Centene withdraws 2025 GAAP, adjusted EPS guidance

Centene (CNC) is withdrawing its previous 2025 GAAP and adjusted diluted earnings per share guidance, including the underlying guidance elements. The Company recently received and analyzed its first view of 2025 industry Health Insurance Marketplace (Marketplace) data from Wakely, an independent actuarial firm, covering 22 of Centene’s 29 Marketplace states, and representing approximately 72% of the Company’s Marketplace membership. This data is submitted to Wakely by most Marketplace insurance carriers. Based upon the Company’s preliminary interpretation of the data and discussions with Wakely, the overall market growth in the 22 states is lower than expected and the implied aggregate market morbidity in those states is significantly higher than, and materially inconsistent with, the Company’s assumptions for risk adjustment revenue transfer used in the preparation of its previous 2025 consolidated guidance. The Company’s preliminary analysis of the 22 states results in a reduction to its previous full year net risk adjustment revenue transfer1 expectation by a preliminary estimate of approximately $1.8 billion which corresponds to an adjusted diluted EPS impact of approximately $2.75. This preliminary estimate includes a projection of the remaining eight months of 2025 and is based on 2025 paid claims through April 30 from Wakely for the 22 states, as well as the Company’s membership estimates and morbidity trend estimates for both its members and the aggregate market, calculated by state. The Company does not have information or estimates for its remaining seven Marketplace states, but anticipates, due to the morbidity trends observed in the 22 states, an additional reduction to its net risk adjustment revenue transfer expectation with a corresponding adjusted diluted EPS impact. Regarding the 2026 Marketplace plan year, the Company has commenced the process of refiling 2026 Marketplace rates to reflect a higher projected baseline of Marketplace morbidity than previously expected. The Company currently expects to be able to take corrective pricing actions for 2026 in states representing a substantial majority of its Marketplace membership. The final 2024 risk adjustment results released by Centers for Medicare and Medicaid Services yesterday were in line with the Company’s expectations, including offsetting increases in the Minimum Medical Loss Ratio payable, Risk Adjustment Data Validation accrual and other offsets, subject to any new information to come from CMS pertaining to its disclaimer regarding another carrier’s late 2024 submission. The Company’s Medicaid business has experienced a step-up in medical cost trend in the same areas previously identified by the Company: behavioral health, home health and high-cost drugs. These dynamics were more pronounced in specific geographies, such as New York and Florida, including carve-ins of related services without sufficient rate or risk adjustment. Accordingly, the Company expects the second quarter 2025 Medicaid Health Benefits Ratio to be higher than the first quarter 2025 Medicaid HBR. The Company’s Medicare Advantage and Medicare Prescription Drug Plan businesses are performing better than expected in the second quarter 2025. The Company also continues to drive strong selling, general and administrative expense leverage on its consolidated premium and service revenue growth. The Company is in the process of closing the second quarter and analyzing data, including in Marketplace and Medicaid, and expects to report the second quarter 2025 results and provide additional insights on July 25, 2025.