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Centene might buy Medicare Advantage plans from rivals

07/28/2015 | 10:42pm US/Eastern

July 28--Clayton-based Centene Corp. said Tuesday that it would consider buying the Medicare Advantage plans its rivals are likely to divest during the current phase of consolidation in the managed care industry.

Anthem Inc. is seeking to acquire Cigna Corp. for about $54.2 billion, while Aetna Inc. is buying Humana Inc. for $37 billion. Antitrust regulators have said both deals could force the sales of some Medicare Advantage plans in some markets.

Centene, which on Tuesday reported a better-than-expected quarterly profit, is more likely to buy the divested plans if they are in the company's existing markets, Chief Executive Michael Neidorff said in a conference call.

"If it's in a new market, it has to have significant size and scale to make it worthwhile," he said.

Centene currently runs Medicare Advantage plans in nine states, but will expand its footprint once it completes its merger with smaller rival Health Net Inc.

Medicare Advantage plans are offered by private health insurers, which are in turn paid by the government.

Centene, which agreed to buy Health Net for $6.3 billion this month, said net profit rose to $88 million, or 72 cents per share, in the second quarter ended June 30, from $49 million, or 41 cents per share, a year earlier.

The earnings per share figure includes a 1 cent per share charge associated with the Health Net merger.

Analysts on average were expecting net earnings of 69 cents per share, according to Thomson Reuters I/B/E/S.

The company also said it added 1.3 million members during the quarter compared with a year earlier.

However, Centene's health benefits ratio, or the amount it spends on medical claims compared with its income from premiums, deteriorated to 89.1 percent from 88.9 percent a year ago, due to a rise in costs as it entered two new states.

Centene forecast full-year earnings of $2.74 to $2.82 per share. Analysts were expecting $2.79 per share.

Total revenue rose 37 percent to $5.51 billion but missed the average estimate of $5.53 billion.

The company's shares rose 57 cents to close at $69.67.

___

(c)2015 the St. Louis Post-Dispatch

Visit the St. Louis Post-Dispatch at www.stltoday.com

Distributed by Tribune Content Agency, LLC.

© Tribune Content Agency, source Regional News

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