After Centene’s January 23 acquisition of WellCare, the combined company is now a “$100 billion-plus enterprise,” CEO Michael Neidorff told investors in Centene’s fourth-quarter earnings call on Tuesday.
The combined entity will serve more than 24 million members, with both Centene and WellCare having a large hold in the government health space. Centene is one of the largest Medicaid managed care organizations (MCO), and also has a large membership across state health exchanges. WellCare also operates as a Medicaid MCO, and offers Medicare Advantage plans and Medicare prescription drug plans.
For 2019, Centene reported revenues of $74.64 billion, up 24 percent from the prior year. Neidorff attributed the growth to Centene’s acquisition of New York-based insurance company Fidelis Care, and growth in its health insurance marketplace business.
Centene saw its total membership increase from 14.17 million to 15.24 million last year. That included a 20 percent increase in the number of people who enrolled in its ACA plans to 1.81 million. It also saw a more modest increase in its Medicaid membership, from 8.39 million to 8.64 million.
The Missouri-based insurer currently offers its health plans across 20 states. In 2017, it stepped in to cover “bare” counties in Nevada and Missouri, that otherwise would not have had an ACA exchange option. More insurers have entered the marketplaces since then, including startups Oscar Health and Bright Health, but Centene is still the sole provider in portions of Missouri, Mississippi and Georgia, according to the Kaiser Family Foundation.
“We remain pleased with the strength of our marketplace business, which has continued to be very popular and an attractive option for many consumers,” Neidorff said.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
The company’s health benefits ratio — the amount it paid out in medical claims compared to how much it collected from premiums — increased from 85.9% to 87.4%. Centene also saw its net income increase from $900 million last year to $1.32 billion in 2019.
Plans for block grants
Neidorff also spent some time on Tuesday discussing a new proposal by the Centers for Medicare and Medicaid Services that would allow states to fund Medicaid expansion through block grants. While the policy is brand new, Neidorff said he thinks it could be positive for Centene “…because it’s giving the states some opportunities to be innovative. And as you know, we are very decentralized and our local plans have strong relationships with those states.”
One critical change as part of the CMS policy change would be the ability for states to create their own drug formularies for Medicaid expansion rather than just opting for the statutory rebate. For Centene, which bought a stake pharmacy benefit manager RxAdvance in 2018, analysts asked which system the company would prefer.
“I’ve always liked the idea, we are more masters of our destiny, right? But, I think, when you have the systems we have and the capabilities where we’re going, we have the flexibility to work either way,” Neidorff said. “These are still issues under discussion. And there are opportunities to influence some aspects of that, we believe…. And I’m comfortable we’ll end up in a strong position at the end of the day.”
Centene has not yet released guidance for its 2020 financial results, due to the timing of the WellCare deal. The company said it will announce its guidance for the combined company on March 3. Centene expects to at least break even from the WellCare acquisition in 2020, and expects to see the business begin growing in value in the years after.
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