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By Sara Hansard
The most successful Obamacare plan provider in the country owes that status to also being a key player in the Medicaid managed care market.
St. Louis-based Centene Corp. is one of the few large for-profit national health insurers that has done well in the Obamacare exchanges, thanks to its position as the country’s largest operator of Medicaid managed care plans, which many states have adopted. In 2018 it increased its exchange membership by 400,000 to 1.6 million members, making it the largest exchange operator. The company expects to operate exchange plans in 16 states following the expected closing of its purchase of Fidelis Care in April.
At the end of 2017, 7.1 million of Centene’s 12.2 million members were in Medicaid managed care plans.
Centene Chairman and Chief Executive Officer Michael Neidorff talked with Bloomberg Law March 29 about how it has been successful in the Affordable Care Act exchanges. Centene’s “typical” pre-tax profit margins are between 3 and 5 percent, “and we’re closer to the high end of the range than the lower,” he said. Profits for its exchange plans are over 5 percent, a company spokeswoman said.
The company, which operates in 31 states, has grown from 1996, when it had revenues of $40 million covering 40,000 people “in two counties in Wisconsin and half a county in Indiana,” he said. In 2017, Centene had revenues of $48.4 billion, and Neidorff said it expects $60 billion in revenues in 2018.
Why has Centene been successful in the exchanges when other large insurers have had to pull out due to heavy losses?
According to Neidorff, the company’s use of technology has helped. For example, Centene may be able to detect that someone could have a heart attack “before they have it,” keeping its patients healthier.
“We also are insuring a lot of people we’ve insured under Medicaid. We call it the churn, where people lose Medicaid and they come into our network, so they’ve had good, high-quality care for a long period of time. And now we have a smaller and high-quality network. And when you put all that together you end up with a very consistent, good product.”
In March, Washington state fined Centene’s Coordinated Care Corp. a total of $1.6 million, suspending $1 million if Coordinated Care corrects problems with its medical provider network. Coordinated Care failed to maintain an adequate network of medical providers, the Washington Office of the Insurance Commissioner said in a press release.
Centene has also been sued in federal court for allegedly misleading customers about the number of doctors covered under its health plans. Centene disputes the allegations in the complaint and has filed motions to dismiss all of the Centene defendants, a company spokeswoman said.
“It all started with a group of anesthesiologists that had not signed up,” Neidorff said. “Those hospitals now have full coverage of anesthesiologists. We have put in place a senior management team, parachuted some people in to correct the situation. Management did not follow our guidelines over there and we had to replace them. We’re putting in place individuals that follow our procedures.
“We’re not proud of it, I don’t make excuses for it, we didn’t do it well, but I’m not sure it’s as bad as people have talked about,” he said. “Even the senior administrative officials in the state believe we’re doing a pretty good job. I don’t blame them for being upset. We have even higher standards than they do, and I’d be plenty upset. That’s why we have new people there.”
Centene says it hasn’t been affected very much by the federal government withdrawing payments to insurers to cover cost-sharing reduction (CSR) subsidies for low-income people under the Affordable Care Act because most of its exchange enrollees receive premium tax credits. Insurers in most states were able to shift the cost of covering the CSRs onto silver tier plans, on which the premium tax credits are based. People who receive premium tax credits then receive greater subsidies and insurers receive payments from the federal government to cover the premium tax credits.
“Ninety-three percent of our population gets subsidies,” Neidorff said. “We got the premium subsidy. [It’s] in the law, it’s not by regulation or executive order.” Still, he said, “We had to raise the premiums more than we wanted to,” and the federal government had to pay more to cover the premium tax credits. In addition, “There were more people at higher incomes affected.”
According to Neidorff, Centene’s average rate increases “weren’t excessive; high-single digits.” That contrasts with 2018 price increases averaging 32 percent nationally for the lowest priced silver plans, which are the most commonly purchased plans on the exchanges, according to the Urban Institute.
Turning to a recent trend of states asking the Centers for Medicare & Medicaid Services to allow them to impose work requirements on Medicaid beneficiaries, Neidorff said Centene is not opposed to work requirements for Medicaid enrollees.
“We have no trouble with it,” he said. “We think it’s somewhat appropriate.” For the Medicaid expansion population, “We’re talking about childless adults who are physically able to work.”
Centene helped Indiana introduce similar requirements, and it didn’t hurt the company’s business, Neidorff said. “You want to be reasonable. They have to be physically able to work,” he said.
Neidorff sees the ACA Medicaid expansion continuing over time, albeit slowly. “We’re doing it much like we did the exchanges,” he said. “We’ll see it growing at accelerated rates in the coming years.” Centene also expects to have an additional 100,000 Medicare enrollees at the end of the year compared with the end of 2017, he said.
Centene also expects the federal government to promote efforts to give states more regulatory flexibility, Neidorff said in a February conference call with analysts about Centene’s 2017 results. That aligns well with Centene’s business approach, he said in that call.
“Centene is very decentralized,” and local presidents and chief executives of Centene health plans work with state and local officials, he told Bloomberg Law. “The fact that we are decentralized, they can work with the state in any way that it makes sense to do it.”
Asked how the movement by states to Medicaid managed care is affecting patient care, Neidorff said, “I believe they end up with higher quality, more continuity of care. Case management makes the difference. We spend hundreds of millions of dollars on our system that enhances what we do. We manage the utilization.”
For example, he said. “We have some products with systems to ensure that [patients] are compliant in the drugs they take.”
In addition, Centene has identified patients at risk of opioid addiction. “We have some models where we’ve reduced the utilization by 50 percent. We work with them. We believe we’re making significant advances there.”
To contact the reporter on this story: Sara Hansard in Washington at email@example.com
To contact the editor responsible for this story: Kendra Casey Plank at firstname.lastname@example.org
Information on the Washington state fine is at https://www.insurance.wa.gov/news/coordinated-care-corp-fined-100000-failing-follow-compliance-plan.
The Urban Institute's premium report is at http://src.bna.com/xtl.
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
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