Dive Brief:
Centene beat investor expectations on earnings and revenue in the third quarter despite Medicaid headwinds that are challenging other payers.
The insurer reported profit of $713 million on a topline of $42 billion compared with $469 million on revenue of $38 billion during the same period last year.
Centene, the nation’s largest Medicaid insurer, continues to manage increased medical needs among its beneficiaries in the safety-net program, but executives on an earnings call said the company is making progress working with states to boost payment rates.
Dive Insight:
Increased costs in Medicaid have pressured insurers this year as states redetermined beneficiaries’ eligibility for the program after a period of continuous enrollment during the COVID-19 pandemic. More than 25 million people have been disenrolled, according to a tracker by health policy research firm KFF.
Payers say the redeterminations process created a mismatch between member acuity and rates, as people leaving the program are likely healthier than those left behind. UnitedHealth called out the elevated cost trend in third quarter earnings last week, while Elevance Health lowered its profit guidance for 2024 due to the “unprecedented challenges” in the program.
But Molina, another large Medicaid payer, also beat investor expectations on earnings and revenue in the third quarter, thanks to what executives say was careful planning and business growth.
Higher acuity in Medicaid contributed to increased medical utilization for Centene. The insurer’s medical loss ratio — a marker of spending on patient care — was 89.2% for the third quarter, compared with 87% last year.
Members who were removed from the program during the unwinding but later rejoined contributed to higher utilization as well. These beneficiaries came back to Centene largely because they needed services, however, their care patterns later normalized, CEO Sarah London said on an earnings call Friday.
“Had we been receiving premiums for those members during the time that we had the gap, it would have normalized their HBR [Health Benefits Ratio] more than what we’re seeing,” she said.
Centene ended the quarter with about 13 million members enrolled in its Medicaid segment compared with more than 15 million last year.
There are still some small pockets of redeterminations taking place, but Chief Financial Officer Drew Asher said he expects stability in Medicaid enrollment at the end of the year. The third quarter should also be the “high water mark” for MLR in the safety-net program, he said.
“We remain confident that this is not a matter of if, but when, we get back to equilibrium between rates and acuity,” Asher said on the earnings call. “We are pleased and encouraged by the progress since our last call, but there’s more wood to chop with our state partners.”
A diversified portfolio of insurance products helped Centene navigate challenges in the third quarter, the payer said. Membership in its Affordable Care Act marketplace plans increased 22% over last year, and enrollment in Medicare prescription drug plans rose 49%.
The insurer has also improved its Medicare Advantage star ratings, which rates the private Medicare plans on quality. About 46% of its MA membership is enrolled in plans rated 3.5 stars or higher for 2025, compared with 23% this year.
Centene’s star ratings could improve even more if an appeal goes through, the company said in a press release. Earlier this week, Centene sued the HHS over alleged mishandling of a “secret shopper” call that was meant to assess a text-to-voice service used by customers who are deaf or hard of hearing.
