Centene raised its 2026 profit guidance after successfully wrestling down medical costs in the first quarter.
The St. Louis-based payer posted adjusted earnings per share of $3.37 in the quarter, well above analysts’ consensus expectations of about $2.20 to $2.30 as rate hikes offset membership losses.
Companies generally argue that adjusted results are a better indicator of a company’s performance, as they exclude factors outside of a company’s control. But even when filtered through the U.S.’ default accounting standards, or unadjusted, Centene’s top and bottom-line results remained positive.
In the first quarter, the insurer brought in net profit of $1.5 billion, up 18% year over year, on revenue of $49.9 billion, up 7% year over year.
On a call with investors Tuesday morning, Centene executives said the results evinced progress towards margin recovery efforts, and raised the company’s earnings per share guidance to greater than $3.40, up 40 cents from its prior outlook, as a result.
Centene’s first quarter was “quite strong,” and a “positive start to the year,” commented Jefferies analyst David Windley and J.P. Morgan analyst John Stansel in separate notes on the earnings.
Still, the payer still has a ways to go after a difficult year for the managed care industry.
The new $3.37 guide is better than the $2.08 in adjusted EPS that Centene eked out in 2025, but well below the $7.17 and $6.68 that the company enjoyed in 2024 and 2023, respectively, before a tsunami of unexpected medical spending slammed government programs like Medicaid and the Affordable Care Act.
Centene is a major player in both markets, with its more than 26 million members heavily concentrated in those businesses.
Centene would have been justified in raising its 2026 EPS guidance even higher, given the extent to which it outperformed earnings expectations in the quarter, analysts said.
But management said they’re being conservative given ongoing uncertainty — especially in the ACA exchanges, which are experiencing historic volatility as a result of more generous subsidies for coverage expiring at the end of last year.
“It is early, so while we are off to a great start we are taking a prudent outlook for the balance of 2026,” CEO Sarah London told investors on the call.
The loss of the enhanced financial assistance caused premiums to double on average for subsidized enrollees and spurred many Americans to drop out of the exchanges altogether.
The impact on U.S. hospitals and health insurers is still coming into focus, though health systems are reporting admissions declines and rising uncompensated care. Meanwhile, payers that have reported first quarter earnings so far have sketched out a smaller ACA membership more concentrated in less robust, lower premium plans.
Centene, the largest insurer on the ACA exchanges, was no exception.
The company’s exchange membership fell from 5.6 million people at the end of 2025 to 3.6 million in the first quarter.
Investors had been concerned that membership losses might be steeper, after Centene earlier this year reported faster-than-expected member attrition from people dropping off coverage after refusing to pay premiums. But to date, the pace of membership losses has aligned with Centene’s expectations, the insurer said.
Centene’s membership is more concentrated in low-tier bronze plans than in 2025, though mid-tier silver members still make up the majority of its enrollment. However, it’s looking like members in silver plans are going to be sicker than before, according to London.
“The silver tier remaining membership really followed the golden rule of risk pools, that when it shrinks it becomes more morbid. So given our market size, our silver footprint and frankly our intentional decision not to go as hard on a bronze strategy — which we still very much stand by — we were positioned to retain and attract more silver members who are now more acute,” London said on the call.
However, Centene should benefit from the the ACA’s risk adjustment mechanism, which corrects for adverse selection by requiring insurers with healthier members to pay insurers with sicker members, this year as a result, the CEO added. Centene had previously expected to be hit with a risk adjustment payment in 2026 and now expects to receive money through the pathway.
As a result of risk adjustment, “often it can actually be a profitable strategy to care for sicker members in this market,” London said.
Premium hikes for Centene’s ACA plans more than accounted for members’ utilization trends in the quarter. The division reported a medical loss ratio, a key marker of spending on patient care, of 75.3%, slightly above the company’s expectations though below analysts’. The ACA MLR was likely the largest driver of outperformance in the quarter, according to J.P. Morgan’s Stansel.
Medicaid, Medicare outperform with smaller membership
Centene’s membership also fell in Medicaid, which makes up the largest portion of Centene’s membership and the biggest chunk of its premiums. Centene’s Medicaid enrollment declined by about 500,000 people compared to the end of 2025, leaving the insurer with about 12.4 million Medicaid members.
Centene reported a Medicaid MLR of 93.1%, better than analysts expected as medical spending begins to slow.
Though utilization remains high, especially in behavioral health, home health and pricey prescription drugs, Centene is “beginning to see pockets of deceleration,” London said.
Centene was also helped by lower-than-expected spending on cold and flu in the winter months. Lower viral activity in the first quarter is a trend that’s been helping insurers while hurting hospitals by lowering volumes.
Centene has also been hustling to secure payment increases from its state partners, better manage utilization trends, expand clinical programs and crack down on fraudulent providers in Medicaid to control costs, according to executives.
“Our slate of initiatives on both revenue and medical expense are bearing fruit as we continue to navigate an elevated behavioral health and high-cost drug environment. While we have a ways to go to get back to a reasonable Medicaid margin, this is the third consecutive quarter of progress toward that goal,” CFO Drew Asher said.
Centene’s Medicare MLR of 84.9% also beat analyst expectations, driven by better-than-expected performance in prescription drug plans and the privatized Medicare Advantage program.
Centene said it is confident that it will reach breakeven margins in 2027, especially after the CMS finalized a more generous Medicare rate notice for next year than originally proposed.
