Centene's Medicaid pressures weigh on stocks of major insurers
By Eleanor Laise
Health insurer feels pinch of coverage gaps but reiterates full-year guidance
Shares of major players in the Medicaid business dropped sharply Wednesday after Centene Corp. (CNC) executives spoke about ongoing tumult in the joint federal and state program.
"We are still seeing pressure in Medicaid, largely driven by the unprecedented redeterminations process," Centene Chief Executive Sarah London said Wednesday morning at a Wells Fargo & Co. (WFC) healthcare conference, referring to a process used by states to ensure that Medicaid enrollees are still eligible for coverage.
The insurer now expects its Medicaid membership to level off around 12.9 million or 13 million, Centene Chief Financial Officer Drew Asher said at the conference, whereas the company had previously projected Medicaid membership would trough at around 13.2 million and would grow back to 13.6 million by the end of the year.
Although the company reiterated its full-year adjusted earnings-per-share guidance floor of $6.80, Centene's stock was down more than 8% at midday Wednesday, on pace for its largest percentage decline in nearly four years. Shares of other major Medicaid insurers also fell. Molina Healthcare Inc.'s stock (MOH) was down 9%, while Elevance Health Inc.'s stock (ELV) fell 4.4%.
More than 25 million people have been removed from the Medicaid rolls since early 2023, when states were allowed to resume disenrolling people who were no longer eligible for the program, according to health-policy-research nonprofit KFF. A pandemic-era law previously gave states extra federal funding in exchange for keeping people enrolled in Medicaid.
This Medicaid "unwinding" process has been a major sticking point for some top health insurers this year. Shares of UnitedHealth Group Inc. (UNH) and other major insurers also plunged in late May after UnitedHealth forecast a "disturbance" in its Medicaid business.
About 30% of the people administratively terminated from Medicaid ultimately make their way back to Centene, Asher said at the conference Wednesday morning. "But that time period where there's a gap in coverage continues to widen a little bit," he said, "and that's a time period where we're not getting premium."
Amid the upheaval, Centene expects its third-quarter Medicaid medical costs, as a percentage of premium revenues, to be higher than in the second quarter, Asher said. But strong performance in other parts of the business, including Affordable Care Act marketplace plans, allowed the company to reaffirm its full-year guidance, he said.
Centene's stock is down 1% in the year to date, while the S&P 500 SPX has gained 15.8%.
-Eleanor Laise
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09-04-24 1231ET
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