Rising health costs and expected fallout from President Trump's tax-and-spending law are casting a pall over major health insurers, who've been issuing a steady drip of grim financial forecasts over the past month.

Why it matters: Higher drug costs and increased demand for services including mental health care are squeezing health plans. And the new law is expected to shrink the insured population, potentially leaving more sick people in the risk pool.

Driving the news: Molina Health — which draws the majority of its business from government programs like Medicaid and Affordable Care Act marketplaces — lowered its financial outlook this week, with CEO Joseph Zubretsky blaming "a temporary dislocation" between premiums collected and costs paid that he said had recently accelerated.

• Centene the previous week withdrew its 2025 guidance, pointing to sicker-than-expected patients on its ACA marketplace plans.
• Insurer share prices have been depressed all month, including bellwether UnitedHealthcare, CVS Health, Oscar and Molina.

Between the lines: UnitedHealth signaled tough times ahead back in April, when it revised its forecast and cited "heightened care activity" in its private Medicare plans. The company also saw its share price slide following CEO Andrew Witty's abrupt departure.

• It's the continuation of a trend that's seen increased demand for care shrink companies' profit margins in recent years. The companies haven't been able to offset added costs through premium increases and scrutiny of pharmacy benefit managers, Moody's noted early this year, when it changed its outlook for the sector from stable to negative.
• The insurers also facing higher costs associated with an aging population, as well as increases in the use of pricey specialty drugs and GLP-1s.
• UnitedHealth is also facing increased scrutiny from federal investigators over its Medicare Advantage billing practices, the Wall Street Journal reported.

Zoom in: After years of leaning into their government business such as Medicaid and Medicare Advantage, insurers are seeing the downside with federal pullbacks.

• That's expected to get worse with the GOP law that's projected to slash more than $1 trillion from Medicaid, put new restrictions on ACA enrollment and cause the loss of coverage for up to 12 million.
• And Congress could deliver another blow, if lawmakers decide not to extend enhanced ACA tax credits by the end of the year.

What they're saying: "It's a crazy time for payers, and it's going to stay that way," said Sarah James, an analyst with Cantor Fitzgerald, to the Wall Street Journal.

• The trade group AHIP has warned the combined effects of the new law could bring "the biggest rollback in health care coverage in the country's history" while destabilizing state Medicaid programs and creating an individual market that has less choice and higher premiums.

Reality check: It's not bad news for all insurers. The Financial Times pointed out that companies like Cigna and Elevance that have reduced or otherwise limited their footprints in the Medicare business in recent years have fared better than their counterparts.

Undocumented immigrants already can't access most federal benefits. But HHS on Thursday took the extra step of restricting their ability to access community health centers, mental health and substance use disorder programs and Head Start as part an immigration crackdown.

The big picture: The change follows a February executive order from President Trump directing federal agencies to tighten restrictions on undocumented people's access to taxpayer-funded benefits.

Driving the news: HHS reinterpreted a legal notice concerning the 1996 welfare reform law that stipulated that undocumented immigrants aren't eligible for federal public benefits but left a narrow set of exceptions.

• The law defines federal public benefits as retirement, welfare, health, disability, housing assistance, postsecondary education, food assistance, unemployment benefits and similar benefits where federal assistance is provided to an individual, household or family.
• Health programs covered under the change include mental health and substance use disorder block grants, the Title X family planning program and certified community behavioral health clinics. Officials said more could be added.

The added citizenship requirement took effect immediately and upended decades of legal precedent. It drew swift condemnation from advocates for the poor.

• Head Start "has never required documentation of immigration status as a condition for enrollment over the last 60 years," Yasmina Vinci, executive director of the National Head Start Association, said in a statement.
• "Attempts to impose such a requirement threaten to create fear and confusion among all families who are focused on raising healthy children, ready to succeed in school and life."

HHS said that for Head Start, the change is expected to free up about $347 million annually for U.S. citizens but will cost an estimated $21 million a year in time spent by individuals seeking to use the benefits and those who have to review program eligibility.