Featured in Health Business Daily, June 20, 2017

4Q 2016 Earnings for Centene, Humana, WellCare Indicate Growth

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. Subscribe today!

February 13, 2017Volume 27Issue 6

Centene Corp. ended 2016 with 11.4 million members — up 6.3 million members, or 124%, from the end of 2015, the company said Feb. 7 when it reported its fourth-quarter 2016 earnings. In addition to its Medicare and Medicaid business, the company finished the year with slightly more than 1 million people covered by individual policies sold through public exchanges — nearly double the 537,000 the company reported at the end of 2015. In a note to investors, Credit Suisse analyst Scott Fidel said the company’s growing exchange business will have an unknown impact on its earnings in 2017 and 2018 given the volatility of the individual market.

Despite the political turmoil surrounding exchanges and Medicaid, CEO Michael Neidorff told investors it is taking a business-as-usual approach. “We believe we can work on any basis, whether it is [Medicaid] block grants or per capita caps. I will note that per capita caps is a fair approach for states that have a growing Medicaid population,” he said in a conference call with investors (see story, p. 5).

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Centene’s fourth-quarter earnings beat analyst expectations. For the last three months of 2016, the company posted $11.9 billion in total revenue — up nearly 90% from the fourth quarter of 2015 — and $40.6 billion for full year 2016, representing 78% growth year over year.

Net earnings increased to $261 million ($1.49 per share) for the last three months of 2016, up from $111 million (90 cents per share) in the year-ago period. Centene expects revenue for 2017 to be between $46 billion and $46.8 billion. Company executives said the 2017 revenue guidance includes the recently renewed PA Medicaid HealthChoices contract, which begins on June 1, with likely enrollment between 75,000 and 100,000.

Humana Reports 49% Loss

Humana Inc. on Feb. 8 reported a loss of $486 million ($2.86 per share) for the fourth quarter of 2016 — down nearly 50% from a profit of $246 million (67 cents a share) for the same period a year ago. Adjusted earnings for the quarter came in at $2.06 per share, slightly ahead of analyst expectations. The company’s full-year 2016 income increased to $2.82 billion — up 15% from 2015. Humana reported total revenue of $54.96 billion, up 1.2% year over year.

The company noted that part of the loss was due to $583 million it is owed through the Affordable Care Act’s risk-corridors program, which was created to offset high-cost members who purchased coverage through public insurance exchanges.

Last year, Humana decided not to sell coverage on public insurance exchanges in many of its markets. That decision caused enrollment to plunge nearly 70% from 404,000 in December to 152,000 in January. Individual enrollment for the 2017 plan year was lower than expected, although half of the members were new to Humana, analyst Fidel wrote in a research note.

The company will eliminate about 500 positions in a home health-care unit in early April, USA Today reported Feb. 8. The decision is not related to Aetna’s efforts to acquire the company, according to the article.

The company said it would delay the release of its 2017 financial guidance until no later than Feb. 16 due to the U.S. District Court’s Jan. 23 decision to block Aetna from acquiring the company. Humana also said Chief Operating Officer James Murray will retire at the end of March.

Also on Feb. 7, WellCare Health Plans, Inc., a Medicare and Medicaid managed care firm, reported fourth-quarter 2016 net income of $46.0 million ($1.03 per share). Adjusted net income for the fourth quarter of 2016 was $46.0 million ($1.03 per share). Net income for the full year was $266.0 million ($5.96 per share).

CEO Kenneth Burdick noted that the company won two Medicaid contracts and announced four acquisitions — two of which closed in 2016. “Our momentum is strong as we enter 2017,” he said in a prepared statement. On Jan. 3, WellCare completed the acquisition of Care1st Health Plan Arizona, Inc. from Care1st Health Plan, an affiliate of Blue Shield of California. In December, WellCare agreed to acquire Medicaid membership and certain provider contracts in Arizona from Phoenix Health Plan, a wholly owned subsidiary of Tenet Healthcare.

For full-year 2017, the company reaffirmed earlier guidance in the range of $6.00 to $6.25 per share. The company noted that its guidance doesn’t reflect the pending acquisitions of Universal American Corp. and certain assets of Phoenix Health Plan.

WellCare ended 2016 with 345,000 members in Medicare, up by 7,000 members at the end of the third quarter, but down 9,000 from the end of 2015. Medicare Prescription Drug Plan (PDP) membership was about 1 million at the end of 2016, down about 1,600 members from the end of 2015.


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