Centene posts shock loss as medical prices surge

Centene on Friday posted a shock quarterly loss, in yet one more disappointment for traders within the sector that has suffered a sequence of setbacks on account of rising prices in government-backed insurance coverage.

Shares of the corporate tumbled 14.5% in premarket buying and selling, dragging down friends Elevance and Molina Healthcare, which have additionally warned of elevated prices in government-backed insurance coverage.

The insurance coverage sector has been underneath pressure for the previous two years on account of rising medical prices.

On one hand, insurers are grappling with elevated utilization of behavioral well being companies, house care, and high-cost medication, whereas on the opposite, the expiration of pandemic-era subsidies and Medicaid protections has shifted enrollment towards sicker members, squeezing their margins.

Centene, which largely focuses on government-sponsored plans, posted a medical price ratio (MCR) of 93% for the quarter, effectively above Wall Road’s expectation of 89.3% and a transparent signal of strain throughout all enterprise traces.

“The medical price ratio for the quarter was surprisingly excessive and appeared associated to all main traces of enterprise, though its particular person alternate enterprise was doubtless the largest wrongdoer,” stated Morningstar analyst Julie Utterback.

The quarterly loss was largely attributed to a downward revision in anticipated 2025 danger adjustment income, a part of the Inexpensive Care Act’s mechanism to steadiness prices throughout insurers.

The adjustment, mixed with rising Medicaid expenditure, drove Centene to a second-quarter adjusted lack of $0.16 per share, versus an anticipated revenue of $0.86, based on information compiled by LSEG.

“We’re disillusioned by our second-quarter outcomes, however we have now a transparent understanding of traits which have impacted efficiency, and are working with urgency and focus to revive our earnings trajectory,” CEO Sarah London stated.

Centene stated it could present 2025 earnings expectations on the convention name.

The corporate is within the technique of requesting premium will increase for Obamacare plans for 2026 to mirror the next proportion of sicker sufferers who want extra medical care than it beforehand anticipated.

Centene expects to have the ability to take corrective pricing actions for 2026 in states that symbolize a considerable majority of its membership in these plans.