Centene Shares Plunge Amid Medicare Payment Changes
Written by Emily J. Thompson, Senior Investment Analyst
Source: Benzinga
- Medicare Payment Changes: Federal regulators' proposed 2027 Medicare Advantage payment changes project a mere 0.09% increase, significantly below Wall Street's expectations of 4% to 6% growth, implying a real cut when considering medical inflation, which directly impacts Centene's revenue and profitability.
- Tighter Risk Adjustment Rules: CMS's proposal to exclude diagnoses captured via audio-only visits and some chart reviews starting in 2027 raises the risk that Centene will receive lower payments for the same sick members, further squeezing margins and forcing the company to rapidly adjust coding and pricing strategies.
- Deteriorating Market Sentiment: Following UnitedHealth's report of elevated medical care ratios and a revenue outlook that trailed expectations, Centene's stock is under pressure as investors fear lower future bids and potential membership losses, leading to decreased confidence in its future performance.
- Short-Term Strength vs. Long-Term Challenges: While Centene's stock is currently trading 2.1% below its 20-day simple moving average but 7.1% above its 50-day average, indicating short-term strength, the stock has decreased by 33.46% over the past 12 months and is closer to its 52-week lows, highlighting long-term challenges.
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Analyst Views on CNC
Wall Street analysts forecast CNC stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for CNC is 43.07 USD with a low forecast of 32.00 USD and a high forecast of 59.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
15 Analyst Rating
5 Buy
8 Hold
2 Sell
Hold
Current: 41.900
Low
32.00
Averages
43.07
High
59.00
Current: 41.900
Low
32.00
Averages
43.07
High
59.00
About CNC
Centene Corporation is a healthcare company. The Company provides fully integrated services to government-sponsored and commercial healthcare programs, focusing on under-insured and uninsured individuals. Its segments include Medicaid, Medicare, Commercial and Other. Specifically, the Medicaid segment includes the Temporary Assistance for Needy Families (TANF) program, Medicaid Expansion programs, the Aged, Blind or Disabled (ABD) program, the Children's Health Insurance Program (CHIP), Long-Term Services and Supports (LTSS), Foster Care, Medicare-Medicaid Plans (MMP), which cover beneficiaries who are dually eligible for Medicaid and Medicare and other state-based programs. The Medicare segment includes Medicare Advantage, Medicare Supplement, Dual Eligible Special Needs Plans and Medicare Prescription Drug Plans. The Commercial segment includes the Health Insurance Marketplace product along with individual, small group, and large group commercial health insurance products.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Trump Administration's Medicare Proposal Shocks Healthcare Stocks
- Payment Increase Proposal: The Centers for Medicare and Medicaid Services proposed a mere 0.09% net increase in Medicare Advantage payments for 2027, significantly below the anticipated 4% to 6%, resulting in a $90 billion market value loss for the healthcare sector, highlighting the substantial impact of policy uncertainty on market dynamics.
- Earnings Risk Heightened: Analysts warn that if the proposed rates are finalized without adjustments, insurers could see a 15% to 20% decrease in earnings due to the disconnect between rising medical costs and flat funding, exacerbating profitability pressures within the industry.
- Bleak Industry Outlook: Although final rates are expected in April and historical trends suggest potential improvements, analysts predict the healthcare sector may enter a stagnation period of one to two years where earnings fail to expand as previously hoped, negatively affecting investor sentiment.
- Operational Improvements Overlooked: Despite UnitedHealth reporting quarterly improvements in profitability, the headline risk from the payment proposal continues to overshadow operational gains, with analysts noting that while progress is being made, significant recovery challenges remain.
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WellCare Donation Strengthens Food Resources in Kentucky
- Donation Amount: WellCare of Kentucky and Centene Foundation announced a $145,000 donation to address Kentucky's historic food insecurity, helping 280,000 people access healthy food, demonstrating the company's commitment to community welfare.
- Community Support: The donation will support various organizations, including the Family Service Society in Paducah and the Owensboro office, aiming to improve local families' quality of life by providing nutritious food and enhancing community health foundations.
- Long-term Commitment: WellCare's donation is part of Centene Foundation's $1.5 million national commitment to tackle food insecurity through community-driven solutions, highlighting the strategic importance of improving health outcomes.
- Innovative Programs: Centene invested $77.1 million in food security in 2024, launching innovative initiatives like Fresh Food Pharmacies and farmers market produce vouchers, further solidifying its leadership in addressing health drivers.
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