Centene Corporation Withdraws 2025 Earnings Guidance Amidst Rising Marketplace Morbidity and Medicaid Cost Trends
Centene Corporation (NYSE: CNC), a leading healthcare enterprise, announced on July 1, 2025, the withdrawal of its 2025 GAAP and adjusted diluted earnings per share (EPS) guidance. This decisive move follows a comprehensive analysis of preliminary 2025 Health Insurance Marketplace data from Wakely, an independent actuarial firm, covering 22 of Centene’s 29 Marketplace states, representing approximately 72% of its Marketplace membership.
Key Findings and Financial Impact: - The overall market growth in these states is lower than expected. - The implied aggregate market morbidity is significantly higher and materially inconsistent with Centene’s prior assumptions for risk adjustment revenue transfers. - This discrepancy results in a preliminary estimated reduction of approximately \(1.8 billion in net risk adjustment revenue transfer for 2025. - The adjusted diluted EPS impact from this reduction is approximately \)2.75 per share. - The company anticipates further reductions from the remaining seven states due to similar morbidity trends.
Medicaid and Medicare Business Insights: - Medicaid business is experiencing a step-up in medical cost trends, particularly in behavioral health, home health, and high-cost drugs, with pronounced effects in New York and Florida. - The second quarter 2025 Medicaid Health Benefits Ratio (HBR) is expected to be higher than the first quarter. - Medicare Advantage and Medicare Prescription Drug Plan businesses are outperforming expectations in Q2 2025. - Strong selling, general, and administrative (SG&A) expense leverage continues alongside premium and service revenue growth.
Forward-Looking Actions: - Centene has begun refiling 2026 Marketplace rates to reflect a higher baseline of Marketplace morbidity. - Corrective pricing actions are expected in states representing a substantial majority of Marketplace membership.
Financial Context: - Centene reported a net income of approximately \(3.31 billion for FY 2024. - With 523.7 million common shares outstanding in FY 2024, the \)2.75 EPS impact represents a significant adjustment to prior earnings expectations.
This 8-K filing underscores the challenges Centene faces in managing risk adjustment revenue amid evolving morbidity trends and cost pressures in Medicaid. The company’s proactive approach to revising guidance and pricing strategies highlights its commitment to financial discipline and operational responsiveness.
Previous earnings calls have emphasized Centene’s focus on managing Medicaid cost trends and leveraging Medicare Advantage growth, themes that resonate strongly with the current 8-K disclosures.
For investors and stakeholders, this update signals a critical recalibration in Centene’s financial outlook for 2025, driven by external market dynamics and internal cost management strategies.
Source Document: Centene 8-K Filing
Tags: CNC, Centene Corporation, FY 2025, Marketplace Morbidity, Medicaid Cost Trends, Risk Adjustment Revenue