CENTENE CORP
For the period ended Sep 30, 2024. Filed Oct 25, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 25, 2024
CNC$69.74-6.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-26.
0001071739-24-000157
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-25.
0001071739-24-000200
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 160 previous paragraphs and 164 current paragraphs.
79 unchanged; 72 reworded; 13 added; 7 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
Third Quarter 2024 Highlights
Current report
•Operating cash flows used cash of $1.0 billion in the third quarter of 2024.
Current report
•In September 2024, our subsidiary, Health Net Community Solutions, was selected by the California Department of Health Care Services to provide managed dental health care services to beneficiaries of Medi-Cal, the State's Medicaid program, in Los Angeles and Sacramento counties. The new 54-month contract is expected to take effect on July 1, 2025.
Current report
•In September 2024, our subsidiary, Iowa Total Care, was selected by the Iowa Department of Health and Human Services to continue providing Medicaid managed care services under the Iowa Health Link program. The contract is expected to begin July 1, 2025 and is a four-year term, with an optional two-year extension, for a total of six possible contract years.
Current report
•In August 2024, our subsidiary, PA Health and Wellness, was selected by the Pennsylvania Department of Human Services to continue to administer Pennsylvania's Community HealthChoices program, the Medicaid managed care program that covers adults who are dually eligible for Medicare and Medicaid or who qualify to receive Medicaid long-term services and supports due to a need for the level of care provided in a nursing facility. The contract is expected to begin April 1, 2025 and is a five-year term, with three optional one-year extensions, for a total of eight possible contract years.
Current report
•In July 2024, the State of Florida announced plans to execute agreements with eight health plans, including our subsidiary, Sunshine Health. The Statewide Medicaid Managed Care program includes integrated Managed Medical Assistance, Long-Term Care services, Serious Mental Illness, Child Welfare and HIV specialty products. The contract is expected to begin on February 1, 2025.
Current report
•In 2025, Wellcare will offer Medicare Advantage plans in 32 states, including its newest state, Iowa. Wellcare will discontinue offering Medicare Advantage products in Alabama, Massachusetts, New Hampshire, New Mexico, Rhode Island and Vermont in 2025. We currently anticipate that the 2025 Plan year will operate at a loss driven by Star ratings; accordingly, we expect to record a premium deficiency reserve in the fourth quarter of 2024.
Current report
•In October 2024, CMS issued 2025 Medicare Advantage Star Ratings on the Medicare Plan Finder. Based on the data, Centene Corporation had approximately 46% of its Medicare Advantage membership enrolled in plans rated 3.5 stars or higher – compared to approximately 23% in the prior year. This represents meaningful progress and was consistent with internal expectations despite higher than industry-anticipated cut point changes. Additionally, we are appealing CMS' scoring of our TTY (Text-to-Voice teletypewriter services for the hearing impaired) measure which, if successful, could further increase our percentage of Medicare Advantage members enrolled in plans rated 3.5 stars or higher.
Current report
•In October 2024, our subsidiary, Meridian Health Plan of Michigan, was selected by the MDHHS to provide highly integrated Medicare and Medicaid services for dually eligible Michiganders through a Highly Integrated Dual Eligible Special Needs Plan. The plan is expected to launch on January 1, 2026 and is a seven-year term, with three optional one-year extensions, for a total of 10 possible contract years.
Current report
•In 2025, our Health Insurance Marketplace product, Ambetter Health will expand its geographic footprint, adding 60 new counties across 10 states, which includes expansion into Iowa. In total, the Marketplace plan will be available across 29 states.
Current report
For the three months ended September 30, 2024, we recorded income tax expense of $211 million on pre-tax earnings of $921 million, or an effective tax rate of 22.9%. For the third quarter of 2024, our effective tax rate on adjusted earnings was 23.3%.
Current report
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Current report
During the nine months ended September 30, 2023, we recorded total impairment charges of $478 million, including a $251 million charge related to assets associated with the then pending divestiture of Circle Health, a $142 million charge related to assets associated with our Operose Health business based on market indicators of fair value, and additional impairments of $85 million related to our ongoing real estate optimization initiatives.
Removed paragraphs (7)
Previous report
Second Quarter 2024 Highlights
Previous report
•Operating cash flows provided cash of $2.2 billion in the second quarter of 2024.
Previous report
(a) gain on the sale of Apixio of $91 million, or $0.16 per share ($0.11 after-tax), gain on the previously reported divestiture of Centurion of $15 million, or $0.02 per share ($0.01 after-tax), an additional loss on the divestiture of our Spanish and Central European businesses of $13 million, or $0.02 per share ($0.01 after-tax) and real estate impairments of $19 million, or $0.03 per share ($0.02 after-tax).
Previous report
•In April 2024, the state of Florida announced its intent to award contracts to five health plans, including Centene's Florida subsidiary, Sunshine Health, as a result of the reprocurement of the Statewide Medicaid Managed Care program.
Previous report
•In October 2023, CMS issued 2024 Medicare Advantage Star Ratings on the Medicare Plan Finder, which was subsequently updated in July 2024. Based on the data, approximately 74% of membership is associated with contracts showing year-over-year unrounded score improvement, and approximately 91% of membership is associated with contracts rated 3.0 stars or better - compared to 53% in the prior year.
Previous report
For the three months ended June 30, 2024, we recorded income tax expense of $370 million on pre-tax earnings of $1.5 billion, or an effective tax rate of 24.4%. The effective tax rate for the second quarter of 2024 reflects tax effects of settlements with taxing authorities. For the second quarter of 2024, our effective tax rate on adjusted earnings was 24.4%.
Previous report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Reworded paragraphs (72)
Previous wording
In contrast to previous executive and legislative efforts to restrict or limit certain provisions of the Affordable Care Act (ACA), legislation and regulations at the federal level over the last few years have contained provisions aimed at leveraging Medicaid and the Health Insurance Marketplace to expand health insurance coverage and affordability to consumers. The American Rescue Plan Act (ARPA), enacted in March 2021, initially enhanced eligibility for the premium tax credit for enrollees in the Health Insurance Marketplace, which was extended through 2025 by the Inflation Reduction Act, enacted in August 2022.
Current wording
The American Rescue Plan Act (ARPA), enacted in March 2021, initially enhanced eligibility for the premium tax credit for enrollees in the Health Insurance Marketplace. The enhanced eligibility extended by the Inflation Reduction Act, enacted in August 2022, expires at the end of 2025. We continue to advocate for legislation and regulations aimed at leveraging Medicaid and the Health Insurance Marketplace to maintain health insurance coverage and affordability for consumers.
Previous wording
The COVID-19 pandemic impacted and continues to affect our business as it relates to Medicaid eligibility changes. The Families First Coronavirus Response Act, enacted in March 2020, increased federal matching rates for state Medicaid programs with a requirement that states suspend Medicaid redeterminations throughout the public health emergency (PHE). As a result, since the onset of the PHE through March 2023, our Medicaid membership increased by 3.6 million members (excluding new states North Carolina and Delaware and various state product expansions or managed care organization changes). The Consolidated Appropriations Act, 2023, signed into law on December 29, 2022, delinked the Medicaid continuous coverage requirements from the PHE and, as a result, some states began Medicaid disenrollments on April 1, 2023. Per the Act and clarifying CMS guidance, redeterminations related to the PHE were largely intended to conclude during the second quarter of 2024. However, redeterminations in certain states moved at a slower pace due to CMS compliance action to pause and/or complete corrective action prior to disenrolling beneficiaries and some states have seen redeterminations extend past the second quarter of 2024. Since redeterminations began in April 2023, our Medicaid membership decreased by 2.4 million members. We anticipate that any remaining reductions will be limited as the majority of states have substantially completed their unwinding processes as of July 2024.
Current wording
The COVID-19 pandemic impacted and continues to affect our business as it relates to Medicaid eligibility changes. The Families First Coronavirus Response Act, enacted in March 2020, increased federal matching rates for state Medicaid programs with a requirement that states suspend Medicaid redeterminations throughout the public health emergency (PHE). As a result, since the onset of the PHE through March 2023, our Medicaid membership increased by 3.6 million members (excluding new states North Carolina and Delaware and various state product expansions or managed care organization changes). The Consolidated Appropriations Act, 2023, signed into law on December 29, 2022, delinked the Medicaid continuous coverage requirements from the PHE and, as a result, some states began Medicaid disenrollments on April 1, 2023. Per the Act and clarifying CMS guidance, redeterminations related to the PHE were largely intended to conclude during the second quarter of 2024. However, redeterminations in certain states moved at a slower pace due to CMS compliance action to pause and/or complete corrective action prior to disenrolling beneficiaries and some states have seen redeterminations extend past the second quarter of 2024. Since March 31, 2023, redeterminations are the primary driver of our Medicaid membership decline. While some states are still concluding the redetermination process for certain populations of members, we anticipate that any remaining reductions will be limited as the majority of states have substantially completed their unwinding processes as of October 2024. We continue to work with our state partners to match rates to acuity post-redeterminations.
Previous wording
Our financial performance for the second quarter of 2024 is summarized as follows:
Current wording
Our financial performance for the third quarter of 2024 is summarized as follows:
Previous wording
•Managed care membership of 28.5 million, an increase of 66 thousand members, or 0.2% year-over-year.
Current wording
•Managed care membership of 28.6 million, an increase of 670 thousand members, or 2% year-over-year.
Previous wording
•Total revenues of $39.8 billion, representing 6% growth year-over-year.
Current wording
•Total revenues of $42.0 billion, representing 10% growth year-over-year.
Previous wording
•Premium and service revenues of $36.0 billion, representing 3% growth year-over-year.
Current wording
•Premium and service revenues of $36.9 billion, representing 6% growth year-over-year.
Previous wording
•HBR of 87.6%, compared to 87.0% for the second quarter of 2023.
Current wording
•HBR of 89.2%, compared to 87.0% for the third quarter of 2023.
Previous wording
•SG&A expense ratio of 8.0%, compared to 8.7% for the second quarter of 2023.
Current wording
•SG&A expense ratio of 8.3%, compared to 8.7% for the third quarter of 2023.
Previous wording
•Adjusted SG&A expense ratio of 8.0%, compared to 8.6% for the second quarter of 2023.
Current wording
•Adjusted SG&A expense ratio of 8.3%, compared to 8.6% for the third quarter of 2023.
Previous wording
•Diluted earnings per share (EPS) of $2.16, compared to $1.92 for the second quarter of 2023.
Current wording
•Diluted earnings per share (EPS) of $1.36, compared to $0.87 for the third quarter of 2023.
Previous wording
•Adjusted diluted EPS of $2.42, compared to $2.10 for the second quarter of 2023.
Current wording
•Adjusted diluted EPS of $1.62, compared to $2.00 for the third quarter of 2023.
Previous wording
(a) gain on the previously reported divestiture of Circle Health Group (Circle Health) of $10 million, or $0.02 per share ($0.02 after-tax), an additional loss on the divestiture of our Spanish and Central European businesses of $7 million, or $0.01 per share ($0.01 after-tax), severance costs due to a restructuring of $4 million, or $0.01 per share ($0.01 after-tax), reduction to the net gain on the sale of property due to closing costs of $3 million, or $0.00 per share ($0.00 after-tax) and net gain on the finalization of working capital adjustments for the previously reported divestiture of Magellan Specialty Health of $2 million, or $0.00 per share ($0.00 after-tax);
Current wording
(a) Circle Health Group (Circle Health) impairment of $251 million, or $0.46 per share ($0.50 after-tax), Operose Health Group (Operose Health) impairment of $142 million, or $0.26 per share ($0.24 after-tax), real estate impairments of $47 million, or $0.09 per share ($0.09 after-tax), severance costs due to a restructuring of $22 million, or $0.04 per share ($0.03 after-tax) and a reduction to the previously recorded gain on the sale of Magellan Rx of $10 million, or $0.02 per share ($0.00 after-tax).
Previous wording
(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. The six months ended June 30, 2023, include a one-time income tax benefit of $69 million, or $0.12 per share, resulting from the distribution of long-term stock awards to the estate of the Company's former CEO.
Current wording
(2)The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. The three months ended September 30, 2024, include a tax benefit of $2 million, or $0.00 per share, related to tax adjustments on previously reported divestitures.
Previous wording
•In July 2023, our subsidiary, Superior, announced it entered into a contract to continue to provide healthcare coverage to the aged, blind or disabled (ABD) population in the state's STAR+PLUS program. The contract is anticipated to begin in September 2024 for a six-year term with a maximum of three additional two-year extensions.
Current wording
•In September 2024, our subsidiary, Superior HealthPlan (Superior), commenced the contract awarded by the Texas Health and Human Services Commission to continue to provide healthcare coverage to the aged, blind or disabled (ABD) population in the state's STAR+PLUS program. The contract has a six-year term with a maximum of three additional two-year extensions.
Previous wording
•In January 2024, our subsidiary, NH Healthy Families, was selected by the New Hampshire Department of Health and Human Services to continue providing physical health, behavioral health and pharmacy services for New Hampshire's Medicaid managed care program, known as Medicaid Care Management. The contract is expected to begin in September 2024 for a five-year term.
Current wording
•In September 2024, our subsidiary, NH Healthy Families, commenced the contract awarded by the New Hampshire Department of Health and Human Services to continue providing physical health, behavioral health and pharmacy services for New Hampshire's Medicaid managed care program, known as Medicaid Care Management (MCM). The contract has a five-year term.
Previous wording
•In July 2024, our subsidiaries, Carolina Complete Health and WellCare of North Carolina, began coordinating physical and/or other health services with Local Management Entities/Managed Care Organizations under the state's new Tailored Plan program. The Tailored Plans are integrated health plans designed for individuals with significant behavioral health needs or intellectual/developmental disabilities.
Current wording
•In July 2024, our subsidiaries, Carolina Complete Health and WellCare of North Carolina, began coordinating physical and other health services with Local Management Entities/Managed Care Organizations under the state's new Tailored Plan program. The Tailored Plans are integrated health plans designed for individuals with significant behavioral health needs or intellectual/developmental disabilities.
Previous wording
•In September 2023, our subsidiary, Superior HealthPlan (Superior), commenced a new six-year contract awarded by the Texas Health and Human Services Commission to continue providing youth in foster care with healthcare coverage through the STAR Health Medicaid program. Superior has been the sole provider of STAR Health coverage since the program launched in 2008.
Current wording
•In September 2023, our subsidiary, Superior, commenced a new six-year contract awarded by the Texas Health and Human Services Commission to continue providing youth in foster care with healthcare coverage through the STAR Health Medicaid program. Superior has been the sole provider of STAR Health coverage since the program launched in 2008.
Previous wording
•In April 2023, eligibility redeterminations related to the PHE began. We anticipate that any remaining reductions will be limited as the majority of states have substantially completed their unwinding processes as of July 2024. We continue to work with our state partners to match rates to acuity post-redeterminations.
Current wording
•In April 2023, eligibility redeterminations related to the PHE began. We anticipate that any remaining reductions will be limited to certain populations of members as the majority of states have substantially completed their unwinding processes as of October 2024. We continue to work with our state partners to match rates to acuity post-redeterminations.
Previous wording
•Given our strong bid positioning, Medicare Prescription Drug Plan (PDP) membership increased 47% year-over-year.
Current wording
•Given our strong bid positioning, Medicare Prescription Drug Plan (PDP) membership increased 49% year-over-year.
Previous wording
•Consistent with our strategic positioning and bid strategy, Medicare Advantage membership declined year-over-year.
Current wording
•Consistent with our strategic positioning and bid strategy, Medicare Advantage membership declined 14% year-over-year.
Previous wording
•The decrease in our Star quality ratings in the 2023 rating year, which CMS published in October 2022, adversely impacts our 2024 Medicare revenue. The decrease in Star quality ratings is driven by the expiration of certain disaster relief provisions as well as deterioration in select metrics. As a result of this expectation, we recorded a premium deficiency reserve of $250 million in the fourth quarter of 2023, which increased to $300 million in the first quarter of 2024 and to $335 million in the second quarter of 2024 to reflect the seasonality of earnings, in connection with the 2024 Medicare Advantage business.
Current wording
•The decrease in our Star quality ratings in the 2023 rating year, which CMS published in October 2022, adversely impacts our 2024 Medicare revenue. The decrease in Star quality ratings is driven by the expiration of certain disaster relief provisions as well as deterioration in select metrics. As a result of this expectation, we recorded a premium deficiency reserve of $250 million in the fourth quarter of 2023, which increased to $300 million in the first quarter of 2024 to $335 million in the second quarter of 2024 and decreased by $90 million to $245 million in the third quarter of 2024 to reflect the seasonality of earnings, in connection with the 2024 Medicare Advantage business.
Previous wording
•In 2024, our Health Insurance Marketplace product, Ambetter Health expanded into Delaware. In total, the Marketplace plan is available across 29 states. Additionally, Marketplace membership increased 34% year-over-year due to the expanded footprint, strong product positioning and open enrollment results, as well as overall market growth.
Current wording
•In 2024, our Health Insurance Marketplace product, Ambetter Health expanded into Delaware. In total, the Marketplace plan is available across 29 states. Additionally, Marketplace membership increased 22% year-over-year due to the expanded footprint, strong product positioning and open enrollment results, as well as overall market growth.
Previous wording
•In December 2023 and January 2024, we completed the divestitures of Operose Health Group (Operose Health) and Circle Health, respectively.
Current wording
•In December 2023 and January 2024, we completed the divestitures of Operose Health and Circle Health, respectively.
Previous wording
•In April 2024, our subsidiary, Meridian in Michigan, was selected by the Michigan Department of Health and Human Services to continue to serve as a Medicaid health plan for the Comprehensive Health Care Program. The proposed Medicaid contracts are expected to begin on October 1, 2024, and run through September 30, 2029, with three, one-year optional extensions.
Current wording
•In October 2024, our subsidiary, Meridian Health Plan of Michigan, commenced the contract awarded by the Michigan Department of Health and Human Services (MDHHS) to continue serving as a Medicaid health plan for the Comprehensive Health Care Program. The contract has a five-year term, with three optional one-year extensions, for a total of eight possible contract years.
Previous wording
•In May 2024, our subsidiary, Sunflower Health Plan, was selected to continue providing managed health care services through KanCare, the State of Kansas' Medicaid and Children's Health Insurance Program. The new, three-year contract is expected to take effect on January 1, 2025, with the option to renew for up to two, 12-month extensions.
Current wording
•In May 2024, our subsidiary, Sunflower Health Plan, was selected to continue providing managed health care services through KanCare, the State of Kansas' Medicaid and Children's Health Insurance Program. The new contract is expected to take effect on January 1, 2025 for a three-year term, with two optional one-year extensions, for a total of five possible contract years.
Previous wording
•In December 2023, our subsidiary, Arizona Complete Health, was selected by the Arizona Health Care Cost Containment System – Arizona's single state Medicaid agency – to provide managed care for the Arizona Long Term Care System (ALTCS). The program supports Arizonans who are elderly and/or have a physical disability (E/PD) with physical and behavioral healthcare, as well as provides pharmacy benefits. The new ALTCS-E/PD contract is anticipated to begin in October 2024 and is a three-year term, with four optional one-year extensions, for a total of seven possible contract years.
Current wording
•In December 2023, our subsidiary, Arizona Complete Health, was selected by the Arizona Health Care Cost Containment System – Arizona's single state Medicaid agency – to provide managed care for the Arizona Long Term Care System (ALTCS). The program supports Arizonans who are elderly and/or have a physical disability (E/PD) with physical and behavioral healthcare, as well as provides pharmacy benefits and home and community-based services. The new ALTCS-E/PD contract is expected to begin in October 2025 and is a three-year term, with four optional one-year extensions, for a total of seven possible contract years.
Previous wording
•In August 2022, our subsidiary, Magnolia Health Plan (Magnolia), was awarded the Mississippi Division of Medicaid contract. Under the new contract, Magnolia will continue serving the state's Coordinated Care Organization Program, which will consist of the Mississippi Coordinated Access Network and the Mississippi CHIP. The contract is anticipated to begin in July 2025.
Current wording
•In August 2022, our subsidiary, Magnolia Health Plan (Magnolia), was awarded the Mississippi Division of Medicaid contract. Under the new contract, Magnolia will continue serving the state's Coordinated Care Organization Program, which will consist of the Mississippi Coordinated Access Network and the Mississippi CHIP. The contract is expected to begin in July 2025.
Previous wording
•In July 2024, we entered into a definitive agreement to sell Collaborative Health Systems, a management services organization, to Astrana Health, Inc. The transaction is expected to close by the end of 2024.
Current wording
•In October 2024, we completed the sale of Collaborative Health Systems, a management services organization.
Previous wording
•In December 2022, the Department of Defense announced that the TRICARE Managed Care Support Contract commencing in 2025 were not awarded to Health Net Federal Services.
Current wording
•In December 2022, the Department of Defense announced that the TRICARE Managed Care Support Contract commencing in 2025 was not awarded to Health Net Federal Services.
Previous wording
From June 30, 2023 to June 30, 2024, our managed care membership increased by 66 thousand, or 0.2%. The following table sets forth our membership by line of business:
Current wording
From September 30, 2023 to September 30, 2024, our managed care membership increased by 670 thousand, or 2%. The following table sets forth our membership by line of business:
Previous wording
The following discussion and analysis is based on our Consolidated Statements of Operations, which reflect our results of operations for the three and six months ended June 30, 2024 and 2023, prepared in accordance with generally accepted accounting principles in the United States (GAAP).
Current wording
The following discussion and analysis is based on our Consolidated Statements of Operations, which reflect our results of operations for the three and nine months ended September 30, 2024 and 2023, prepared in accordance with generally accepted accounting principles in the United States (GAAP).
Previous wording
Summarized comparative financial data for the three and six months ended June 30, 2024 and 2023 is as follows ($ in millions, except per share data in dollars):
Current wording
Summarized comparative financial data for the three and nine months ended September 30, 2024 and 2023 is as follows ($ in millions, except per share data in dollars):
Previous wording
Total revenues increased 5% in the six months ended June 30, 2024, over the corresponding period in 2023 primarily driven by membership growth in the Marketplace business due to strong product positioning as well as overall market growth and outperformance in Marketplace risk adjustment for the 2023 benefit year, along with increased premium tax revenue, partially offset by recent divestitures in the Other segment and lower Medicaid membership primarily due to redeterminations.
Current wording
Total revenues increased 10% in the three months ended September 30, 2024, over the corresponding period in 2023, primarily driven by Medicaid rate increases, membership growth in the Marketplace business due to strong product positioning as well as overall market growth, along with increased premium tax revenue, partially offset by lower Medicaid membership primarily due to redeterminations and recent divestitures in the Other segment.
Previous wording
The HBR for the six months ended June 30, 2024 was 87.3%, compared to 87.0% in the same period in 2023. The increase was driven by higher acuity in Medicaid as we progressed through the redetermination process and continue to work with states to match rates with acuity. The increase was also driven by Medicare Star rating impacts. The increase was partially offset by Marketplace membership growth and improved margin through strong 2024 product design and execution as well as outperformance in Marketplace risk adjustment for the 2023 benefit year.
Current wording
The HBR for the three months ended September 30, 2024, was 89.2%, compared to 87.0% in the same period in 2023. The increase was primarily driven by higher acuity in Medicaid resulting from the redetermination process as we continue to work with states to match rates with acuity. The increase was also driven by Medicare Star rating impacts.
Previous wording
Cost of services decreased by $197 million in the three months ended June 30, 2024, compared to the corresponding period in 2023. The decrease was driven by recent divestitures. The cost of service ratio for the three months ended June 30, 2024, was 81.6%, compared to 78.0% in the same period in 2023. The increase was primarily driven by the divestiture of Circle Health, which operated at a lower cost of service ratio.
Current wording
Cost of services decreased by $164 million in the three months ended September 30, 2024, compared to the corresponding period in 2023. The decrease was primarily driven by recent divestitures. The cost of service ratio for the three months ended September 30, 2024, was 88.3%, compared to 77.7% in the same period in 2023. The increase was primarily driven by the divestiture of Circle Health, which operated at a lower cost of service ratio.
Previous wording
The SG&A expense ratio was 8.0% for the second quarter of 2024, compared to 8.7% in the second quarter of 2023. The adjusted SG&A expense ratio was 8.0% for the second quarter of 2024, compared to 8.6% in the second quarter of 2023. The decreases were driven by Marketplace risk adjustment revenue, the divestiture of Circle Health, which operated at a higher SG&A expense ratio, and ongoing SG&A reduction initiatives. The decreases were partially offset by growth in the Marketplace business, which operates at a meaningfully higher SG&A expense ratio as compared to Medicaid.
Current wording
The SG&A expense ratio was 8.3% for the third quarter of 2024, compared to 8.7% in the third quarter of 2023. The adjusted SG&A expense ratio was 8.3% for the third quarter of 2024, compared to 8.6% in the third quarter of 2023. The decreases were primarily driven by the divestiture of Circle Health, which operated at a higher SG&A expense ratio, and continued leveraging of expenses over higher revenues. The decreases were partially offset by growth in the Marketplace business, which operates at a meaningfully higher SG&A expense ratio as compared to Medicaid.
Previous wording
During the second quarter of 2023, we recorded total impairment charges of $18 million related to our ongoing real estate optimization initiative.
Current wording
During the third quarter of 2023, we recorded total impairment charges of $440 million, including a $251 million charge related to assets associated with the then pending divestiture of Circle Health, a $142 million charge related to assets associated with our Operose Health business based on market indicators of fair value, and additional impairments of $47 million related to our ongoing real estate optimization initiatives.
Previous wording
Investment and other income. Investment and other income increased by $38 million in the three months ended June 30, 2024, compared to the corresponding period in 2023. The three months ended June 30, 2024 included increased interest income on investments driven by higher interest rates and cash balances. The three months ended June 30, 2024 also included a $10 million gain on the previously reported divestiture of Circle Health partially offset by a $7 million additional loss on the divestiture of our Spanish and Central European businesses, a $3 million reduction to the net gain on the sale of property due to closing costs and a net gain on the finalization of working capital adjustments for the previously reported divestiture of Magellan Specialty Health of $2 million.
Current wording
Investment and other income. Investment and other income increased by $218 million in the three months ended September 30, 2024, compared to the corresponding period in 2023. The three months ended September 30, 2024 included increased interest income on investments driven by higher cash balances. The three months ended September 30, 2023 included a $75 million realized loss on the sale of investments from rebalancing a portion of our portfolio with a focus on higher interest rate investments.
Previous wording
For the three months ended June 30, 2023, we recorded an income tax expense of $360 million on pre-tax earnings of $1.4 billion, or an effective tax rate of 25.4%. For the second quarter of 2023, our effective tax rate on adjusted earnings was 24.9%.
Current wording
For the three months ended September 30, 2023, we recorded an income tax expense of $293 million on pre-tax earnings of $768 million, or an effective tax rate of 38.2%. The effective tax rate for the third quarter of 2023 reflects the tax effects of impairments as well as the then pending divestiture of Circle Health. For the third quarter of 2023, our effective tax rate on adjusted earnings was 24.2%.
Previous wording
Total revenues decreased 2% in the three months ended June 30, 2024, compared to the corresponding period in 2023. Gross margin decreased $973 million in the three months ended June 30, 2024, compared to the corresponding period in 2023. The decrease in total revenues was driven by lower membership largely due to redeterminations. Gross margin decreased due to lower overall membership as a result of the redetermination process, coupled with higher acuity post-redeterminations as we continue to work with our state partners to match rates to the changes in acuity.
Current wording
Total revenues increased 7% in the three months ended September 30, 2024, compared to the corresponding period in 2023. Gross margin decreased $537 million in the three months ended September 30, 2024, compared to the corresponding period in 2023. The increase in total revenues was primarily driven by increased premium tax revenue and rate increases, partially offset by lower membership primarily due to redeterminations. Gross margin decreased due to lower overall membership as a result of the redetermination process, coupled with higher acuity post-redeterminations as we continue to work with our state partners to match rates to the changes in acuity.
Showing the first 40 of 72 pairs. Open the source sections for the rest.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
The three months ended June 30, 2023 included a $91 million gain on the sale of Apixio and a $15 million gain on the previously reported divestiture of Centurion, partially offset by an additional loss on the divestiture of our Spanish and Central European businesses of $13 million.
Previous report — wording carried elsewhere
During the six months ended June 30, 2023, we recorded total impairment charges of $38 million related to our ongoing real estate optimization initiative.