Centene Corporation's high medical expenses drew alarm from financial analysts, but executives say that the costs are not related to COVID-19 and are instead costs they expected to see this quarter.
However, they also warn that there are plenty of unanswered questions about the impact of the pandemic on finances through the rest of the year.
"I think the biggest issue we have is we've never seen it like this before," CEO Michael Neidorff said on the company's earnings call Tuesday. "It's difficult to model, we have no prior experience."
Unemployment could reach depression levels, he said, even by early next year could remain high. While vaccine development continues, it likely remains a ways off. He said it's critical to take these issues on a quarterly basis, which is why they chose to main guidance.
"We don't even know how many peaks we're going to have this year," Neidorff said.
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On the other hand, hospitals are already taking steps to begin offering elective procedures again, which could balance out the costs related to COVID-19 more quickly, Neidorff said.
CFO Jeff Schwaneke said the higher medical costs for the first quarter are reflective of issues outside of COVID-19, such as the impact of WellCare's growth in prescription drug plans.
Centene earned $46 million in profit for the first quarter of 2020, missing Wall Street projections.
The insurer released its quarterly earnings report Tuesday morning, which included $26 billion in total revenue. That's a significant boost from the first quarter of 2019, where Centene reported $18.4 billion in quarterly revenue.
However, medical costs were far higher in the first quarter of 2020 compared to the prior-year quarter, Centene said. It paid out $20.4 billion in medical costs in the first quarter, compared to $13.9 billion last year.
As such, the insurer's profits fell short of the first quarter of 2019, in which it earned $522 million in profit. The eight cents in earnings per share was notably below analyst projections of about $1.02 per share.
"We all recognize the unprecedented nature of the COVID-19 pandemic and the significant impact from both a health and economic perspective," Centene CEO Michael Neidorff said in a statement. "This is not a business as usual environment and economic recovery will be choppy. In this challenging landscape that we all face, Centene has the team, systems, expertise and financial strength to rise to the occasion."
"We are confident in our approach to navigate the crisis while executing on our priorities and remain highly committed to meeting the needs of our members, providers and our state customers," he added.
The biggest highlight of the quarter was the closure of Centene's acquisition of WellCare. The deal was completed Jan. 23. Because of combined operations, Centene's membership saw an increase of 9 million, 61% over the prior-year quarter.
Centene expects to see revenues of between $110 billion and $112.4 billion for the year, a bump from its 2020 guidance released in March.