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How Obamacare is helping Centene grow its business

The nation's largest health insurer may be pulling out of most state health-care exchanges, but St. Louis-based managed care provider Centene is benefiting from the expansion of Medicaid under the Affordable Care Act.

Centene on Tuesday reported better-than-expected quarterly profit, helped by lower medical costs in certain patient populations and the acquisition of rival Health Net.

Earlier this month, UnitedHealth Group said it would largely abandon the exchanges, a move that stands to increase premiums slightly for many customers and leave some states with few insurer options, according to the Kaiser Family Foundation.

Centene's chairman and CEO, Michael Neidorff, said Thursday that United caters to a "high-end" client relative to his company's typical customer. Centene specializes in providing care to people who drop out of Medicaid because they lose eligibility.

"We're doing managed care. We're improving quality," he told CNBC's "Squawk Box."

The company aims to administer government programs with a private sector model to deliver care at lower costs, for example, by reducing emergency room visits.

Centene incentivizes women to take advantage of prenatal care by offering $60 credits for keeping appointments. Neidorff said Centene's early start program had helped reduce premature birth rates in Georgia by about 0.4 percent. "That's huge," he said.

The company's health benefits ratio, or the amount it spends on medical claims compared with its income from premiums, improved to 88.7 percent in the first quarter from 89.9 percent a year earlier.

This decrease was driven by lower medical expenses in higher acuity patients, who need more care, the company said.

The ratio, which is closely watched by investors for increased medical costs and usage, was 80 basis points below what Susquehanna Financial analysts were expecting.

The company's membership increased by 7.1 million to a total of 11.5 million, primarily due to the Health Net acquisition.

— Reuters contributed to this story.

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