- Centene CEO Michael Neidorff announced an organizational restructuring Tuesday and said the company would cut 3,000 employees and eliminate 1,500 job openings, representing a workforce reduction of about 6%. Reductions will be in areas of significant overlap following acquisitions, he said.
- The news comes as Centene reported a $12 million loss in the fourth quarter of 2020 due in part to higher testing and treatment costs associated with COVID-19. The loss ends Centene's run of profitable results, particularly in the second and third quarters as members deferred care.
- Still, despite the fourth quarter loss, Centene posted a profit of $1.8 billion for the full year of 2020. Also, executives expressed enthusiasm for a COVID-19 relief bill that increases premium subsidies for marketplace members.
At the outset of the pandemic, Neidorff warned the company's performance would likely be choppy as it navigated through the outbreak of the virus. That prediction was realized, the executive told investors Tuesday.
Near the beginning of 2020, the St. Louis-based insurer's first quarter profit was down compared with the prior-year period, though it remained in the black. It went on to report significant leaps in profit in both the second and third quarters. At the time, insurers largely benefited from the steep declines in patient volumes as members delayed care as a result of the deadly coronavirus pandemic.
However, that all changed in the fourth quarter as Centene posted a loss of $12 million down from the $209 million profit in the fourth quarter of 2019.
Although traditional utilization was lower than normal due to the pandemic, it was offset by a few factors, including an increase in COVID-19 testing and treatment costs among its marketplace members, particularly in regions where infections rates rose sharply in December, CFO Jeff Schwaneke said Tuesday.
For the full year, Centene paid $3.6 billion for COVID-19 associated claims.
Medical costs jumped nearly 50% during the fourth quarter, according to latest earnings release. Still, its medical loss ratio of 88.4% was in line with Q4 of 2019, but higher than analysts' expectations. Its full-year MLR of 86.2% came in lower than 2019.
Centene wasn't the only one to experience a bump in COVID-19 costs during the fourth quarter. Humana noted a similar trend that also resulted in a Q4 loss.
Centene said it expects traditional utilization to be lower than historical trends at least through the first half of 2021, returning to normal levels in the back half of the year.