Centene's Guidance Withdrawal Spooks Sector, Oscar Health Stock Falls

Oscar Health, Inc. (NYSE:OSCR) stock is trading lower on Wednesday, in reaction to Centene Corp.’s (NYSE:CNC) decision to withdraw its 2025 earnings guidance.

This move by Centene has raised concerns across the health insurance sector, particularly regarding the individual Health Insurance Marketplace.

Centene’s withdrawal of its 2025 GAAP and adjusted diluted EPS guidance stems from its initial review of 2025 industry data from Wakely, an independent actuarial firm.

Also Read: Centene Withdraws 2025 Guidance, Shares Dive

This data, covering 22 of Centene’s 29 Marketplace states and representing approximately 72% of their Marketplace membership, revealed two critical issues.

Firstly, overall market growth in these states is proving to be lower than anticipated. Secondly, and more significantly, the implied aggregate market morbidity, or the prevalence of illness, in these states is substantially higher than Centene’s original assumptions for risk adjustment revenue transfer.

This discrepancy has led Centene to estimate a preliminary reduction of approximately $1.8 billion in its full-year net risk adjustment revenue transfer expectation, which translates to an adjusted diluted EPS impact of around $2.75.

While withdrawing its comprehensive EPS guidance, Centene has reaffirmed its fiscal year 2025 adjusted EPS to be greater than $7.25, aligning with the consensus of $7.23.

It is worth noting that Centene had previously, in its first-quarter earnings release in April, raised its 2025 premium and service revenue guidance by $6 billion.

Centene now projects its 2025 premium and service revenue to be between $164 billion and $166 billion. This revised expectation is an increase from its earlier forecast of $158 billion to $160 billion.

The upward revision is attributed to two key factors: an additional $5 billion in Marketplace premium revenue, driven by stronger-than-expected enrollment during the first quarter, and an extra $1.0 billion in premium revenue due to outperformance in the Medicare Advantage annual enrollment period.

Oscar Health, despite this unsettling news from a peer, recently reported strong financial results for its first quarter. The company reported first-quarter revenue of approximately $3.0 billion, up 42% year over year, beating the consensus of $2.86 billion. The increase was primarily due to higher membership.

Furthermore, Oscar Health’s earnings per share came in at 92 cents, exceeding the consensus of 83 cents. Oscar Health has reiterated its full-year 2025 outlook, which was initially provided in its February financial results. The company continues to anticipate sales between $11.2 billion and $11.3 billion, with a projected medical cost ratio of 80.7%-81.7%.

The market’s reaction, evidenced by Oscar Health’s stock being down 15%, suggests that investors are interpreting Centene’s issues as potentially indicative of broader challenges within the individual health insurance marketplace.

Price Action: OSCR stock is down 15.0% at $17.38 at last check on Wednesday.

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