The leader of one of the largest, fastest-growing health insurers in the United States is still wary of what COVID-19 will do.
Michael Neidorff, the chief executive officer of Centene Corp., told securities analysts Tuesday, that, because of the pandemic, he continues to see the business environment for health insurers as being “choppy.”
As recently as June, Neidorff said, the company was assuming that a big COVID-19 peak in March and April would be followed by a series of smaller spikes in the summer, and, possibly, a second big wave of cases in the fall.
Overall, June looked almost like a normal month, Neidorff said.
“However, the current trajectory shows the infection rates are rising significantly across a number of key states, and case counts continue to go up which differs from what we expected only a few weeks ago,” Neidorff said.
“With the recent surge in the virus, we are seeing some decline in utilization in July,” Neidorff said. “While we believe hospitals are better prepared to manage COVID cases after learning from the experience of the initial outbreak, there are indications that some hospitals are reverting back to delaying elective procedures, if necessary, based on a regional infection rate.”
In the fall, “if we have a bad flu season, that, combined with COVID, could be a very serious combination, Neidorff said.
He said that he thinks tough, two-month lockdowns have helped some European countries get COVID-19 under control, but that no U.S. region seems to have the pandemic fully under control.
One a region gets the pandemic under control, officials lighten social distancing restrictions, and “then it pops up again,” Neidorff said.
Neidorff said he wants to encourage everyone to wear masks, until an effective vaccine comes along.
Countries in Asia have held pandemic death rates to much lower levels than the U.S. levels over the years because people in Asia accept the idea of wearing masks, Neidorff said.
Neidorff said Centene is trying to emphasize the high level of uncertainty about the pandemic in conversations with state insurance regulators, and state Medicaid program managers, about COVID-19-related reductions in health care spending in the first half of the year.
The states saw the low health care utilization rates and told Centene, “‘Oh, you’re saving all this money,’” Neidorff said. “They now understand that utilization will come back in the second half [of the year]. So they’re now understanding that there’s no windfall over the course of the full year.”
- Links to Centene earnings resources are available here.
- An earlier article about Centene’s earnings is available here.
Centene is a St. Louis-based health insurer that has specialized in managing Medicaid plans and other types of public health plans. It also has a significant presence in the Affordable Care Act public exchange system, and it has inherited some group health plans from another insurer it acquired, Health Net.
Centene organized the conference call to go over its earnings for the second quarter with securities analysts. The company has posted a recording of the call on its website.
Centene is reporting $1.2 billion in net income for the second quarter on $28 billion in revenue, compared with $492 million in net income on $18 billion in revenue for the second quarter of 2019.
Earnings were higher partly because COVID-19 reduced the ratio of health benefits spending to premium to 82.1%, from 86.7% in the second quarter of 2019.
Jeff Schwaneke, Centene’s chief financial officer, said that Centene did incur some COVID-19-related care costs, such as intensive care unit costs, but that emergency room claims and office visit claims were down.
The company ended the quarter providing or administering health coverage for 25 million people, up from 15 million people a year earlier.
Here’s what happened to key types of enrollment between the second quarter of 2019 and the latest quarter:
- Medicare plans: 996,100 (up from 398,500)
- U.S. commercial major medical insurance: 2.7 million (up from 2.5 million)
- ACA exchange plans: 2.8 million (up from 2.4 million)
- Medicaid and similar programs: 13 million (up from 8.5 million)
- International: 600,400 (up from 463,100)
Executives said the company has access to about $3 billion in immediate liquidity through $1.1 billion in cash and cash equivalents held by entities that face no regulatory constraints on what they can do with their cash, and through a $2 billion revolving credit facility. A revolving credit facility is the corporate equivalent of a credit card account.
— Read Life, Health and Annuity Issuer Earnings Season Begins, on ThinkAdvisor.