Centene's Q2 profit, revenue soar with new contracts, Medicaid expansion

Medicaid expansion and an aggressive growth strategy are paying early dividends for Centene Corp. The St. Louis-based health insurer has raised its expectations for the rest of the year yet again after reporting a highly profitable second quarter.

Revenue and earnings grew mostly from new and expanded Medicaid managed-care contracts in three states: Florida, Ohio and California, Centene officials said.

This year, Florida rolled out its Medicaid Managed Medical Assistance program for its more than 3.5 million Medicaid enrollees, where Centene subsidiary Sunshine Health is playing a big role. Centene increased Florida membership in the second quarter by 45%. The company also finalized a contract adding 55,000 California Medicaid beneficiaries and stabilized business in Ohio.

Medicaid expansion boosted earnings in the second quarter, company officials said. As of June 30, Centene covered almost 156,000 members who gained insurance through Medicaid expansion in California, Massachusetts, Ohio and Washington.

“We continue to view this as a growth opportunity as more states adopt expansion,” Centene CEO Michael Neidorff said during an investor call Tuesday.

Centene also had 75,700 people purchase coverage through the marketplaces, though Neidorff said the company expects only a “minimal impact” from exchange enrollees this year. Most of Centene's exchange enrollees were low income, and more than 90% were eligible for premium subsidies.

Net earnings in the second quarter grew almost 24% to $48.9 million, while total revenue climbed 54% to more than $4 billion. In the first six months of fiscal 2014, Centene posted more than $81.8 million in profit with $7.5 billion in revenue.

The insurer covered almost 3.2 million people as of June 30, and predicted full-year premium and service revenue will total between $15 billion and $15.5 billion. In the first quarter of this year, Centene raised its full-year revenue guidance to between $14.2 billion and $14.8 billion.

Centene is primed to benefit from several new initiatives. For example, effective July 1, Centene's Illinois plan, IlliniCare Health Plan, began to care for the 115,000 people within Cook County Health and Hospitals System's managed-care program. The five-year agreement is worth $1.8 billion.

Investors responded positively to Centene's results. By the end of morning trading, Centene's shares were up more than 7% to $81.35.

Follow Bob Herman on Twitter: @MHbherman