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Centene's Q2 loss: Why health insurers face such big headwinds
Centene's Q2 loss: Why health insurers face such big headwinds

Yahoo

time4 days ago

  • Business
  • Yahoo

Centene's Q2 loss: Why health insurers face such big headwinds

Health insurers are navigating rising costs and regulatory challenges, with Centene (CNC) slashing its forecast amid ACA uncertainties. Arthur Wong, S&P Global Ratings healthcare managing director, and Adriel Bettelheim, Axios senior healthcare editor, discuss the impact on the industry and what's ahead. To watch more expert insights and analysis on the latest market action, check out more Market Catalysts here. Managed care company Centene swung to a loss in its most recent quarter, blaming rising Medicare costs and ACA issues during the three-month period. Centene's struggles are part of a broader trend in the health insurance industry. Several insurers this earnings season, including Molina Healthcare and Elevance Health, have called out things like rising costs, regulation, and shifting membership. Here to talk about this backdrop and what it means for the future of the industry are Arthur Wong, S&P Global Ratings Healthcare managing director, and Adriel Bettelheim, senior healthcare editor at Axios. Thank you both for being here. We appreciate it. Happy to be here. Thank you, Julie. So it's interesting in the case of something like a Centene, which slashed its forecast for this year but says it's focused on trying to make its ACA business profitable going ahead into 2026. Adriel, I want to start with you and what we've seen kind of big picture from the health insurance industry, which really seems to be grappling with some of the changes that are happening on the regulatory and reimbursement front. What do you think is or what have you been seeing in your reporting as sort of the biggest challenge there? It's probably the most volatile time for health policy since 2018, and I think some of them in their rate filings, at least, are anticipating both higher costs for care and higher demand. On the policy front, obviously the big beautiful bill Act made the biggest package of changes to Medicaid. And that is going to bring, if estimates hold, about 10 million more uninsured. So there's the prospect of sicker risk pools, more uninsured people showing up in hospital emergency departments. But then also, there's the anticipation that the enhanced Affordable Care Act subsidies, which are due to expire at the end of this year, that the Republicans in Congress won't renew them. So that adds millions more uninsured, not uninsured, but leaving the ACA market. So I think the insurers are all factoring this volatility in, both the higher costs and the changing risk, and it's definitely giving them jitters. And Arthur, how do they possibly navigate in this kind of environment? How do you think they're adapting, and who's sort of doing the best job? Yeah, I mean, it's it's tough to say, in terms of on top of all the legislative changes and the uncertainty being brought about by the BBB Act. I mean, the insurers are already dealing with higher utilization rates for healthcare services, higher costs, and that's coming in from this labor inflation over the last several years. So it's been an issue they've been grappling with since the second half of 2023. So it'll be interesting to see in terms of what they do in terms of cutting costs or trying to lower the utilization. You've seen them trying to increase approval times for procedures. Also, from the service providers' perspective that we cover, we do see them in terms of their collections and in terms of their approvals that those days have stretched out over the past year as well. That's had an impact for the service providers. And Arthur, are there certain insurers that are more and less exposed to certain patient cohorts that will therefore make them sort of more and less vulnerable, or is the industry as a whole affected? I think the whole industry, there are certain providers that are more exposed to the ACA market, the Medicaid market, or the, I mean, Medicare Advantage is also a market that's also been under pressure the last couple of years. So it's it's been a mix, but given how interrelated the whole healthcare system is, it's broadly hit across all of the health insurers. Adriel, I want to ask you as well about UnitedHealth because the company just confirming this week that it was responding to requests from the Justice Department investigators on both the civil and criminal front. There's been some reports about those investigators looking into its Medicare business. And obviously, UnitedHealth has been under a microscope both publicly and regulatorily for a little while now. What have you seen in your reporting in terms of what that means for that company? Yeah, we still don't know a lot of the details of the investigation, but it is, you know, Medicare Advantage insurers are paid more to care for sicker patients. So there is this concern about upcoding, making the patient look sicker and collecting more in payments. And the Trump administration, in general, is looking at overbilling of Medicare by all sorts of providers, making that a priority. So, I think the upcoding, particularly dealing with Optum, the United unit, is definitely a focus. There's also separate antitrust investigations and criminal investigations, which could, you know, relate to a variety of things. So the the admission, bearing out some of the earlier reporting by The Wall Street Journal, I think, puts them under especially close scrutiny. And we'll see if Congress is moved to act. There are some pieces of legislation addressing upcoding in Medicare Advantage that could be part of a deal if they choose to go that far sort of later in the year. Has there been any sort of independent investigation, Adriel, into how prevalent upcoding is and how much, you know, more that insurers are charging as a result of all this? I think there's a general feeling that it's kind of breaks a little bit along partisan lines, but certainly on the Democratic side, there's a feeling that they're overpaid and that there is a certain amount of fraud. And I think the Republicans are kind of, they do love Medicare Advantage historically, and it does now account for more than half of the Medicare enrollees. So there's a reluctance to touch it too much, but I think it is a real concern that there's some more integrity. And that's why some of these proposals are putting it on CMS on the Medicare administrators to do lookbacks and to do a lot more oversight into the billings. 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