Michael Neidorff said he does not think any U.S. community has
the pandemic fully under control.
The leader of one of the largest,
fastest-growing health insurers in the United States is still wary of what
COVID-19 will do.
Michael Neidorff, the chief executive officer
of Centene Corp., told securities analysts Tuesday, that, because of the
pandemic, he continues to see the business environment for health insurers as
being “choppy.”
As recently as June, Neidorff said, the
company was assuming that a big COVID-19 peak in March and April would be
followed by a series of smaller spikes in the summer, and, possibly, a second
big wave of cases in the fall.
Overall, June looked almost like a normal
month, Neidorff said.
“However, the current trajectory shows the
infection rates are rising significantly across a number of key states, and
case counts continue to go up which differs from what we expected only a few
weeks ago,” Neidorff said.
“With the recent surge in the virus, we are
seeing some decline in utilization in July,” Neidorff said. “While we believe
hospitals are better prepared to manage COVID cases after learning from the
experience of the initial outbreak, there are indications that some hospitals
are reverting back to delaying elective procedures, if necessary, based on a
regional infection rate.”
In the fall, “if we have a bad flu season,
that, combined with COVID, could be a very serious combination, Neidorff said.
He said that he thinks tough, two-month
lockdowns have helped some European countries get COVID-19 under control, but
that no U.S. region seems to have the pandemic fully under control.
One a region gets the pandemic under control,
officials lighten social distancing restrictions, and “then it pops up again,”
Neidorff said.
Neidorff said he wants to encourage everyone
to wear masks, until an effective vaccine comes along.
Countries in Asia have held pandemic death
rates to much lower levels than the U.S. levels over the years because people
in Asia accept the idea of wearing masks, Neidorff said.
Neidorff said Centene is trying to emphasize
the high level of uncertainty about the pandemic in conversations with state
insurance regulators, and state Medicaid program managers, about
COVID-19-related reductions in health care spending in the first half of the
year.
The states saw the low health care utilization
rates and told Centene, “‘Oh, you’re saving all this money,’” Neidorff said.
“They now understand that utilization will come back in the second half [of the
year]. So they’re now understanding that there’s no windfall over the course of
the full year.”
Resources
Centene is a St. Louis-based health insurer
that has specialized in managing Medicaid plans and other types of public
health plans. It also has a significant presence in the Affordable Care Act
public exchange system, and it has inherited some group health plans from
another insurer it acquired, Health Net.
Centene organized the conference call to go
over its earnings for the second quarter with securities analysts. The company
has posted a recording of the call on its website.
Earnings
Centene is reporting $1.2 billion in net
income for the second quarter on $28 billion in revenue, compared with $492
million in net income on $18 billion in revenue for the second quarter of 2019.
Earnings were higher partly because COVID-19
reduced the ratio of health benefits spending to premium to 82.1%, from 86.7%
in the second quarter of 2019.
Jeff Schwaneke, Centene’s chief financial
officer, said that Centene did incur some COVID-19-related care costs, such as
intensive care unit costs, but that emergency room claims and office visit
claims were down.
The company ended the quarter providing or
administering health coverage for 25 million people, up from 15 million people
a year earlier.
Here’s what happened to key types of
enrollment between the second quarter of 2019 and the latest quarter:
·
Medicare plans: 996,100
(up from 398,500)
·
U.S. commercial major
medical insurance: 2.7 million (up from 2.5 million)
·
ACA exchange plans: 2.8
million (up from 2.4 million)
·
Medicaid and similar
programs: 13 million (up from 8.5 million)
·
International: 600,400
(up from 463,100)
Liquidity
Executives said the company has access to
about $3 billion in immediate liquidity through $1.1 billion in cash and
cash equivalents held by entities that face no regulatory constraints on what
they can do with their cash, and through a $2 billion revolving credit
facility. A revolving credit facility is the corporate equivalent of a credit
card account.
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