costs rose faster. Molina's Medicaid MCR rose a full point, to 93.0% from 92.0%. Its Medicaid medical margin (premiums minus medical costs) fell by $62 million, to $577 million. That is more than the $59 million decline for the whole company, so Medicaid alone explains Molina's drop. Its 10-Q blames outpatient care, high-cost drugs, program changes and "member mix changes." That last point refers to states removing people from Medicaid rolls after re-checking eligibility. The members who stay tend to use more care.

Centene's Medicaid deteriorated less. Its HBR was 93.6% against 93.4%, and segment gross margin was nearly flat at $1,528 million against $1,532 million. Even so, our Centene report called Medicaid the segment that "did not improve." Neither company has shown that the Medicaid margin squeeze is over.

Where they diverge

Centene had other businesses to lean on. Medicaid is a smaller share of Centene's revenue than of Molina's premiums, where it makes up 78%. Centene's Medicare segment gross margin rose $161 million, driven by its stand-alone drug-plan business, where membership grew 12% to 8.95 million. Its Commercial HBR improved to 89.0% from 89.9% after it repriced Marketplace plans and its membership fell 42%. Those gains, plus cost cuts, lifted adjusted pre-tax earnings by about 38% to $346 million. Molina's Medicare segment has 222,000 members, too small to offset Medicaid.

Molina's improvements came mostly from estimate changes. Molina's Marketplace MCR fell to 92.5% from 95.6%, and its Medicare MCR fell to 93.0% from 93.6%. But the 10-Q attributes both mainly to favorable risk-adjustment true-ups, and for Medicare also to releases of prior-period reserves. Those are revisions to estimates for earlier periods, not evidence that care got cheaper. Over nine months, Molina's Marketplace MCR is slightly worse than last year (88.3% vs 87.9%). Centene's Marketplace improvement is tied to pricing and the ACA risk-transfer system, which reflects how sick its remaining members are.

The one-offs point in opposite directions. Centene's GAAP loss comes from $311 million of severance and vendor costs for its cost-cutting program. That is a one-off charge, which is why our report graded the quarter "understated." Molina's GAAP-to-adjusted gap was only $0.16 per share, all of it amortization. Molina had no big charge to add back, so its weak adjusted figure reflects how the business actually did.

Tax pushed each in a different direction. Centene's 14.5% adjusted tax rate added about $0.07 to its $0.58. Molina's effective rate jumped to 28.5% from 10.1%, so net income fell 52% while pre-tax income fell 40%. Adjusting for tax narrows the gap between the two companies, but it does not close it.

Reserves also point opposite ways. Days in claims payable (how many days of medical bills a company holds in reserve) slipped to 44 from 46 a year earlier at Molina. That leaves less room for the kind of reserve releases that helped its year to date, which totaled $352 million. At Centene the figure was 48, up one day from Q2, which our report read as mildly conservative.

What comes next

Neither company's guidance promises a strong fourth quarter. Centene's floor of more than $5.20, against $6.45 of adjusted EPS earned through nine months, still allows an adjusted loss of up to about $1.25 per share in Q4. Molina's target of at least $5.25 implies about $0.51 of adjusted EPS in Q4. That figure absorbs start-up losses on its new Florida Kids contract. Both face the same 2027 pressure: Medicaid work requirements and more frequent eligibility checks under the 2025 OBBBA law. Both companies also won the Illinois Medicaid contract for 2027.

Takeaway: Centene handled the quarter better. Its Medicaid HBR rose 0.2 points against Molina's 1.0 point, and its drug-plan business and Marketplace repricing lifted adjusted pre-tax earnings about 38%, enough for a $0.40 guidance raise. Molina depends more heavily on Medicaid, and its other improvements came mostly from estimate true-ups, so its adjusted EPS halved. For both companies, the recovery depends on 2027 state Medicaid rates catching up with costs, and neither company's results show that happening yet.