Citing cost pressures, Centene posted a $253 million loss in Q2, with stocks taking a hit upon news of the earnings miss.
Shares of the company lost about 10% in early premarket trading on Friday, according to Seeking Alpha. Centene set its 2025 earnings per share guidance at $1.75 during the earnings call, compared to $2.94 in the consensus.
The company is assuming a $2.4 billion hit from worse-than-expected cost trends in its Affordable Care Act Marketplace business. Shares traded about 7% higher as the earnings call was in progress, according to Seeking Alpha.
The medical loss ratio for the quarter was 93%, reflecting higher Medicaid and marketplace costs, plus lower-than-expected risk adjustment revenue transfers, which were the leading factors in the Q2 loss, said Centene.
Despite the hit on profit, Centene outperformed on revenue, bringing in $48.7 billion, which compares with the $39.8 billion in revenue and $1.1 billion in profit it logged in Q2 2024.
CEO Sarah London said in an earnings release that while the numbers are not what the company had hoped, there’s a clear path forward.
"We are disappointed by our second-quarter results, but we have a clear understanding of the trends that have impacted our performance, and are working with urgency and focus to restore our earnings trajectory," said London. "Despite the shifting landscape, we believe that the staying power of Medicaid, Medicare and the Individual Marketplace is as strong as it has ever been. Centene has significantly fortified our platform in service of these programs over the last three years, and as we move forward, we are focused on continuing to adapt with the market to deliver meaningful value to our members, our stakeholders and our shareholders over the long term."
WHAT’S THE IMPACT
Centene has brought in $95.4 billion in revenue and $1.05 billion in profit so far through the first six months of 2025.
As of June 30, medical membership was 28 million, down about 500,000 from Q2 2024. Most of those losses were in Medicaid. Centene attributed the Medicaid losses to redeterminations and lower Marketplace net risk adjustment revenue.
The health benefits ratio was 93%, up from 87.6% in Q2 2024, driven by a reduction in the company's net 2025 Marketplace risk adjustment revenue transfer estimate, increased Marketplace medical costs, higher medical costs in Medicaid driven primarily by behavioral health, home health and high-cost drugs, and an increase to the 2025 Medicare Advantage premium deficiency reserve based on the progression of earnings during the year.
Cash flow provided by operations for the second quarter of 2025 was $1.8 billion, primarily driven by improved pharmacy rebate remittance timing.
THE LARGER TREND
In June, a Centene subsidiary was sued by the mother of a deceased member in Arizona for allegedly failing to provide adequate access to mental health coverage.
The lawsuit centers around the death of Ravy Coutinho, who died allegedly because Centene subsidiary Health Net of Arizona failed to adhere to a law requiring appropriate access to mental healthcare.
This, the lawsuit claims, is a result of ghost networks – inaccurate and misleading provider directories that falsely list providers as in-network and available when they're not.
The suit accuses Centene of wrongful death, as well as negligence and negligent misrepresentation for allegedly falsely representing its provider network and failing to disclose material facts. It also accuses Centene of consumer fraud and insurance fraud, for allegedly misrepresenting coverage benefits, directory accuracy and plan adequacy – a felony under Arizona law.
The suit seeks wrongful death and punitive damages.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.