By Peter Johnson

Centene Corp. reported second-quarter earnings in line with its own projections and Wall Street consensus, but also enrolled fewer members than executives had expected. The firm touted revenue growth from its acquisition of WellCare Health Plans, Inc. and attributed strong revenues to decreased utilization related to COVID-19 shutdowns, though Centene said claims rebounded in June to more normal levels.

Centene’s adjusted earnings per share (EPS) was $2.40, which came close to what SVB Leerink analyst Stephen Tanal described as the Wall Street consensus of $2.42. The firm’s non-adjusted EPS increased by 79.5% compared with the second quarter of 2019, which is mainly attributable to the WellCare acquisition.

According to a transcript of the firm’s earnings call on July 28 prepared by the Motley Fool, Centene Chief Financial Officer Jeffrey Schwaneke reported a medical loss ratio of 82.1%, compared to 86.7% in the second quarter of 2019 and 88.0% in the first quarter of 2020.

“The HBR was low by historical measures and the decline was primarily driven by a reduction of medical utilization as a result of the COVID-19 pandemic, partially offset by increased costs associated with COVID-19 claims,” said Schwaneke. “In terms of monthly trends, utilization deferrals experienced during April and May largely reversed in the month of June.”

New enrollment so far this year has not met Centene’s internal expectations. As a result, Schwaneke expects peak membership growth to be 1.4 million in the fourth quarter, compared to a previous projection of 1.9 million new enrollees through August.

“We believe the temporary nature of some of the unemployment, enhanced unemployment benefits, and employers furloughing rather than terminating employees has all contributed to lower application rates than what is implied by overall unemployment levels,” Schwaneke explained.

Wall Street perception of the results was mostly positive. But Tanal said that Centene’s second-quarter results “demonstrate that the effects of the pandemic on Medicaid enrollment could be less helpful than initially anticipated, providing a smaller offset to Medicaid rate pressure that is likely to impact the business in the coming quarters.”