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Government-sponsored business to lift health insurers' Q3 earnings

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Government-sponsored business to lift health insurers' Q3 earnings

Out of the nine largest U.S managed care companies, seven are expected to grow their earnings in the third quarter of 2018 compared with the same quarter a year ago, according to an S&P Global Market Intelligence review of analysts' EPS projections.

Government-sponsored business lines under Medicaid managed care, Medicare Advantage and the Affordable Care Act are likely to boost earnings figures for health insurance companies, Leerink Partners analyst Ana Gupte wrote in a research note. Health insurers still have strong balance sheets and cash flows, and the broader market selloff has presented a buying opportunity, Gupte said.

Health insurers have requested lower rate increases on ACA exchanges that have finally stabilized since the law was implemented in 2013, a departure from the massive rate hikes that defined the business just a year ago.

For Centene Corp., the ACA business has become profitable enough to expand into new markets. Chairman and CEO Michael Neidorff told S&P Global Market Intelligence in an interview that about 80% of Centene's members have re-enrolled.

BMO Capital Markets analyst Matthew Borsch said Centene's performance on the exchanges has been exceptional, given its tailored plans to attract Medicaid managed care recipients.

"It says to us they must be continuing to do reasonably well," Borsch said in an interview.

On the other end of the spectrum, WellCare Health Plans Inc. and Triple-S Management Corp. are expected to see their third-quarter earnings per share come in lower than the same period a year ago.

WellCare has an EPS estimate of $3.13 per share for the third quarter, whereas Triple-S Management has an estimate of 35 cents per share, a significant decrease of 42 cents per share from the same period last year.

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