(Reuters) -Centene said on Tuesday it had withdrawn its 2025 earnings forecast after new industry data showed a significant drop in expected revenue from its marketplace health insurance plans.
Shares of the U.S. health insurer declined nearly 22% in extended trading.
The company said preliminary data from 22 of the 29 U.S. states where Centene offers marketplace plans suggested a $1.8 billion drop in risk adjustment revenue, equivalent to a $2.75 hit to adjusted earnings per share.
Centene had previously forecast 2025 adjusted earnings per shares of more than $7.25.
The shortfall reflects higher-than-expected patient morbidity, or a sicker population, and slower market growth in those 22 states, which represent about 72% of Centene’s marketplace membership, the company said.
The data was provided by independent actuarial firm Wakely.
The drop in risk adjustment payments, which are meant to balance costs for covering higher-risk patients, is likely to weigh on Centene’s earnings this year.
The company also reported elevated Medicaid medical costs in states like New York and Florida, particularly in behavioral health, home care and drug spending, and said it expects its second-quarter medical costs to be higher as a result.
In the first quarter, the company faced elevated costs in its government-backed Medicaid plans for lower-income groups.
Insurers who offer Medicaid plans have seen elevated costs over the past few quarters after the end of a pandemic-era policy.
As states re-determined eligibility for the plans, healthier members fell off the rolls, leaving behind those who require more medical services.
Industry bellwether UnitedHealth in May also suspended its annual forecast due to surging medical costs.
Centene offers insurance plans under the federal Obamacare marketplace.
It is the largest marketplace carrier, serving 4.4 million members across 29 states as of December 31 under the brand name Ambetter Health, the company said in an annual filing.
Centene plans to report its quarterly results on July 25.
(Reporting by Arunima Kumar and Sneha S K in Bengaluru; Editing by Maju Samuel)
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