Managed Care Insurers Brace for Q2 Declines Amid Policy Shifts and Rising Costs

The second quarter of 2025 is shaping up to be a challenging period for publicly traded US managed care insurers, as most are expected to post quarter-over-quarter declines in both revenue and net income. An analysis by S&P Global Market Intelligence reveals that of the eight largest insurers, only UnitedHealth Group, Inc and Alignment Healthcare, Inc are forecast to grow revenue sequentially. Still, all nine are projected to report year-over-year revenue gains compared to Q2 2024.

Persistent headwinds from Medicare Advantage (MA) and evolving Medicaid policy continue to distort earnings outlooks. James Sung, director of insurance ratings at S&P Global Ratings, notes that high MA-related costs and changes in Medicaid enrollment have skewed financial performance. "I think some of the large companies pulling guidance partially provides some cover for the other companies to be a little bit more conservative with the guidance," Sung said.

Centene Corp notably joined UnitedHealth in retracting its 2025 earnings guidance, citing larger-than-expected misestimations in risk adjustment and earnings calculations, surprising analysts and casting a shadow on the rest of the sector.

Further complicating the landscape is President Donald Trump's “One Big Beautiful Bill Act,” which introduces federal cuts to subsidized health plans for low-income populations. The legislation mandates biannual redeterminations for Medicaid expansion eligibility and introduces work requirements, which are expected to be phased in by 2027. Though their impact is delayed, Sung emphasized the long-term implications: “A lot of it is delayed and creates an extended overhang for the sector that people will be monitoring and asking about every quarter.”

These developments, coupled with post-COVID redetermination processes, are expected to gradually shift Medicaid toward a higher-risk, more costly patient mix, further pressuring earnings.

The net income picture is similarly bleak. All but The Cigna Group are projected to log lower net income quarter-over-quarter, and all eight are forecast to report year-over-year declines. Investor anxiety persists, though analysts from J.P. Morgan suggest the low expectations could open the door to “better-than-feared” results. They added that near-term confidence favors insurers like Cigna and CVS, citing lower exposure to government-backed insurance and larger health care services arms.

Medical loss ratios (MLRs), a key measure of insurer cost performance, are expected to deteriorate for nearly all the major players. Only Molina Healthcare, Inc is forecast to improve quarter-over-quarter. Seven of the eight major insurers are also projected to see year-over-year increases in MLRs, with Alignment Healthcare as the lone exception, maintaining a flat MLR.

Cost pressures from delayed care in the MA population continue to be a significant factor, although the J.P. Morgan team notes that some recent pricing adjustments may offset these impacts. “With minimal shifts in enrollment [quarter over quarter], we think that [the second quarter] provides a relatively consistent baseline and opportunity for [managed care insurers] to frame whether utilization has continued to progress in line with expectations.”

Insurers with significant exposure to MA may encounter ongoing pricing and margin pressure as previously delayed care begins to normalize, straining financial performance. Simultaneously, anticipated policy changes to Medicaid—such as increased redetermination frequency and the introduction of work requirements—are expected to shift the population toward a higher-risk, higher-cost mix. This evolution could impact plan designs and challenge the adequacy of current premium structures.

The projected rise in MLRs across most major insurers also points to a need for reassessing provider contracting strategies and implementing stronger cost-control mechanisms. Furthermore, the recent trend of earnings guidance withdrawals underscores a heightened level of volatility in the sector, warranting caution when interpreting short-term outlooks and performance projections.

Reference

Hammel T, Adeel NA. Most managed care insurers expected to see Q2 2025 drops in revenue, net income. S&P Global. July 16, 2025. Accessed July 17, 2025. https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/7/most-managed-care-insurers-expected-to-see-q2-2025-drops-in-revenue-net-income-91550120