KHI News Service

Outlook mixed for parent companies of KanCare MCOs

Centene and WellPoint predict continued growth, UnitedHealth Group expects tougher year in 2014

By Jim McLean | October 23, 2013

The parent companies of Kansas’ three main Medicaid managed care organizations posted mixed earnings reports this week and provided stock analysts with differing forecasts.

Centene, the St. Louis-based company that does business in Kansas as the Sunflower State Health Plan, reported third quarter earnings of $49.4 million on revenue of $2.7 billion. In the same quarter last year, the company’s earnings took a $63 million hit due to higher than anticipated medical costs in its Kentucky Medicaid managed care program, which it has since discontinued.

William Scheffel, the company’s chief financial officer, said the start-up of the Kansas managed care contract on Jan. 1 and the expansion of contracts in Mississippi and Texas helped boost revenues by $500 million over the same period last year.

Michael Neidorff, chairman and chief executive, said he expected the company to continue its success in “winning new business” to produce robust earnings growth.

“We already have visibility on 2014 revenue growth in excess of 20 percent, excluding exchanges,” Neidorff said Wednesday on a call with financial analysts. “This compares to our previous estimate of 15 percent.”

Neidorff said the projections excluded any revenue growth attributable to the company’s participation in state and federal online marketplaces created by the Affordable Care Act. However, they said they might revise their projections in December if more states decide to expand eligibility for their Medicaid programs.

WellPoint, the nation’s second-largest health insurer and parent company of Amerigroup, which holds a KanCare contract, reported today that its third quarter earnings fell by 5 percent compared with the corresponding period last year but still topped analyst expectations.

The Indianapolis-based company posted earnings of $656.2 million, or $2.16 per share. Analysts had expected earnings of $1.81 per share.

Company executives said they expected adjusted 2013 earnings to also exceed market expectations despite one-time expenses related to preparing for the ACA marketplaces and increased marketing costs.

Joseph Swedish, WellPoint’s chief executive, said the positive forecast reflects “our continued preparation and the outlook for coming market changes under the Affordable Care Act.”

UnitedHealth Group shares dropped last week after company officials reported 3rd quarter earnings that met but didn’t exceed analyst expectations and warned of a drop in earnings next year. They said they didn’t expect that earnings from the company’s other business lines would be sufficient to offset federal cuts in reimbursements to Medicare Advantage plans.

In addition, the company expects enrollment in its commercial insurance products to decline as some companies experiment with sending their employees to the ACA marketplace to purchase coverage.

The Minnetonka, Minn.-based company is the nation’s biggest health insurer and the largest provider of Medicare Advantage plans, with nearly 2.9 million members.

UnitedHealth reported 3rd quarter earnings of $1.57 billion, up only slightly from $1.56 billion a year earlier. Revenues grew by 12 percent to $30.6 billion but that was $200 million below analysts’ estimates.

Kansas healthcare and social service providers recently criticized the performance of all three Medicaid managed care companies in testimony to a legislative oversight committee. Most of the complaints were related to reimbursement delays and disputed claims for payment.

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