Centene to lay off 3% of workforce in 'rightsizing' of cost structure
The layoffs begin October 2, and the affected workers will end their employment on December 8.
Photo: Bloom Productions/Getty Images
Health insurer Centene, based out of St. Louis, will be laying off about 2,000 employees, representing about 3% of its total workforce, with the affected workers set to receive severance packages and outplacement services upon the end of their employment. The layoffs begin October 2, and the affected workers will end their employment on December 8.
It's been a rocky few months for the insurer, which reported a $213 million net earnings loss to end 2022, although it saw a 9% increase in revenue, driven by organic Medicaid growth and a 21% increase in membership in its Medicare business.
Medicare Advantage and Part D Star Ratings were not kind to Centene this year. Only four plans received a low two-star rating, compared to none last year in the one- to five-star rankings. All were Wellcare plans by Centene.
At the time, Centene CEO Sarah London outlined "aggressive action" to turn around results, but EVP and Chief Financial Officer Andrew Asher said during a February earnings call that potential difficulties lay ahead.
"Medicare is going to be challenging for us in 2024," said Asher. "We knew it was going to be tough given the cards we were dealt in star scores, stemming from poor decisions in 2020. And the impact of a disappointing advanced notice on 2024 rates does not help."
He said the company will be temporarily pricing for a negative margin in Medicare Advantage in 2024. He added the company doesn't expect to grow MA in 2024, and it will likely shrink a little.
Centene did not provide a concrete reason for the layoffs. A Centene spokesperson said in a statement that the company remains committed to improving the health and care of its members.
"We are investing to deliver value for our customers now and into the future, both by leveraging our size and scale and by rightsizing our cost structure," the spokesperson said. "We routinely assess our workforce to ensure we have the talent and expertise necessary to support our members and the evolving needs of our business. Our decision was not made lightly and impacts approximately 2,000 employees, just over 3% of our workforce. Centene will support impacted employees with severance packages and outplacement services, consistent with our standard approach."
THE LARGER TREND
At the tail end of last year, Centene sold off Magellan Rx to Prime Therapeutics for $1.5 billion. The agreement included a number of Magellan Rx business segments, including specialty drug management and full-service specialty pharmacies; a state government division serving 28 states and Washington, D.C.; and a pharmacy benefit manager serving about 1.7 million members.
This followed an announcement that Centene was selling Magellan Specialty Health to Evolent Health for about $750 million in aggregate proceeds, including potential earnout. Magellan Specialty Health is a specialty benefit management organization that offers utilization management solutions to health plans, including radiology management, musculoskeletal management, physical medicine management and genetic testing solutions.
In April, Centene downgraded its 2024 adjusted earnings per share target to greater than $6.60, reflecting its view of Medicaid redeterminations, its Medicare bid strategy and business investments. This compares to an earlier forecast of $7.15 per share.
Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com
