Centene’s Medicaid enrollment is growing slower than expected amid COVID-19

Health insurer Centene Corp. said Tuesday that its Medicaid enrollment isn’t growing quite as fast as expected amid the COVID-19 crisis.

Researchers widely anticipated that enrollment in the public insurance program for low-income people would swell during the pandemic as employers laid off workers, who they expected would look to Medicaid as a replacement for job-based health coverage.

The Urban Institute estimated that nearly 12 million people could gain Medicaid coverage because of the pandemic if the unemployment rate hits 20%. The Kaiser Family Foundation projected 12.7 million people who likely lost their job-based coverage as of May 2020 and became uninsured would be eligible for Medicaid.

But so far, Medicaid enrollment growth has been muted. The latest national data from CMS shows that Medicaid and Children’s Health Insurance Program enrollment was 72.3 million in April, an increase of just 1.7% since January and 2% since March. Centene is seeing similarly slow growth within its own plans.

“Membership is coming in at lower rates than initially anticipated and below what was expected based on unemployment trends,” Centene CEO Michael Neidorff said during the company’s second quarter earnings call.

Company officials said the slower-than-expected enrollment growth could stem from more employers choosing to furlough rather than lay off workers during the COVID-19 crisis. They also said enhanced unemployment benefits could be contributing to the lower enrollment.

To be sure, Centene still recorded higher Medicaid membership in the quarter, even if lower than the company expected. It covered nearly 12.6 million members at the end of June, an increase of about 6%, or 736,300 members, over the end of March, when the pandemic first began disrupting the U.S. economy. Membership in the public health insurance exchanges, which was also expected to accelerate during the pandemic, grew just 2% to 2.2 million over the same time period.

Jeffrey Schwaneke, Centene’s chief financial officer, noted that Medicaid membership growth did not result from newly unemployed people signing up, but from states suspending eligibility redeterminations. He also said enrollment gains varied widely by state: “We saw good growth in Florida, but hardly any growth in California.”

Centene now expects membership growth to peak during the fourth quarter at 1.4 million new members across its business lines, including Medicaid. Just a month ago, Centene said it expected to see membership growth hit 1.9 million in August.

As a result, Centene decided to lower its revenue expectations for this year by $500 million. It now expects to add $3.5 billion in revenue from COVID-related membership growth in 2020. Earlier this year, the company told investors it would bring in $4 billion in revenue from pandemic-driven membership gains. The company left its earnings guidance unchanged.

Overall, Centene’s top and bottom lines were driven higher in the second quarter by its $17 billion acquisition of insurer WellCare Health Plans, which closed in January, as well as membership growth. Like other insurers, Centene also benefited from members’ using fewer healthcare services during the pandemic as providers postponed elective procedures and routine appointments to conserve resources for COVID-19 patients.

Neidorff said that by the end of the second quarter, patients’ use of healthcare services was back to normal, though it is has begun to slip again in July. He also said the company is now experiencing an increase in COVID-related costs.

Centene recorded net income of $1.2 billion in the three months ended June 30, up from $492 million at the same time in 2019. Its revenue grew 51% to $27.7 billion, while operating costs increased 45.1% to $25.7 billion. Membership totaled 24.6 million people, an increase of 64.1% from one year ago.

Centene’s medical loss ratio, which illustrates the amount of premiums spent on medical care and quality improvement, fell to 82.1% in the second quarter from 86.7% a year ago.