Centene Corp. on Tuesday reported large increases in profit and revenue in the third quarter, yet another period of significant growth for the St. Louis-based Medicaid managed-care insurer.
Centene has added Medicaid members at a high rate thanks to new and sustained state managed-care contracts as well as the Affordable Care Act's Medicaid expansion. The company has also enrolled thousands more exchange members and low-income seniors who are dually eligible for Medicare and Medicaid.
Next year, Centene will be even bigger. The insurer has made “significant progress” toward completing its acquisition of Health Net, Centene CEO Michael Neidorff said on an earnings call Tuesday. Shareholders of both companies overwhelmingly gave their blessing to the $6.8 billion deal, and state and federal officials have also signaled the transaction will be approved by early 2016. Health Net will give Centene a bigger presence on the West Coast and in the private Medicare market.
Centene's third-quarter profit jumped 13% to $93 million. Revenue soared 34%, totaling more than $5.8 billion in the three-month period that ended Sept. 30. It's the eighth consecutive quarter in which Centene's total revenue has increased by at least 30%.
Medicaid patients usually require more medical care than those with commercial, employer-based coverage, which makes Medicaid managed care one of the least profitable insurance ventures. Centene's profit margin was only 1.6% in the quarter. But when a company handles as much volume as Centene, that slim margin still results in a lot of money and the attraction of investors. Centene's stock is up more than 15% so far this year and up 448% since the ACA was passed in 2010.
Centene covered more than 4.8 million people as of Sept. 30, a vast majority of whom are in a state Medicaid program. For those in managed-care programs, Centene receives an average of $361 per member every month.
Approximately 156,000 people have purchased a Centene health plan on the ACA exchanges. Most Centene exchange enrollees receive premium subsidies, and Centene has offered exchange coverage mostly to capture the churn of people who fluctuate in and out of Medicaid.
The company's medical-loss ratio in the third quarter was 89%, indicating that Centene spent 89 cents of every premium dollar on medical care and “quality improvement” measures. That was down from 89.7% in the same period of 2014.
While Centene has won several niche healthcare contracts and a large rebid in Georgia, Centene has also lost out on some potentially lucrative Medicaid deals. Iowa and Michigan did not pick Centene to insure their Medicaid populations, which cost the company billions in potential revenue.
Nebraska issued a request for proposals for its Medicaid managed-care program this month and will award contracts to three companies next March. Centene does not operate yet in Nebraska and could bid on the deal.