Centene Reports Significant Loss in Q2 2025, Citing Higher Medical Costs

Centene Corporation, a major player in government-sponsored healthcare programs, has reported a substantial loss for the second quarter of 2025, marking a significant downturn in the company's financial performance. The St. Louis-based insurer's stock plummeted to its lowest level in a decade following the announcement, as the company grapples with rising medical costs across its Affordable Care Act (ACA) and Medicaid plans.

Q2 Financial Results and Stock Performance

Centene reported a loss of $253 million for the second quarter, a stark contrast to the $1.1 billion profit recorded in the same period last year. This decline comes despite a 22% increase in revenue to $48.7 billion. The company's stock has fallen 56% year-to-date, reaching pre-pandemic lows.

The medical loss ratio (MLR), a key indicator of spending on patient care, surged to 93% in the quarter, up from 87.6% in the previous year. This increase significantly exceeds the target range of 80-85% that insurers typically aim for in government programs.

CEO Sarah London expressed disappointment with the company's performance during an investor call, stating, "This is obviously a disappointing outcome."

Factors Contributing to the Loss

Several factors have contributed to Centene's financial challenges:

1. ACA Marketplace Risk Pool Shift: A high percentage of healthy members dropped their ACA plans during open enrollment for 2025, likely due to stricter program integrity measures preventing auto-renewal.

2. Increased Morbidity: First-time enrollees in Centene's ACA plans through its Ambetter subsidiary tended to be sicker, possibly due to former Medicaid beneficiaries losing coverage post-pandemic and opting for ACA exchanges.

3. Higher Utilization: The company observed a broader increase in marketplace utilization combined with more aggressive provider coding.

4. Risk Adjustment Payments: Centene now expects to lose $2.4 billion in risk adjustment payments this year, up from the previous estimate of $1.8 billion.

5. Medicaid Utilization Trends: The company is experiencing increased utilization in Medicaid, particularly in behavioral health, home health services, and high-cost medications such as cancer drugs and gene therapies.

Strategic Response and Future Outlook

Centene is taking steps to address these challenges:

1. Rate Adjustments: The company plans to refile its ACA plan bids for 2026 in all states where it operates, with CFO Drew Asher stating, "As we sit here today we expect to make meaningful upward 2026 rate adjustments reflecting this data across our marketplace footprint."

2. Medicaid Rate Negotiations: Centene is hopeful that states will increase their Medicaid rates to cover the rising trends, potentially including retroactive increases for services with peaking spend.

3. Navigating Regulatory Changes: The company is preparing for the potential expiration of enhanced ACA subsidies and the implementation of the "Big Beautiful Bill," which includes Medicaid and ACA overhauls that could impact enrollment and risk pools.

Despite the current challenges, Centene's leadership remains optimistic about the company's ability to recover. CFO Drew Asher emphasized, "This is fixable," while acknowledging the need to navigate significant shifts in the marketplace risk pool and regulatory landscape.

Centene has revised its full-year adjusted diluted earnings per share guidance to $1.75, down from the previous target of at least $7.25, reflecting the substantial impact of these challenges on the company's financial outlook for 2025.