- Centene reported a higher than expected medical loss ratio during the fourth quarter of 2019 due in part to flu-related costs and more visits to the doctor among its health insurance exchange population, executives said during Tuesday's call with investors.
- The insurer reported revenue for the fourth quarter increased 14% to nearly $19 billion while net earnings dipped to $209 million.
- CEO Michael Neidorff also weighed in on the administration's proposal to partially reshape the Medicaid program into a block grant system, calling it a potential net positive for payers.
Despite increasing membership 8% to cover more than 15 million Americans, Centene's executives were peppered with investor questions over what some characterized as a "sizable" MLR miss during the quarter.
The St. Louis-based insurer reported an MLR of 88.4% in the fourth quarter, an increase from 86.8% during the prior-year quarter.
Executives said the higher medical costs among the health insurance marketplace population were not associated with inpatient stays or specialists but rather more doctor visits, providing some insight on the acuity level of the members.
Despite the miss on MLR, an important measure that compares the amount an insurer brings in from premiums to the amount it spends on care, executives said the margins are still in line with their expectations.
The marketplace business was largely responsible for driving the 14% fourth quarter revenue increase, the company said. Membership increased more than 20% year over year to cover 1.8 million members at the end of December.
Neidorff said the company has continued to hold the No. 1 spot in the marketplaces. Heading into 2020, he noted the payer expanded its presence in 10 existing states, including Texas and Florida.
He also provided some insight into the demographics of those in Centene exchanges products, telling investors the average age has been relatively consistent at around 42.
However, the company did not achieve its growth expectations for its Medicare business, reporting a 3% dip in membership. Neidorff said the business has failed to keep pace with the rest of the company's products. However, the addition of WellCare "will serve as an important catalyst to accelerate our growth and performance in this business," he said. He has previously noted the company plans to market its Medicare business under the WellCare brand going forward.
For the full year of 2019, Centene's revenue increased 24% to nearly $75 billion and net earnings attributable to the company increased to $1.3 billion.
Neidorff also weighed in on the Trump administration's plan to revamp part of the way it funds a the Medicaid program by allowing states to opt into a block grant system, which Centene is still reviewing. "Block grants work really well in states that are not growing and states that are it can have an impact. So various states will have various impacts," he said.
He said it's "key" that the proposal is limited to the expansion population.
"I'm going to say that I tilt toward a net positive on it because it's giving the states some opportunities to be innovative." He noted that the company is well positioned to help states given the strong relationships its local plans have with state government.
"We're going to continue to work with it and help to make it better," Neidorff said of the proposal.