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Twice-Weekly Briefing
Friday, July 31, 2026
Issue 260731-51
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The MOC Brief
Health policy, priced and translated for self-funded plan sponsors
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In This Edition
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Cigna beats on Q2 earnings and says employers are asking Express Scripts for a rebate-free, fee-based PBM model. | | 2. |
Humana posts $694 million in Q2 net income as individual Medicare Advantage membership rises 23 percent. | | 3. |
Molina raises 2026 EPS guidance but estimates managed Medicaid is underfunded by 300 basis points. | | 4. |
JPMorgan employees push back on dismissal of their ERISA prescription drug suit over the CVS Caremark contract. | | 5. |
A federal judge declines to block the Medicaid work rule, which takes legal effect today with merits briefing to follow. |
Five stories, one theme: pricing, fiduciary duty, and coverage risk are converging on the same 2027 renewal, and your vendors are moving faster than most plan sponsors are.
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01
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PBM STRATEGY
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July 30, 2026
Cigna Beats on Q2 as Employers Push Express Scripts Toward Rebate-Free Pricing
Cigna reported Q2 2026 revenue of $71.7 billion and profit of $1.7 billion on July 30, 2026, beating on both lines, with adjusted income from operations of $2.1 billion, or $7.78 per share. The company raised full-year adjusted EPS guidance to at least $30.45 from at least $30.35. The medical loss ratio was 84.5 percent, up from 83.2 percent a year earlier. On the call, new CEO Brian Evanko said Express Scripts is seeing "significant early interest" in Signature, its fee-based pharmacy model that moves away from traditional drug rebates. Signature reaches Cigna Healthcare fully insured plans in 2027 and becomes the standard Express Scripts offering in 2028. Evanko tied the demand directly to the self-funded market, citing rising fiduciary obligations and client appetite for a simple, transparent, fee-based structure.
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MOC Perspective
Read past the earnings beat. The country's largest PBM just told investors that fiduciary pressure is what is moving self-funded employers off rebates. That is your negotiating position, stated on the record by the vendor. Now look at the timeline: fully insured in 2027, standard offering in 2028. If you renew Express Scripts this fall on traditional rebate terms, you are signing a contract the vendor's own roadmap is retiring, and you will be the one explaining that choice if a Stern-style complaint ever lands on your plan.
What To Do Now
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Ask Express Scripts in writing whether Signature terms are available to your plan for 2027 rather than 2028, and file the answer. | | ▪ |
Quote the rebate-based renewal and a fee-based alternative side by side, so the comparison is documented before you sign. | | ▪ |
Require any 2027 renewal to carry a mid-term conversion right to a fee-based model with no termination penalty. |
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Source: Fierce Healthcare
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02
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PAYER EARNINGS
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July 29, 2026
Humana Posts $694 Million Q2 Profit as Individual MA Membership Rises 23 Percent
Humana reported Q2 2026 net income of $694 million, or $5.73 per share, on July 29, 2026. Adjusted EPS of $7.61 beat the $6.22 average estimate from nine analysts surveyed by Zacks, and adjusted revenue of $40.89 billion topped the $40.65 billion forecast. The insurance segment benefit ratio came in at 91.2 percent, in line with management's guide of slightly above 91 percent and up from 89.7 percent a year earlier. Individual Medicare Advantage membership rose 23 percent and standalone drug plan membership rose 63 percent. Humana held its 2026 adjusted profit outlook of at least $9 per share and said 2027 Medicare Advantage plan design changes put it on a path to a sustainable pretax margin of at least 3 percent by 2028.
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MOC Perspective
Set the 23 percent membership jump against a benefit ratio that climbed 150 basis points year over year and the picture gets clearer: Humana bought growth and is now repricing to earn it back. That repricing lands in 2027 plan design. Meanwhile CFO Celeste Mellet called pharmacy cost trend very elevated and said it will run slightly higher next year, driven by drug prices and new launches rather than member demand. That is the same trend line inside your own plan, described by someone with a much larger claims file.
What To Do Now
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Request Humana's 2027 Medicare Advantage rate action disclosure in writing before you finalize a commercial renewal in a Humana heavy market. | | ▪ |
Separate pharmacy trend from medical trend in your renewal exhibit, since the two are moving at different speeds. | | ▪ |
Cite the 3 percent pretax margin target when a carrier or ASO asks you for trend relief. |
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Source: Forbes, Bruce Japsen
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03
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MEDICAID MARGINS
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July 23, 2026
Molina Raises 2026 EPS Guidance and Calls Managed Medicaid Underfunded by 300 Basis Points
Molina Healthcare reported Q2 2026 adjusted EPS of $1.51 on $10.2 billion of premium revenue, with a consolidated MCR of 92.2 percent and a Medicaid MCR of 92.7 percent, in line with management's guide. The company held full-year premium revenue guidance at roughly $42 billion and raised full-year adjusted EPS guidance by $0.25 to at least $5.25. CEO Joe Zubretsky called 2026 a trough year for Medicaid margins and said he is optimistic about 2027 rate setting as state actuaries take in more recent cost trends. The near-term direction runs the other way. CFO Mark Keim said Medicaid's first-half MCR of 92.4 percent should rise to 93.3 percent in the second half, and management estimates the broader managed Medicaid market is underfunded by 300 basis points and not sustainable at that level.
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MOC Perspective
The EPS raise is not the number that matters to you. The 300 basis points is. Underfunded Medicaid does not stay inside Medicaid. Hospitals recover it through the commercial charge master, and your plan is the commercial charge master. Molina's own guidance has Medicaid margins getting worse before they get better, which means the cross-subsidy pressure on your 2027 hospital contracts is building right now, not easing.
What To Do Now
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Request the facility's Medicaid payer mix and MCR trend for the trailing 24 months before you open 2027 rate talks. | | ▪ |
Tighten reference-based pricing floors to Medicare plus 175 to 180 percent. | | ▪ |
Require any charge master increase above the CMS market basket to be justified against documented Medicaid rate changes. |
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Source: Yahoo Finance, earnings call coverage
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04
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ERISA LITIGATION
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July 13, 2026
JPMorgan Employees Fight Dismissal of ERISA Prescription Drug Suit
Cohen Milstein and Fairmark Partners represent participants in Stern v. JPMorgan Chase & Co. (S.D.N.Y., No. 1:25-cv-02097), a proposed ERISA class action alleging JPMorgan mismanaged its prescription drug benefit through CVS Caremark. In a filing reported July 13, 2026, the employees urged the court not to end the case, arguing JPMorgan still has not shown the Caremark contract was reasonable. On March 9, 2026, the court pared the claims, dismissing the fiduciary breach counts as settlor decisions while opening discovery on whether the PBM contract caused prohibited transactions. The complaint alleges that across 366 generic drugs on the plan formulary with public acquisition cost data, the plan and its participants paid an average markup above 211 percent over what pharmacies paid to acquire those drugs, with some markups above 5,000 percent.
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MOC Perspective
One drug carries the whole argument. The complaint alleges the plan paid $6,229 for a 30-unit prescription of generic Teriflunomide that Cost Plus Drugs sells for $11.05. Now note what survived the March ruling and what did not. Plan design choices were treated as settlor decisions and dismissed. The vendor contracting decision went to discovery. That is the line your file has to sit on the right side of, and read this next to the Cigna story, because a fee-based alternative now exists from the second largest PBM in the country. "There was no other option" gets harder to argue every quarter.
What To Do Now
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Complete a fiduciary decision memo for your current PBM contract before the 2027 renewal cycle opens. | | ▪ |
Name every alternative evaluated, the compensation categories reviewed including spread and retained rebates, and the benchmarked cost per covered life range. | | ▪ |
Record the specific reason each alternative was accepted or rejected, and date the record. |
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Source: Cohen Milstein, case background
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05
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MEDICAID LITIGATION
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July 29, 2026
Judge Declines to Block the Medicaid Work Rule, Which Takes Legal Effect Today
U.S. District Judge Richard Stearns denied a preliminary injunction on July 29, 2026 in the suit brought by 25 states and the District of Columbia against the CMS Medicaid community engagement interim final rule. The rule takes legal effect July 31, 2026, the same day its comment period closes, and requires non-pregnant adults ages 19 to 64 in the Medicaid adult group who are not enrolled in Medicare to document 80 hours per month of work, education, job training, or community service, or to earn at least $580 per month. Stearns found the states had not shown irreparable harm, noting the federal government represented it will reimburse 90 percent of their eligibility system costs and that Congress, not CMS, set the timeline. The denial came without prejudice and does not reach the merits. The court plans an expedited briefing schedule so the merits can be decided before the January 1, 2027 compliance deadline.
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MOC Perspective
Plan on the rule proceeding, but do not file it as settled. The denial turned on irreparable harm, not on whether CMS read the statute correctly, and Stearns wrote that the case raises difficult questions about how far Congress delegated authority to HHS. Those go to summary judgment before January 1. The operational clock runs either way. States must notify affected enrollees by August 31, which is roughly when your open enrollment materials reach the same mailboxes, and CMS projects 2.3 million fewer enrollees in fiscal 2027. Those people do not stop getting sick. They reach your plan as self-pay emergency volume and as uncompensated care loaded back into hospital rates.
What To Do Now
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File a comment before the window closes today if verification burden on hourly or seasonal workers affects your workforce. | | ▪ |
Time your ICHRA or navigator messaging to the August 31 member notices rather than to January. | | ▪ |
Build the 2027 coverage bridge on the assumption the rule holds, and track the merits schedule so you are not rebuilding it in December. |
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Source: Becker's Payer Issues
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The Bottom Line
Cigna told investors that fiduciary pressure is what moves self-funded employers off rebates, and put its own timeline at 2028. JPMorgan is in court over whether it documented a PBM decision. Molina says managed Medicaid runs 300 basis points short. A judge let the Medicaid work rule stand, and coverage starts coming off January 1. All four land on the same 2027 renewal. Open the file now, while you still have room to negotiate the terms.
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Thanks for reading.
Jude Odu
Founder and Principal, Model Optimal Care
Author, Model Optimal Care: End U.S. Healthcare Waste, One Health Plan at a Time
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