Selling government-sponsored insurance is looking less lucrative. It’s about to get even messier.
Cuts to Medicaid and signs that ACA enrollees are becoming costlier are weighing on some insurers. Is Centene the canary in the coal mine?
Providing healthcare on behalf of the government might be becoming less lucrative than it used to be.
On Tuesday, Centene, the largest seller of Affordable Care Act plans, tanked after it withdrew its 2025 guidance because new data showed its ACA enrollees are using their benefits significantly more than expected, which threatens to eat into profits. The government pays insurers to cover ACA enrollees based on how sick they are assumed to be.
Centene is down by about 40% Wednesday, setting it up for its worst single day since it went public in 2001.
The ACA, which passed in 2010 and took effect in 2014, gave millions of Americans access to healthcare by expanding who is eligible for Medicaid. It also created a multibillion-dollar revenue stream for insurance companies. Some struggled to offer profitable plans, in some cases even dropping off the ACA marketplace, but the market eventually leveled and insurers like Centene wound up making up a majority of their business via the government.
The news from Centene also dragged down other insurers, including Oscar Health and Molina Healthcare. Oscar, a digital-first newcomer, does make some money from ACA plans, but not nearly as much as others. It’s also a retail favorite vulnerable to speculation.
Molina, on the other hand, is in a similar boat as Centene. Nearly all of its revenue comes from selling Medicare and Medicaid plans. The company fell 20% on Wednesday.
But sicker ACA enrollees may be just the start of their problems.
President Trump and his supporters in Congress have made it their mission to cut government spending on social programs, and Medicaid and Medicare are at the top of their list. Republicans are pushing a bill that would result in the largest cut to Medicaid in history, threatening to shrink a key revenue stream.
UnitedHealthcare, the insurance arm of the conglomerate United Health Group, is also down for the year, but not quite for the same reasons.
UNH, the largest health insurer in the country, gets a larger sum of its revenue from Medicare Advantage. The program allows American seniors to get their government-funded healthcare through a private insurer. UNH said in its most recent earnings report that its Medicare Advantage costs were higher than expected.
Higher costs are also not the company’s only issue. The head of its insurance arm, Brian Thompson, was killed in Manhattan in December in a high-profile shooting, with alleged gunman Luigi Mangione having expressed frustration with healthcare companies. UnitedHealth ousted its CEO in May amid increased government scrutiny over potential fraud in its Medicare Advantage program as well as antitrust probe. A whistleblower report by The Guardian set it back another notch.
UNH and its peers may not have an easy time winning over lawmakers and regulators, even if cutting their revenue streams means Americans, especially the poor and vulnerable, will die.
