Centene now thinks its Medicare business will break even one year ahead of its previous expectations after a buoyant third quarter.

Insurers continue to dig themselves out of the hole they found themselves in starting in 2024, when higher medical spending started eating into profits, especially in government programs like Medicaid and the Affordable Care Act.

As the largest insurer in both programs, Centene has outsized exposure to the cost fluctuations. But recent Medicaid rate hikes, and Centene jacking up premiums in its ACA plans this year, has boosted the company’s bottom line — momentum that continued into the third quarter.

It was “another very good quarter on our path to margin restoration,” CFO Drew Asher said on the call.

Centene reported a medical loss ratio, an important marker of spending on patient care, of 92.7% in the quarter, flat year over year and slightly better than analysts had expected.

Medicaid spending remains elevated, driven by behavioral health, home health and high-cost drugs, according to CEO Sarah London. Centene also dealt with some one-time wrinkles, like spiking spending in a Florida contract for children with complex needs before it passed the contract over to rival Molina Healthcare at the start of October.

But medical costs were covered by better reimbursement updates from states, including rates renegotiated in July along with off-cycle and retroactive pay bumps, executives said. State actuaries are using more recent cost data to determine Medicaid reimbursement, which better represents the “core trend we’ve been battling for the last 18 months,” London said.

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