Centene Corporation reported a surprise adjusted diluted loss per share of $(0.16) for the second quarter of 2025, a significant decline from previous expectations. Total revenues, however, showed robust growth, increasing 22% year-over-year to $48.74 billion for the three months ended June 30, 2025.
The Marketplace segment faced substantial headwinds, with a $1.2 billion pretax drag from a shortfall in projected 2025 risk adjustment transfer revenue, now expected to reach $2.4 billion for the full year. The Marketplace Health Benefits Ratio (HBR) jumped to 93.0% from 87.6% year-over-year, as the Ambetter product was underpriced for a shift in the risk pool and is expected to run slightly below breakeven for the remainder of 2025.
Medicaid also underperformed with an HBR of 94.9%, driven by an accelerated medical cost trend in behavioral health, home health, and high-cost drugs, particularly concentrated in Florida. Medicaid revenues increased 16% to $27.998 billion, but membership decreased to 12.82 million due to redeterminations.
In contrast, the Medicare segment delivered strong results, with revenues surging 58% to $9.45 billion and PDP membership growing 19% to 7.85 million. Consolidated Selling, General & Administrative (SG&A) expense ratio improved to 7.1% from 8.0% year-over-year, and operating cash flow for the first six months of 2025 was $3.3 billion, a substantial increase from $1.7 billion in the comparable 2024 period.
Centene revised its full-year 2025 adjusted diluted EPS guidance to approximately $1.75, a significant adjustment from the previous $7.25 guidance. This revision is primarily due to the $2.4 billion pretax headwind from Marketplace morbidity shifts and a $2.1 billion pretax headwind from elevated Medicaid HBR, partially offset by favorability in Medicare and SG&A management.
Looking to 2026, Centene is aggressively repricing its Marketplace portfolio, with filings already submitted in 17 states and plans to reprice 100% of the book. In Medicaid, 88% of the book is rerating between July 2025 and January 2026, with an expected 5% composite rate adjustment. The company also views the One Big Beautiful Bill Act (OBBBA) as establishing a new policy floor, though it may introduce work requirements and more frequent eligibility redeterminations in Medicaid.
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