Comparing Expense Trends for CNC and HUM in 2019


May. 29 2019, Updated 1:22 p.m. ET

Centene’s HBR trends

In its first-quarter earnings press release, Centene (CNC) reiterated its 2019 HBR (health benefits ratio) guidance of 86.5%–87.0%. In the first quarter, the company reported an HBR of 85.7%, a YoY (year-over-year) rise of 140 basis points, of which 130 basis points came from its acquisition of Fidelis Care and a moratorium on health insurance fees in 2019.

According to the company’s first-quarter earnings conference call, its entry into Medicaid programs, such as Pennsylvania’s long-term service and support program (with an HBR in the 90%-plus range), New Mexico’s managed Medicaid program, and the expanding managed Medicaid programs in Illinois and Florida, had a detrimental YoY impact on its HBR. However, the company’s HBR benefited from the improved performance and seasonality of its health insurance marketplace business on a sequential basis.

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According to its first-quarter earnings conference call, Centene is scheduled to initiate operations in Iowa’s managed Medicaid program starting on July 1, 2019. In accordance with historical trends, the company expects to report a higher HBR for Iowa’s managed Medicaid contract in the initial quarters, but the company expects the HBR to gradually reduce once it acquires experience with the new members.

Humana’s HBR trends

In its first-quarter earnings press release, Humana (HUM) reduced the 2019 HBR guidance for its Retail segment by 20 basis points from 86.6%–87.6% to 86.4%–87.4%. The company, however, increased its 2019 HBR guidance for its Group and Specialty segment by 30 basis points from 81.0%–81.5% to 81.3%–81.8%.

In the first quarter, Humana reported an HBR of 86.2%, a YoY increase of 170 basis points, mainly driven by a one-year moratorium on health insurer fees in 2019 and stronger-than-expected growth in Medicare advantage enrollments in the open enrollment period.

According to its first-quarter earnings conference call, Humana has revised its 2019 operating cost ratio guidance upward from 10.6%–11.4% to 10.7%–11.5% based on estimates of increased investments in its integrated delivery model and the anticipated return of health insurance fees in 2020. The company expects its health insurance fees to be ~$1.2 billion in 2020 and to affect its EPS by $2.15.


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