Centene raises Wall Street optimism that Medicaid insurers can improve profits

Wall Street regained confidence in Medicaid insurers after Centene said on Friday it expects to be able to raise rates charged to states for 2026 health plans for low-income Americans and strengthen profit margins.

Insurer shares rose across the board. Centene shares were up 5% in early afternoon trading after falling 16% on the company’s announcement of a second-quarter loss and forecast cut. Rivals UnitedHealth, CVS Health and Humana rose 1.61%, 2.69% and 3.45%, respectively.

All three report earnings next week.

Centene in an earnings call reassured investors it would work with states to ensure their payments for Medicaid plans match the company’s increased medical costs for 2026.

“Our goal is to reprice 100%” of plans, said company CEO Sarah London.

Insurers are paid a set amount by states for Medicaid plans, which are jointly funded with the federal government. Centene, UnitedHealth and Elevance have said this year that state reimbursements for these plans have lagged behind actual costs of care.

Cautious investors have been looking for Medicaid health plan design changes and strategic geographic changes by the companies to reduce use of healthcare services.

New work requirements for Medicaid recipients in President Donald Trump’s signature tax-cut and spending bill have made some investors worry that healthy people could disenroll in coming years.

The bill requires states to verify certain members are working or volunteering a minimum of 80 hours per month to qualify for Medicaid coverage starting in 2027.

After a COVID-19 era requirement to keep people enrolled expired in 2023, Medicaid plans redetermined each person’s eligibility. This pushed members off, changing the mix of sick and healthy participants, and some Medicaid insurers struggled.

Inflows into global equity funds picked up again in the week through July 23 as optimism over U.S. trade deals, stronger than expected U.S. economic reports and an encouraging start to the corporate earnings season boosted risk sentiment.

Global investors snapped up a net $8.71 billion worth of equity funds during the week, reversing a $4.4 billion net withdrawal in the prior week, data from LSEG Lipper showed.

The United States and Japan agreed a deal earlier this week which cut existing import tariffs on Japanese goods to a lower-than-threatened 15%. Investors were also hopeful about the prospects of the U.S. and the European Union settling on U.S. import tariffs of around 15%.

Investors took comfort from encouraging initial earnings reports as advanced AI chip maker TSMC posted a record profit and Gatorade owner PepsiCo upgraded its earnings forecasts.

Net European equity fund inflows reached an 11-week high of $8.79 billion, while Asian funds drew a net $1.17 billion. U.S. equity funds lagged, although net outflows eased to $2.68 billion from about $11.67 billion the prior week.

“The Medicaid redeterminations have proven to be far more disruptive than anyone thought,” said Jeff Jonas, a portfolio manager at Gabelli Funds. “The entire industry is focused on restoring margin over winning new contracts and membership.”

More detailed data could justify midyear price increases, said Kevin Gade, chief operating officer at Bahl & Gaynor, and correct mismatched rates set by states after the pandemic.

More data over the next year will also enable insurers to improve cost management techniques and raise rates paid by states, Gade said. “With enough data you can take care of the problem.”

The technology sector gained $1.61 billion, reversing the previous week’s $576 million net outflow. The financial and industrial sectors also saw $1.13 billion and $1.61 billion net additions, respectively.

Net purchases of global bond funds extended into a 14th week as they added $17.94 billion.

Investors pumped $4.14 billion into short-term bond funds, the largest amount in 13 weeks. Euro-denominated bond funds and high-yield funds attracted a net $3.89 billion and $2.51 billion, respectively.

Gold and precious metals commodity funds recorded a net $1.9 billion worth of purchases, the largest weekly figure since June 18.

Global money market funds drew a net $2.09 billion after about $21.78 billion of net sales a week ago.

Emerging markets saw a revival in buying interest with investors adding bond funds of $2.19 billion and equity funds of $250 million after net disposals of $1.14 billion and $155 million in the prior week, data for a combined 29,669 funds showed.