The company raised its 2026 adjusted profit forecast to more than $4.80 per share, from above $3.40. Analysts were expecting a profit of $3.52 per share.
Centene's quarterly adjusted profit per share was $2.51, surpassing estimates of $1.09.
Analyst comments and quarterly results
Morningstar analyst Julie Utterback said that this near-term challenge, particularly through 2027, may be creating some volatility in shares, although the risk is not new.
A mismatch in payment rates and demand for healthcare has pressured health insurers offering the plans for the last few years.
The company's second-quarter medical loss ratio, the percentage of premiums spent on medical care, was 89.6%, lower than 93% last year and below analysts' estimates of 91.30%, as per data compiled by LSEG.
Centene said the lower costs were due to improved pricing of its Obamacare plans, as well as a boost from risk-adjustment payments that reimburse insurers who cover a disproportionate share of sicker members.
Americans this year are dropping off the plans, established under former President Barack Obama's Affordable Care Act, as members struggle to make payments after the end of extra subsidies created during the COVID-19 pandemic.
Membership outlook weakens as shares fall
July 28 (Reuters) - Centene said on Tuesday it expects a larger dip in membership in its plans for lower-income individuals, leaving the health insurer with a sicker patient population, sending its shares down nearly 6% in morning trade.
The company said it expects its Medicaid membership through the year to fall between 8% and 9%, compared with a dip of 6% expected previously.
Losses in Medicaid enrollment have been spurred by regulatory changes implementing work requirements for low-income Americans enrolling in the government-sponsored plans. Enrollees must meet requirements by January 1, 2027.
Company says it can return Medicaid business to profitability
"It is not something that we can or should hand wave," CEO Sarah London said on a post-earnings conference call.
London added that the company aims to return its Medicaid business to profitability over the next few years.
Centene saw a slight uptick in sicker patients from the population that rolled into Medicaid plans when states expanded it under the Affordable Care Act to higher income levels, directly consistent with the increased attrition in the quarter.
As use of medical services moves back toward pre-pandemic patterns, and states tighten eligibility criteria, Centene has enrolled members with higher usage rates of health coverage. Losses are sharply driven by the Medicaid expansion population, or higher-income people, Chief Financial Officer Drew Asher said.
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