Medicaid insurance provider Centene Corp. (NYSE: CNC) today announced that it is exercising its contractual right to discontinue offering its Medicaid managed care in the state of Kentucky. The state and the company have been negotiating a solution to the dispute, but Centene now says:
Since the inception of the contract, we have been in discussions with the [state] about our concerns with the Medicaid managed care program but have been unable to resolve our differences. Consequently, we do not believe there is a viable path to a sustainable managed care program in Kentucky.
Centene expects to record a pre-tax premium deficiency reserve of $60 to $70 million related to the issue in the third quarter of 2012, which ended September 30th. The company expects its forecast to remain as stated, excluding the establishment of the reserve. The consensus earnings per share (EPS) estimate for the third quarter is $0.46 on revenue of $2.23 billion.
Centene lowered its full-year guidance in June based in part on its difficulties in Kentucky. Two other insurers, WellCare Health Plans Inc. (NYSE: WCG) and Coventry Health Care Inc. (NYSE: CVH) will continue to offer Medicaid managed care programs in the state.
Shares of Centene are up 10.6% today at $38.69 in a 52-week range of $24.26 to $50.98.