Centene reports strong earnings as it supports ACA exchanges

Centene Corp. on Tuesday reported strong revenue in the first quarter as it continues to be an outlier among big insurers by committing to stick with the Affordable Care Act insurance exchanges.

The St. Louis-based insurer reported $11.7 billion in total revenue in the first quarter of 2017, up by 69% from the first quarter of 2016. Operating cash flow was also up from $196 million in the first quarter last year to $1.25 billion this quarter.

The gains were largely attributable to its completed acquisition last year of HealthNet as well as growth in new members from the marketplaces and Medicaid expansion, said CEO Michael Neidorff in an earnings call on Tuesday.

HealthNet—a Medicare, Medicaid, Tricare and ACA marketplace insurer—helped boost Centene's Medicare Advantage enrollment, which served more than 328,000 Medicare and dual beneficiaries at the end of the quarter. This is a big jump from the 34,000 enrolled in its Medicare Advantage plan in 2015.

Since the beginning of this year, Centene has launched Medicare Advantage plans in Texas, Georgia, Mississippi and Florida.

"We are trying a test-and-learn approach to our ... Medicare advantage operations," Neidorff said.

Centene reported that it had 1.2 million exchange members in the first quarter, which ended March 31. This is "slightly ahead of expectations," Neidorff said.

Neidorff also continued his tune of supporting the ACA marketplace even as a repeal bill looms. "We see nothing at this point to prevent us from proceeding—we got 2018 marketplace participation," he said.

Neidorff's optimism is in contrast to other big insurer CEOs like Anthem, Cigna and Aetna, who won't commit to participate due to the uncertainty surrounding the health insurance marketplaces.

Centene has succeeded in the exchanges thanks to its low-premium, high-deductible plans, which appeal to the low-income exchange demographic. About 90% of Centene's marketplace enrollees are eligible for premium subsidies.

Neidorff highlighted the importance of funding the cost-sharing subsidies that help members afford insurance, adding he is optimistic they will be funded because "there is bipartisan support for cost-sharing subsidies."

Centene also experienced a hike in enrollment through Medicaid expansion. The insurer served almost 1.1 million through Medicaid expansion in 10 states, compared with 984,000 members at the end of the same quarter last year. It also expects to begin Medicaid contracts with Mississippi, Nevada and Pennsylvania by the end of this year, Neidorff said.

Centene's overall managed care membership is 12.1 million, an increase of 605,000 members, or 5% over 2016.