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Centene handily beat Wall Street’s expectations in the second quarter, as higher revenue from premiums and rate hikes for the managed care company’s plans shielded its bottom line from elevated medical costs.
Centene posted $53.6 billion in revenue, up 10% year over year, and $1.1 billion in profit in the quarter. That’s compared to a loss of $253 million the same time last year when Centene was caught off guard by higher spending — the insurer’s first quarterly loss in more than two years.
Centene raised its 2026 financial outlook on Tuesday following the outperformance, which TD Cowen analyst Ryan Langston called “huge.”
“Any way you slice it, this was a fantastic quarter,” CFO Drew Asher said during a morning call with investors.
It’s the second beat-and-raise this year for the St. Louis-based insurer, following a buoyant first quarter when Centene bumped its 2026 guidance on the back of better controlled medical costs. Some investors griped at the time that Centene should have raised its outlook more. They’re now getting their wish.
Centene now expects 2026 adjusted earnings per share of greater than $4.80, up from $3.40 previously. The outlook is better than the $2.08 in adjusted EPS that Centene eked out in 2025, but well below the $7.17 and $6.68 that the company enjoyed in 2024 and 2023, respectively, before it was hit with unexpected medical spending.
The biggest boost for Centene in the second quarter came from the Affordable Care Act exchanges. It’s a turnaround for a business that’s been one of the biggest drags to the managed care company’s earnings, as Americans on the plans set up by the Obama-era law gobbled up more medical care that became more expensive.
Insurers overhauled their ACA businesses this year to account for that higher spending — jacking up premiums at the same time that more generous federal subsidies for ACA plans expired, fueling a cost crisis for enrollees that has led millions to drop the coverage.
Centene’s ACA membership fell by almost 2.4 million people year over year, to just below 3.5 million enrollees. But the people who remain are significantly more profitable.
Centene’s commercial medical loss ratio, an important marker of spending on patient care, was 79.2% in the quarter, a notable improvement from 90.6% same time last year. Lower is better for MLR, though insurers try to keep the metric above regulatory bounds.
The better MLR is due to Centene raising ACA premiums for 2026, and a “tapering” medical trend which drove the payer’s spending lower than anticipated in the quarter, according to Asher.
Centene also benefited from a higher payout from a government program meant to reimburse insurers if they cover sicker enrollees than other ACA plans.
That risk adjustment settlement contributed about $180 million in net pre-tax favorability in the quarter, and about $481 million in the first half of the year, according to Centene’s financial disclosures.
Centene now expects its ACA business to yield a 4.5% to 5% margin in 2026, up from previous guidance and “back on track after a temporary industry detour in 2025,” Asher said.
Still, Centene expects to lose more ACA enrollees as 2026 progresses, as people elect not to pay higher premiums or drop off coverage as a result of the Trump administration’s program integrity efforts. That could create some unexpected acuity shifts. Insurers downsizing or exiting their ACA businesses is also creating volatility moving into 2027. Centene is one such payer, announcing plans in June to leave its ACA business in New Hampshire after this year.
But the situation could be worse: The CMS has tried to overhaul the exchanges in a way that would cause even more people to lose coverage, but federal courts have stayed or vacated the policies to date, creating some relief for insurers.
“While we are still vigilant about pricing for risk shifts due to program integrity measures and changes affecting eligibility prospectively, we would expect the marketplace to be a more stable business for Centene as we look at over the next couple of years, compared to the prior periods of abrupt program changes,” Asher said.
Medicaid, Medicare and board transition
Centene’s postive second quarter results were not just restricted to the ACA, as membership cuts across multiple products yielded a smaller but more profitable book.
Centent lost more than 700,000 Medicaid members year over year, leaving the insurer with 12.1 million enrollees in the safety-net insurance program.
The step-down in Medicaid — Centene’s bread and butter, accounting for roughly half of total membership and premiums — was larger than anticipated, as states tweaked their Medicaid programs in ways that trimmed eligibility, London said.
But Centene improved its medical cost management, and states continue to increase their payment rates to better match the acuity of the insurer’s members, according to the CEO.
Centene’s Medicaid business posted an MLR of 93.9%, down from 94.9% same time last year.
Centene is the latest insurer to report that the gap between rates and acuity is closing, following similar comments from Elevance and UnitedHealth this quarter.
But Medicaid managed care companies are bracing for more volatility on the horizon stemming from billions of dollars in Medicaid cuts approved by the Republican-led Congress last summer. In particular, new work requirements next year are expected to boot about 5 million Americans from Medicaid.
Centene — the largest Medicaid managed care organization in the U.S. with members spanning 30 states — is working with states to minimize membership disruption, and generally isn’t worried about the impact on its bottom line, London said.
“The number of different policy changes that are going to collide for states next year — it is certainly impactful, and so it is not something that we can or should hand wave,” the CEO said. But, Centene has “a sense of confidence in terms of, again, that goal of continued margin progression through the headwinds.”
Centene’s Medicare business outperformed expectations in the quarter, posting an MLR of 89.5%, down from 90.9% the same time last year. The insurer said margin improvement in its privatized Medicare Advantage plans has accelerated after trimming the business for 2026, and it’s planning further reductions in 2027.
Centene’s falling membership may be yielding higher margins, but it’s also forcing a downsizing of the insurer’s workforce. This summer, Centene began offering its 61,000 employees buyouts in a bid to shrink the company to better match its lower enrollment numbers.
Centene’s expenses in the quarter included $37 million in “enterprise optimization” costs, and another $15 million in spending on severance for personnel.
The compayn has also moved to shore up its executive leadership and board of directors, and announced further changes to its board on Tuesday.
Kenneth Burdick, a longtime health plan executive who has served on the board since 2022, is retiring. He is being replaced by Paul Diaz, a managing partner at private equity and investment firm Cressey & Company. Diaz previously worked as the chief executive of precision medicine company Myiad Genetics and long-term care provider Kindred Healthcare.
