Centene raises Wall Street optimism that Medicaid insurers can improve profits
Insurer shares rose across the board. Centene shares were up 5% in early afternoon trading after falling 16% on the company's announcement of a second-quarter loss and forecast cut. Rivals UnitedHealth (UNH.N), opens new tab, CVS Health (CVS.N), opens new tab and Humana (HUM.N), opens new tab rose 1.61%, 2.69% and 3.45%, respectively.
All three report earnings next week.
Centene in an earnings call reassured investors it would work with states to ensure their payments for Medicaid plans match the company's increased medical costs for 2026.
'Our goal is to reprice 100%' of plans, said company CEO Sarah London.
Insurers are paid a set amount by states for Medicaid plans, which are jointly funded with the federal government. Centene, UnitedHealth and Elevance have said this year that state reimbursements for these plans have lagged behind actual costs of care.
Cautious investors have been looking for Medicaid health plan design changes and strategic geographic changes by the companies to reduce use of healthcare services.
New work requirements for Medicaid recipients in President Donald Trump's signature tax-cut and spending bill have made some investors worry that healthy people could disenroll in coming years.
The bill requires states to verify certain members are working or volunteering a minimum of 80 hours per month to qualify for Medicaid coverage starting in 2027.
After a COVID-19 era requirement to keep people enrolled expired in 2023, Medicaid plans redetermined each person's eligibility. This pushed members off, changing the mix of sick and healthy participants, and some Medicaid insurers struggled.
'The Medicaid redeterminations have proven to be far more disruptive than anyone thought," said Jeff Jonas, a portfolio manager at Gabelli Funds. "The entire industry is focused on restoring margin over winning new contracts and membership."
More detailed data could justify midyear price increases, said Kevin Gade, chief operating officer at Bahl & Gaynor, and correct mismatched rates set by states after the pandemic.
More data over the next year will also enable insurers to improve cost management techniques and raise rates paid by states, Gade said. "With enough data you can take care of the problem.'
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