Centene’s quality scores for its Medicare Advantage plans came in worse than its executives expected, jeopardizing the insurer's revenue in 2024.
Federal regulators assess Medicare Advantage plans’ quality through star ratings, which span a five-point scale. Plans that achieve a score of four stars or higher receive bonuses, which insurers rely on to offer generous benefits to differentiate their products in the crowded Medicare Advantage market. The Centers for Medicare and Medicaid Services awarded $10 billion in bonuses in 2022, according to an analysis by Kaiser Family Foundation.
Patients can see the scores for health plans while shopping for one.
Medicare Advantage insurers’ ratings fell this year due to the resumption of stricter pre-pandemic standards, as well as the increased sway given to consumer experience surveys. Centene’s scores fell at a greater rate than the industry average. The percentage of members in Centene’s four-star or-higher plans will drop to 3% from 48% in 2022, according to a research note published this month by Scott Fidel, an analyst at Stephens, a financial services firm. Some Centene plans will be barred from expanding in 2023 due to their consistently low scores.
“Our star scores were slightly worse than internal expectations but the vast majority of our revenue headwind was known months in advance,” CEO Sarah London said Tuesday during the health insurer's third-quarter earnings call with investors.
Centene is working to improve its scores by hiring a chief quality officer, centralizing its quality improvement operations and setting up systems to track its metrics in real-time. The insurer also added quality improvement as a compensation metric by which all employees’ performance will be measured this year, London said. The company's new pharmacy benefit provider, Cigna's Express Scripts, will also drive improvement, she said.
The company prepared for the fall in stars revenue in 2024 by offering more conservative benefits this year, she said.
Centene expects the decline in revenue from the stars program, along with the loss of key counties in California’s Medicaid managed care program, to translate to a drop of up to 50 cents in its earnings per share price in 2024.
California regulators’ decision will cause Centene to exit several large counties, including Sacramento, Los Angeles and Kern. Centene and other insurers have filed protests over the Medi-Cal contract awards. “We plan to exhaust all available avenues of appeal,” London said.
Medicaid remains the largest portion of Centene’s business, with its membership growing to 15.7 million patients as of Sept. 30 compared with nearly 14.8 million reported during the same time last year. The company counts 26.7 total enrollees. Growth in Medicaid and Medicare plans increased Centene’s net income 1.3% to $755 million on revenues of $35.8 billion.
The company is growing its exchange footprint as states prepare to reassess patients’ eligibility for the Medicaid program. States paused removing individuals from the public health program’s rolls as part of the disaster relief effort responding to the COVID-19 pandemic. Up to 15 million patients could lose Medicaid coverage once states begin reviewing their qualifications for the program, and many are expected to transition to exchange coverage. To capture the new enrollees, Centene will expand its virtual-first Ambetter plan to nine new states in 2023, bringing its total footprint to 13 states.
The company also plans to receive an influx of exchange members after Bright Health Group and Friday Health Plans announced they would end much of their marketplace coverage in 2023. State regulators will automatically assign patients from these plans new coverage if they do not sign up for a health insurance plan during open enrollment, which runs from Nov. 1 to Jan. 15.
“We’ve spent many, many years working very closely with state regulators and that gives us an opportunity to work with them as they face a challenge as people have exited their markets,” Chief Operating Officer Brent Layton said during Tuesday's call.
