Centene Profits Grow Thanks to an Increase in Members

Health Insurance

May 1, 2018

Centene Corporation announced on April 24 that its first-quarter profit more than doubled. One of the largest insurance companies in the Obamacare business, Centene attributed its growth to market stabilization, an increase in members and lower costs out of its Medicaid division.

Centene is the country’s largest provider of individual healthcare plans under the Affordable Care Act (ACA). As of April 2018, the company reported more than 1.6 million health plan members, a 35 percent increase over the 1.2 million members it had during the first quarter of 2017. The company also retained over 80 percent of its ACA enrollees for 2018. Centene feels that this large number of repeat customers is a sign that people are getting a good value for their money. Michael Neidorff, the company’s CEO, noted enrollees’ high satisfaction with the insurer.

But it’s not just repeat business that helped Centene increase profits. Centene also entered new marketplaces – including Missouri, Kansas and Nevada – in 2018. The health insurance provider also expanded its offerings in other states where it offered existing policies. The acquisition of Community Health Group in Florida helped the company expand its member base as well.

Overall, these changes saw Centene’s first-quarter net earnings jump to $338 million or $1.91 per share as of March 31. This is a huge increase from the $132 million or $0.79 cents per share that the company reported last year. Driving the increase was the rise in insurance coverage that Centene sells on the ACA marketplaces, as was successfully managing the cost of its enrollees’ health plans.

The company also had some help from its Medicaid division. Centene, which has over 7 million Medicaid members, spent 84.3 percent of its earnings on medical claims in the first quarter, down from 87.6 percent the year before. Centene doesn’t expect its growth to stop anytime soon. The company explains that it’s looking into two acquisitions that should further expand its member base. Centene expects its acquisition of New York-based Fidelis to close on July 1 of this year. The transaction was originally expected to be complete by April but was pushed back due to delays with New York regulators.

Neidorff said that the company has big plans to become more diversified as a health insurance provider in the future. He wants the company to maintain its targeted acquisition approach. Staying competitive in the market and acquiring companies that can help it expand its member base, he added, will continue to be a top goal of the company moving forward.

Centene’s success in the ACA exchanges and in Medicaid may spur other companies to compete in the individual market. Health experts fear that the loss of competition in the exchanges will continue given the Trump administration’s push to weaken Obamacare regulations. Innovative policies and competitive rates may encourage younger, healthier individuals to sign up for health insurance, which could bring stability back to the market.