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Largest Obamacare insurer sees strong profits in ACA market despite 'headline noise' of repeal

Michael Neidorff, chairman and chief executive officer of Centene Corp.
Andrew Harrer | Bloomberg | Getty Images
Michael Neidorff, chairman and chief executive officer of Centene Corp.

Centene CEO Michael Neidorff said he remains bullish on the Obamacare exchange business, and he's confident congressional leaders won't pull the plug on people who have gained health coverage over the last three years.

Neidorff's comments came just hours before Senate Republicans voted by a narrow margin to begin debate on repealing the Affordable Care Act.

"I genuinely believe in the time I've spent in Washington, that there is not the appetite across the broad perspective of both houses to take the most vulnerable populations and leave them without insurance, when there are programs that are working very well," Neidorff said on the company's second-quarter earnings conference call, referring to much of the political wrangling between the White House and Congress as "headline noise."

Centene reported a quarterly profit of $1.42 per share, on an adjusted basis, well above the Thomson Reuters analyst expectations for $1.32 per share. Revenue of $11.95 billion also exceeded analyst estimates.

The company said profit margins on its marketplace exchange plans exceeded its expectations, contributing 12 cents per share to earnings. So far, medical costs on its exchange plans remain in line with its projections.

Centene specializes in Medicaid plans, but has grown over the last three years to become the nation's largest insurer on ACA marketplaces, with more than 1.1 million insured in six states this year. The company plans to expand coverage to three more states in 2018.

Executives also told analysts that its Medicare Advantage plans for seniors are also performing well, and that they plan to increase spending on expanding that part of its business into markets where it will be offering individual health plans for individuals under 65 years of age.

Centene's expansion plans stand in contrast to its smaller Medicaid and Obamacare exchange rival Molina Health's announcement to employees Monday that the firm will be cutting 10 percent of its workforce over the next two months, in an effort cut costs.

Molina's acting CEO, Joe White, told employees in a memo obtained by CNBC that the firm would cut 1,400 jobs across all levels, "from senior leader to front line staff," in order to improve the company's operations and financial performance.

A spokesperson for Molina said the company would not comment on the job cuts, first reported by Reuters. Shares of Molina Health were recently down more than 1 percent.

Centene shares surged more than 5 percent in opening trade to a historic high of $87.94 before edging lower during the session, as the Senate geared up for an afternoon procedural vote on dismantling Obamacare. Shares of Anthem, which reports second-quarter earnings Wednesday, remained fractionally positive.

Centene, Anthem and Molina are among the last of the publicly traded insurers who are still planning to offer health coverage in the individual exchange marketplaces next year, despite the continuing regulatory uncertainty over the rules which will govern Obamacare plans.

With just over three months until 2018 open enrollment is scheduled to begin, insurers still don't know whether the Trump administration will commit to funding cost-reduction subsidies known as CSRs, whether the individual mandate to buy coverage will remain in effect, or whether the Trump administration will try to boost enrollment next year.

Centene's Neidorff urged officials to maintain funding for cost-sharing reduction subsidies, which reduce out-of-pocket costs for lower-income Obamacare enrollees.

"At the state and federal level, leadership understands that to eliminate the CSRs is to create havoc to the insured marketplace," he said. "We are corporately convinced that when the dust settles, there will be subsidies in some form."

As for the near-term uncertainty about the 2018 marketplace, insurers have until Sept. 27 to make their final commitment on exchanges for next year. Neidorff said he's willing to wait until the rules are firmed up over the next couple of months.

"To try do the 'what ifs' — that's where you end up with what I call paralysis by analysis," he said.

"So, as we get closer, we'll continue to look at the facts and we'll make those decisions based on where we are."

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