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Life Health > Long-Term Care Planning

We Planned for 2018 ACA Subsidy Changes: Centene

By Allison Bell

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Michael Neidorff walks to a morning session at the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, U.S., on Thursday, July 11, 2013. Executives from media, finance and politics mingle at the mountain resort between presentations on business trends and social issues, brought together by New York investment banker Herb Allen. Photographer: Scott Eells/Bloomberg *** Local Caption *** Michael Neidorff (Photo: Scott Eells/BB)

Executives from Centene Corp. told Wall Street securities analysts today that they expect their high-performing Affordable Care Act public exchange plan business to continue to do well in 2018, even if the cost-sharing reduction subsidy goes away.

About 90% of 2017 Centene exchange plan enrollees use the subsidy today, but Michael Neidorff, Centene’s chairman, said the company paid attention to the news in Washington.

“We fully recognized the possibility that the cost-sharing reductions, the CSRs, might not continue to be funded,” Neidorff said. “As such, we planned accordingly.”

(Related: ACA Taxes Aren’t Necessarily Going Away: GOP Senators)

Centene filed 2018 rates that exclude cost-sharing reduction subsidy support in every state in which it intends to sell exchange plan coverage in 2018, and rates free from that subsidy have been approved in each of those states, Neidorff said.

“Centene is agile,” Neidorff said.

The cost-sharing reduction subsidy fight will not be an earnings headwind for Centene in 2018, Neidorff said.

Neidorff talked about the subsidy during a conference call with securities analysts, when he went over the company’s third-quarter earnings.

Earnings

Centene, a St. Louis-based company that has traditionally focused on the Medicaid plan market, is reporting $201 million in net income for the third quarter on $12 billion in revenue, compared with $147 million in net income on $11 billion in revenue for the third quarter of 2016.

Money puzzle (Image: Thinkstock)

(Image: Thinkstock)

The company ended the quarter providing or administering major medical coverage for 12 million people, up from 11 million people a year earlier.

The number of people the company covers through Affordable Care Act public exchange plans has increased to 1 million, from 582,600 people a year earlier.

Cost-sharing reduction subsidy program

The Affordable Care Act cost-sharing reduction subsidy program helps Affordable Care Act public exchange plan users with income under 250% of the federal poverty level pay their health plan deductibles, co-payments and coinsurance amounts.

The money goes to the insurers, not to the enrollees.

Republicans have argued since before the program began making subsidy payments that the program lacks a valid appropriation from Congress.

Trump administration officials recently said they will end program payments, starting with the payments insurers were expecting to get in October, because the government still lacks a valid congressional appropriation for the program.

Centene said today that the mid-year subsidy cut-off, which was not built into its 2017 rates, could lead to a charge that would amount to about 6% to 9% of its third-quarter earnings.

The effect is smaller than it could be, because the federal government has been having exchange plan issuers “net out” the amounts they expect to get from the major Affordable Care Act subsidy programs and they amounts they expect to get from, or pay into, the Affordable Care Act risk-adjustment program, Centene executives told securities analysts, during the conference call.

Because Centene has had relatively healthy enrollees in many states, and owes money to the risk-adjustment programs for those states, it was not expecting to get any subsidy cash from the government for the enrollees in those states this year, and the October subsidy cut-off should not affect the company in those states, executives said.

Open enrollment for 2018 individual major medical coverage starts Nov. 1. Centene executives said they still hope 2018 will be a growth year for the company.

—-Read Centene to Enter New York State Individual Health Market on ThinkAdvisor.

— Connect with ThinkAdvisor’s Life/Health channel on Facebook and Twitter.

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