Health insurers have been getting a lot of heat surrounding the rising costs of Medicare Advantage (MA) plans. Companies like CVS Health Co. (NYSE: CVS) have seen their medical benefits ratio (MBR) continue to rise, forecasting 90.8%, driven by the rising costs to provide MA plans to seniors. The MBR, also referred to as the health benefits ratio (HBR) and medical costs ratio (MCR), is the percentage of insurance premium payments that are paid out to providers and facilities for medical services. Higher MBR/HCRs mean smaller profits and compressed margins for the insurers.

In light of regulators cracking down and providers' reluctance to accept MA plans, there are still health insurers in the medical sector that are thriving (for now). Here are two health insurers that are still profiting in this uncertain healthcare landscape.

Centene: Managed Care Magic or Mischief?  

Medicaid is a joint federal and state health insurance program for low-income people. Individual states administer the program and establish eligibility requirements, payment rates and covered services. The federal government funds half of the costs of the program. Medicaid is arguably the stingiest payer of all insurance plans, as many providers opt not to take Medicaid patients due to the low reimbursements and hassle involved in getting paid. Centene Co. (NYSE: CNC) has swooped in, applying "managed care" tactics for Medicaid, locking in lucrative state contracts to offer Medicaid plans, becoming the nation's largest Medicaid managed care organization (MCO).

Centene is a massive company with numerous subsidiaries that offer its Medicaid and MA plans through different states. Credit has to be given to Centene for taking the most difficult segment of the medical patient population with the lowest reimbursement rates and turning a massive profit. The company has settled previous claims for overcharging states for pharmacy services.

The company reported a third quarter of 2024 EPS of $1.62, beating consensus estimates by 26 cents. Revenues rose 10.5% YoY to $42.02 billion, absolutely obliterating consensus estimates of $37.91 billion. Premium and service revenue rose 6% YoY to $36.9 billion, driven by Medicaid rate increases and Marketplace membership growth. However, its MBR has been up-ticking, reporting 89.2% in the quarter, up from 87% last year. This impacted its adjusted EPS, which actually dropped 19% YoY to $1.62.

Centene issued upside guidance for full-year 2024 EPS consensus estimates of $6.80 versus $6.72. The company expects revenues of $159 billion to $161 billion versus $1.56.58 billion.

Centene stock is trading down 14.4% year-to-date (YTD), with a 32% upside to the consensus analyst price target of $84.00.

Molina Health: A Top 5 Medicaid MCO    

While Centene is the largest Medicaid MCO, Molina Healthcare (NYSE: MOH) is one of the top five providers of Medicaid and MA in the United States. The company saw its consolidated Medicaid and MA MBR at 89.2% in its third quarter of 2024. However, its Medicaid MBR rose to 90.5%. Molina mentions that 50 basis points was from a retroactive premium rate reduction back to the start of 2024, and 20 basis points was attributed to new Medicaid "store" plans. Backing out the adjustments and new stores, its Medicaid MBR was 89.8%, which was still higher than 89.2% for Centene. Medicare MBR was 89.6%, reflecting higher-than-expected utilization, which is a common theme among MA insurers.

For its Q3, Molina reported EPS of $6.01, beating consensus estimates by 7 cents. Revenues surged 21% YoY to $10.34 billion, beating $9.92 billion consensus estimates. Its premium revenue rose 18% YoY to $9.7 billion, driven by new contract wins and acquisitions offset by Medicaid redeterminations. Adjusted net income took the opposite trajectory from Centene's 19% decline, with a 19% YoY rise for Molina to $6.01.

The company closed the quarter with $195 million in cash and investments, down from $742 million due to the buyback of 1.5 million shares for $500 million in Q3.

Molina reaffirmed full-year 2024 EPS guidance of $23.50 versus $23.51 consensus estimates. Premium revenue is expected to grow 17% YoY to $38 billion. Molina shares are trading down 9.5% YTD with a 12% upside to its consensus analyst price target of $367.00.