Centene CEO says proposed Medicare Advantage rates are 'insufficient'

UPDATED: Feb. 6 at 12:48 p.m.

Centene's top brass said Tuesday that the proposed Medicare Advantage rates for 2025 fall short of what's needed.

The Centers for Medicare & Medicaid Services issued its annual Advance Notice proposal last week, where benchmark payments in MA are set to decline by about 0.16%. While CMS said payments to MA plans should increase by 3.7% under the proposal, the notice is likely to give payers the squeeze.

Centene CEO Sarah London said the proposed decrease comes in a time where the feds are also making significant changes to risk adjustment and star ratings calculations.

"Bearing in mind the continued expectation for the multi-year phase-in of the risk adjustment model change that was finalized in 2023, we view the preliminary rates as insufficient with respect to general medical cost trend expectations," London said.

Chief Financial Officer Drew Asher said the company is preparing commentary on the impact of the proposed rates, including "questions so far around the adequacy of fee for service trend."

Humana on Monday also issued a filing with the Securities and Exchange Commission warning that the proposal included a higher-than-expected decrease. The final rates will be revealed by April 1, and it's likely that they will be adjusted.

London said Centene will provide additional color around its bid plans on its Q1 2024 call, after the rates are finalized.

Centene posted $45 million in profit for the fourth quarter of 2023, with its profitability for the full year growing notably compared to 2022.

The company released its earnings report Tuesday morning, in which it also noted $39.5 billion in total revenue for the quarter. Both figures surpassed Wall Street analysts' expectations, according to Zacks Investment Research.

By comparison, Centene reported a $213 million loss and $35.6 billion in revenue for the fourth quarter of 2022.

For the full year, the company brought in $2.7 billion in profit and $154 billion in revenue, according to the report. In 2022, full-year profits were $1.2 billion, and revenues were $143.2 billion.

"Looking ahead, we are excited by the opportunities we see within our core businesses as we execute against our strategic plan, fortify our foundational assets and drive cost savings," Centene CEO Sarah London said in the press release. "With increased focus and reduced complexity, Centene is well positioned to continue navigating the dynamic operating landscape while creating shareholder value."

Centene's membership grew across 2023 to about 27.5 million people compared to 27.1 million at the end of 2022. This is despite a loss of about 1.5 million Medicaid members amid the redetermination process, according to the report.

Enrollment in its commercial marketplace and group products grew in tandem, though, from 2.5 million in total to 4.3 million, according to the report.

Thanks to the "stronger than expected" marketplace enrollment, Centene said it would increase its premium and service revenue guidance for the year by $2.5 billion and now expects between $134.5 billion and $137.5 billion. In addition, it projects earnings per share of at least $6.50 for 2024.