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Centene urges federal government to keep Obamacare subsidies

Centene urges federal government to keep Obamacare subsidies

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Centene planned expansion brings concern

Nearby buildings are reflected in the windows of the Centene Building in Clayton on Monday, June 6, 2016. Photo by Christian Gooden, cgooden@post-dispatch.co

Updated at 12:25 p.m.

Centene Corp., one of the biggest insurers in the Affordable Care Act's marketplaces, is urging the federal government to preserve cost-sharing payments for low-income customers to avoid hurting millions of people.

The Clayton-based health insurer said Tuesday a better-than-expected performance in those individual insurance markets enabled it to beat Wall Street expectations in the second quarter and raise its forecast for 2017.

But Chairman and CEO Michael Neidorff, like other insurance executives, is worried about the fate of cost-sharing reduction payments that ease expenses like deductibles for people with low incomes. Money for those payments has made it into Congressional bills that aim to dismantle the Obama-era law, but the fate of that legislation is uncertain.

Republicans have challenged those payments in court, and President Donald Trump has offered no guarantees that they will continue beyond this month.

Neidorff said those payments and some other government support will be crucial to stabilize the exchanges, which have been marred by dwindling choices and soaring prices.

"Any intentional act to stop these ... payments does not advance the debate on how to fix our health care delivery system," he said. "It only hurts the millions of Americans who currently have affordable health care insurance in the marketplace. The leadership in Washington bears the responsibility to ensure that is not happening."

Centene covers more than 1 million people through the law's state-based health insurance exchanges, which let people shop for coverage and then buy a plan with help from an income-based tax credit. While big national carriers like UnitedHealth and Aetna have retreated from this market, Centene has switched to growth mode.

Amid the uncertainty in the health care debate, Centene has continued to expand its footprint in its Obamacare business. It will offer exchange plans in Missouri in 2018, filling in what would have been 25 bare counties, or ones without an exchange plan next year. It's also expanding into exchanges in Kansas and Nevada.

"Centene remains the only larger-cap publicly-traded managed care company to show strong performance in its individual exchange efforts," Cantor Fitzgerald analysts said.

Analysts have said Centene does well on the exchanges because it sticks with customers it knows. The insurer specializes in managing the state and federally funded Medicaid program for the poor. On the exchanges, it markets to low-income customers in areas where it has a Medicaid presence.

"They came at the exchanges from a core Medicaid business and built (care) networks around largely the same providers," said Jefferies analyst David Windley.

People with low incomes are eligible for large tax credits that help keep their premiums affordable and shield them from big tax hikes. That makes it more likely they keep up with their insurance payments and renew their coverage.

Neidorff didn't spell out on Tuesday what his company would do if the cost-sharing reduction payments end. But other insurers have said premiums will soar in many markets.

Leerink analyst Ana Gupte said in recent note that she expects more insurers to leave the markets if the future of payments isn't clarified by September, and that could include Centene reducing its presence. But both she and Neidorff think the funding ultimately will be preserved.

Neidorff said that he thinks congressional leaders won't have the appetite to leave the "most vulnerable populations" without coverage.

"I am personally, and I think corporately we are, convinced that when all the dust settles there will be subsidies in some form," he said.

Net earnings attributable to Centene rose to $254 million, or $1.44 per share, in the second quarter ended June 30, from $170 million, or 97 cents per share, a year earlier.

Excluding items, Centene earned $1.59 per share.

The company said its second-quarter earnings included a 17 cents per share net benefit related to risk adjustment under the ACA.

Centene's adjusted profit of $1.42 per share was above analysts' expectations of $1.32 per share, according to Thomson Reuters I/B/E/S.

"We believe CNC is the best way to play the reform cycle with potential for multiple expansion now that Medicaid expansion and exchanges look more secure," Piper Jaffray analysts said.

Revenue rose to $11.95 billion from $10.90 billion, slightly ahead of analysts' average estimate of $11.69 billion.

Centene now provides coverage to 12.2 million individuals across the country, an increase from 11.4 million during the prior-year period.

The Associated Press, Reuters and Samantha Liss of the Post-Dispatch contributed to this report.

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