Centene raises outlook for revenue — and costs — in 2025

Dive Brief:

Centene beat Wall Street expectations for earnings and revenue in the first quarter thanks to significant membership increases, especially in Affordable Care Act and Medicare prescription drug plans, according to results released Friday.
Citing the strong enrollment, the St. Louis-based payer raised its revenue guidance and reiterated its earnings guidance for 2025.
However, Centene signaled medical costs may also be increasing, raising the outlook for its full-year medical loss ratio — a marker of spending on patient care. Centene’s stock fell 7% in Friday morning trade following the results.

Dive Insight:

Halfway through an earnings season that so far has been characterized by mismatched commentary around medical utilization, Centene’s results don’t appear to be pacifying investors concerned that the challenges that dogged insurers in 2024 could carry into this year.

During a Friday morning call with analysts, Centene CEO Sarah London said that insurers are operating amid “sector volatility that is unmatched in recent history,” citing looming Republican cuts to Medicaid, the potential expiration of ACA subsidies and the Trump administration’s efforts to reshape the ACA exchanges.

Yet, despite the policy turbulence, outcomes that could have the worst impact on insurers in government programs may not come to pass, London noted. Cuts to Medicaid are unlikely to be broad, given the program’s popularity among voters, she said. Similarly, “we remain optimistic that legislators will act to preserve [ACA] tax credits, given the value they create in health outcomes and market stability,” London said.

Still, CFO Drew Asher said the insurer is preparing for a range of outcomes. Centene has reached agreements with more than half of its state partners to allow the insurer to submit two sets of rates for 2026 plans in case the future of the subsidies isn’t decided by the time rates are due, Asher said.

And Centene may have to hike its prices either way, given a rule proposed by the CMS in March that, if finalized, would make it more difficult for Americans to sign up for ACA plans.

If the subsidies expire and the rule is finalized, “these two items combined may cause high single digit price increases. And that’s before — before — any baseline trend adjustments, pricing forward trend for 2026 and potential tariffs,” Asher said.

Price hikes would be an about-face for Centene, which priced its plans aggressively in 2025 to drive growth. That includes offering more $0 premium plans this year than in 2024, according to analysts.

Already the largest marketplace carrier, those low-priced plans helped drive 1.2 million new members to Centene’s ACA coverage since the end of 2024, bringing the insurer’s total ACA membership to 5.6 million people.

The growth was stronger than Centene predicted earlier this year by about 600,000 individuals.

London said that initiatives meant to improve ACA program integrity, like requiring consumers to report tax information to continue their eligibility for subsidies, led to fewer enrollment losses than expected.

Centene still expects ACA enrollment to slide over 2025 because of these measures. However, the insurer doesn’t appear to be dealing with other challenges cited by some of its peers in the quarter. Those include unauthorized enrollment spurring the government to claw back some subsidies and risk adjustment payouts in the exchanges for Molina, and weak effectuation rates — meaning fewer members are actually paying premiums for their plans — for Elevance.

Asher noted that its new members are utilizing more medical care than normal, lowering their margin profile. That could garner Centene a helpful risk adjustment payout down the line. But “because it’s so early in the year we are not yet recognizing a matching offset for risk adjustment,” the CFO said.

The marketplace growth, which Centene is assuming will be at lower-than-average margins, contributed to the insurer’s decision to increase its MLR guidance for 2025, according to Asher. Other factors include high utilization of specialty drugs among Medicaid prescription drug plan members and higher Medicaid spending.

Overall, Centene posted an MLR of 87.5% in the quarter, at the high end of analysts’ expectations.

Costs were mostly elevated in Medicaid, with members in the safety-net insurance experiencing high levels of cough, cold and flu in the quarter, Asher said.

However, Centene was helped by states bumping their Medicaid payment rates. It’s a positive development for the insurer, which contracts with 31 states in Medicaid managed care and brings in most of its revenue from the massive insurance program.

Like its peers, Centene has struggled with mismatch in patient acuity and the rates that states pay their managed care partners over the past year. But roughly 40% of its Medicaid business received an average rate increase of 4.5% at the start of 2025, which “contributed to underlying improvement” in Centene’s performance, London said.

“However the full impact of this improvement was masked in the quarter by a more active flu season than we anticipated,” she added.

Centene expects its rate adjustments to average out around 4% or higher this year, Asher said — slightly above Centene’s previous forecast of 3% to 4%.

Overall, Centene reported revenue of $47 billion, up 15% year over year, as the insurer brought in more premiums from new members. The company posted net profit of $1.3 billion, up 13% year over year.