Insurer Centene's 3Q profit plunges 87 percent

Centene Corp. said Tuesday it is suing Kentucky, a state that has generated heavy losses for the Medicaid coverage provider, as it reported an 87-percent plunge in third-quarter earnings.

The St. Louis-based company also cut its 2012 earnings forecast again.

Centene said it filed a lawsuit against Kentucky over the state's "failure to completely and accurately disclose material information." The company said last week that it is planning to end a contract to administer Medicaid coverage in Kentucky after starting it last fall.

Representatives of the Kentucky attorney general's office did not immediately return calls from The Associated Press seeking comment Tuesday morning.

Medicaid is the state and federally funded program that provides health coverage to the needy and disabled people. States hire private insurers to administer the coverage.

Centene's problems in Kentucky started shortly after its contract to work in the state began. In June, Centene slashed its full-year earnings outlook, citing in part an increase in costs from that state. The insurer said retroactive assignment of members in Kentucky was affecting its performance.

Uninsured patients are retroactively assigned to a Medicaid coverage provider after they go to a hospital to seek medical care. The insurer then becomes responsible for all medical services the patient receives, and this population can hurt an insurer because it creates more in claims than the insurer receives in premiums.

On Tuesday, the insurer said it took a $63 million hit in the third quarter because the premiums it is collecting in Kentucky aren't matching the medical costs it incurs for coverage in the state. The company last week warned it expected to take a hit of between $60 million and $70 million in the third quarter due to its Kentucky operations.

Centene's net income dropped to $3.8 million, or 7 cents per share, in the three months that ended Sept. 30. That compares to earnings of nearly $29 million, or 55 cents per share, in last year's quarter. Not counting the Kentucky hit and a gain from an investment sale, the insurer earned 47 cents per share.

Centene's revenue climbed 88 percent in the quarter to $2.45 billion, as the insurer added coverage in Kentucky, Louisiana, Missouri and Washington and expanded in Texas since last year's quarter.

Analysts expected, on average, earnings of 47 cents per share on $2.22 billion in revenue, according to FactSet.

Centene's membership rose 54 percent compared to last year's quarter to 2.5 million people. But its medical costs swelled 93 percent to $2.04 billion.

Centene cut its annual earnings forecast but raised its revenue guidance on Tuesday. It now expects 2012 earnings to range between 56 cents and 66 cents per share. That compares with a forecast it made in July for earnings of 95 cents to $1.15 per share.

The company expects premium and service revenue to range between $8.1 billion and $8.3 billion, up from $7.7 billion to $8.1 billion.

Analysts expect, on average, earnings of $1.50 per share on $8.3 billion in revenue.

Centene shares closed Monday at $38.41, down 3 percent since the start of the year.

Source: http://news.yahoo.com/insurer-centenes-3q-profit-plunges-87-percent-121401939--finance.html

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