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Centene Withdraws Financial Outlook, Anticipates Deeper Risk Adjustment Hits

After a Wakely analysis revealed higher morbidity alongside slower ACA market growth, Centene is closing its second quarter expecting further net risk adjustment revenue cuts ahead of its July 25 earnings update.

FILE - This July 2, 2015, file photo shows the building housing the Centene Corporation headquarters in Clayton, Mo. Centene shares sank Monday, June 3, 2019, after rival health insurer Humana took the rare step of refuting reports that it was interested in a deal. Humana said in a brief statement that it would not make a proposal to combine with Centene, which specializes in running state-based Medicaid coverage programs. Humana is one of the nation’s largest providers of privately run Medicare Advantage plans. (AP Photo/Jeff Roberson, File)
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Overview

  • An independent Wakely review of 22 states reduced Centene’s full-year net risk adjustment revenue estimate by about $1.8 billion, translating into roughly a $2.75 hit to adjusted diluted EPS.
  • Centene’s shares plunged 23% in after-hours trading on July 1, dragging down fellow government-plan insurers such as Oscar Health and Molina Healthcare with steep stock declines.
  • The U.S. Senate passed a budget bill projected to strip ACA and Medicaid coverage from 11 million Americans, threatening the primary revenue streams for insurers like Centene.
  • In the first quarter, Centene’s ACA marketplace enrollment rose 29% year over year to 5.6 million members, offset by a decline of over 330,000 Medicaid enrollees.
  • Centene said it expects similar morbidity trends in the seven states not yet reviewed by Wakely, which could trigger additional reductions in its risk adjustment transfers.