What Happened?
Shares of health coverage company Centene (NYSE: CNC) jumped 3.3% in the morning session after regulators lifted an enrollment suspension on one of its Medicare Advantage contracts for the upcoming sign-up season. The contract, Wellcare of Missouri, was previously barred from enrolling new members because the Centers for Medicare and Medicaid Services (CMS) determined it had charged excessive premiums and failed to spend at least 85% of premiums on patient care, a metric known as the medical loss ratio. The lifting of this suspension ahead of the upcoming sign-up season is a significant positive development for the health insurer, allowing it to resume membership growth in that specific plan. This news appeared to outweigh other reports of securities class action lawsuits being filed against the company.
After the initial pop the shares cooled down to $29.08, up 0.3% from previous close.
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What Is The Market Telling Us
Centene’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 3% on the news that markets continued to rally amid growing speculation of an impending interest rate cut by the Federal Reserve. Following a favorable Consumer Price Index (CPI) report, investors are increasingly betting on a rate reduction next month, a sentiment amplified by U.S. Treasury Secretary Scott Bessent's call for a significant cut. This has fueled a 'risk-on' environment across Wall Street. Lower interest rates are typically beneficial for growth-oriented sectors like healthcare, as they reduce the cost of borrowing for research and innovation and increase the present value of future earnings.
Centene is down 51.9% since the beginning of the year, and at $29.08 per share, it is trading 63.8% below its 52-week high of $80.23 from September 2024. Investors who bought $1,000 worth of Centene’s shares 5 years ago would now be looking at an investment worth $458.17.
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