The St. Louis-based payer saw its membership increase by 5% to 12.8 million members compared to last year. The growth was primarily driven by its Affordable Care Act exchanges expansion.
Centene said it plans to further expand in the ACA market next year, including adding new states and growing in the 16 states where the payer already has exchange offerings.
Centene’s operating cash flow was $526 million for the quarter and $1.3 billion for the first half of the year. The company said its Q2 cash flow numbers were hurt by the repayment of $630 million of Medicaid expansion rate overpayments in California.
The payer’s health benefits ratio decreased from 86.3% a year ago to 85.7%. Centene said the drop was mostly because of the its expansion in the ACA exchanges and reinstatement of the health insurer fee this year.
Centene gained the most revenue growth in its commercial plans, mostly in the ACA exchanges. While Medicaid saw an 11% revenue increase and Medicare enjoyed a 6% jump, Centene’s commercial plan revenues increased by 48%.
Centene’s membership growth also came mostly in the commercial market. Commercial customers increased from 1.74 million last year to 2.05 million for Q2 of 2018.
The growth follows Centene expanding its ACA footprint this year by entering Kansas, Missouri and Nevada. Its ACA marketplace offerings have increased from 1.08 million to 1.5 million members in the past year.
Company officials said they remain bullish on the ACA exchanges and pointed to improved stability in the market.
Concerning the Trump administration freezing risk-adjustment payments for ACA plans, Michael Neidorff, Centene’s CEO, said the company continues to advocate for a risk-adjustment program and expects CMS will soon provide “clarity and a clear resolution to the issue.”
CMS froze $10.4 billion in risk-adjustment payments for ACA plans this month following two conflicting federal court cases on the use of statewide average premiums.
Centene CFO Jeff Schwaneke said the company is slated to receive about $79 million pretax from risk-adjustment payments for 2017. Schwaneke said the payer continues using the same risk-adjustment accounting practices while it awaits the CMS decision, and officials said they are confident the company will be fine regardless.
Modest growth in other programs
Many payers have moved more into Medicare Advantage in recent years, while also dropping ACA plans. Centene also views the program favorably, though the insurer is growing both types of plans.
Neidorff said the company expects MA will be a “significant driver of growth” in the coming years.
Still, Medicaid plans continue to make up more than half of Centene’s membership, which increased by about 15,000 members over the past year to 7.18 million. The company also saw slight increases in Medicare and TRICARE.
Fidelis Care purchase expands Centene's footprint
The company’s ACA market, Medicaid and MA growth will continue in the third quarter after Centene purchased Fidelis Care for $3.75 billion at the beginning of the month. The company said the funding came from about $2.8 billion of new equity and about $1.8 billion of new long-term debt.
The purchase gives the company the largest managed care market share in New York. At the time of the acquisition, Queens, N.Y.-based Fidelis had 1.6 million members in the ACA market, MA and Medicaid.
Neidorff added that Fidelis is the fastest growing Medicaid managed care company in New York and second fastest in MA. He said Centene’s footprint now includes each of the four biggest Medicaid managed care states.
Centene expects to see more than $11 billion in revenue from Fidelis, officials said.