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Centene CEO says ACA expansion fills 'social need,' not selling short-term plans

➤ Centene will not start selling short-term, limited duration plans under new rules established by federal regulators.

➤ The company has been looking at an ACA expansion into Tennessee for some time.

➤ Centene's target population remains below 400% of the federal poverty level.

Centene Corp. earlier this week announced that it will enter several ACA markets for the 2019 plan year, continuing to buck earlier trends by other companies, such as Anthem Inc., that pared down its participation in markets it deemed too unprofitable.

Centene is expanding into in Pennsylvania, North Carolina, South Carolina and Tennessee in 2019, and is growing its ACA geographic footprints in Florida, Georgia, Indiana, Kansas, Missouri and Texas.

The trend of skyrocketing ACA premiums may be turning as health insurers have, in the main, asked for less-dramatic rate increases than in previous years. Companies cited a lower level of "regulatory volatility" in their preliminary requests.

In 2017, insurers saw the end of critical cost-sharing reduction subsidies, as well as the repeal of the individual mandate. In addition, expanded access to short-term health plans and association health plans have been viewed by industry insiders as negative alternatives to ACA plans.

Centene Chairman and CEO Michael Neidorff spoke with S&P Global Market Intelligence to explain the company's accelerated participation in ACA markets and his company's view toward the new regulatory structure governing short-term plans.

The following is an edited transcript of that conversation.

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Michael Neidorff, Chairman and CEO, Centene Corp.
Source: Centene

S&P Global Market Intelligence: Why did Centene decide to enter into these states?

Michael Neidorff: There was a clear need for it. We're in South Carolina and Pennsylvania with long-term care already. North Carolina is a market that has a [request for proposal] out and we want to get some experience in it if we're fortunate enough to win. Tennessee is a market that we've looked at for a long time, so now is the time to get into it.

What makes now a good time to expand in Tennessee?

Neidorff: Well, we've done very well with the 16 markets we were in. The business has been growing nicely. We're the largest exchange provider in the country and so you look for ways to expand.

Last year, Centene was entering markets while there were mass exits by your peers. Is this announcement a continuation of that trend? Was that an experiment?

Neidorff: It's all the same. We make decisions based on the facts that there are today ... There is an opportunity here that we should take advantage of. We're past the experiment stage. In 2015, we entered into two markets and [covered] 167,000 lives. We took some losses as we expanded it, predictably, but in 2016 we had 683,000 lives. In 2017, we now have a policy we could do well with. People were liking what they saw and we went up to 1.2 million lives. In this past year, despite people trying to kill [the ACA] and all of the activity, we went up to 1.65 million. We make our decisions based on the facts that there are today. And if something changes, we are a very agile company, we'll make the adjustment.

Experts have said that your company has fashioned these ACA plans to appeal to the Medicaid managed care population. Is that still the strategy?

Neidorff: We focus in all our businesses, particularly on the 400% of the federal poverty level and below, in all of the products we [offer], not just the ACA business.

What do you find attractive about that population?

Neidorff: There's a real need, a real social need. We have the systems now to manage the issues within that [population] and the [provider] network to do it as well.

Industry insiders have said that there is not much else the White House can do to undermine the law. Do you hold that view as well?

Neidorff: There are a lot of serious politicians we've been talking to. But we're moving away from politics and moving to policy. And people like this insurance. We've had 80% of the people re-enroll from last year to this year. We're trying to get people to understand that other people don't have insurance. If they get sick they go to the emergency room. And the hospitals are going to have complicated care. Now, they can't absorb that so they're going to shift to the employed population, making it more expensive for employers.

Is it your goal to fill the uninsured gap? How much of that attitude informs how you operate the company?

Neidorff: I see Centene as the leader. We're the largest Medicaid [managed care insurer], the largest long-term care [provider], the largest exchange participant. When you're the leader, it is incumbent upon you to help people understand what the needs are and how to do it. And that's what we're doing. We're close to becoming the third-largest healthcare company in the country. That brings a serious responsibility.

The White House has ruled that short-term plans can now last up to a year with the option of renewability for up to two years. Will Centene offer short-term plans under the new regulatory framework?

Neidorff: We have the capability to do it. But we're going to stay away from it for now. Association plans have been around for a while, and they haven't been that successful. People don't like plans that have pre-existing condition issues. Most of our population is subsidized, so they're not looking for what's the least expensive. They want good, adequate coverage, and we have the best robust coverage. And so you have to look at how many things get excluded to get a smaller cost structure.

I think people are going to be a little bit surprised when they start to realize they have an insurance plan that doesn't cover what they thought they should. I think people over time are going to be very disappointed.