Centene eyes Medicaid expansions as membership dips

By Lauren Berryman / July 26, 2024

Leading Medicaid insurer Centene aims to expand into additional states after losing millions of members during the eligibility redeterminations process, CEO Sarah London said Friday.

During the second quarter, Centene's Medicaid enrollment fell 18.2% to 13.1 million as states neared the end of a year-plus effort to unwind federal continuous coverage rules enacted to preserve benefits during the height of the COVID-19 pandemic. In addition, the insurer's remaining Medicaid enrollees proved costlier than expected, Centene reported Friday.

“We are disappointed with the magnitude of the disconnect between Medicaid rate and acuity that we saw materialize in the quarter,” London said during a call announcing the financial results to investor analysts.

Medicaid premium revenue fell 8% to $20.3 billion in the second quarter, Centene reported.

Insurance companies that administer Medicaid benefits such as Centene, UnitedHealth Group and Elevance Health have reported recent costs pressures from the program. But the effects of Medicaid redeterminations, which began in April 2023 and are all but over, are mostly baked in, London said.

"Each month and each rate cycle gets us closer to a more normalized operating dynamic," London said. Medicaid costs may remain high in 2024 but will taper off, she said.

Since the unwinding began, more than 24 million Medicaid enrollees have lost benefits, according to Centers for Medicare and Medicaid Services data compiled by KFF. One consequence of this shrunken Medicaid population is fewer customers for managed care carriers.

To strengthen its Medicaid business in the aftermath of redeterminations, Centene is considering geographic expansions, London said.

"As we look ahead to what we think are really exciting organic growth opportunities for Medicaid," London said, "we think about new states, new markets, new programs and then various expansion opportunities."

In the meantime, the company has successfully pressed most states for rate hikes to cover higher costs, Chief Financial Officer Drew Asher said.

In the second quarter, net income increased 8.3% to $1.1 billion as revenue grew 5.9% to $39.8 billion. The insurer's medical loss ratio, or the share of premiums spent on claims, ticked up from 87% to 87.6% compared to the year-ago period, driven by Medicaid costs. The company projects the medical loss ratio for the full year will be 87.9%.

Total membership rose a slight 0.2% to 28.6 million. Strong growth in exchange membership, which jumped 33.6% to 4.4 million, and a 33% increase in Medicare membership to 7.7 million offset the Medicaid losses and a 2% fall in group plan membership to 426,400. Medicare Advantage and Medigap membership slipped 14.3% to 1.1 million while Medicare Part D membership rose 47% to 6.6 million.

Centene is looking at expansion opportunities in the exchange market, as well, with a focus on individual coverage health reimbursement arrangements, also known as ICHRAs, to attract employer clients, London said.

By contrast, the company plans to withdraw from a "handful" of Medicare Advantage markets to align its Medicare and Medicaid geography and adapt to lower federal Medicare Advantage funding next year, London said.

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