Barclays Healthcare Conference 2025

March 11th-March 13th with Presentations from Centene and The Cigna Group

The Barclays Healthcare conference was held in Miami this week (3/11-3/13), and The Cigna Group and Centene had a chance to discuss their performance thus far in 2025. Some interesting points on drug spending and data related to the growth of the PDP markets caught my eye. Below are the largest takeaways from the meetings.

Centene

After reviewing Centene's transcript, here were some of the highlights as they look to have a strong year.

Financial Highlights:

Adjusted EPS: The company reaffirmed its 2025 adjusted earnings per share (EPS) guidance, setting a floor of greater than $7.25.

First Quarter Performance: For Q1, Centene anticipates adjusted EPS in the mid-to-high $2 range, exceeding the consensus estimate of approximately $2.20.

Flu Season Impact: Elevated flu costs in January and February led to $130 million in additional expenses within the Medicaid segment. These costs are already accounted for in the current guidance. This is a potential red flag, as it may contribute to elevated utilization among some of the "Big Six Payors" as Q1 earnings reports approach in four weeks.

Operational Focus:

Medicaid: Centene is actively monitoring the impacts of the flu season, managing behavioral health services, and addressing specialty pharmaceutical trends within its Medicaid operations. As the nation's largest provider of Managed Medicaid, they are sensitive to their PMPM contracts that are capitated with the State partners so elevated utilization with Flu season will be a headwind if it fully manifests.

Affordable Care Act (ACA): The company reported slightly better-than-expected effectuated enrollment in February. It is also preparing for potential membership impacts due to new Failure to Report (FTR) rules anticipated in April and May. The government will begin verifying with the IRS which beneficiaries qualify for premium subsidies for ACA plans. As a result, Centene expects some attrition in the spring as many individuals may not file taxes or qualify for government subsidies.

Medicare Part D: Centene projects a 1% margin in its standalone Part D business and expects a 15% growth in Prescription Drug Plan (PDP) membership. The company has seen significant growth in the PDP market over the past few years with its Value Script Plan, which offers a $0 premium in 43 of the 50 states.

Medicare Advantage: With the preliminary rate notice for 2026 published, Centene aims to achieve break-even in its Medicare Advantage segment by 2027. The company has begun to recover its STAR ratings, which faced headwinds over the past three years but showed improvement last year.

Strategic Initiatives

Policy Engagement: The company is actively engaging with lawmakers on Medicaid reform and the future of enhanced ACA subsidies. Discussions about Medicaid budget cuts in the new administration and the expiration of ACA premium subsidies at the end of the year could lead to challenges for Centene.

Membership Trends: As of January, ACA plan enrollment exceeded 5 million members, with FTR impacts already included in the guidance. Centene remains the national leader in ACA enrollment and the Managed Medicaid space. The company ended the year with 13 million Medicaid members, down from 16.3 million during the pandemic/PHE.

Rate Management: Centene is closely monitoring specialty pharmaceutical trends to inform strategic decisions and rate settings. Although the company no longer owns its PBM, it will continue tracking drug spending for its PDP plans, considering the new Inflation Reduction Act cap on drug costs for seniors, as well as Medicaid-related expenditures.

The Cigna Group

Cigna also presented at Barclays, and the key takeaways from its presentation were as follows. While the company did not reveal much beyond what was covered in the earnings call, there were some new discussion points.

4Q 2024 Challenges and Stop-Loss Business Issues: Cigna had a tough Q4 due to underperformance in its stop-loss business, driven by higher specialty drug costs and increased high-acuity surgeries (oncology, cardiac). While 2025 pricing has been adjusted, lingering effects are expected before full recovery over the next two pricing cycles. Most stop-loss customers utilize other Cigna assets, so the company is willing to accept some margin compression in stop-loss to retain long-term relationships.