Centene Q1 2010 Earnings Call Transcript

Centene Q1 2010 Earnings Call Transcript
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Centene (UIS)

Q1 2010 Earnings Call

April 27, 2010 12:30 pm ET

Executives

Michael Neidorff - Chairman, Chief Executive Officer and President

Edmund Kroll - Senior Vice President of Finance and Investor Relations

Jesse Hunter - Executive Vice President of Corporate Development

Mark Eggert - Executive Vice President of Health Plan Business Unit

William Scheffel - Chief Financial Officer, Executive Vice President and Treasurer

Analysts

Thomas Carroll - Stifel, Nicolaus & Co., Inc.

Brian Wright - Collins Stewart LLC

Joshua Raskin - Barclays Capital

Scott Green - Bank of America/Merrill Lynch

Daryn Miller - Goldman Sachs Group Inc.

John Rex - JP Morgan Chase & Co

Scott Fidel - Deutsche Bank AG

Presentation

Operator

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Good morning. My name is Shannon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Centene Corporation First Quarter 2010 Earnings Call. [Operator Instructions] Thank you. I'll now turn the call over to Mr. Ed Kroll, Senior Vice President, Investor Relations.

Edmund Kroll

Good morning, everyone, and thank you for joining today's call, our first quarter 2010 earnings call. Michael Neidorff, Centene's Chairman and Chief Executive Officer; and Bill Scheffel, Centene's Executive Vice President and Chief Financial Officer, will be hosting this morning's call. The call is expected to last approximately 45 minutes and may also be accessed through our website at www.centene.com. A replay will be available shortly after the call's completion also on our website, or by dialing (800)642-1687 in the U.S. and Canada or (706)645-9291 from other countries. And for both, enter access code 63527302.

Any remarks that Centene may make about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in Centene's Form 10-Q dated April 27, 2010, and other public SEC filings.

Centene anticipates that subsequent events and developments will cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

I'd also like to remind everyone that our annual Investor Day is on June 2 this year in New York City, and that's a Wednesday this year. Normally, we do it on a Tuesday, but Memorial Day falls on a Monday. So please contact Libby Abelt in our New York office to RSVP to this event.

And with that, I'd like to turn the call over to our Chairman and CEO, Michael Neidorff. Michael?

Michael Neidorff

Thank you, Ed. Good morning, everyone, and thank you for joining Centene's First Quarter 2010 Earnings Call. Before I begin to comment on another solid quarter, I would like to take a moment to share my thoughts on Centene's position in a health care reform era. I will then briefly review some of the first quarter highlights, and then turn the call over to Bill who will walk you through the financial details.

Health care reform legislation, as we all know, was signed into law on March 23, 2010. Many of the details of reform have yet to be determined and more importantly, regulations has to be written and employees for the multitude of new government departments has to be hired. We recognize the importance of our role in facilitating the expansion of access to affordable, quality coverage for the additional 30 million Americans. This expansion will be accomplished by extending Medicaid eligibility and creating exchanges in the states. These exchanges will help working poor and other underinsured and uninsured individuals gain access to health care insurance via subsidized coverage.

Reform presents a large growth opportunity for us. Providing effective quality coverage to this vulnerable population as a low-cost producer is at the core of Centene's competency. We have the systems and infrastructure in place that will allow us to be ready as reform continues to unfold over the next three to four years and believe we are extremely well positioned to benefit in this new era.

As you know, beginning on January 1 of 2014, Medicaid eligibility in all states will increase to 133% of the federal poverty level or FPL for all of all non-elderly individuals. This will add 16 million new Medicaid beneficiaries, more than half of the total expected coverage expansion.

From 2014 to 2016, the federal government will pay 100% of the incremental cost of the new beneficiaries. This will come down to 90% by 2020 and will reach a more normalized 55% level by 2024. The increased FMAP over the 2014 to 2024 time period will provide extra help for state Medicaid budgets and the support needed for the additional Medicaid lines.

As we have discussed for the past 18 months, we have been working on repositioning Centene from a Medicaid-focused company to an organization that provides products and services to all individuals that fall within the underinsured and uninsured spectrum. We began this endeavor with the purchase of Celtic in July of 2008 which allowed us to tap into the underinsured and uninsured market.

Celtic was important in terms of having the systems and capabilities to cover individuals and small groups. In July of 2009, our CeltiCare subsidiary began serving low-income working adults up to 300% of the federal poverty level through the Commonwealth Care Program in Massachusetts. And in October 2009, CeltiCare began managing the health program for legal immigrants through Commonwealth Bridge Program in Massachusetts.

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