Centene (NYSE:CNC) executives told investors the company expects a rebound in 2026 after what CEO Sarah London repeatedly characterized as a “challenging” 2025. On the company’s fourth-quarter and full-year 2025 earnings call, management highlighted improving trends in Medicaid profitability, a planned margin recovery in the Health Insurance Marketplace business, and continued progress toward break-even Medicare Advantage results by 2027.
2025 results and a “prudent” setup for 2026
Centene reported a fourth-quarter adjusted diluted loss per share of $1.19, contributing to full-year 2025 adjusted diluted EPS of $2.08. CFO Drew Asher said full-year results included $174.6 billion in premium and service revenue.
Looking ahead, management guided to 2026 adjusted EPS greater than $3, which London said implies more than 40% year-over-year growth. She attributed the outlook to three central assumptions: Medicaid margin stability, “significant margin recovery” in Marketplace, and continued improvement toward Medicare Advantage break-even.
Medicaid: HBR improvement, rate outlook, and targeted cost actions
In Medicaid, London said Centene has been “laser-focused” on restoring sustainable profitability while maintaining quality outcomes. She pointed to a fourth-quarter health benefits ratio (HBR) of 93.0%, which she said was consistent with expectations and represented 40 basis points of sequential improvement and 190 basis points of improvement from Q2 levels. Asher echoed that the second half of 2025 showed “two consecutive quarters of HBR improvement,” while emphasizing there is “a lot further to go.”
Management said flu-related costs were consistent with elevated expectations already baked into the outlook. London said Medicaid trend patterns in Q4 remained largely consistent with Q3, with behavioral health driving roughly half of excess trend and home health and high-cost drugs as secondary pressure points. Asher added that inpatient costs “look good” in Medicaid and said that within Centene’s TANF population (which he described as roughly 5 million members), trend “looks normal” when excluding behavioral health.
Centene described a series of operational levers it expects to use to manage Medicaid costs, including network optimization, new clinical programs, rate advocacy, utilization controls, and “a more aggressive approach to fraud within the provider ecosystem.” London highlighted the company’s Applied Behavior Analysis (ABA) task force, launched in Q2 2025, which analyzed data across Centene’s 29-state footprint and identified outlier providers with “volume versus outcomes-driven” care patterns. She described examples including therapy durations of five to 10 years versus what she called an optimal two to three years, and 40 hours per week of therapy versus balanced school-integrated care. London said Centene has engaged providers directly, focused networks on evidence-based practices, and worked with state partners on program design and reducing outlier payments.
On rates, London said Centene exited 2025 with a composite rate adjustment of approximately 5.5% above 2024 levels, and said 1/1 final rates were in line with expectations. For 2026, Asher said the company’s Medicaid assumptions include a mid-4% net rate impact and a corresponding mid-4% net trend expectation, supporting a view of a stable Medicaid HBR. In Q&A, management said 2025 Medicaid trend was in the mid-6% range and framed 2026’s mid-4% assumption as “net trend,” reflecting actions taken in the back half of 2025, including measures that do not take effect until 2026.
Centene expects ongoing Medicaid membership attrition, closing 2025 at 12.5 million members. Asher said the company expects Medicaid member months down 5%–6% in 2026, and discussed additional puts and takes including Florida Children’s Medical Services rolling off 10/1 and a subset of the New York Essential Plan rolling off around 7/1, which he quantified as about 140,000 members.
Marketplace: better underlying trend, NSA pressure, and a smaller 2026 membership base
In the Marketplace segment, London said fundamental medical cost trend came in slightly better than expectations in Q4. She also said Centene received an updated view of 2025 Wakely data showing favorable development relative to reserves. Asher quantified this as $200 million of net P&L outperformance tied to an improved view of 2025 morbidity/risk adjustment based on the “third round” of Wakely data.
However, management cited two out-of-period items that weighed on the quarter: a 2023 CMS reconciliation and No Surprises Act (NSA) dispute costs. London said those items prompted Centene to add an accrual for further NSA development tied to 2025 dates of service, pushing the segment HBR up by roughly 100 basis points versus original expectations. She said the company has accounted for estimated 2026 NSA costs in guidance and described the IDR process as increasingly “weaponized” by participants seeking to extract profits. London said Centene is advocating for NSA reform and will take a “more proactive litigious posture,” citing a multimillion-dollar lawsuit filed against a New York provider alleging fraudulent manipulation of in-network and out-of-network claims.
For 2026 enrollment, London said the expiration of Enhanced Advance Premium Tax Credits (EAPTCs) at the end of 2025 created significant market change, which Centene incorporated into 2026 pricing. She said Ambetter membership is expected to be roughly 3.5 million at the end of Q1 2026, compared with 5.5 million in December. Management emphasized that “paid membership” is the key metric and said paid rates through the end of January were below historical levels but in line with expectations in a post-EAPTC environment.
London also described a shift in metallic tier mix, with Bronze expected to represent a little over 30% of Marketplace enrollment in 2026, compared with a 19%–24% range over the past four years. She said age and gender demographics remain consistent with recent years. In Q&A, she said the company re-underwrote assumptions across metal tiers using both recent experience and pre-EAPTC history, and also reduced parts of its footprint where it had been a low-cost Bronze player.
Asher said Centene expects Marketplace pricing actions to support “meaningful pre-tax margin expansion” in 2026 versus losing approximately 1% in 2025. Later in Q&A, he said the 2026 guidance implies Marketplace pre-tax margin of roughly 4% (based on the HBR bridge math), while reiterating that 2025 was around -1%.
Medicare: PDP growth, MA repositioning, and rate uncertainty
Centene’s Medicare segment “delivered strong results throughout 2025,” London said, with Medicare Advantage fundamentals in Q4 in line with expectations. She noted a review of provider contracts led to adjustments to certain receivables, contributing to a slightly elevated HBR compared to expectations. Asher described this as a write-off of older provider receivables.
Management reiterated its goal of break-even Medicare Advantage results in 2027. London said Centene intentionally expects Medicare Advantage membership to decline by the end of Q1 2026, consistent with a strategy to refine its footprint and value proposition for Medicaid beneficiaries. She added that dual-eligible members account for roughly 40% of Centene’s Medicare Advantage business and said the company launched a redesigned duals operating model.
In Part D, Centene pointed to moderating trend late in 2025 and said Part D enrollment is tracking to high single-digit percentage growth at the end of Q1 2026 versus year-end 2025. Asher provided additional detail in guidance, saying the Medicare segment is expected to grow premium revenue about $7.5 billion, driven largely by PDP, with membership at about 8.7 million coming out of open enrollment. He said 2026 Medicare segment revenue is forecast to be approximately 41% Medicare Advantage and 59% PDP.
Asher also addressed the HBR impact of the direct subsidy change in PDP, noting the direct subsidy increased from $143 to $200, which increases both premium revenue and pharmacy expense and mechanically raises the HBR without requiring higher SG&A. For PDP, Centene is assuming a 2026 pre-tax margin around 2%, down from “the 3s” in 2025.
Both London and Asher commented that the 2027 Medicare Advance Notice appeared more pressured than industry expectations, though they said it does not change the company’s focus on returning Medicare to profitability. Rates are expected to be finalized in early April.
2026 guidance: revenue range, HBR outlook, and seasonality
For 2026, Centene guided to premium and service revenue of $170 billion to $174 billion. Asher said Medicaid premium revenue is expected to be down $2 billion, with attrition partly offset by rate increases, while Marketplace revenue is expected to be down about $8 billion due to EAPTC expiration and market impacts, net of rate increases intended to raise yield and improve margin.
Centene guided to a consolidated 2026 HBR of 90.9% to 91.7%, which Asher said is 60 basis points lower at the midpoint than 2025, driven primarily by Marketplace recovery. Medicaid is expected to be flat versus the 2025 HBR of 93.7%.
On costs and capital structure, Asher said Centene’s Q4 adjusted SG&A ratio was 7.5% and full-year 2025 was 7.4%, which he said was 110 basis points lower than 2024. Centene ended the year with about $400 million of cash available for general corporate use, reduced debt by $189 million in Q4, and reported a debt-to-cap ratio of 46.5%. He also said there is no share buyback reflected in 2026 guidance.
Asher cautioned on earnings seasonality, saying Centene expects the majority of 2026 adjusted EPS in Q1, stepping down in Q2, to around break-even in Q3, and a loss in Q4, due to Marketplace and PDP benefit design that tends to produce lower HBRs early in the year and higher HBRs later in the year.
About Centene (NYSE:CNC)
Centene Corporation (NYSE: CNC) is a diversified, multi-national healthcare enterprise that specializes in providing services to government-sponsored and national health programs. The company primarily acts as a managed care organization, delivering healthcare coverage and administering benefits for Medicaid, the Children’s Health Insurance Program (CHIP), Medicare Advantage, and individual marketplace plans. Centene also contracts with federal and state agencies to manage specialty care programs and community-based services for vulnerable populations.
Centene’s offerings extend beyond traditional insurance to include a range of specialty and support services.
