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5 things to know about Centene's earnings

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Centene Corp. says that its Affordable Care Act exchange plans are still doing well.

Executives at the St. Louis-based insurer talked about the ACA exchange plans, its recently completed acquisition of Woodland Hills, California-based Health Net, and other matters Tuesday, during a conference call with securities analysts. The company held the call to discuss its second-quarter earnings.

The company is reporting $169 million in net income for the quarter on $11 billion in revenue, up from $88 million in net income on $5.3 billion in revenue for the second quarter of 2015.

The company ended the quarter providing or administering major medical coverage for 11.4 million people, up from 4.6 million people a year earlier.

Even though the company owes $424 million to the ACA risk-adjustment program as of June 30, compared with having a $108 million payable a year earlier, the risk-adjustment figure was better than the company had estimated.

Because the actual risk-adjustment number was better than Centene had feared, and it has a $217 million receivable coming from the ACA reinsurance program, it was able to add a $70 million ACA risk program improvement benefit to its net income.

Related: 10 top ACA individual risk-adjustment bills

For a look some of what Centene executives said during the company’s earnings call, read on:

Centene is hinting that it might move into the ACA exchange system in more states. (Image: Centers for Medicare & Medicaid Services)

1. The company’s ACA exchange business continues to do well, and it likes its group commercial business.

The company says it now has about 618,000 exchange plan enrollees in 15 states. It expects normal attrition to reduce that number to about 550,000 by the end of the year.

Michael Neidorff, Centene’s chairman, said the exchange business is achieving profit margins “at the high end of our targeted range.”

Later, he described the operation as having a “very strong, positive quarter” but not a “wild and wonderful quarter.”

“We see ourselves continuing to grow it, and we’ll be looking forward to talking about that in December relative to 2017.”

Centene also acquired some commercial group business when it bought Health Net.

Off-net commercial enrollment fell about 6 percent from a year earlier.

Neidorff said Centene wants to grow the off-exchange commercial business. “We have a strong commitment to build that,” he said.

Related: Humana to cut 2017 individual market footprint 88%

A Medicare card

Centene says the rumored sellers have a different provider network contracting strategy. (Image: Centers for Medicare & Medicaid Services)

2. The company is not interested in buying Medicare Advantage operations from Aetna or Humana.

A Bloomberg reporter has suggested that Centene could help Hartford-based Aetna complete its proposed acquisition of Louisville, Kentucky-based Humana by buying Medicare Advantage plan operations from the two companies, to help the companies resolve Medicare-related antitrust concerns.

Neidorff said that Centene is not interested in bidding wars, and that its not interestedin acquiring plans with enrollees who expect higher-end provider networks. Neidorff said his company focuses on building networks aimed at concumers who are used to getting coverage from Medicaid and other public health programs.

Related: WellCare, Centene are said to bid for Aetna Medicare assets

A dollar puzzle

Health Net is questioning the honesty of some behavioral health claims in Arizona and California. (Image: Thinkstock)

3. The company inherited a fight with substance abuse treatment providers in Arizona and California.

The company is setting aside about $300 million for a premium deficiency reserve, to cover costs related to a fight Health Net was having with substance abuse treatment providers in Arizona and California.

The providers accused Health Net of withholding payment without cause.

Neidorff declined to give details about how Centene sees the dispute, but, in the past, Centene has questioned the accuracy of substance abuse provider claims in those states.

Partly in response to that, Centene is reducing the size of its operations in Arizona and seeking permission to increase its individual preferred provider organization premiums in California, Neidorff said.

Related: EBSA Answers Mental Parity Preauthorization Questions

Uncle Sam with money

Centene’s Health Net unit may have to fight to keep a big Tricare contract. (Image: Tricare)

4. For Centene, one important vocabulary word is ‘reprocurement.’

Centene’s Health Net Federal Services unit won a West Region Tricare contract, or military health benefits contract, that could have a value of about $17.7 billion over five years. It also has big Medicaid contracts. 

One securities analysts asked about whether executives are worried about “reprocurement” risk,” or the risk that its government plans could face serious challenges from losing bidder that files an appeal. Neidorff said he thinks Centene has a good record of minimizing reprocurement risk.

Related: Humana, Centene win big military health administration contracts 

Baby with microcephaly

Florida has added a Zika testing mandate. (Image: U.S. Centers for Disease Control and Prevention)

5. Testing pregnant moms in Florida for the Zika virus is not a problem.

One analyst asked about the financial impact of a new Florida Zika testing mandate for pregnant women.

Jesse Hunter, a Centene product manager, said the cost of Zika testing is very low. 


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