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Centene raised its annual profit forecast Tuesday even as it reported a third-quarter loss under standard accounting rules, showing how an insurer’s improving financial outlook can coexist with high medical costs and sharply lower enrollment in some health plans.
The company reported a diluted loss of 14 cents a share for the quarter ended September 30. On an adjusted basis, which excludes certain expenses, it earned 58 cents a share. Total revenue was $50.65 billion, while premium and service revenue rose 0.5% from a year earlier to $45.1 billion.
Medical costs still take most premium dollars
Centene’s health benefits ratio was 92.7%, unchanged from a year earlier. The ratio compares medical costs with premium revenue: a higher reading means a larger share of premiums is going toward care, before administrative costs and other expenses.
The company said that result was better than it had expected, driven by Medicare. It lowered the midpoint of its full-year ratio forecast to 90.75%, an improvement of 0.15 percentage point.
Centene said Marketplace pricing and risk-adjustment transfers helped improve that business’s medical-cost ratio. It also cited strong performance in Medicare Advantage and prescription-drug plans. Those are company financial measures, not evidence that an individual member’s premiums, deductible or medical bills have fallen.
Marketplace enrollment falls
Centene reported 3.40 million Marketplace members at the end of September, compared with 5.83 million a year earlier. Medicaid membership declined to 11.90 million from 12.71 million. Its Medicare prescription-drug-plan membership, by contrast, rose to 8.95 million from 7.97 million.
The company said higher premium yields and prescription-drug-plan enrollment, Marketplace and Medicaid rate increases, risk-adjustment revenue and state-directed payments helped revenue. Lower Marketplace and Medicaid membership partly offset those gains.
These are changes in Centene’s enrollment, not a count of people who became uninsured. The release does not establish where departing members obtained coverage or whether they did.
Higher forecast, with a gap between reported and adjusted earnings
Centene increased its full-year adjusted diluted earnings forecast by 40 cents to more than $5.20 a share. Its forecast for earnings under standard accounting rules is more than $3.46 a share.
The distinction matters because the adjusted forecast leaves out costs that still affect the business. The company’s annual reconciliation excludes substantial severance and outside-vendor expenses linked to its enterprise optimization program, among other items.
Centene also reported $3.7 billion of cash used in operations during the quarter, which it attributed mainly to the timing of pass-through, premium and other payments. It said debt had fallen by $1.1 billion since June 30, including the October redemption of its remaining 2027 senior notes.
Management is scheduled to discuss the results on an earnings call at 8:30 a.m. Eastern time Tuesday. For members, the earnings release describes the insurer’s finances; it is not a notice changing their own coverage or benefits.
JBizNews Desk | St. Louis
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