Centene Stock Plummets 40%. What Sparked the Brutal Selloff.
Updated July 02, 2025, 10:41 am EDT / Original July 02, 2025, 7:09 am EDT
It’s panic time once again for the big health insurance companies.
Late Tuesday, the insurer Centene issued a startling announcement: New data the company had seen on the insurance plans it sells on the Affordable Care Act exchanges were so bad that it was pulling its full-year financial guidance.
Centene shares were down 40% on Wednesday. Analysts at at least one investment bank, J.P. Morgan, have cut their rating on the stock. In a note early Wednesday, analysts at Mizuho wrote that based on the announcement, they thought Centene’s 2025 earnings per share could come in at half of the initial guidance.
It is the latest out-of-the-blue disaster to hit a sector that is getting quite familiar with out-of-the-blue disasters. Over the past year and a half, bad news on Medicare Advantage plans has sparked selloff after selloff.
Now, it is the turns of the plans offered through the ACA exchanges, otherwise known as the health insurance marketplaces. These lower-cost plans for individuals, which are often government subsidized, cover 24.3 million people across the country.
Shares of other managed care companies with exposure to the ACA exchanges were also down Wednesday. Molina Healthcare was down 20%, Oscar Health was down 14%, and Elevance Health was down 9%.
Centene’s marketplace problems come as the political backdrop worsens. Generous federal subsidies that drew millions of people to the marketplace plans are set to expire at the end of the year, and Congressional Republicans are rushing to finalize a bill that could have major impacts on the marketplaces.
Centene had said in April that it expected adjusted diluted earnings of at least $7.25 per share, and total revenue of between $178.5 billion and $181.5 billion, in 2025. Now that’s all out the window.
In its Tuesday night announcement, the company said it had received data on plans covering 72% of its marketplace members. That data showed that plan growth was lower than anticipated, and that patients were sicker than Centene had expected.
All told, it said that that preliminary data would imply a $2.75 per-share reduction to 2025 earnings. The company said it was still waiting for additional data covering the rest of its members.
Centene said it could adjust its prices for next year. But for this year, analysts are bracing for a major hit.
“We do not believe it is out of the realm of possibility that CNC’s current 2025E adjusted EPS guide of at least $7.25 is cut in half,” Mizuho analyst Ann Hynes wrote early Wednesday.
Centene shares had been down 15% over the past 12 months before Wednesday’s selloff.
The company also said late Tuesday that its Medicaid plans, which account for the majority of its revenues, were also experiencing higher costs, and that it expects the proportion of its Medicaid premiums it spends to cover medical costs to climb in the second quarter.
Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and George Glover at george.glover@dowjones.com
