Dive Brief:
- Centene, which specializes in government-sponsored healthcare, posted better-than-expected earnings off of increased plan membership and lower Medicaid medical costs despite a strong flu season, it said on a first-quarter earnings call Tuesday.
- But the company dropped its annual guidance in part due to a delay in the insurer's $3.75 billion acquisition of nonprofit insurer Fidelis Care. The deal is now set to close by July 1, later than the original April 1 expected closing.
- The company retained 80% of its 2017 Affordable Care Act exchange members, Centene CEO Michael Neidorff said on the call. As of March 31, Centene had 1.6 million ACA exchange members, ahead of a 1.3 million prior estimate. That compares with about 1.2 million beneficiaries in the same period last year, representing growth of 35%.
Dive Insight:
Neidorff noted that the company does not expect much action out of Congress for the remainder of 2018, saying that any healthcare changes will be made by regulators.
Republicans in Washington have tried for the past year to undermine the ACA, cutting funds for marketing and enrollment outreach. "We successfully navigated a difficult enrollment environment, we gained market share and exceeded our growth targets," Neidorff said.
Despite the intense flu season, the company's health benefits ratio, also known as a medical loss ratio, moved to 84.3% for Q1 2018, compared to 87.6%in Q1 2017. CFO Jeff Schwaneke said some of the change was driven by growth in the marketplace.
Centene's effective tax rate for the first quarter was 34.1%, compared to 39.7% in Q1 2017, according to Schwaneke. "The lower tax rate was driven by the effect of income tax reform in 2018, partially offset by the return of the [ACA] health insurer fee," he said. For the full year, the company's updated guidance predicts an effective tax rate between 34% and 36%.
The company cut its annual guidance from a range of $6.95 to $7.35 in profit per share to $6.75 to $7.15.
Centene announced that the Fidelis deal received regulatory approval from the New York Department of Health and and New York Department of Financial Services on Monday. The deal is still subject to approval from the New York attorney general and other closing conditions, according to the company.
The payer, often one of the only insurers in certain geographic areas offering marketplace plans, is facing a class action lawsuit alleging the company's plans are leaner than advertised. In March, Centene was fined an additional $100,000 by the state of Washington for not adhering to an agreed compliance plan to fix an inadequate provider network in the state.