Centene swung to a $1.09B Q2 profit ($2.19/share) from a $253M loss as Marketplace repricing and risk-adjustment true-ups cut its health benefits ratio to 89.6% from 93.0%, despite 2.1M fewer members; 2026 EPS guidance raised again.
Revenue
$53.6B
+9.9% YoY
Net income
$1.1B
Diluted EPS
$2.19
Operating margin
2.2%
Overview
Centene, the largest US insurer of Medicaid and Affordable Care Act Marketplace ("Obamacare") members, swung from a loss to a profit in the second quarter of 2026. Net earnings attributable to Centene were $1,091 million ($2.19 per diluted share), against a $253 million loss ($0.51 per share) a year earlier. Total revenues rose 9.9% to $53.6 billion, even though the company covered 2.1 million fewer people (25.9 million, down 8%).
The main driver was a sharp drop in the health benefits ratio (HBR). That is the share of each premium dollar that Centene pays back out as medical claims. The lower it is, the more room is left to cover overhead and earn a profit. Consolidated HBR fell to 89.6% from 93.0%. The biggest improvement came from the Marketplace business: Centene raised prices for 2026 and booked a $481 million pre-tax benefit when CMS finalized the ACA's 2025 risk-adjustment transfers (explained below). Part of the improvement is non-recurring, and Centene says so itself.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Total revenues
$53,579M
$48,742M
+9.9%
Premium and service revenues
$44,375M
$42,467M
+4.5%
Earnings (loss) from operations
$1,198M
$(458)M
n.m. (loss to profit)
Operating margin (on total revenues)
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n.m. = not meaningful, because the result went from a loss to a profit.
Year to date (six months): total revenues were $103,523M (+8.6%), net earnings attributable to Centene were $2,632M versus $1,058M, GAAP diluted EPS was $5.30 versus $2.13, adjusted diluted EPS was $5.88 versus $2.75, and HBR was 88.4% versus 90.2%.
Takeaway: This quarter's profit rests mostly on the Marketplace business repricing successfully. Commercial HBR fell from 90.6% to 79.2%, and Commercial gross margin roughly doubled (+$1.0B) even as Marketplace membership fell 40%. Some of the gain comes from one-time 2025 true-ups, and Medicaid, the largest business, still pays out 93.9 cents of every premium dollar in claims. Guidance also implies the second half of the year will be much weaker than the first.
Revenue: headline growth is inflated by pass-through money
The 9.9% rise in total revenue overstates how much the business grew. Premium tax revenue, money that states route through Centene and that goes straight back out as premium tax expense, jumped 47% to $9,204M ($9,220M went back out as expense). Excluding it, premium and service revenues rose 4.5% to $44,375M. The 10-Q attributes that growth to "premium yield and membership growth in the PDP business, rate increases in Marketplace and in the Medicaid business to address medical trend, Marketplace risk adjustment revenue transfer for the 2025 and 2026 benefit years, and state directed payments." Lower Marketplace and Medicaid membership partly offset those gains.
The operating margin (earnings from operations as a share of revenue, before interest and tax) was 2.2% on total revenue. Measured against premium and service revenues, which excludes the pass-through, it was about 2.7%. Thin margins like these are normal for government-program insurers. They also mean that a one-point move in HBR changes profit a great deal.
Segment performance
Segment
Premium & service rev. Q2 26
YoY
HBR Q2 26
HBR Q2 25
Gross margin Q2 26
Gross margin Q2 25
Medicaid
$22,766M
+5%
93.9%
94.9%
$1,388M
$1,117M
Medicare (MA, PDP, Supplement)
$11,057M
+17%
89.5%
90.9%
$1,165M
$863M
Commercial (mostly Marketplace)
$9,356M
-7%
79.2%
90.6%
$1,947M
$946M
Other
$1,196M
-2%
n/a
n/a
$117M
$92M
Gross margin here means premium and service revenue minus medical costs and cost of services, before overhead. Segment HBRs are from Centene's Q2 earnings release (8-K Exhibit 99.1) and match medical costs ÷ premiums in the 10-Q segment note.
Commercial / Marketplace: fewer members, far better pricing
Marketplace membership fell to 3.49 million from 5.86 million (-40%). The 10-Q links this to the expiry of the enhanced ACA premium subsidies at the end of 2025, together with CMS's 2025 Marketplace integrity rule. Centene expected the members who stayed to be sicker on average (higher "morbidity"). It says it "took corrective pricing actions for 2026 covering 95% of Marketplace membership," which contributed to the membership loss. The pricing worked: segment revenue fell 7%, but gross margin rose $1.0 billion to $1,947M.
Risk adjustment, the ACA mechanism that moves money from insurers with healthier-than-average members to those with sicker members, drove a large part of this result:
2025 true-up (a prior-year item). CMS published final 2025 risk-adjustment transfers on June 30, 2026. Centene's net risk-adjustment payable fell by $541M. After offsetting increases in minimum medical-loss-ratio rebates (money insurers must return when they spend too little on care), audit (RADV) accruals and other offsets, the net pre-tax benefit was $481M, recognized in the first half. Even if all of it landed in Q2, Commercial gross margin without it would be about $1.47B, still well above last year's $946M.
2026 estimate. The 10-Q says the Commercial margin also reflects "the current 2026 risk adjustment revenue transfer estimate based on the first round of Wakely relative risk adjustment transfer data." Wakely is an independent actuarial firm that pools market data. This estimate will be updated "throughout 2026 and 2027," so it could still move in either direction.
Easy comparison. Q2 2025 was hurt by "lower Marketplace estimated risk adjustment revenue." That depressed quarter is part of why the year-over-year swing in Commercial HBR (90.6% to 79.2%) looks so large.
Individual and commercial group membership (which includes ICHRA, a way for employers to fund workers' individual plans) grew 10.5% to 497,000. Centene now offers its ICHRA-oriented plans in 13 states, up from 6 in 2025.
Medicaid: margins are recovering, but slowly
Medicaid membership fell 5.5% to 12.11 million, driven by ongoing state eligibility redeterminations (post-pandemic re-checks of who still qualifies) and policy changes. High-acuity Medicaid (aged, blind, disabled and long-term care members) fell to 1.36 million from 1.59 million. Part of that decline is a reclassification: dual-eligible MMP members moved into the Medicare line in 2026. Medicaid HBR improved to 93.9% from 94.9% because of "rate and revenue increases and continued tangible progress in managing medical costs." Gross margin rose 24% to $1,388M.
The question for Medicaid is rate adequacy: whether states pay enough per member for the (on average sicker) people who remain after redeterminations. Centene says it continues to "work with our state partners to match rates to acuity." A 93.9% HBR is an improvement, but it is still high for this business. Segment revenue rose 14% in total, mostly from pass-through payments. Premium and service revenue rose 5%. State-directed payments are booked as premium at close to a 100% HBR, so they add revenue without adding meaningful profit.
Medicare: helped by a prior-year reserve and 2025 true-ups
Medicare revenue rose 17%, driven by the stand-alone prescription drug plan (PDP) business. PDP membership grew 12% to 8.80 million, and premiums per member rose. The Medicare line (Medicare Advantage, Supplement and integrated plans) shrank 4.6% to 980,000. Segment HBR improved to 89.5% from 90.9%, but two of the drivers do not reflect underlying improvement:
In Q2 2025, Centene raised its premium deficiency reserve for 2025 Medicare Advantage to $389M (from $270M). This is a provision booked in advance for contracts expected to lose money. No such reserve has been recorded for 2026, which the filing attributes to "progression towards profitability."
The filing also credits "the favorable resolution of programmatic elements for the 2025 benefit year," which is a prior-year true-up.
The earnings release says the guidance raise includes "approximately $0.50 of non-recurring items in Medicare and Commercial segments."
GAAP vs. adjusted EPS
Adjusted diluted EPS of $2.51 is $0.32 above GAAP EPS of $2.19. Almost all of the gap comes from recurring amortization of acquired intangibles ($161M pre-tax, $0.32/share). The remaining adjustments net to zero per share after tax: $37M of enterprise-optimization costs, $15M of severance, a $6M gain on debt repurchases, and the related tax effects. There was no impairment this quarter. Q2 2025 included a $55M intangible-asset impairment tied to winding down certain contracts in the Other segment. The effective tax rate was 26.9%.
Balance sheet and cash
Operating cash flow was $3.6B in Q2 and $8.0B in the first half, versus $3.3B a year earlier. The filing attributes the increase partly to the "timing of pass-through and other payments," so it overstates underlying cash generation.
Centene repurchased $1.3B of senior notes in the first half ($260M in Q2) and bought back no stock in the quarter. The debt-to-capital ratio fell to 41.6% from 46.5% at year-end 2025.
Cash available for general corporate use was $715M. Days in claims payable (how many days of medical costs are held in reserve) was 47.
In March, Centene sold a $1.0B participating interest in its 2025 Part D risk-sharing receivables from CMS for $970M and booked a $30M loss. It used the proceeds to retire 2027 notes.
Guidance and outlook
Guidance below is from the Q2 earnings release (8-K Exhibit 99.1, July 28, 2026) and, for the April column, the Q1 earnings release (April 28, 2026). Centene raised its 2026 outlook for the second straight quarter:
2026 guidance
April 2026
July 2026
Total revenues
$187.5–191.5B
$193.5–197.5B
Premium and service revenues
$171.0–175.0B
$173.0–177.0B
HBR
90.9–91.7%
90.5–91.3%
GAAP diluted EPS
> $2.37
> $3.11
Adjusted diluted EPS
> $3.40
> $4.80
Our read: The guidance points to a much weaker second half. First-half adjusted EPS was already $5.88, but the full-year floor is only above $4.80, which leaves room for an adjusted loss of roughly $1 per share in July–December. The full-year HBR range of 90.5–91.3% also sits well above the first half's 88.4%. Part of the H2 weakness is seasonal: the filing notes that Medicare earnings are higher early in the year and lower later as members' cost-sharing (deductibles and copays) is used up. Separately, the GAAP guidance assumes about $0.93 per share of "other adjustments" for the year versus $0.11 so far. The earnings release puts full-year severance tied to enterprise optimization and contract exits at roughly $355–405M.
Beyond 2026, the 10-Q lists several known headwinds:
California: about 250,000 Medi-Cal members with unsatisfactory immigration status move out of managed care on January 1, 2027.
Contract losses: Certain Hawaii Medicaid contracts were not renewed. The Florida Children's Medical Services contract ends in September 2026. Centene is protesting the results of Medicaid procurements in Georgia and Texas.
New York: the state terminated its Essential Plan-5 in July 2026.
Federal law: One Big Beautiful Bill Act work requirements and more frequent eligibility checks for Medicaid expansion members, largely beginning in 2027, could shrink enrollment and raise the average sickness of those who remain.
On the positive side, about 60% of Medicare Advantage members are in plans rated 3.5 stars or higher for 2027 payments, up from about 55%. About 20% are in 4-star plans, up from 1%, and higher-rated plans receive bonus payments. Illinois also re-awarded Centene's Medicaid contract starting in 2027.
Overall, Centene's Marketplace repricing has clearly restored margin in that business. How much of this quarter's profit repeats depends on the 2026 risk-adjustment estimate holding up and on Medicaid rates keeping pace with a sicker, shrinking membership. The 2025 true-ups will not recur.