Health insurer Centene reports surprise loss on rising medical costs
The health insurance industry has seen elevated medical costs and changing enrollment patterns, at a time when it braces for big spending cuts and rule changes under the Trump administration.
"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," CEO Sarah London said.
Rivals Elevance and Molina Healthcare have also warned of elevated costs in government-backed insurance plans.
Centene reported a medical cost ratio, the percentage of premiums spent on medical care, of 93% in the second quarter, compared with analysts' expectation of 89.34%.
The increase was driven by a reduction in net 2025 marketplace risk adjustment revenue as well as higher medical costs in Medicaid, driven mainly by behavioral health, home health and high-cost drugs.
Earlier this month, Centene withdrew its 2025 earnings forecast due to an expected revenue slump from commercial plans under Affordable Care Act, also known as Obamacare. These plans offer a sliding scale of government subsidies based on income.
For the second quarter, the health insurer reported adjusted loss per share of 16 cents, compared to analysts estimates of a profit of 86 cents, according to data compiled by LSEG.
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But tariffs can also hurt them, by raising the costs of the inputs they import to make their products. Several studies of the tariffs imposed during Trump's first term, which were much smaller and more targeted, found that manufacturing employment either stayed level or actually fell as a result. The ultimate result of the current wave of tariffs is yet to be determined, but so far, since Liberation Day, the manufacturing sector has shed tens of thousands of jobs and investment in new factories has fallen. A quarterly survey conducted by the National Association of Manufacturers in May found that optimism among manufacturing firms had fallen to its lowest point since the height of the coronavirus pandemic; trade uncertainty and raw-material costs were cited as top concerns. Rogé Karma: The mystery of the strong economy has finally been solved The new deals should at least give companies some much-needed certainty about tariff rates, which will help them make investment decisions. But in other ways, the deals actively undermine key American industries. Foreign cars, which represent the single largest American import from Japan and South Korea and the third largest from the EU, will face 15 percent tariffs. That is far lower than the rate American car companies have to pay to import car parts, which are tariffed at 25 percent, and crucial car-building materials like steel and aluminum, which are tariffed at 50 percent. As Jim Farley, the CEO of Ford, said in a recent interview, foreign competitors such as Toyota now have a $5,000 to $10,000 cost advantage over American-made vehicles. Ford projects that it will lose $2 billion in profits this year alone because of higher tariffs; General Motors forecasts losses of $4 billion to $5 billion by the end of the year. The deals announced so far are only the beginning. The Trump administration is currently in the midst of negotiations with several trading partners, including China, Mexico, Switzerland, and Taiwan, and just yesterday implemented a new round of tariffs on about 90 countries, the ostensible goal being to bring those nations to the bargaining table too. If recent events are an indication, any future pacts will be framed as historic milestones in the quest to remake the global trade system in America's favor. The White House will issue pronouncements of eye-popping investments, drastically reduced foreign-trade barriers, and major concessions to American industry. When that happens, remember to look closely at the details.
