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Centene Braces for COVID-19 Impact

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Michael Neidorff, the chief executive officer of Centene Corp., told securities analysts today that the health insurer can manage through COVID-19 pandemic uncertainty, and is managing through a great deal of uncertainty.

Neidorff warned the analysts that predicting what the rest of the year, or next year, will be like is difficult.

“We’ve never seen it like this before,” Neidorff said. “It’s difficult to model a situation when you have no prior experience. And the biggest issue I see is, for example, unemployment, it could reach as high as 20%. It’s around 15% right now. That’s depression level.”

Centene will do well, but ”it’s going to be lumpy,” Neidorff said.

Resources

Centene is a St. Louis-based health insurer that has specialized in managing Medicaid plans and other types of public health plans.

It now has a large Affordable Care Act public exchange plan operation. It acquired Health Net, a California-based commercial health insurer, from UnitedHealth Group Inc. in 2016, and it completed the acquisition of WellCare Health Plans Inc., a Medicare plan issuer, in January.

Centene is on track to generate about $110 billion in revenue for all of 2020.

Neidorff and other Centene executives talked about COVID-19, and other matters, during a conference call the company held to go over its earnings for the first quarter.

Earnings

Centene is reporting $46 million in net income for the first quarter on $26 billion in revenue, compared with $519 million in net income on $18 billion in revenue for the first quarter of 2019.

Results were affected by New York state’s delay in paying Centene $700 million in premiums.

Executives said the company has $2 billion in cash on hand and about $1.4 billion available through a revolving credit facility, giving it access to about $3.5 billionin immediate liquidity.

The company ended the quarter providing or administering health coverage for 24 million people, up from 15 million people a year earlier.

Here’s what happened to key types of enrollment between the first quarter of 2019 and the latest quarter:

  • Medicare plans: 976,700 (up from 393,900)
  • U.S. commercial major medical insurance: 2.7 million (up from 2.5 million)
    • ACA exchange plans: 2.2 million (up from 2 million)
  • Medicaid and similar programs: 12 million (up from 8.6 million)
  • International: 599,900 (up from 151,600)

Pandemic Response

Like other life and health insurer CEOs who have spoken at analyst calls this month, Neidorff took time during the call to express his pride in the efforts his company’s employees have made to keep operations moving in the face of shelter-in-place rules.

The company was able to get 66,000 employees, or about 90% of all company employees, working at home within three days, Neidorff said.

Neidorff said Centene is donating 1 million meals a month for 12 months to feed people in communities all over the country; providing 50,000 gift cards to be used to purchase essential health care and educational items; and giving medical personnel personal protective equipment and support services.

Neidorff said Centene’s own operations are an important part of the response to the COVID-19 crisis.

“Our mission at Centene is clear,” Neidorff said. “We have to provide accessible, high-quality, affordable health care to our members, some of whom are among the nation’s most vulnerable population. As we have seen both the public health and an economic crisis of unprecedented nature and scale unfold, we are acutely aware of the vital role we must play. We have never been more resolute in serving our members, as well as supporting our providers.

Pandemic Impact Tracking

Centene has said that it will cover COVID-19 testing and treatment for its enrollees without imposing deductibles or other cost-sharing amounts.

Executives who spoke during the conference call said the company has paid some COVID-19-related claims, but not enough to talk about what the average cost of a COVID-19 claim might be.

Because Centene serves many people with Medicaid coverage and ACA exchange plan coverage, it could end up getting new enrollees as a result of rising unemployment levels, Neidorff said.

One planning challenge for Centene is that many of those new enrollees could leave quickly, as the economy recovers and unemployment falls, Neidorff said.

Neidorff said that Centene has seen some types of utilization of health care fall but is expecting use of care to rebound later this year, and is worrying that enrollees who have put off getting care may end up developing serious health problems as a result of those delays.

The Future of Health Insurance Claims

Neidorff emphasized repeatedly that predicting just what will happen to claims is difficult.

Centene has been assuming that claims might start returning to normal in July, but, based on what hospital executives are saying, it’s possible that claims could begin returning to normal in some markets as early as May, Neidorff said.

If Centene notices any clear claim trends, it will let investors know quickly, Neidorff said.

Centene’s Future

Neidorff said it will wait at least until the end of May to bring  employees back into its offices.

The company is trying to reduce the spread of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), the virus that causes COVID-19, by installing equipment that will measure employees’ temperatures when they arrive for work.

The company is also working to install 6-foot-high partitions between seats, to add a random COVID-19 testing program, and to buy personal protective equipment.

But Centene does want to get people back into the office, because it’s easier to help employees develop in the office, and Centene is in a high-growth industry, Neidorff said.

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