Dive Brief:
- On Tuesday, Centene touted healthy membership growth in Affordable Care Act plans, while arguing that Medicaid and Medicare — businesses that proved rocky last year — will stabilize in 2025.
- Already the largest marketplace carrier, Centene now has upwards of 5 million ACA members paying premiums, executives told investors during a call to discuss its fourth-quarter results. That’s compared to 4.8 million members at the end of 2024.
- Growth in ACA members was a major contributor to Centene’s $3.3 billion in profit last year, according to the company. However, Centene expects enrollment to peak in the first quarter before sliding back down over the year, in part from efforts to improve program integrity, CEO Sarah London said.
Dive Insight:
Overall, Centene beat Wall Street expectations for earnings and revenue in the fourth quarter with a topline of $40.8 billion, up 3% year over year.
The St. Louis-based insurer’s profit was $283 million — more than six times larger than in the fourth quarter of 2023, when it was hit with higher taxes on premiums.
Centene’s bottom-line growth came despite elevated medical costs. The insurer reported a medical loss ratio, an important marker of spending on patient care, of 89.6% in the quarter, up slightly from 89.5% same time last year.
Centene chalked the increase up to higher acuity in Medicaid as the insurer continues to struggle with states’ payment rates not matching patients’ health needs in the safety-net insurance program.
The problem stems from Medicaid unwinding, a process in which states reviewed the eligibility of tens of millions of Americans for the safety-net program starting in spring 2023. Millions of people lost Medicaid coverage as a result, and individuals who remained in the program tended to be sicker and therefore more expensive for insurers that contract with states to manage Medicaid to cover.
Top insurance executives have said for months that they’re working with states to hike their rates. States are — Centene cited higher Medicaid rates as one driver of increasing revenue — but not as quickly or as dramatically as insurers may have hoped.
Overall, Centene’s composite Medicaid rates for coverage starting this January were higher by about 4.5%, according London. Across all of 2025, Centene expects rate adjustments will average out about 3% to 4%, and its Medicaid business will reach “equilibrium” this year, the CEO said.
However, “we were expecting a couple of late-year 2024 [retroactive] adjustments that did not come in by year-end,” CFO Drew Asher said on the call.
That was the cause of Centene’s Medicaid MLR rising to 93.4% from 93.1% in the third quarter, according to Asher.
“We’ve made great progress in being able to influence states with data and get to the right level of rates. We just aren’t always perfect at predicting the timing,” London said.
Centene has deals with 31 states in Medicaid managed care, and brings in the lion’s share of its revenue from the massive insurance program. Almost three-fifths of Centene’s premiums and services revenue came from Medicaid last year.
Yet Centene points to the ACA as its key growth market, as the exchanges — which tend to have lower medical costs than Medicaid and Medicare — continue to swell.
The plans have enjoyed historic growth in the past few years thanks to more generous subsidies meant to help Americans afford coverage during the coronavirus pandemic. ACA enrollment reached a record 24.2 million people this year, up about 13% from 2024.
Yet Centene is focused on members who have signed up and paid premiums, known as effectuated members, to get a clearer picture of enrollment, London said.
Each year, some people sign up for ACA plans but never pay initial premiums or stop paying them later in the year, so their coverage either doesn’t go into effect at all or eventually drops out.
That attrition could be significant this year given regulatory changes meant to increase program integrity, like the “agent of record lock” that sticks members with a particular broker. That slightly slowed the pace of open enrollment in the fall and could drag it into 2025, London said. Similarly, potential member failure to report tax information could cause members to lose out on subsidies and lead to enrollment losses.
Centene will have more visibility into true membership come April, London said.
“I think we need to see how the program integrity impacts play out in Q2 to know what the net market growth post-effectuations will look like,” London said.
Centene also said it was pleased with its Medicare Advantage enrollment for this year, even after pruning its footprint in order to make coverage more profitable.
After the signup period for 2025, Centene expects Medicare enrollment upwards of 900,000 individuals, according to London. That’s down from 1.1 million at the end of 2024.
“It is still early, but based on things we can know today, such as demographic and retention levels, we are pleased with the membership mix we are carrying into 2025,” the CEO said.
Centene hiked its 2025 guidance for revenue from premiums and services by $4 billion following the results. The increase in expected revenue is because one state added behavioral health coverage to Centene’s Medicaid contract, and because of the stronger-than-expected growth in Medicare Advantage and Medicare prescription drug plans.
All told, Centene expects to bring in revenue from premiums and services between $158 billion and $160 billion this year.
That’s compared to full-year revenue of $163.1 billion in 2024.
Correction: A previous version of this story misstated Centene’s profit in 2024. The insurer reported $3.3 billion in net income last year.
