Centene headquarters in the St. Louis suburb of Clayton, Mo.
Centene
Health insurer Centene’s net income eclipsed $1 billion in the second quarter as the company is getting a better handle on rising costs of people in its commercial and government-subsidized health plans.
Centene, which is one of the nation’s largest providers of Obamacare and is also a large provider of Medicaid health benefits for poor Americans, said its earnings swung to a net income of $1.09 billion, or $2.19 a share compared to a loss of $253 million, or 50 cents a share in the second quarter of last year.
Like other health insurers, Centene has been battling the rising medical expenses of its health plan members. But Tuesday’s earnings report indicated high healthcare costs that have been a drag in past earnings may be stabilizing somewhat as the company’s health benefits ratio, which is the percentage of premium spent on medical costs was down to 89.6% for the second quarter compared to 93% in the year-ago period.
With the company’s earnings improving and the company getting a better handle on its “cost structure,” executives increased its earnings guidance for the rest of 2026. Centene has launched an array of efforts to control costs including a companywide worker buyouts disclosed earlier this year.
“Our second quarter results and improved full-year outlook represent meaningful milestones on our path to restoring profitability and increasing shareholder value,” said Centene chief executive officer Sarah M. London. “We are excited by the positive momentum we have built and remain focused on our goal of delivering industry-leading health outcomes with an industry-leading cost structure.”
In particular, Centene reported a commercial health benefits ratio of 79.2%. The industry would prefer such ratios to be below 90% and into the mid 80s, where the industry was less than two years ago.
“The consolidated HBR (health benefits ratio) benefited from a lower marketplace HBR resulting from improved pricing and risk transfer reflecting the acuity of the marketplace membership,” the company said in its earnings report. “The HBR also decreased due to rate and revenue increases and continued tangible progress in managing medical costs in the Medicaid business. The HBR benefited by the favorable resolution of programmatic elements for the 2025 benefit year in Medicare and was also driven by an increase to the premium deficiency reserve (PDR) in 2025 versus no PDR in 2026 for our Medicare Advantage business as a result of our progression towards profitability.”
Centene is also benefitting from providing health benefits to a smaller pool of patients. The company’s total enrollment tumbled to nearly 25.9 million from more than 28 million in the year-ago period largely due to a big drop in enrollment in “marketplace” plans it sells under the Ambetter brand.
Such marketplace enrollment dropped to 3.5 million at the end of the second quarter compared to 5.8 million in the second quarter of last year. Centene is one of the largest sellers of such plans under the Affordable Care Act also known as Obamacare.
The big dip in Centene’s enrollment is what Democrats in Congress and health insurance industry analysts said would happen after Republicans in Congress and the Donald Trump White House wouldn’t agree to extend enhanced tax credits for buyers of Obamacare.
A KFF analysis last fall said middle income Americans “as well as those with low incomes” will see “major out-of-pocket premium increases” if tax credits aren’t extended. And they are with customers reporting a doubling and even tripling of premiums for this year. The subsidies, or tax credits, made health insurance premiums more affordable for individuals and were enhanced by the Biden administration and the Democratic-controlled Congress, which passed the Inflation Reduction Act of 2022, allowing more Americans to buy coverage.
Still, Centene said premium and service revenues rose 4% to $44.4 billion from $42.5 billion in year-ago period. “The increase was primarily driven by premium yield and membership growth in the (prescription drug plan) PDP business, rate increases in marketplace and in the Medicaid business to address medical trend, Marketplace risk adjustment revenue transfer for the 2025 and 2026 benefit years, and state directed payments. The increases were partially offset by lower Marketplace and Medicaid membership.”