By Sriparna Roy and Sneha S K (Reuters) -Centene’s shares fell nearly 5% on Tuesday hurt by elevated costs tied to its government-backed Medicaid plans, overshadowing a better-than-expected quarterly profit. Costs for health insurers, which offer Medicaid plans for lower-income individuals, have been elevated due to a rise in the number of sicker patients under […]
Health
Centene’s shares slip on higher Medicaid costs
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By Sriparna Roy and Sneha S K
(Reuters) -Centene’s shares fell nearly 5% on Tuesday hurt by elevated costs tied to its government-backed Medicaid plans, overshadowing a better-than-expected quarterly profit.
Costs for health insurers, which offer Medicaid plans for lower-income individuals, have been elevated due to a rise in the number of sicker patients under the plans.
As states redetermined the eligibility for Medicaid plans after the end of a pandemic-era federal policy, healthier members were dropped from the rolls, leaving behind those who require more medical services, adding to insurers’ costs.
At least three analysts said that Centene’s fourth-quarter core Medicaid medical loss ratio — the percentage of premiums spent on medical care — at 93.4% was worse than expected.
The company’s overall medical loss ratio of 89.6%, though slightly higher than last year, came in below analysts’ average estimate of 89.95%. Companies aim for a ratio close to 80%.
The outperformance appears to come from Medicare and commercial plans, said J.P.Morgan analyst John Stansel.
The company said a one-time cost-sharing reduction settlement aided its profit by 29 cents at the end of the year.
Cost-sharing reduction subsidies were federal payments for insurers to help reduce the out-of-pocket costs for eligible lower-income enrollees under Obamacare. The payment was, however, terminated by President Donald Trump during his first term.
The company’s fourth-quarter adjusted profit of 80 cents per share, beat analysts’ average estimate of 49 cents, according to data compiled by LSEG.
For 2025, the company left its forecast of adjusted profit of greater than $7.25 per share unchanged, but increased the annual premium and service revenue range by $4 billion to $158 billion to $160 billion.
The improved revenue target did not, however, translate into a higher profit forecast, which can be interpreted as margin caution by management, said Bernstein analyst Lance Wilkes.
(Reporting by Sriparna Roy and Sneha S K in Bengaluru; Editing by Shinjini Ganguli)