The problems Centene appears to be having managing the costs of low-income Americans covered by Medicaid and individual plans under the Affordable Care Act could only be the beginning of what’s to come for more health insurers.
Centene last week pulled its financial forecast for the rest of this year after an outside firm’s review of data that showed subscribers in its ACA plans are sicker and need more care than the company anticipated. In addition, Centene is also seeing higher cost trends in its Medicaid business — coverage for low-income Americans the insurer helps more than two dozen states manage.
In the future, the management of Medicaid patients may get even trickier for health insurers after President Donald Trump last week signed into law legislation that cuts $1 trillion from Medicaid and ACA plans that is expected to eliminate coverage for nearly 12 million Americans over the next decade, data from the Congressional Budget Office shows.
Analysts expect health insurers to find it more difficult to keep Americans signed up for Medicaid and ACA plans because the Trump-approved bill requires more eligibility checks and bureaucratic hurdles. These eligibility checks in the Medicaid program are called “redeterminations” and they are already to blame for millions of Americans falling off of Medicaid coverage following the end of the Covid-19 pandemic in 2023.
“Due to new red tape and barriers to enrollment and re-enrollment, people losing eligibility for Medicaid will find an individual market with less choice and higher premiums,” the trade group and lobby America’s Health Insurance Plans (AHIP) said. AHIP represents some of the biggest providers of individual coverage including Centene, Oscar Health, Elevance Health, Cigna and an array of Blue Cross and Blue Shield plans.
In the individual market, millions more Americans face the possibility of losing coverage because the legislation written by Republicans in Congress doesn’t extend tax credits signed into law by former President Joe Biden beyond this year. As the bill Trump signed into law takes effect, the reduced spending on these tax credits, or subsidies, means buyers of ACA plans will face higher premiums and out-of-pocket costs.
In Centene’s case, the actuarial firm Wakely found subscribers to ACA plans, also known as Obamacare, were sicker and needed more healthcare services that what the company planned for.
“We believe a key issue could be a structural shift in the cost profile of the (ACA health insurance exchange) population due to Medicaid Redeterminations,” Ann Hynes and colleagues at Mizuho Securities USA wrote in a report last week. “We would not be buyers on weakness and look for increased clarity on Centene’s ability to reprice (health insurance exchange plans) for 2026 and increased visibility on the extent of Medicaid (medical loss ratio) pressures.”
Analysts see sicker patients buying health plans while healthier people will go without, leaving the risk pools filled with those needing more services, costing health insurers even more. Mizuho’s Hynes is already hinting Centene will “reprice” its 2026 plans and they will be more expensive for buyers.
