Release Date: April 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Centene Corp (CNC, Financial) reported strong premium and service revenue of $42.5 billion for Q1 2025, indicating a good start to the year.
- The company maintained its full-year 2025 adjusted EPS outlook of greater than $7.25, reflecting confidence in its financial performance.
- Centene Corp (CNC) experienced better-than-expected Medicare Advantage membership retention, contributing an additional $1 billion to its 2025 revenue outlook.
- The Commercial segment, including the Marketplace business, showed strong growth with higher-than-anticipated new enrollment and retention.
- Centene Corp (CNC) secured key Medicaid contract wins in Illinois and Nevada, expanding its service footprint and demonstrating the competitiveness of its service model.
Negative Points
- The company faced $130 million in unexpected medical expenses due to a more active flu season, impacting Medicaid performance.
- Medicaid rates, while showing progress, are still inadequate in certain areas, such as long-term care and high-cost drugs, indicating ongoing challenges in rate alignment.
- The Medicare segment's HBR is expected to follow an inverted slope line due to Inflation Reduction Act changes, leading to lower earnings later in the year.
- High utilization of specialty drugs in the PDP segment is causing pressure, although partially mitigated by a risk corridor.
- Centene Corp (CNC) is facing challenges with potential policy changes, including the expiration of enhanced premium tax credits and new marketplace integrity rules, which could impact future market dynamics.
Q & A Highlights
Q: Can you provide more details about the flu-related costs and confirm if these are isolated to Medicaid?
A: Sarah London, CEO: The $130 million in excess costs for Q1 in Medicaid is due to flu and influenza-like illnesses, tracked consistently over the last eight years. While some flu was seen in Marketplace and Medicare, the $130 million impact was specific to Medicaid and is considered a Q1 isolated event.
Q: Is the $1 per share headwind estimate still valid if public exchange subsidies expire, and how would work requirements impact the business?
A: Sarah London, CEO: The $1 per share estimate remains valid. We are assessing the impact of new marketplace rules and expect more clarity on subsidies by Q2 or Q3. Work requirements are not new, and their impact will vary by state. We are prepared to work with states to ensure members maintain access to healthcare.
Q: How are you managing the risk adjustment in exchanges, and what is your outlook on Medicaid rates for the second half?
A: Andrew Asher, CFO: Our risk adjustment estimates for 2024 are consistent with Wakely data. For 2025, we are cautious and await further data. Regarding Medicaid, we expect a mid-4% composite rate increase for the year, with more visibility on the 7/1 cohort later in Q2.
Q: Can you explain the progression of Medicaid MLR throughout the year and the expected improvement?
A: Sarah London, CEO: Key levers for MLR improvement include rate negotiations and internal clinical initiatives. We have empirical evidence of acuity shifts, and ongoing discussions with states are constructive. We aim for a mid- to high 91% full-year MLR, with better performance expected in the second half.
Q: How are specialty pharmacy trends affecting your business, particularly in PDP and Medicaid?
A: Sarah London, CEO: In Medicaid, specialty drug utilization will eventually be reflected in state rates. We offer solutions to states for managing high-cost drugs. Andrew Asher, CFO: In PDP, high specialty drug utilization, especially in non-low-income members, is driven by changes in patient assistance programs. We are managing this through SG&A and risk corridors, and will adjust 2026 bids accordingly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
