Wednesday, December 26, 2018

Investor lawsuit accuses Centene of hiding Health Net problems

By Shelby Livingston  | December 18, 2018
Two pension funds that own stock in Centene Corp. are suing the health insurer and certain directors and officers, claiming Centene acquired Health Net in 2016 for $6 billion without fully disclosing the company's significant financial problems.

In a complaint filed Friday in the U.S. District Court in St. Louis, the investors alleged Centene misled them by concealing Health Net's liabilities from its "poorly designed and unprofitable insurance products" in California and its refusal to pay claims from substance abuse treatment centers, a practice that was later the subject of provider lawsuits and state investigations.

The investors also claimed that St. Louis-based Centene knew about but hid that Health Net owed nearly $1 billion in past unpaid tax liabilities to California and was involved in a Medicare fraud scheme under investigation by the U.S. Justice Department.

Disclosing these problems would have reduced Health Net's value and the price that Centene's stockholders paid for the company, the complaint alleged. But Centene failed to tell investors and ended up increasing its reserves by $390 million, causing its share price to fall by more than 8%, leading to a loss of $1 billion in stockholder value.

Moreover, the investors claimed that company directors and officers, including Centene CEO Michael Neidorff, used their inside knowledge to sell their shares when Centene's stock was artificially inflated. Neidorff sold almost 370,000 shares worth roughly $20 million in December 2015, according to the complaint.

A Centene spokeswoman did not respond to requests for a comment on the lawsuit. This isn't the first shareholder lawsuit alleging Centene knowingly misstated Health Net's business problems.

Centene announced its intention to acquire Health Net in July 2015 and shareholders voted to approve the deal that October—based on false information, the investors alleged. The deal officially closed in March 2016. Most of Health Net's members were in Medicaid managed-care plans, but it also served individuals through the ACA exchanges.

Centene initially struggled with massive losses related to Health Net's individual exchange plans and had to exit some markets, increase premiums and change up benefit designs to stop the bleeding. But in years since, Centene has turned a profit on its exchange business. As of Sept. 30, 2018, it covered 1.5 million exchange customers and said on Monday that it expected to add as many as 150,000 more people during the open enrollment period for 2019 coverage.
Shelby Livingston is an insurance reporter. Before joining Modern Healthcare in 2016, she covered employee benefits at Business Insurance magazine. She has a master’s degree in journalism from Northwestern University’s Medill School of Journalism and a bachelor’s in English from Clemson University.
https://www.modernhealthcare.com/article/20181218/NEWS/181219900?utm_source=modernhealthcare&utm_medium=email&utm_content=20181218-NEWS-181219900&utm_campaign=dose

No comments:

Post a Comment