Centene, a major Medicaid managed care player and the market leader on the Affordable Care Act health insurance exchanges, pulled earnings guidance late Tuesday as it warned of higher-than-expected health costs. CNC stock crashed to an eight-year low, making it the worst-performing S&P 500 stock in premarket trade.
Other insurers with ACA and Medicaid exposure also were among the top 10 S&P 500 losers, including Molina Healthcare, Elevance Health, Humana and UnitedHealth Group. The S&P 500 futures traded modestly lower early Wednesday after finishing just below a record closing high on Tuesday.
CNC's Warning On ACA Exchanges
Centene's ACA marketplace enrollment soared to 5.6 million at the end of Q1, giving it at least 23% of overall ACA plan membership.
The company, which offers ACA coverage in 29 states, said that an analysis of trends in 22 of those states by the Wakely actuarial firm showed lower-than-expected market growth and "significantly higher" morbidity than company assumptions, implying a greater need for medical care.
As a result, Centene said it now expects $1.8 billion less in revenue from risk adjustment, lowering full-year adjusted earnings per share by $2.75. Risk adjustment provides payments to carriers whose members are relatively high cost, which is supposed to ensure that health insurers design plans intended to attract only healthy, low-cost customers.
Combined, the Wakely data and Centene's response imply that pretty much every insurer has attracted customers with greater-than-expected medical needs, so Centene's costs won't be defrayed as much by risk-adjustment transfers.
As a result, Centene said it had begun filing plans to raise premiums for 2026 with state regulators. Enhanced premium tax credits expire at the end of 2025 and the Trump administration's shrinking of the open enrollment period point to deep enrollment losses.
"The risk pool issue likely gets worse in 2H as program integrity measures come online in late August," wrote Jefferies analyst David Windley.
In its May 1 earnings report, CVS Health recognized a $448 million premium deficiency for ACA marketplace coverage and said Aetna would exit the exchanges for the 2026 plan year.
Medicaid Woes Continue
Centene's Medicaid warning continues a string of issues faced by managed-care companies after the moratorium on Medicaid redeterminations ended in early 2023, after a long Covid pause.
As beneficiaries with relatively high incomes lost their coverage, the risk pool has taken a turn for the worse, meaning higher average health costs. UnitedHealth first flagged the problem in early 2024. However, it didn't surface early enough for states to alter 2025 Medicaid pricing.
Centene said its Medicaid business has seen a step-up in the cost trend for behavioral health, home health and high-cost drugs.
S&P 500 Managed Care Stocks
Centene crashed 31% to 39. Molina tumbled 12%. Elevance fell 5.4%, Humana 2.4% and UnitedHealth 2.7%.
