Centene posts a loss of $6.6 billion due to a massive write-down
By Rebecca Pifer | Published: 2025-10-29 11:59:00 | Source: Healthcare Dive – Latest News
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Diving brief:
- Centene reported a net loss of $6.6 billion in the third quarter after recording huge charges to reflect a decline in the company’s value amid difficult market conditions, including Republican cuts to the health care system.
- Centene recorded a non-cash goodwill impairment charge of $6.7 billion, pushing the payer deep into the red. Without these charges, which have no impact on Centene’s cash or core operations, the company would have generated a small profit.
- Overall, executives said they were happy with it Centene’s performance in the quarterincluding reducing rising medical costs in Medicaid and the Affordable Care Act. Centene raised its full-year earnings forecast following the results.
Insight Diving:
In the middle of what has become a somewhat mixed quarter, Two cents The results, which beat Wall Street expectations, are “moderately positive,” TD Cowen analyst Ryan Langston wrote in a note Wednesday morning.
Although down year over year, the St. Louis-based insurer’s profits improved from the second quarter on an adjusted basis, which the companies say is a better measure of actual performance.
On an unadjusted basis, Centene’s earnings were impacted by an impairment charge the company made to realign its value on its balance sheet with its market value, which has declined this year.
In July, Centene stock hit its lowest level in a decade after the insurer reported dismal second-quarter results, wiping billions of dollars in value.
The so-called “one big beautiful bill” the GOP signed into law that same month, which included sweeping cuts to Medicaid and revamped the Affordable Care Act in a way that would cut enrollment, also impacted the company’s goodwill and impairment charges, executives said.
But operationally, executives said Centene is making good progress in its transformation. The company’s medical loss ratio, a sign of spending on patient care, was 92.7% in the third quarter, up from 89.2% at the same time last year but down sequentially and lower than analysts expected.
Utilization remains high in Medicaid, which is Centene’s bread and butter area. The safety net insurance program represents 45% of Centene’s approximately 28 million medical members and 52% of its $44.9 billion in premiums and services revenue.
Medicaid spending has been particularly high on behavioral health, home and community-based services and high-cost drugs, according to executives. Insurers say high Medicaid utilization has been difficult for them to absorb because states’ reimbursement rates are insufficient to cover the trend.
However, Centene’s Medicaid MLR service improved in the quarter, a bright spot that Centene attributed to better clinical management, cutting abusive providers from its networks and retroactively increasing revenue in Florida.
The call to raise rates with its partners in the country also helped. Previously, Centene expected the Medicaid composite rate to reach 5% this year. It now expects it to be slightly higher at 5.5%, CEO Sarah London told investors during a call Wednesday morning.
“We are pleased to be making real progress on our Medicaid margin improvement agenda but we are certainly not declaring victory,” London said.
Given the challenges, Centene expects its Medicaid margins to be flat in 2026.
Usage also remains high in Centene’s ACA business, which covers 5.8 million people, although the trend is not beyond what Centene expected. The company is bracing for a potential spike in spending in the fourth quarter as ACA enrollees use more Medicare ahead of the potential expiration of enhanced subsidies for ACA plans at the end of 2025.
Centene also raised ACA plan rates for 2026 to reflect the increased use and expected expiration of enhanced premium tax credits.
Insurers in the ACA exchanges are raising premiums largely across the board, preparing for an exodus of healthier, less expensive members from the ACA exchanges after subsidies, which made the plans largely unaffordable to enrollees, expire.
On average, Centene has guaranteed rate hikes in the “mid-30s,” London said.
The insurer was able to reprice its plans in states that cover 95% of its current membership. When it couldn’t get a high enough raise, Centene “took additional measures to reduce the margin impact,” London said.
The future of subsidies is the driver behind the ongoing government shutdown. Overall, Democrats aim to provide financial aid as soon as possible, while Republicans say the issue can wait until the government reopens.
Ostensibly, Congress still has time to act – subsidies expire on December 31 – but the longer lawmakers wait, the more difficult it will be for insurers and state regulators to reflect any changes in enrollment portals and to communicate with members who may have been spooked by notices of initial rate increases.
Centene expects its ACA business to experience a slight loss this year. “Although the political landscape remains uncertain, based on what we know today, we believe we have positioned the portfolio well to materially improve margin in 2026,” London said.
Overall, Centene reported revenue of $49.7 billion in the third quarter, up 18% year over year due to premium growth from a greater number of members in ACA plans and higher Medicaid interest rates. The company’s loss amounts to $6.6 billion, compared to an income of $713 million at the same time last year.
Centene now expects to generate at least $2 in adjusted earnings per share this year, up from its previous target of $1.75.
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