Centene Corp. public health insurance exchange plans could soon attract tens of thousands of sick people dumped by competitors, and company executives say they are okay with that.
Executives talked about the possibility of an influx of sick Affordable Care Act exchange plan enrollees Tuesday, during a conference they held to go over third-quarter earnings with securities analysts.
For insurers, rapid growth can be a threat as well as an opportunity, especially if the new insureds file more claims than expected.
Centene ended the quarter providing coverage for 582,600 ACA exchange plan enrollees, up from 155,600 a year earlier, and it’s on track to absorb many new exchange plan enrollees during the ACA exchange open enrollment period for 2017, which starts Tuesday and is set to end Jan. 31.
Centene acknowledges in a report filed with the U.S. Securities and Exchange Commission that doing business in the ACA system could be challenging.
“We may face difficulty in estimating our medical claims liability for the relatively new and evolving Health Insurance Marketplaces,” the company says, using the U.S. Department of Health and Human Services’ preferred term for the ACA exchange system. “Any failure to adequately price products offered in the Health Insurance Marketplaces may have a negative impact on our results of operations, financial position and cash flow”
But Michael Neidorff, the chairman of the St. Louis-based carrier, told analysts he thinks the company is expecting to see significant enrollment growth in 2017 and welcomes that growth.
“Some people are worried about whether we’ll pick up some of the individuals who are high-cost for other plans,” Neidorff said, in response to a question about Centene’s ability to find capital to support rapid growth. “We see ourselves in a very strong position to effectively grow [exchange plan management] and still maintain the margins that we’ve become used to having.”
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Centene’s no-frills provider network designed
Centene has traditionally specialized in doing business in the Medicaid market and in the markets for other government-run health programs aimed mainly at poor people and older people.
The company as a whole is reporting $145 million in net income for the third quarter on $11 billion in revenue, up from $93 million in net income on $5.8 billion in revenue for the third quarter of 2015.
Revenue grew as rapidly as it did mainly because Centene acquired Health Net, a Woodland Hills, California-based that had operated in the commercial health coverage, military and Medicare markets, in March.
Centene executives said during the conference call that the health of the people in the core government health program plans tends to be much worse than the health of exchange plan enrollees. The exchange business the company already has attracted has actually lowered the company’s ratio of medical claims to revenue, not increased it, the executives said.
Up till now, the executives said, Centene has held exchange plan claims down by appealing mainly to consumers who qualify for strong ACA subsidies. Heavily subsidized enrollees may be paying for coverage mainly because their out-of-pocket cost for coverage is low, not because they have an urgent need for care.
Centene has also kept costs down by offering the kinds of no-frills doctors and hospitals that typically serve people in Medicaid plans, not the kinds of providers traditionally available through typical commercial plans, executives said.