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What changed in Centene Corporation's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Centene Corporation's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+512 added−428 removedSource: 10-K (2026-02-17) vs 10-K (2025-02-18)

Top changes in Centene Corporation's 2025 10-K

512 paragraphs added · 428 removed · 331 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

92 edited+41 added−25 removed116 unchanged
Biggest changeThrough these initiatives, we have: • centralized the oversight of core quality processes and programs, including the implementation of real-time operational dashboards to track numerous quality performance metrics; • invested in new technology to enhance our access to clinical data on gaps in care, committed to integrating our numerous quality platforms into a single unified workflow and developed advanced analytics to more efficiently and effectively target our member engagement efforts for maximum impact on access, quality and member satisfaction; • increased focus on member engagement, including tripling the capacity of our member outreach services to encourage active participation with their primary care physicians and other members of their care team and overhauling our onboarding process to focus on quality from the very first member touchpoint for Medicare; and • prioritized strengthening relationships with providers to improve access and quality of care for our members; an essential strategy on this front is increasing our value-based provider engagements as those enhanced partnerships have proven to drive higher quality care.
Biggest changeThrough these initiatives, we have: • continued to standardize core quality processes and programs, including those focused on member engagement and care gap closure, encouraging members' active participation with primary care physicians and their care team; • expanded the use of advanced analytics and enhanced our real-time operational dashboards to strategically track numerous quality performance and benchmarks; • enhanced data availability to improve our ability to identify and analyze member care gaps, enabling more informed decision-making and personalized interventions to improve member satisfaction; • advanced local relationships with providers to improve access and quality of care for our members as this will drive greater quality care outcomes.
As an alternative to Original Medicare, beneficiaries may elect to receive their Medicare benefits through Part C, also known as Medicare Advantage. Under Medicare Advantage, MCOs contract with CMS to provide services directly to Medicare beneficiaries as well as through employer and union groups.
Medicare Advantage As an alternative to Original Medicare, beneficiaries may elect to receive their Medicare benefits through Part C, also known as Medicare Advantage. Under Medicare Advantage, MCOs contract with CMS to provide services directly to Medicare beneficiaries as well as through employer and union groups.
The Medicare Part D prescription drug benefit is supported by risk sharing with the federal government through risk corridors designed to limit the losses and gains of the participating drug plans and by providing a portion of reinsurance for catastrophic drug costs.
The Medicare Part D prescription drug benefit is supported by risk sharing with the federal government through risk corridors designed to limit the losses and gains of the participating drug plans by providing a portion of reinsurance for catastrophic drug costs.
Our expertise in government-sponsored programs has helped us establish and maintain strong relationships with community-based organizations, local providers, as well as our state and federal partners. Our health plans develop tailored, local programs and campaigns to support members through solutions that promote whole-person care and enhance healthcare for all. • Data-driven approach to improve health outcomes.
Our expertise in government-sponsored programs has helped us establish and maintain strong relationships with community-based organizations and local providers, as well as our state and federal partners. Our health plans develop tailored, local programs and campaigns to support members through solutions that promote whole-person care and enhance healthcare for all. • Data-driven approach to improve health outcomes.
Privacy Regulations We are subject to various international, federal, state and local laws and rules regarding the use, security and disclosure of protected health information, personal information and other categories of confidential or legally protected data that our businesses handle.
Privacy Regulations We are subject to various federal, state and local laws and rules regarding the use, security and disclosure of protected health information, personal information and other categories of confidential or legally protected data that our businesses handle.
This approach has enabled us to strengthen our provider networks through improved physician recruitment and retention which, in turn, has helped to increase our membership base. 8 Table of Contents The following are among the services we provide to support physicians: • Provider Engagement Performance Tools and Processes can lead to measurable improvements in quality and health outcomes, healthcare costs and member satisfaction.
This approach has enabled us to strengthen our provider networks through improved physician recruitment and retention which, in turn, has helped to increase our membership base. 9 Table of Contents The following are among the services we provide to support physicians: • Provider Engagement Performance Tools and Processes can lead to measurable improvements in quality and health outcomes, healthcare costs and member satisfaction.
Among other provisions, state insurance and HMO laws may restrict the ability of our regulated subsidiaries to pay dividends. 12 Table of Contents Additionally, the holding company regulations of the states in which our subsidiaries are domiciled restrict the ability of any person to obtain control of an insurance company or HMO without prior regulatory approval.
Among other provisions, state insurance and HMO laws may restrict the ability of our regulated subsidiaries to pay dividends. 13 Table of Contents Additionally, the holding company regulations of the states in which our subsidiaries are domiciled restrict the ability of any person to obtain control of an insurance company or HMO without prior regulatory approval.
We believe value-based collaboration with providers leads to improved health outcomes, reduced costs and better member and provider experiences. 7 Table of Contents Providers For each of our service areas, we establish a provider network consisting of primary and specialty care physicians, hospitals, behavioral health practitioners and ancillary providers.
We believe value-based collaboration with providers leads to improved health outcomes, reduced costs and better member and provider experiences. 8 Table of Contents Providers For each of our service areas, we establish a provider network consisting of primary and specialty care physicians, hospitals, behavioral health practitioners and ancillary providers.
Stockholders may obtain a copy of this Annual Report on Form 10-K, without charge, by writing: Investor Relations, Centene Corporation, 7700 Forsyth Boulevard, St. Louis, MO 63105. Please note: Information on our website does not constitute part of this Annual Report on Form 10-K. 17 Table of Contents
Stockholders may obtain a copy of this Annual Report on Form 10-K, without charge, by writing: Investor Relations, Centene Corporation, 7700 Forsyth Boulevard, St. Louis, MO 63105. Please note: Information on our website does not constitute part of this Annual Report on Form 10-K. 18 Table of Contents
Our programs and services are tailored to the unique individuals we serve and include a broad range of initiatives to address social drivers of health such as food insecurity, housing instability, unemployment and access to transportation, which contribute to health disparities among underserved communities.
Our programs and services are tailored to the unique individuals we serve and include a broad range of initiatives to address upstream drivers of health such as food insecurity, housing instability, unemployment and access to transportation, which contribute to health disparities among underserved communities.
As our commercial members reach their deductibles and out-of-pocket maximums, our medical costs rise, creating seasonality in the business with a higher percentage of earnings in the first half of the year. 4 Table of Contents The ACA created the Health Insurance Marketplace, which is a key component of the ACA and provides an opportunity for individuals and families to obtain health insurance.
As our commercial members reach their deductibles and out-of-pocket maximums, our medical costs rise, creating seasonality in the business with a higher percentage of earnings in the first half of the year. The ACA created the Health Insurance Marketplace, which is a key component of the ACA and provides an opportunity for individuals and families to obtain health insurance.
Additionally, we have launched a multi-year plan to improve quality across the enterprise with a strong focus on enhanced patient experience and access to care, which lays the foundation for strong quality ratings in the future, including Medicare Star ratings and Marketplace Quality Rating System (QRS). • Community-specific healthcare programs and a focus on addressing healthcare gaps.
Additionally, we have launched a multi-year plan to improve quality across the enterprise with a strong focus on enhanced patient experience and access to care, which lays the foundation for strong quality ratings in the future, including Medicare Star ratings, Medicaid Health Plan Rating (HPR) and Marketplace Quality Rating System (QRS). • Community-specific healthcare programs and a focus on addressing healthcare gaps.
D-SNPs offer various levels of integration of benefits, care coordination (e.g., care management), and processes (e.g., appeals and grievances, claims, materials) depending on the plan type. Fully Integrated Dual Eligible (FIDE) plans provide Medicaid and Medicare benefits, including LTSS and/or behavior health through one plan under one legal entity.
D-SNPs offer various levels of integration of benefits, care coordination (e.g., care management), and processes (e.g., appeals and grievances, claims, materials) depending on the plan type. Fully Integrated Dual Eligible (FIDE) plans provide Medicaid and Medicare benefits, including LTSS and behavioral health through one plan under one legal entity.
The amount of subsidy an enrollee may receive depends on household income and the cost of the second lowest cost silver plan available to enrollees in their local area. Temporary enhanced subsidies were made available by the American Rescue Plan Act (ARPA), which were further extended through 2025 pursuant to the Inflation Reduction Act.
The amount of subsidy an enrollee may receive depends on household income and the cost of the second lowest cost silver plan available to enrollees in their local area. Temporary enhanced subsidies were made available by the American Rescue Plan Act (ARPA), which were further extended through 2025 pursuant to the IRA.
Furthermore, our Board of Directors' Audit and Compliance Committee reviews ethics and compliance report data quarterly. 10 Table of Contents CORPORATE SUSTAINABILITY Our steadfast commitment to the health and social well-being of our communities, fostering a healthy environment and our culture of sound and ethical corporate governance, extends far beyond individual programs or initiatives.
Furthermore, our Board of Directors' Audit and Compliance Committee reviews ethics and compliance report data quarterly. CORPORATE SUSTAINABILITY Our steadfast commitment to the health and social well-being of our communities, fostering a healthy environment and our culture of sound and ethical corporate governance, extends far beyond individual programs or initiatives.
Our federally-facilitated Marketplace contracts and state-based exchanges are renewable on an annual basis. 14 Table of Contents Other Fraud, Waste and Abuse Laws Investigating and prosecuting healthcare fraud, waste and abuse continues to be a top priority for state and federal law enforcement agencies. These efforts span multiple products, including Medicare, Medicaid, Health Insurance Marketplace and commercial plans.
Our federally-facilitated Marketplace contracts and state-based exchanges are renewable on an annual basis. Other Fraud, Waste and Abuse Laws Investigating and prosecuting healthcare fraud, waste and abuse continues to be a top priority for state and federal law enforcement agencies. These efforts span multiple products, including Medicare, Medicaid, Health Insurance Marketplace and commercial plans.
With local leadership owning all three lines of business, we are able to translate local best practices from our Medicaid business into product development, distribution, network and pricing decisions we make for our Marketplace and Medicare businesses. We know what our customers will value because we live and work alongside them every day. • Partnerships .
With local leadership owning all three lines of business within each health plan, we are able to translate local best practices from our Medicaid business into product development, distribution, network and pricing decisions we make for our Marketplace and Medicare businesses. We know what our customers will value because we live and work alongside them every day. • Partnerships .
Through an intentional focus on building a One CenTeam culture, we have elevated and unleashed the power of 60,500 team members who uniquely understand how to serve our members and are committed to our mission of transforming the health of the communities we serve, one person at a time. 6 Table of Contents Benefits to Customers We feel that our ability to establish and maintain a leadership position in the markets we serve results primarily from our demonstrated success in providing quality care while improving the affordability of healthcare, and from our specialized programs with state governments.
Through an intentional focus on building a One CenTeam culture, we have elevated and unleashed the power of 61,100 team members who uniquely understand how to serve our members and are committed to our mission of transforming the health of the communities we serve, one person at a time. 7 Table of Contents Benefits to Customers We feel that our ability to establish and maintain a leadership position in the markets we serve results primarily from our demonstrated success in providing quality care while improving the affordability of healthcare, and from our specialized programs with state governments.
With over 70% of the approximately 12 million fully-eligible duals population not in fully-integrated coverage arrangements, we see significant opportunity to advance care management, improve member engagement and improve the affordability of healthcare through this process.
With over 70% of the approximately 12 million fully-eligible duals population not in integrated care plans, we see significant opportunity to advance care management, improve member engagement and improve the affordability of healthcare through this process.
In addition to following up on leads from members, providers and our own team members, we use data analytics to identify suspicious activity and, as appropriate, will deny improperly billed claims, recover improperly made payments and make referrals to regulatory entities and law enforcement for further review.
In addition to investigating leads from members, providers and our own team members, we use data analytics to identify suspicious activity and, as appropriate, will deny improperly billed claims, recover improperly made payments and make referrals to regulatory entities and law enforcement for further review.
The parent organization Star rating is used for new Medicare Advantage contracts while existing contracts follow their individual Star ratings to determine bonus payments. 9 Table of Contents Plans receive additional Medicare revenue related to the achievement of higher Star ratings that can be used to offer more attractive benefit packages to members and/or achieve higher profit margins.
The parent organization's Star rating is used for new Medicare Advantage contracts while existing contracts follow their individual Star ratings to determine bonus payments. Plans receive additional Medicare revenue related to the achievement of higher Star ratings that can be used to offer more attractive benefit packages to members and/or achieve higher profit margins.
Open to all employees, these voluntary, employee-led groups provide professional connections and leadership opportunities for all team members and drive impact by supporting the attraction, development and retention of the best talent at all levels. 16 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth information regarding our executive officers, including their ages, at February 14, 2025: Name Age Position Sarah M.
Open to all employees, these voluntary, employee-led groups provide professional connections and leadership opportunities for all team members and drive impact by supporting the attraction, development and retention of the best talent at all levels. 17 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth information regarding our executive officers, including their ages, at February 13, 2026: Name Age Position Sarah M.
Annually, we issue a corporate sustainability report to communicate the value of our efforts, a Task Force on Climate-related Financial Disclosures (TCFD) Index report outlining our governance structure, strategy, risks, opportunities and metrics related to managing climate change, and a SASB Index report aligned with the SASB Managed Care standards maintained by the International Sustainability Standards Board providing corporate sustainability disclosures to our stakeholders.
We also annually issue a Task Force on Climate-related Financial Disclosures (TCFD) Index report outlining our governance structure, strategy, risks, opportunities and metrics related to managing climate change, and a SASB Index report aligned with the SASB Managed Care standards maintained by the International Sustainability Standards Board providing corporate sustainability disclosures to our stakeholders.
According to CMS, there were more than 12 million dual-eligible enrollees in 2023. These members may receive assistance from Medicaid for benefits, such as nursing home care, HCBS and/or assistance with Medicare premiums and cost-sharing depending on their income level. Dual-eligibles use more services due to their tendency to have more chronic health issues.
According to CMS, there were approximately 12 million dual-eligible enrollees in 2025. These members may receive assistance from Medicaid for benefits, such as nursing home care, HCBS and/or assistance with Medicare premiums and cost-sharing depending on their income level. Dual-eligibles use more services due to their tendency to have more chronic health conditions.
The laws and regulations relating to fraud, waste and abuse and the requirements applicable to health plans, PDPs and providers participating in these programs are complex and change regularly. Compliance with these laws may require substantial resources. We are constantly looking for ways to improve our fraud, waste and abuse detection methods.
The laws and regulations relating to fraud, waste and abuse and the requirements applicable to health plans, PDPs and providers participating in these programs are complex and change regularly. Compliance with these laws may require substantial resources. We are constantly looking for ways to improve our fraud, waste and abuse detection methods through new technology and enhanced analytics.
Part A provides hospitalization benefits financed largely through Social Security taxes and requires beneficiaries to pay out-of-pocket deductibles and coinsurance. Part B provides benefits for medically necessary services and supplies including outpatient care, physician services and home health care. Parts A and B are referred to as Original Medicare.
Part A provides hospitalization benefits financed largely through Social Security taxes and requires beneficiaries to pay out-of-pocket deductibles and coinsurance. Part B provides benefits for medically necessary services and supplies including outpatient care, physician services and home health care. Parts A and B are referred to as Original Medicare. Revenues from CMS are significant to the segment.
Our 2025 PDP bids resulted in 33 of the 34 CMS regions for which we were below the benchmarks and one region for which we were above the benchmark, compared to 30 of 34 CMS regions for which we were below the benchmark for the 2024 PDP bids.
Our 2026 PDP bids were below the benchmarks for all 34 CMS regions, compared to our 2025 PDP bids, which resulted in 33 of 34 CMS regions for which we were below the benchmarks and one region for which we were above the benchmark.
In addition to traditional healthcare benefits, we also offer various wellness programs, an employee assistance program, tuition reimbursement/educational assistance, a 401(k) retirement plan, as well as programs for family support such as adoption assistance, parental leave and caregiver leave.
In addition to traditional healthcare benefits, we also offer various wellness programs, an employee assistance program, tuition reimbursement/educational assistance, a 401(k) retirement plan, an employee stock purchase plan, as well as programs for family support such as adoption assistance, back-up dependent care, parental leave and caregiver leave.
During 2024, we operated in four segments: Medicaid, Medicare, Commercial and Other. • Medicaid - includes the Temporary Assistance for Needy Families (TANF) program; Medicaid Expansion programs; the Aged, Blind or Disabled (ABD) program; the Children's Health Insurance Program (CHIP); Long-Term Services and Supports (LTSS); Foster Care; Medicare-Medicaid Plans (MMP), which cover beneficiaries who are dually eligible for Medicaid and Medicare; and other state-based programs. • Medicare - includes Medicare Advantage, Medicare Supplement, Dual Eligible Special Needs Plans (D-SNPs) and Medicare Prescription Drug Plans (PDP), also known as Medicare Part D. • Commercial - includes the Health Insurance Marketplace product along with individual, small group and large group commercial health insurance products. • Other - includes our pharmacy operations, Envolve Benefit Options' vision and dental services, clinical healthcare, behavioral health, the TRICARE program, and corporate management companies, among others.
During 2025, we operated in four segments: Medicaid, Medicare, Commercial and Other. • Medicaid - includes the Temporary Assistance for Needy Families (TANF) program; Medicaid Expansion programs; the Aged, Blind or Disabled (ABD) program; the Children's Health Insurance Program (CHIP); Long-Term Services and Supports (LTSS); Foster Care; Medicare-Medicaid Plans (MMP), which cover beneficiaries who are dually eligible for Medicaid and Medicare; and other state-based programs. • Medicare - includes Medicare Advantage, Dual Eligible Special Needs Plans (D-SNPs), Medicare Prescription Drug Plans (PDP), also known as Medicare Part D, and Medicare Supplement. • Commercial - includes the Health Insurance Marketplace product along with individual and commercial group, Individual Coverage Health Reimbursement Arrangement (ICHRA) and other off-exchange individual products. • Other - includes our specialty pharmacy operations, vision and dental services, clinical healthcare, behavioral health, and centralized services, among others.
Medicaid helps meet the needs of various populations through the following products and programs: • The TANF program covers low-income families with children. • Medicaid Expansion covers all individuals under age 65 with incomes up to 138% of the federal poverty level, subject to each state's election.
Medicaid helps meet the needs of various populations through the following products and programs: • The TANF program covers low-income families with children. • Medicaid Expansion covers individuals under age 65 with incomes up to 138% of the federal poverty level, subject to each state's election. • The ABD program covers low-income individuals with chronic physical disabilities or behavioral health impairments.
London 44 Chief Executive Officer Andrew L. Asher 56 Executive Vice President, Chief Financial Officer Katie N. Casso 43 Senior Vice President, Finance, Corporate Controller and Chief Accounting Officer Christopher A. Koster 60 Executive Vice President, Secretary and General Counsel Tanya M. McNally 51 Chief People Officer Susan R. Smith 49 Chief Operating Officer Sarah M. London . Ms.
London 45 Chief Executive Officer Andrew L. Asher 57 Executive Vice President, Chief Financial Officer Katie N. Casso 44 Senior Vice President, Finance, Corporate Controller and Chief Accounting Officer Christopher A. Koster 61 Executive Vice President, Secretary and General Counsel Tanya M. McNally 52 Chief People Officer Susan R. Smith 50 Chief Operating Officer Sarah M. London . Ms.
A plan or provider may engage in other activities that violate fraud, waste and abuse laws, such as paying or receiving kickbacks or other inducements for the referral of members or coverage of products (such as prescription drugs), billing for unnecessary medical services or making false or misleading sales-related representations.
A plan or provider may engage in other activities that violate fraud, waste and abuse laws, such as paying or receiving kickbacks or other inducements for the referral of members or coverage of products (such as prescription drugs), billing for unnecessary medical services or making false or misleading sales-related representations. 15 Table of Contents Our program integrity efforts aim to detect, prevent and correct fraud, waste and abuse.
We pursue and achieve accreditation in the majority of states where we currently have health plan operations. We also verify the credentials and backgrounds of our partner providers using standards supported by NCQA to ensure the quality of our networks. Accreditation is only one measure of our ability to provide access to quality care for our members.
We pursue and achieve accreditation in the majority of states where we currently have health plan operations. We also verify the credentials and backgrounds of our partner providers using standards supported by NCQA to ensure the quality of our networks.
Our uniquely local approach – with local brands and local teams who live in, care about and directly influence the communities they serve – is a key differentiator in our ability to provide access to quality care to our members.
We believe the best way to deliver healthcare is with a personal approach, with local brands and local teams who live in, care about and directly influence the communities they serve – a key differentiator in our ability to provide access to quality care for our members.
HUMAN CAPITAL RESOURCES As of December 31, 2024, we had approximately 60,500 team members. Our team members are guided by our mission-driven culture. Our culture values of accountability, courage, curiosity, trust and service guide our workforce and foster high-performing teams that serve our customers and key stakeholders each day while delivering against our long-term strategic goals.
Our team members are guided by our mission-driven culture. Our culture values of accountability, courage, curiosity, trust and service guide our workforce and foster high-performing teams that serve our customers and key stakeholders each day while delivering against our long-term strategic goals.
Costs are primarily composed of pediatrics and family care, which tend to be more predictable than those associated with other healthcare issues predominantly affecting the adult population. • LTSS is a Medicaid product that covers Institutional/Residential Care (Nursing and Intermediate Care Facilities) and Home and Community Based Services (HCBS) for beneficiaries requiring assistance with their activities of daily living.
Costs are primarily composed of pediatrics and family care, which tend to be more predictable than those associated with other healthcare issues predominantly affecting the adult population. • LTSS refers to a set of Medicaid-covered services that include Institutional/Residential Care (such as Nursing and Intermediate Care Facilities) and Home and Community Based Services (HCBS) for individuals who need assistance with activities of daily living.
This results in better clinical outcomes and improved member satisfaction. • The Provider Portal delivers claims and eligibility information, prior authorization submissions and status, member panels, care gaps, patient analytics and provider analytics to contracted providers to drive provider engagement and improve patient outcomes. Data and reporting are delivered via a secure, user-friendly web-based provider portal.
This results in better clinical outcomes and improved member satisfaction. • The Provider Portal delivers claims and eligibility information, prior authorization submissions and status, member panels, care gaps, patient analytics and provider analytics to contracted providers to drive provider engagement and improve patient outcomes.
Under HIPAA, health plans and providers are required to have the capacity to accept and send all covered transactions in a standardized electronic format. Penalties can be imposed for failure to comply with these requirements. The Transactions Standards were modified in October 2015 with the implementation of the ICD-10 coding system.
Under HIPAA, health plans and providers are required to have the capacity to accept and send all covered transactions in a standardized electronic format. Penalties can be imposed for failure to comply with these requirements.
We offer benefits to our team members to help them achieve optimum work-life balance and meet their needs as well as the needs of their families.
We align our team members' compensation with their skills, experiences, contributions and performance. We offer benefits to our team members to help them achieve optimum work-life balance and meet their needs as well as the needs of their families.
Responsibilities also include the ongoing maintenance of our privacy program and oversight of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) as it pertains to us and our business units from a compliance, business and technical perspective.
Responsibilities also include the ongoing maintenance of our privacy program and oversight of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) as it pertains to us and our business units from a compliance, business and technical perspective. CMS sets forth requirements that govern corporate compliance programs in the healthcare industry.
In addition, under the ACA, former foster care children are eligible for Medicaid until the age of 26, provided that they turned 18 while in foster care and were enrolled in Medicaid at that time. • A portion of Medicaid beneficiaries are dual-eligible, low-income seniors and people with disabilities who are enrolled in both Medicaid and Medicare.
Under the Affordable Care Act (ACA), youth who age out of foster care at 18 and were in Medicaid at the time, are eligible for Medicaid coverage until age 26. • A portion of Medicaid beneficiaries are dual-eligible, low-income seniors and people with disabilities who are enrolled in both Medicaid and Medicare.
The IRA changes effective for 2025 result in a meaningful shift in cost-sharing responsibilities between members, drug companies, CMS, and PDPs and will result in a significant increase in our premiums in consideration for our PDPs responsibility for a larger portion of total Part D benefit costs.
The members' Part D annual out-of-pocket cap for 2026 is $2,100. The IRA changes effective for 2025 resulted in a meaningful shift in cost-sharing responsibilities between members, drug companies, CMS, and PDPs and have resulted in a significant increase in our premiums in consideration for our PDPs' responsibility for a larger portion of total Part D benefit costs.
We also compete with other MCOs in establishing provider networks. When contracting with various health plans, we believe that providers consider existing and potential member volume, reimbursement rates, provider experience, value-based payment programs, speed of reimbursement and administrative service capabilities. See "Risk Factors - Competition may limit our ability to increase penetration of the markets that we serve .
Providers consider member volume, reimbursement rates, experience with value-based payment programs, speed of payment, and administrative support when contracting with health plans. See "Risk Factors - Competition may limit our ability to increase penetration of the markets that we serve .
While we have both prospective and retrospective processes to identify abusive patterns and fraudulent billing, we continue to increase our capabilities to proactively detect inappropriate billing prior to payment.
While we have both prospective and retrospective processes to identify abusive patterns and fraudulent billing, our anti-fraud strategy continues to focus on increasing our capabilities to proactively detect inappropriate billing prior to payment.
Newly finalized CMS regulations will require beneficiaries dually enrolled in Medicare and in a Medicaid managed care plan to receive integrated care through the Medicaid company's Medicare Advantage D-SNPs beginning in 2030, with certain restrictions beginning in 2027.
CMS regulations will require beneficiaries dually enrolled in Medicare and in a Medicaid managed care plan to receive integrated care through the Medicaid company's Medicare Advantage D-SNPs beginning in 2030, with certain restrictions beginning in 2027. Integrated D-SNPs are designed to enhance the coordination of care and streamline services while delivering improved outcomes.
For a further discussion of the ACA, see "Risk Factors - Significant changes or judicial challenges to the ACA and the other government-sponsored healthcare programs in which we participate could materially and adversely affect our results of operations, financial condition, and cash flows.
For a further discussion of the ACA, see "Risk Factors - Significant changes to the ACA and the other government-sponsored healthcare programs in which we participate could materially and adversely affect our results of operations, financial condition, and cash flows. " We must also comply with laws and regulations related to the award, administration and performance of U.S. Government contracts.
The Inflation Reduction Act (IRA) significantly changes Medicare PDPs in 2025, most notably by eliminating the coverage gap and capping members' annual out-of-pocket cost at $2,000 in order to provide more predictable and affordable prescription drug coverage for Medicare beneficiaries.
The Inflation Reduction Act (IRA) significantly changed Medicare Part D, impacting stand-alone Medicare PDPs as well as the Part D benefit in many of our Medicare Advantage plans beginning in 2025, most notably by eliminating the coverage gap and capping members' annual out-of-pocket costs at $2,000 in order to provide more predictable and affordable prescription drug coverage for Medicare beneficiaries.
Item 1. Business OVERVIEW Our mission is to transform the health of the communities we serve, one person at a time. Centene is a leading healthcare enterprise that is committed to helping people live healthier lives.
Item 1. Business OVERVIEW Our mission is to transform the health of the communities we serve, one person at a time. As the nation's largest managed care company focused on underserved populations, Centene is committed to helping people live healthier lives.
Community Medical Group (CMG) provides clinical healthcare, encompassing primary care, access to certain specialty services and a suite of social and other support services. CMG operates in Florida through an at-risk primary care provider model, focusing on clinical and social care for at-risk beneficiaries. Additionally, Denova Collaborative Health provides outpatient primary care and behavioral healthcare services. • Federal Services.
CMG operates in Florida through an at-risk primary care provider model, focusing on clinical and social care for at-risk beneficiaries. Additionally, Denova Collaborative Health provides outpatient primary care and behavioral healthcare services. • Centralized Services.
We remain committed to our quality initiatives and continue to focus on investments that we expect to translate into value over the next few years.
Performance is monitored by health plan quality improvement committees and our corporate population health management and quality improvement teams. We remain committed to our quality initiatives and continue to focus on investments that we expect to translate into value over the next few years.
We intentionally attract, develop and retain top talent who bring a broad range of voices and experiences, passion and vision to help us transform the health of the communities we serve. Compensation and Other Benefits Our overall compensation philosophy is to pay for performance by linking the achievement of both Company and individual goals to total compensation.
We intentionally attract, develop and retain top talent who bring a broad range of voices and experiences, passion and vision to help us transform the health of the communities we serve. Compensation and Other Benefits We have a pay-for-performance compensation philosophy and are committed to fair and competitive compensation practices designed to retain and attract top talent.
OUR COMPETITIVE STRENGTHS Our approach is based on the following key competitive strengths: • Focus and Experience . Centene was established as a Medicaid company, anchored around long-lasting, trusted relationships, with a continual focus on low-income populations.
Centene was established as a Medicaid company, anchored around long-lasting, trusted relationships, with a continual focus on low-income populations.
The goal of our program is to build a culture of integrity, ethics and compliance, which is assessed periodically to measure engagement and effectiveness. Our Ethics and Compliance intranet site, accessible to all team members, links to our Code of Conduct and guidance for team members to assist them in reporting concerns or asking questions.
Our Ethics and Compliance intranet site, accessible to all team members, links to our Code of Conduct and guidance for team members to assist them in reporting concerns or asking questions.
Typically, as our Medicare Advantage members reach their deductibles and out-of-pocket maximums, our medical costs rise, creating seasonality in the business with a higher percentage of earnings in the first half of the year. The Congressional Budget Office estimates the total Medicare market will grow from $1.0 trillion in 2023 to $1.6 trillion by 2030.
Typically, as our Medicare Advantage members reach their deductibles and out-of-pocket maximums, our medical costs rise, creating seasonality in the business with a higher percentage of earnings in the first half of the year.
Our Medicaid contracts with the states of Florida and New York accounted for approximately 10% or more of our consolidated Medicaid premium revenues individually in the year ended December 31, 2024.
We are the largest Medicaid health insurer in the country, serving 12.5 million Medicaid members in 30 states as of December 31, 2025. Our Medicaid contracts with the states of Florida and New York accounted for approximately 10% or more of our consolidated Medicaid premium revenues individually in the year ended December 31, 2025.
For example, money laundering is a method of attempting to conceal the origins of money gained through illegal activity and is itself a crime that can result in substantial criminal and civil sanctions including fines and imprisonment.
Government contract laws and regulations affect how we do business with our customers and, in some instances, impose added costs on our business. For example, money laundering is a method of attempting to conceal the origins of money gained through illegal activity and is itself a crime that can result in substantial criminal and civil sanctions including fines and imprisonment.
Lastly, Coordination-Only Dual Eligible plans can coordinate care with Medicaid fee-for-service or Medicaid MCOs from different parent organizations and in some states can also serve partial dual-eligibles who do not receive full Medicaid benefits. Accordingly, we have been refining our Medicare footprint to overlap more closely with our Medicaid presence to provide D-SNP offerings that support alignment.
Lastly, Coordination-Only Dual Eligible plans can coordinate care with Medicaid fee-for-service or Medicaid MCOs from different parent organizations and in some states can also serve partial dual-eligibles who do not receive full Medicaid benefits.
In addition, we process and maintain personal card data, particularly in connection with our Marketplace business. As a result, we must maintain compliance with the Payment Card Industry Data Security Standard, which is a multifaceted security standard intended to optimize the security of credit, debit and cash card transactions and protect cardholders against misuse of their personal information.
As a result, we must maintain compliance with the Payment Card Industry Data Security Standard, which is a multifaceted security standard intended to optimize the security of credit, debit and cash card transactions and protect cardholders against misuse of their personal information. HUMAN CAPITAL RESOURCES As of December 31, 2025, we had approximately 61,100 team members.
Consistent with our strategy, we have reduced our Medicare Advantage footprint to 32 states as of January 1, 2025. 3 Table of Contents Dual-Eligible Alignment Recently finalized CMS regulations are promoting greater alignment and integration for dual-eligible members across both programs, whereby full dual beneficiaries would be enrolled under the same company's Medicaid and Medicare plan, improving the quality of care and overall member experience.
Dual-Eligible Alignment CMS regulations are promoting greater alignment and integration for dual-eligible members across both programs, whereby full dual beneficiaries would be enrolled under the same company's Medicaid and Medicare plan, improving the quality of care and overall member experience.
These key components are: • written standards of conduct; • designation of compliance officers and compliance committees; • effective training and education; • effective lines for reporting and communication; • enforcement of standards through well-publicized disciplinary guidelines and actions; • internal monitoring and auditing; and • prompt response to detected offenses and development of corrective action plans.
These seven elements are: • written standards of conduct; • designation of compliance officers and compliance committees; • effective training and education; • effective lines for reporting and communication; • enforcement of standards through well-publicized disciplinary guidelines and actions; • internal monitoring and auditing; and • prompt response to detected offenses and development of corrective action plans. 11 Table of Contents The goal of our Ethics and Compliance Program is to build a culture of integrity, ethics and compliance, which is assessed periodically to measure engagement and effectiveness.
Each of our health plans contracts with our corporate management company to provide certain functions required to manage the health plan including, but not limited to, salaries and wages for personnel, rent, utilities, population health management, provider contracting, compliance, member services, claims processing, information technology, cash management, finance and accounting and other services.
Each of our health plans contracts with our corporate management companies to provide certain functions required to manage the health plan which often include salaries and wages for personnel, rent, utilities, population health management, provider contracting, compliance, member services, claims processing, pharmacy oversight services, information technology, cash management, finance and accounting and other services. 6 Table of Contents OUR COMPETITIVE STRENGTHS Our approach is based on the following key competitive strengths: • Focus and Experience .
We are positioned at the nexus of affordability and choice, ready to meet the needs of consumers who increasingly seek innovative products like ICHRAs. • Local Approach . Our local approach to delivering healthcare enables us to meet members and providers in the communities where they are to facilitate member access to high-quality, culturally sensitive healthcare services.
Our local approach to delivering healthcare enables us to meet members and providers in the communities where they are to facilitate member access to high-quality, culturally sensitive healthcare services.
As states increasingly move to integrate care for individuals who are dually eligible for both Medicaid and Medicare, our expertise uniquely positions us to serve this population of more than 12 million beneficiaries nationwide.
As states increasingly move to integrate care for individuals who are dually eligible for both Medicaid and Medicare, our expertise uniquely positions us to serve this population of 12 million beneficiaries nationwide. We are positioned at the nexus of affordability and choice, ready to meet the needs of consumers who increasingly seek innovative products like ICHRAs. • Local Approach .
We serve dual-eligibles primarily through our ABD, LTSS, MMP and Medicare Advantage D-SNPs lines of business. 2 Table of Contents While Medicaid programs have directed funds to many individuals who cannot afford or otherwise maintain health insurance coverage, they did not initially address the inefficient and costly manner in which the Medicaid population tends to access healthcare.
We operated MMPs, which ended on December 31, 2025, as CMS transitioned to D-SNP-based integration. 2 Table of Contents While Medicaid programs have directed funds to many individuals who cannot afford or otherwise maintain health insurance coverage, they did not initially address the inefficient and costly manner in which the Medicaid population tends to access healthcare.
An ICHRA allows employers of all sizes to directly reimburse employees for individual health insurance premiums and qualifying medical expenses tax free in lieu of traditional employer-sponsored health insurance. The ICHRA model relies heavily on off-exchange, individual health insurance coverage as the most efficient way to use the funds. These off-exchange plans often mimic employer-provided coverage in benefit design.
The ICHRA model relies heavily on off-exchange, individual health insurance coverage as the most efficient way to use the funds. These off-exchange plans often mimic employer-provided coverage in benefit design.
Commercial We offer commercial health insurance products to individuals through the ACA Health Insurance Marketplace, and through large and small employer groups. These plans offer differing benefit designs and varying levels of co-payments at different premium rates. These plans facilitate access to healthcare services for our members through network contracts with physicians, hospitals and other providers.
These plans offer differing benefit designs and varying levels of co-payments at different premium rates. These plans facilitate access to healthcare services for our members through network contracts with physicians, hospitals and other providers. Coverage typically is subject to copays and can also be subject to deductibles and coinsurance.
They are designed to provide comprehensive, consistent coverage and benefits that meet members' needs. Using an ICHRA allows employees to tap into a more competitive health plan marketplace and a larger risk pool, creating stronger potential for lower, more stable premiums. At the same time, this approach allows employees to find products that better fit their needs.
They are designed to provide comprehensive, consistent coverage and benefits that meet members' needs. 5 Table of Contents Using an ICHRA allows employees to tap into a competitive marketplace and a risk pool larger than the employer's risk pool creating the opportunity for lower, more consistent premiums each year.
The largest groups receiving LTSS, by spending, are older individuals and individuals with physical disabilities, followed by individuals with intellectual and developmental disabilities, those with serious mental illness and/or serious emotional disturbance and other populations.
The largest share of LTSS spending is for older adults and individuals with physical disabilities, followed by individuals with intellectual and developmental disabilities, serious mental illness or other complex needs.
Our commitment to achieving better health outcomes for our members has led to recent investments in key initiatives involving people, processes, technology and partner management.
Quality Improvement Quality improvement is foundational for our organization. Our commitment to achieving better health outcomes for our members has led to expanded focus and investment on key initiatives involving people, processes, technology and partnership management.
In addition, there are state laws that have been adopted to provide for, among other things, private rights of action for breaches of data security and mandatory notification to persons whose identifiable information is obtained without authorization. 15 Table of Contents The requirements of the Transactions Standards apply to certain healthcare-related transactions conducted using "electronic media." Since "electronic media" is defined broadly to include "transmissions that are physically moved from one location to another using portable data, magnetic tape, disk or compact disk media," many communications are considered to be electronically transmitted.
The requirements of the Transactions Standards apply to certain healthcare-related transactions conducted using "electronic media." Since "electronic media" is defined broadly to include "transmissions that are physically moved from one location to another using portable data, magnetic tape, disk or compact disk media," many communications are considered to be electronically transmitted.
For the year ended December 31, 2024, our Medicaid, Medicare, Commercial and Other segments accounted for 62%, 14%, 21% and 3%, respectively, of our total external revenues. Our membership totaled 28.6 million as of December 31, 2024.
We signed a definitive agreement to divest the remaining Magellan Health businesses in December 2025. For the year ended December 31, 2025, our Medicaid, Commercial, Medicare and Other segments accounted for 57%, 21%, 19% and 3%, respectively, of our total external revenues. Our membership totaled 27.6 million as of December 31, 2025.
Medicare spending is estimated to have increased 6% in fiscal 2024 and is projected to increase at an average annual rate of 7% between 2023 and 2030. Over 40% of Medicare spend in 2023 was in Medicare fee-for-service, representing a notable market opportunity to increase penetration of the Medicare Advantage products.
CMS estimates Medicare spending will grow at an average annual rate of 8% to $1.9 trillion by 2031. Over 40% of Medicare spend in 2024 was in Medicare fee-for-service, representing a notable market opportunity to increase penetration of the Medicare Advantage products.
Implementation of the Framework is overseen by the Board of Directors' Governance Committee and corporate sustainability initiatives throughout the organization are driven by a cross-functional network of executives.
Implementation of the Framework is overseen by the Board of Directors' Governance Committee and corporate sustainability initiatives throughout the organization are driven by a cross-functional network of executives. We issue an annual Corporate Responsibility Report, which highlights how we advance our strategy in a way that proudly reflects our mission and values.
A violation of specific laws and regulations by us and/or our agents could result in, among other things, the imposition of fines and penalties on us, changes to our business practices, the termination of our contracts or debarment from bidding on contracts. 13 Table of Contents State and Federal Businesses; Contracts In addition to being a licensed insurance company or HMO, in order to be a Medicaid MCO in each of the states in which we operate, we generally must operate under a contract with the state's Medicaid agency.
State and Federal Businesses; Contracts In addition to being a licensed insurance company or HMO, in order to be a Medicaid MCO in each of the states in which we operate, we generally must operate under a contract with the state's Medicaid agency.
CMS developed the Medicare Advantage Five-Star Quality Rating System to help consumers choose among competing plans, awarding between 1.0 and 5.0 Stars to Medicare Advantage plans based on performance on composite measures of quality.
We believe these initiatives will improve members' overall health and healthcare experience and help us achieve stronger quality scores overall, such as Medicare Star ratings, Medicaid HPR and Marketplace QRS. 10 Table of Contents CMS developed the Medicare Advantage Five-Star Quality Rating System to help consumers choose among competing plans, awarding between 1.0 and 5.0 Stars to Medicare Advantage plans based on performance on composite measures of quality.
Three standards by which corporate compliance programs in the healthcare industry are measured are the Federal Organizational Sentencing Guidelines, the CMS Chapter Guidance, and the Compliance Program Guidance series issued by the Department of Health and Human Services' Office of the Inspector General. Our program contains each of the seven elements suggested by these authorities.
Additionally, compliance programs are assessed against regulations and guidelines such as: the Federal Organizational Sentencing Guidelines, the Department of Justice's Evaluation of Corporate Compliance Programs, and the Compliance Program Guidance series issued by the Department of Health and Human Services' Office of the Inspector General. There are seven elements suggested by these authorities to ensure an effective compliance program.
Instead of owning providers, we identify the best providers for our members, investing in data and engagement models that will support them in delivering health outcomes.
That includes building partnerships with the best providers for our members and investing in data and engagement models that empower them to deliver better health outcomes.
Our contracted physicians also benefit from several of the services offered to our members and population health management programs, which assist physicians in managing their patients with chronic diseases. Quality Improvement Quality improvement is foundational for our organization.
Data and reporting are delivered via our secure, user-friendly web-based provider portal or a third-party, payor-agnostic portal which supports a more streamlined workflow for providers. Our contracted physicians also benefit from several of the services offered to our members and population health management programs, which assist physicians in managing their patients with chronic diseases.
These rates differ by membership category and by state depending on the specific benefits and policies adopted by each state. In addition, several of our Medicaid contracts require us to maintain Medicare Advantage D-SNPs, which are regulated by CMS and the state Medicaid agency, for dual-eligible individuals within the state.
In addition, several of our Medicaid contracts require us to maintain Medicare Advantage D-SNPs, which are regulated by CMS and the state Medicaid agency, for dual-eligible individuals within the state. 14 Table of Contents We provide Medicare Advantage, PDPs, D-SNPs and MMPs pursuant to contracts with CMS and subject to federal regulation regarding the award, administration and performance of such contracts.
As of December 31, 2024, we operated in 29 states under federally-facilitated Marketplace contracts with CMS and state-based exchanges.
CMS also has the right to audit our performance to determine our compliance with these contracts, other CMS regulations, and the quality of care we provide to Medicare beneficiaries under these contracts. As of December 31, 2025, we operated in 29 states under federally-facilitated Marketplace contracts with CMS and state-based exchanges.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFrom time to time, we are a defendant in lawsuits and regulatory actions and are subject to investigations relating to our business, including, without limitation, medical malpractice claims; claims by members and providers alleging failure to timely and accurately pay for or provide healthcare; claims related to non-payment or insufficient payments for out-of-network services; claims related to provider directory accuracy, claims related to network adequacy; claims alleging bad faith; compliance with CMS Medicare and Marketplace regulations, including risk adjustment and broker compensation; claims related to the False Claims Act, the calculation of minimum MLR and rebates related thereto; claims related to privacy, intellectual property and vendor disputes; investigations regarding our submission of risk adjuster claims; putative securities class actions; protests and appeals related to Medicaid procurement awards; cybersecurity issues, including those related to our or our third-party vendors' information systems; employment-related disputes, including wage and hour claims; submissions to state agencies related to payments or state false claims acts, preauthorization penalties, timely review of grievance and appeals; and claims related to the imposition of new taxes, including but not limited to claims that may have retroactive application.
Biggest changeFrom time to time, we are a defendant in lawsuits and regulatory actions and are subject to investigations relating to our business, including, without limitation, claims that may have retroactive application and periodic compliance and other reviews and investigations by various federal and state regulatory agencies with respect to requirements applicable to our business, including, without limitation, those related to payment of claims, compliance with the CMS Medicare and Marketplace regulations, including risk adjustment, prior authorizations and broker compensation, compliance with the False Claims Act, the calculation of minimum MLR and rebates related thereto, submissions to state agencies related to payments or state false claims acts, pre-authorization penalties, timely review of grievances and appeals, timely and accurate payment of claims, provider directory accuracy, network adequacy, cybersecurity issues, including those related to our or our third-party vendors' information systems, HIPAA and other federal and state fraud, waste and abuse laws; litigation arising out of general business activities, such as tax matters, disputes related to healthcare benefits coverage or reimbursement, putative securities class actions and related derivative lawsuits, and medical malpractice, privacy, real estate, intellectual property, vendor disputes and employment-related claims; and disputes regarding reinsurance arrangements, claims arising out of the acquisition or divestiture of various assets, class actions and claims relating to the performance of contractual and non-contractual obligations to providers, members, employer groups, vendors and others, including, but not limited to, the alleged failure to properly pay claims and challenges to the manner in which we processes claims, claims related to network adequacy and claims alleging that we have engaged in unfair business practices; and protests and appeals related to Medicaid procurement awards.
We and our third-party vendors are subject to various federal, state and international laws, regulations, rules, standards and contractual requirements regarding the use, disclosure and other processing of confidential member information (including personal information), including HIPAA, the HITECH Act, the Gramm-Leach-Bliley Act, which require us to protect the privacy of medical records and safeguard personal health information we maintain, use and otherwise process.
We and our third-party vendors are subject to various federal and state laws, regulations, rules, standards and contractual requirements regarding the use, disclosure and other processing of confidential member information (including personal information), including HIPAA, the HITECH Act, the Gramm-Leach-Bliley Act, which require us to protect the privacy of medical records and safeguard personal health information we maintain, use and otherwise process.
In addition, we may be unable to accurately predict demand for both our Health Insurance Marketplace and Medicare Advantage products, as demand depends on factors outside of our control such as the competitiveness of our bids, the broker distribution channels, additional program integrity initiatives that have the effect of reducing membership and the entry and exit of other competitors in the markets.
In addition, we may be unable to accurately predict demand for both our Health Insurance Marketplace and Medicare products, as demand depends on factors outside of our control such as the competitiveness of our bids, the broker distribution channels, additional program integrity initiatives that have the effect of reducing membership and the entry and exit of other competitors in the markets.
Furthermore, Medicare remains subject to the automatic spending reductions imposed by the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 (sequestration), subject to a 2% cap, which was extended by the Bipartisan Budget Act of 2019 through 2029, which was reinstated on July 1, 2022, after a temporary suspension due to the COVID pandemic.
Medicare remains subject to the automatic spending reductions imposed by the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 (sequestration), subject to a 2% cap, which was extended by the Bipartisan Budget Act of 2019 through 2029, which was reinstated on July 1, 2022, after a temporary suspension due to the COVID pandemic.
In addition, if another federal government shutdown were to occur for a prolonged period of time, federal government payment obligations, including its obligations under Medicaid, Medicare, TRICARE, CHIP, LTSS, ABD, Foster Care and the Health Insurance Marketplace, may be delayed. Similarly, if state government shutdowns were to occur, state payment obligations may be delayed.
In addition, if another federal government shutdown were to occur for a prolonged period of time, federal government payment obligations, including its obligations under Medicaid, Medicare, CHIP, LTSS, ABD, Foster Care and the Health Insurance Marketplace, may be delayed. Similarly, if state government shutdowns were to occur, state payment obligations may be delayed.
In addition, CMS' new risk model may not account for the full severity of several chronic conditions, which could also disproportionately affect the dual-eligible population which is more medically complex and faces additional socio-economic barriers to health compared to others.
In addition, CMS' risk model may not account for the full severity of several chronic conditions, which could also disproportionately affect the dual-eligible population which is more medically complex and faces additional socio-economic barriers to health compared to others.
We are subject to tax examinations in various jurisdictions that might assess additional tax liabilities against us. Our tax reporting positions might be challenged by relevant tax authorities, we might incur significant expense in our efforts to defend those challenges and we might be unsuccessful in those efforts.
We are also subject to tax examinations in various jurisdictions that might assess additional tax liabilities against us. Our tax reporting positions might be challenged by relevant tax authorities, we might incur significant expense in our efforts to defend those challenges and we might be unsuccessful in those efforts.
When a state implements either new programs to determine eligibility or new processes to assign or enroll eligible members into health plans, or when it chooses new subcontractors, or has not adequately maintained systems, there is an increased potential for an unanticipated impact on the overall number of members assigned to managed care plans. 22 Table of Contents Additionally, we rely on the accuracy of eligibility lists provided by state governments and their vendors.
When a state implements either new programs to determine eligibility or new processes to assign or enroll eligible members into health plans, or when it chooses new subcontractors, or has not adequately maintained systems, there is an increased potential for an unanticipated impact on the overall number of members assigned to managed care plans. 23 Table of Contents Additionally, we rely on the accuracy of eligibility lists provided by state governments and their vendors.
Our medical expenses include claims reported but not paid, estimates for claims incurred but not reported (IBNR), and estimates for the costs necessary to process unpaid claims at the end of each period.
Our medical expenses include claims reported but not paid, estimates for claims incurred but not reported, and estimates for the costs necessary to process unpaid claims at the end of each period.
Any of these events could have a material adverse effect on the provision of services to our members and our operations. 24 Table of Contents In any particular market, physicians and other healthcare providers could refuse to contract, demand higher payments or take other actions that could result in higher medical costs or difficulty in meeting regulatory or accreditation requirements, among other things.
Any of these events could have a material adverse effect on the provision of services to our members and our operations. 25 Table of Contents In any particular market, physicians and other healthcare providers could refuse to contract, demand higher payments or take other actions that could result in higher medical costs or difficulty in meeting regulatory or accreditation requirements, among other things.
Any failure to adequately price or anticipate demand for products offered, anticipate changes to the competitive landscape or any reduction in products offered for Medicare Advantage and in the Health Insurance Marketplace may have a material adverse effect on our results of operations, financial condition and cash flows.
Any failure to adequately and timely price or anticipate demand for products offered, anticipate changes to the competitive landscape or any reduction in products offered for Medicare and in the Health Insurance Marketplace may have a material adverse effect on our results of operations, financial condition and cash flows.
In addition, revisions by our government customers to the risk-adjustment models have reduced and may continue to reduce our premium revenue. As a result of the variability of certain factors that determine estimates for risk-adjusted premiums, including plan risk scores and competitor positioning, the actual amount of retroactive payments could be materially more or less than our estimates.
In addition, revisions by our government customers to the risk-adjustment models have reduced and may continue to reduce our premium revenue. 21 Table of Contents As a result of the variability of certain factors that determine estimates for risk-adjusted premiums, including plan risk scores and competitor positioning, the actual amount of retroactive payments could be materially more or less than our estimates.
It is possible that Congress may enact additional legislation in the future to increase the amount or application of penalties and to create a private right of action under HIPAA, which could entitle patients to seek monetary damages for violations of the privacy and security provisions. We might be adversely impacted by tax legislation or challenges to our tax positions.
It is possible that Congress may enact additional legislation in the future to increase the amount or application of penalties and to create a private right of action under HIPAA, which could entitle patients to seek monetary damages for violations of the privacy and security provisions. 35 Table of Contents We might be adversely impacted by tax legislation or challenges to our tax positions.
If we, our healthcare providers, brokers' or our third-party vendors experience difficulties with the transition to or from information systems or networks or do not appropriately integrate, maintain, enhance or expand information systems or networks, we could suffer, among other things, operational disruptions, loss of existing members and providers and difficulty in attracting new members and providers, complaints, regulatory problems and increases in administrative expenses.
If we, our healthcare providers, brokers or our third-party vendors experience difficulties with the transition to or from information systems or networks or do not appropriately integrate, maintain, enhance, secure or expand information systems or networks, we could suffer, among other things, operational disruptions, loss of existing members and providers and difficulty in attracting new members and providers, complaints, regulatory problems and increases in administrative expenses.
We anticipate this will require government agencies to find funding alternatives, which may result in reductions or delays in funding for programs, contraction of covered benefits and limited or no premium rate increases or premium rate decreases.
We anticipate this will require government agencies to find funding alternatives, which may result in reductions or delays in funding for programs, contraction of covered benefits, increases to taxes and fees and limited or no premium rate increases or premium rate decreases.
If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all or may take longer to realize than expected and the value of our common stock may decline. The integration of acquired businesses with our existing business is a complex, costly and time-consuming process.
If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all or may take longer to realize than expected and the value of our common stock may decline. 37 Table of Contents The integration of acquired businesses with our existing business is a complex, costly and time-consuming process.
Under the IRA, PDP plan costs will increase significantly due to a reduction in members cost share (close of coverage gap, and the $2,000 cap on member out-of-pocket expenses) and a decrease in federal reinsurance (from 80% to 20%, while a greater portion of the plan drug costs will fall into the catastrophic phase).
Under the IRA, PDP plan costs increased significantly due to a reduction in members cost share (close of coverage gap, and the $2,000 cap on member out-of-pocket expenses) and a decrease in federal reinsurance (from 80% to 20%, while a greater portion of the plan drug costs fall into the catastrophic phase).
There is continuing risk that declines in the fair value of our investments may occur and material impairments may be charged to income in future periods, resulting in recognized losses. 34 Table of Contents Adverse credit market conditions may have a material adverse effect on our liquidity or our ability to obtain credit on acceptable terms.
There is continuing risk that declines in the fair value of our investments may occur and material impairments may be charged to income in future periods, resulting in recognized losses. Adverse credit market conditions may have a material adverse effect on our liquidity or our ability to obtain credit on acceptable terms.
While we continue to work with our state partners to match rates to acuity post-redeterminations, such rate adjustments may be delayed or insufficient to offset the increased acuity. In addition, states may decide to reduce reimbursement or reduce benefits.
While we continue to work with our state partners to match rates to acuity post-redeterminations, such rate adjustments may be delayed or insufficient to offset the increased acuity. In some cases, states may decide to reduce reimbursement or reduce benefits.
Additional changes to the funding or eligibility criteria for these programs could materially impact our membership, revenues, financial condition and cash flows. The IRA enacts significant changes to the Medicare Part D program beginning on January 1, 2025. These changes create additional uncertainty for 2025 Medicare Part D bids, including their profitability and the competitive market landscape.
Additional changes to the funding or eligibility criteria for these programs could materially impact our membership, revenues, financial condition and cash flows. The IRA enacted significant changes to the Medicare Part D program beginning on January 1, 2025. These changes created additional uncertainty for 2025 Medicare Part D bids, including their profitability and the competitive market landscape.
Risks Associated with Mergers, Acquisitions, and Divestitures Previous or future acquisitions may not perform as expected and we may not realize the financial results expected from acquisitions or divestitures. The market price of our common stock is generally subject to volatility, and there can be no assurances regarding the level or stability of our share price at any time.
Previous or future acquisitions may not perform as expected and we may not realize the financial results expected from acquisitions or divestitures. The market price of our common stock is generally subject to volatility, and there can be no assurances regarding the level or stability of our share price at any time.
Significant changes or judicial challenges to the ACA and the other government-sponsored healthcare programs in which we participate could materially and adversely affect our results of operations, financial condition, and cash flows.
Significant changes to the ACA and the other government-sponsored healthcare programs in which we participate could materially and adversely affect our results of operations, financial condition, and cash flows.
The information gathered and processed by information systems and networks assists us in, among other things, monitoring utilization and other cost factors, processing provider claims and providing data to our regulators. Our healthcare providers also depend upon our information systems and networks for membership verifications, claims status and other information.
Our operations depend significantly on effective information systems and networks. The information gathered and processed by information systems and networks assists us in, among other things, monitoring utilization and other cost factors, processing provider claims and providing data to our regulators. Our healthcare providers also depend upon our information systems and networks for membership verifications, claims status and other information.
We might have financial exposure in a divested business, such as through minority equity ownership, financial or performance guarantees, indemnities or other obligations, such that conditions outside of our control might negate the expected benefits of the disposition. The impact of a divestiture on our results of operations could also be greater than anticipated. 36 Table of Contents Item 1B.
We might have financial exposure in a divested business, such as through minority equity ownership, financial or performance guarantees, indemnities or other obligations, such that conditions outside of our control might negate the expected benefits of the disposition. The impact of a divestiture on our results of operations could also be greater than anticipated.
In the Health Insurance Marketplace, we may be adversely impacted if we have not accurately predicted the health needs of our members, including individuals exiting the market causing the morbidity of the risk pool to rise without a proportionate change to risk adjustment.
In the Health Insurance Marketplace, we may be adversely impacted if we have not accurately and timely predicted the health needs of our members, including individuals exiting or entering the market, causing the morbidity of the risk pool to rise without a proportionate change to risk adjustment.
Given the extensive judgment and uncertainties inherent in such estimates, there can be no assurance that our medical claims liability estimate will be accurate, and any adjustments to the estimate may unfavorably impact our results of operations and financial condition and may be material. Assumptions and estimates are utilized in establishing premium deficiency reserves.
Given the extensive judgment and uncertainties inherent in such estimates, there can be no assurance that our medical claims liability estimate will be accurate, and any adjustments to the estimate may unfavorably impact our results of operations and financial condition and may be material. 19 Table of Contents Assumptions and estimates are utilized in establishing premium deficiency reserves, when necessary.
Reductions or delays in funding, changes to eligibility requirements for government-sponsored healthcare programs in which we participate, and any inability on our part to effectively adapt to changes to these programs could have a material adverse effect on our results of operations, financial condition and cash flows.
Risks Relating to Regulatory and Legal Matters Reductions or delays in funding of, changes to eligibility requirements for, government-sponsored healthcare programs in which we participate, and any inability on our part to effectively adapt to changes to these programs could have a material adverse effect on our results of operations, financial condition and cash flows.
We derive a portion of our cash flow and gross margin from our PDP operations, for which we submit annual bids for participation. The results of our bids could have a material adverse effect on our results of operations, financial condition and cash flows.
We derive a portion of our cash flow and gross margin from our PDP operations, for which we submit annual bids for participation. The results of our bids and the design of the risk-sharing program could have a material adverse effect on our results of operations, financial condition and cash flows.
Changes in healthcare regulations and practices, the level of utilization of healthcare services, out-of-network utilization and pricing, medical claim submission patterns, hospital and pharmaceutical costs, including new high-cost specialty drugs, unexpected events, such as natural disasters, the effects of climate change, acts of war or aggression, geopolitical instability, major epidemics, pandemics and their resurgence, or newly emergent diseases, new medical technologies, increases in provider fraud and other external factors, including general economic conditions such as interest rates, inflation and unemployment levels, are generally beyond our control and could reduce our ability to accurately predict and effectively control the costs of providing health benefits.
Changes in healthcare regulations and practices, including due to the OBBBA, the level of utilization of healthcare services, including due to eligibility changes, benefit design, provider or consumer behavior changes, out-of-network utilization and pricing, medical claim submission patterns, including due to the use of artificial intelligence, hospital and pharmaceutical costs, including new high-cost specialty drugs, unexpected events, such as natural disasters, the effects of climate change, acts of war or aggression, geopolitical instability, major epidemics, pandemics and their resurgence, or newly emergent diseases, new medical technologies, increases in provider fraud, tariffs, unexpected increases in taxes and fees, including provider taxes, and other external factors, including general economic conditions such as interest rates, inflation and unemployment levels, are generally beyond our control and could reduce our ability to accurately predict and effectively control the costs of providing health benefits.
In addition, as a result of the expiration of the public health emergency (PHE) due to the COVID-19 pandemic, and the resulting Medicaid redeterminations process, we have experienced a higher HBR related to the remaining members, due to the acuity profile of this membership, as well as the gaps in eligibility for certain members who have rejoined the Medicaid plans.
In addition, as a result of the expiration of the public health emergency (PHE) due to the COVID-19 pandemic, and the resulting Medicaid redeterminations process, as well as changes in state benefit designs, we have continued to experience a higher HBR related to the remaining members, due to the acuity profile of this membership, as well as the gaps in eligibility for certain members who have rejoined the Medicaid plans.
The accurate and timely reporting of encounter data is increasingly important to the success of our programs because more states are using encounter data to determine compliance with performance standards and to set premium rates.
Our contracts require the submission of complete and correct encounter data. The accurate and timely reporting of encounter data is increasingly important to the success of our programs because more states are using encounter data to determine compliance with performance standards and to set premium rates.
If any state in which we operate were to decrease premiums paid to us or pay us less than the amount necessary to keep pace with our cost trends, it could have a material adverse effect on our results of operations, financial condition and cash flows.
If any state in which we operate were to decrease premiums paid to us or pay us less than the amount necessary to keep pace with our cost trends, it could have a material adverse effect on our results of operations, financial condition and cash flows. The Final Rule was published in the Federal Register on June 25, 2025.
Such indebtedness could reduce our agility and may adversely affect our financial condition. As of December 31, 2024, we had consolidated indebtedness of $18.5 billion. We may further increase or refinance our indebtedness in the future.
Such indebtedness could reduce our agility and may adversely affect our financial condition. As of December 31, 2025, we had consolidated indebtedness of $17.4 billion. We may further increase or refinance our indebtedness in the future.
In addition, any failure by us to comply with these restrictive covenants could result in an event of default under our Company Credit Facility and, in some circumstances, under the indentures governing our notes, which, in any case, could have a material adverse effect on our financial condition.
This restrictive covenant could limit our ability to pursue our business strategies. In addition, any failure by us to comply with this restrictive covenant could result in an event of default under the Company Credit Facility and, in some circumstances, under the indentures governing our notes, which, in any case, could have a material adverse effect on our financial condition.
Any significant variation from our expectations regarding acuity, enrollment levels, adverse selection, out-of-network costs or other assumptions utilized in setting adequate premium rates could have a material adverse effect on our results of operations, financial condition and cash flows for both our Health Insurance Marketplace and Medicare Advantage products.
Any significant variation from our expectations regarding acuity of our members, the Marketplace membership as a whole, enrollment levels, adverse selection, out-of-network costs or other increased costs, including due to tariffs or other assumptions utilized in setting adequate premium rates could have a material adverse effect on our results of operations, financial condition and cash flows for both our Health Insurance Marketplace and Medicare products.
If the third-party vendors cannot adequately perform services to us due to lack of adequate staffing, infrastructure, experience, operational maturity, funding, bankruptcy, insolvency, or other credit failure, it could have a material adverse effect on our results of operations if we are not able to contract with other service providers on a timely basis or at all.
If the third-party vendors cannot adequately perform services to us due to lack of adequate staffing, infrastructure, experience, operational maturity, funding, bankruptcy, insolvency, or other credit failure, it could have a material adverse effect on our results of operations if we are not able to contract with other service providers on a timely basis or at all. 26 Table of Contents If we or our third-party vendors are unable to integrate and manage information systems and networks effectively, our operations could be disrupted.
While we continue to work with our state partners to match rates to acuity post-redeterminations, such rate adjustments may be delayed or insufficient to offset the increased acuity.
While we continue to work with our state partners to match rates to acuity to reflect more recent experience, such rate adjustments may be delayed or insufficient to offset the increased acuity.
If our future Part D premium bids are not below the CMS benchmarks, we risk losing PDP members who were previously assigned to us and we may not have additional PDP members auto-assigned to us, which could materially reduce our revenue. 21 Table of Contents The IRA is expected to substantially increase PDP's risk exposure in 2025.
If our future Part D premium bids are not below the CMS benchmarks, we risk losing PDP members who were previously assigned to us and we may not have additional PDP members auto-assigned to us, which could materially reduce our revenue. In addition, the IRA has substantially increased PDP's risk exposure.
The market price of our common stock also may decline if we do not achieve the perceived benefits of such acquisitions and divestitures as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the acquisitions and divestitures on our financial condition, results of operations or cash flows is not consistent with the expectations of financial or industry analysts. 35 Table of Contents We may be unable to successfully integrate our existing business with acquired businesses and realize the anticipated benefits of such acquisitions.
The market price of our common stock also may decline if we do not achieve the perceived benefits of such acquisitions and divestitures as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the acquisitions and divestitures on our financial condition, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.
Also, states or other governmental entities may carve out certain services and benefits from the government programs in which we participate, or they may not allow us to continue to participate in their government programs or we may fail to win procurements to participate in such programs, any of which could materially and adversely affect our results of operations, financial condition and cash flows. 31 Table of Contents Our ability to provide services and support to manage our members' pharmacy benefits face regulatory risks and uncertainties which could materially and adversely affect our results of operations, financial condition and cash flows.
Also, states or other governmental entities may carve out certain services and benefits from the government programs in which we participate, or they may not allow us to continue to participate in their government programs or we may fail to win procurements to participate in such programs, any of which could materially and adversely affect our results of operations, financial condition and cash flows.
The health service industry continues to be competitive, dynamic and rapidly evolving. Any significant shifts in the structure of the industry could alter industry dynamics and adversely affect our ability to compete, attract or retain clients and customers.
We operate in a highly competitive, dynamic and rapidly evolving industry and our failure to adapt could negatively impact our business. The health service industry continues to be competitive, dynamic and rapidly evolving. Any significant shifts in the structure of the industry could alter industry dynamics and adversely affect our ability to compete, attract or retain clients and customers.
If we cannot comply with such accuracy requirements or other contractual operational requirements, we may be subject to regulatory audits and investigations, litigation and otherwise suffer competitive harm, which could have a material adverse impact on our business reputation, financial condition, cash flows or results of operations.
If we are determined to be out of compliance with such accuracy requirements or other contractual operational requirements, we may be subject to penalties, sanctions, damages or other consequences resulting from regulatory audits and investigations and/or litigation and otherwise suffer competitive harm, which could have a material adverse impact on our business reputation, financial condition, cash flows or results of operations.
We are therefore exposed to risks associated with federal and state government contracting or participating in programs involving a government payor, including but not limited to the general ability of the federal and/or state governments to terminate or modify contracts with them, in whole or in part, without prior notice, for convenience or for default based on performance; potential regulatory or legislative action that may materially modify amounts owed; our dependence upon Congressional or legislative appropriation and allotment of funds and the impact that delays in government payments could have on our operating cash flow and liquidity; responses to pandemics, resurgences and new emergent diseases and other regulatory, legislative or judicial actions that may have an impact on the operations of government subsidized healthcare programs including ongoing litigation involving the ACA. 28 Table of Contents Future levels of funding and premium rates may be affected by continuing government efforts to contain healthcare costs and may further be affected by state and federal budgetary constraints and spending initiatives or changes in political party or administrations at the state and federal level.
We are therefore exposed to risks associated with federal and state government contracting or participating in programs involving a government payor, including but not limited to the general ability of the federal and/or state governments to terminate or modify contracts with them, in whole or in part, without prior notice, for convenience or for default based on performance; potential regulatory or legislative action that may materially modify amounts owed; our dependence upon Congressional or legislative appropriation and allotment of funds and the impact that delays in government payments could have on our operating cash flow and liquidity; responses to pandemics, resurgences and new emergent diseases and other regulatory, legislative or judicial actions that may have an impact on the operations of government subsidized healthcare programs, including ongoing litigation involving the ACA.
Changes in business strategy, divestitures, government regulations or economic or market conditions and non-renewal of government contracts have resulted and may result in impairments of our real estate portfolio, goodwill and other intangible assets at any time in the future. For additional information, see Note 6. Property, Software and Equipment , Note 7. Goodwill and Intangible Assets, and Note 11.
Changes in business strategy, divestitures, government regulations or economic or market conditions and non-renewal of government contracts have resulted and may result in impairments of our real estate portfolio, goodwill and other intangible assets at any time in the future.
Our encounter data may be inaccurate or incomplete, which could have a material adverse effect on our results of operations, financial condition and cash flows and ability to bid for, and continue to participate in, certain programs. Our contracts require the submission of complete and correct encounter data.
Such factors could have an adverse effect on our premium revenues and results of operations, financial condition and cash flows. Our encounter data may be inaccurate or incomplete, which could have a material adverse effect on our results of operations, financial condition and cash flows and ability to bid for, and continue to participate in, certain programs.
We contract with various third-party vendors to perform certain functions and services, including for PBM, medical management and other member-related services.
We contract with various third-party vendors to perform certain functions and services, including for pharmacy benefits management, medical management and other member-related services as well as technology services, including AI.
While this incident did not have a material impact on Centene, there can be no assurance that this incident and other privacy or security breaches will not require us to expend significant resources to remediate any damage, interrupt our operations and damage our business or reputation, subject us to state, federal, or international agency review, and result in enforcement actions, material fines and penalties, litigation or other actions which could have a material adverse effect on our business, reputation, results of operations, financial condition and cash flows. 26 Table of Contents While we generally perform data security due diligence on our key service providers, we do not control our service providers and our ability to monitor their data security practices is limited.
While this incident did not have a material impact on Centene, there can be no assurance that this incident and other privacy or security breaches will not require us to expend significant resources to remediate any damage, interrupt our operations and damage our business or reputation, subject to state or federal agency review, and result in enforcement actions, material fines and penalties, litigation or other actions which could have a material adverse effect on our business, reputation, results of operations, financial condition and cash flows.
We are also exposed to interest rate risk to the extent of our variable rate indebtedness. Changes in interest rates can increase our cost of borrowing, and volatility in U.S. and global financial markets could impact our access to, or further increase the cost of, financing.
We are also exposed to interest rate risk to the extent of our variable rate indebtedness. Changes in interest rates can increase our cost of borrowing, and volatility in U.S. and global financial markets could impact our access to, or further increase the cost of, financing. The Company Credit Facility also requires us to comply with a maximum debt-to-capital ratio.
The ultimate content, timing or effect of any potential future legislation or litigation and the outcome of other lawsuits cannot be predicted. 29 Table of Contents Among the most significant of the ACA's provisions was the establishment of the Health Insurance Marketplace for individuals and small employers to purchase health insurance coverage that included a minimum level of benefits and restrictions on coverage limitations and premium rates, as well as the expansion of Medicaid coverage to all individuals under age 65 with incomes up to 138% of the federal poverty level beginning January 1, 2014, subject to each state's election.
Among the most significant of the ACA's provisions was the establishment of the Health Insurance Marketplace for individuals and small employers to purchase health insurance coverage that included a minimum level of benefits and restrictions on coverage limitations and premium rates, as well as the expansion of Medicaid coverage to all individuals under age 65 with incomes up to 138% of the federal poverty level beginning January 1, 2014, subject to each state's election.
Among other things, our Revolving Credit Facility and Term Loan Facility (collectively, the Company Credit Facility) and the indentures governing our notes require us to comply with various covenants that impose restrictions on our operations, including our ability to incur additional indebtedness, create liens, pay dividends, make certain investments or other restricted payments, sell or otherwise dispose of substantially all of our assets and engage in other activities.
This may have the effect, among other things, of subjecting us to additional restrictive covenants and reducing our flexibility to respond to changing business and economic conditions and increasing borrowing costs. 36 Table of Contents Among other things, our Revolving Credit Facility and Term Loan Facility (collectively, the Company Credit Facility) and the indentures governing our notes require us to comply with various covenants that impose restrictions on our operations, including our ability to incur additional indebtedness, create liens, pay dividends, make certain investments or other restricted payments, sell or otherwise dispose of substantially all of our assets and engage in other activities.
To the extent that competition intensifies in any market that we serve, as a result of industry consolidation or otherwise, our ability to retain or increase members and providers, or maintain or increase our revenue growth, pricing flexibility and control over medical cost trends may be adversely affected. 23 Table of Contents We operate in a highly competitive, dynamic and rapidly evolving industry and our failure to adapt could negatively impact our business.
To the extent that competition intensifies in any market that we serve, as a result of industry consolidation or otherwise, our ability to retain or increase members and providers, or maintain or increase our revenue growth, pricing flexibility and control over medical cost trends may be adversely affected.
If we experience higher demand for our products than anticipated, we may not have adequate staffing to be able to adequately meet service level requirements in our call centers, which could negatively impact our quality scores, our relationships with our members and providers, as well as our regulators.
If we experience higher demand for our products than anticipated, we may not have adequate staffing to be able to adequately meet service level requirements in our call centers, which could negatively impact our quality scores, our relationships with our members and providers, as well as our regulators. 20 Table of Contents Our Medicare programs are subject to a variety of unique risks that could adversely impact our financial results.
If these benchmarks are no longer published by third parties, or we, or our contractual partners, adopt other pricing benchmarks for establishing prices within the industry, or legislation or regulation requires the use of other pricing benchmarks, or future changes in drug prices substantially deviate from our expectations, the short- or long-term impacts may have a material adverse effect on our business and results of operations.
If these benchmarks are no longer published by third parties, or we, or our contractual partners, adopt other pricing benchmarks for establishing prices within the industry, or legislation or regulation requires the use of other pricing benchmarks, or future changes in drug prices substantially deviate from our expectations, the short- or long-term impacts may have a material adverse effect on our business and results of operations. 33 Table of Contents We have been and may from time to time become involved in costly and time-consuming litigation and other regulatory proceedings, which require significant attention from our management and could adversely affect our business.
In each of the jurisdictions in which we operate, we are regulated by the relevant insurance, health, and/or human services or government departments that oversee the activities of MCOs providing or arranging to provide services to Medicaid, Medicare, Health Insurance Marketplace enrollees or other beneficiaries. 30 Table of Contents The frequent enactment of, changes to, or interpretations of laws and regulations could, among other things: force us to restructure our relationships with providers within our network; require us to implement additional or different programs and systems; restrict revenue and enrollment growth; increase our healthcare and administrative costs; impose additional capital and surplus requirements; modify how we contract, pay and interact with brokers, enact additional payment integrity initiatives that have the effect of reducing membership and increase or change our liability to members in the event of malpractice by our contracted providers.
The frequent enactment of, changes to, or interpretations of laws and regulations could, among other things: force us to restructure our relationships with providers within our network; require us to implement additional or different programs and systems; restrict revenue and enrollment growth; increase our healthcare and administrative costs; impose additional capital and surplus requirements; modify how we contract, pay and interact with brokers, enact additional payment integrity initiatives that have the effect of reducing membership and increase or change our liability to members in the event of malpractice by our contracted providers.
Further, changes in the competitive market for both Health Insurance Marketplace and the Medicare Advantage products over time, changes to member eligibility in the program design, including due to changes to the eligibility or amount of the enhanced advanced premium tax credits and the timing of those changes, additional program integrity initiatives that have the effect of reducing membership or changes in the financial incentives of individuals, brokers and competitors to participate in such products may make pricing difficult to predict.
Further, changes in the competitive market for both Health Insurance Marketplace and the Medicare products over time, unanticipated changes to member eligibility requirements or verification processes in the program design, including due to changes to the expiration of the Enhanced APTCs and the timing of those changes, additional program integrity initiatives that have the effect of reducing membership or causing the morbidity of the risk pool to rise, changes in consumer or provider behavior, or changes in the financial incentives of individuals, brokers and competitors to participate in such products may make pricing difficult to predict.
Government entities in states we currently serve could open the bidding for their Medicaid or other healthcare programs to other health insurers through a request for proposal process.
Government entities in states we currently serve could open the bidding for their Medicaid or other healthcare programs to other health insurers through a request for proposal process. For example, we are currently protesting the Texas and Georgia Medicaid reprocurements in which we were not a successful bidder.
For example, as part of the normal course of business, several of our Medicaid contracts are up for reprocurement in 2025 (for contracts largely commencing in 2026).
For example, as part of the normal course of business, our Medicaid contracts are routinely up for reprocurement.
Any security breach could result in the misappropriation, loss or other unauthorized access, disclosure or use of confidential member information, including personal information, financial data, competitively sensitive information or other proprietary data, whether by us or a third party, and could have a material adverse effect on our business reputation, financial condition, cash flows or results of operations.
Any security breach could result in the misappropriation, loss or other unauthorized access, disclosure or use of confidential member information, including personal information, financial data, competitively sensitive information or other proprietary data, whether by us or a third party, and could have a material adverse effect on our business reputation, financial condition, cash flows or results of operations. 27 Table of Contents We maintain a system of prevention and detection controls through our security programs; however, our prevention and detection controls may not prevent or identify all such attacks on a timely basis, or at all.
Our provider arrangements with our primary care physicians, specialists and hospitals generally may be canceled by either party without cause upon 90 to 120 days prior written notice.
Our profitability depends, in large part, upon our ability to contract at competitive prices with hospitals, physicians, and other healthcare providers. Our provider arrangements with our primary care physicians, specialists and hospitals generally may be canceled by either party without cause upon 90 to 120 days prior written notice.
For example, we have established a premium deficiency reserve in connection with the 2025 Medicare Advantage business as of December 31, 2024. If our assumptions are inaccurate, we may be required to increase our premium deficiency reserves which could have a material adverse effect on our results of operations and financial condition.
In the instance a premium deficiency reserve is necessary, if our assumptions are inaccurate, we may be required to increase our premium deficiency reserves which could have a material adverse effect on our results of operations and financial condition.
If any of our government contracts are terminated, not renewed, renewed on less favorable terms, or not renewed on a timely basis, or if we receive an adverse finding or review resulting from an audit or investigation, our business and reputation may be adversely impacted, our goodwill could be impaired and our results of operations, financial condition or cash flows may be materially adversely affected.
If any of our government contracts are terminated, not renewed, renewed on less favorable terms, or not renewed on a timely basis, or if we receive an adverse finding or review resulting from an audit or investigation, our business and reputation may be adversely impacted, our goodwill could be impaired and our results of operations, financial condition or cash flows may be materially adversely affected. 22 Table of Contents In addition, we contract with independent third-party vendors, brokers and service providers who provide services to us and our subsidiaries or to whom we delegate selected functions.
Any of the foregoing could harm our reputation, distract our management and technical personnel, increase our costs of doing business, adversely affect the demand for our products and services, and ultimately result in the imposition of liability, any of which could have a material adverse effect on our business, financial condition and results of operations. 33 Table of Contents If we fail to comply with the extensive federal and state fraud, waste and abuse laws, our business, reputation, results of operations, financial condition and cash flows could be materially and adversely affected.
Any of the foregoing could harm our reputation, distract our management and technical personnel, increase our costs of doing business, adversely affect the demand for our products and services, and ultimately result in the imposition of liability, any of which could have a material adverse effect on our business, financial condition and results of operations.
In addition, adverse economic conditions may put pressures on state budgets as tax and other state revenues decrease while the population that is eligible to participate in these programs remains steady or increases, creating more need for funding.
However, some states have already moved or are planning to exclusively align dual-eligible enrollment under an aligned D-SNP before this timeframe. In addition, adverse economic conditions may put pressures on state budgets as tax and other state revenues decrease while the population that is eligible to participate in these programs remains steady or increases, creating more need for funding.
There can be no assurances that we will be successful in managing our expanded operations as a result of acquisitions or that we will realize the expected growth in earnings, operating efficiencies, cost savings and other benefits. Our business and results of operations may be materially adversely affected if we fail to manage and complete divestitures.
There can be no assurances that we will be successful in managing our expanded operations as a result of acquisitions or that we will realize the expected growth in earnings, operating efficiencies, cost savings and other benefits. Item 1B. Unresolved Staff Comments None.
The attractiveness of our Medicare Advantage plans may be reduced if we are unable to maintain or improve these ratings, if there are changes to the ratings system that make achieving and maintaining ratings of 3.0 stars or higher more difficult, or if our performance does not improve compared to our competitors. 19 Table of Contents CMS establishes annually different pricing components of the Medicare Advantage program that may not adequately reflect changes in the underlying health care costs, and which may reduce the profitability or desirability of various Medicare Advantage plans.
The attractiveness of our Medicare Advantage plans may be reduced if we are unable to maintain or improve these ratings, if there are changes to the ratings system that make achieving and maintaining ratings of 3.0 stars or higher more difficult, or if our performance does not improve compared to our competitors.
We regularly evaluate our portfolio to determine whether an asset or business is still consistent with our business strategy or whether there may be a more advantaged owner for that asset or business.
Risks Associated with Mergers, Acquisitions, and Divestitures Our business and results of operations may be materially adversely affected if we fail to manage and complete divestitures. We regularly evaluate our portfolio to determine whether an asset or business is still consistent with our business strategy or whether there may be a more advantaged owner for that asset or business.
The development and use of artificial intelligence technologies is still in its early stages, and as a result it is not possible to predict all of the risks and potentially unintended consequences related to the use of artificial intelligence by us, our health care providers, our brokers or our third-party vendors. 25 Table of Contents We may also from time to time obtain significant portions of our systems-related or other services or facilities from independent third-party vendors, which may make our operations vulnerable if such third-party vendors fail to perform adequately.
The development and use of artificial intelligence technologies is still in its early stages, and as a result it is not possible to predict all of the risks and potentially unintended consequences related to the use of artificial intelligence by us, our health care providers, our brokers or our third-party vendors.
Further, while we strive to publish and prominently display privacy policies that are accurate, comprehensive, and compliant with applicable laws, regulations, rules and industry standards, we cannot ensure that our privacy policies and other statements regarding our practices will be sufficient to protect us from claims, proceedings, liability or adverse publicity relating to data privacy and security.
Moreover, laws in all 50 U.S. states require businesses to provide notice under certain circumstances to consumers whose personal information has been disclosed as a result of a data breach. 34 Table of Contents Further, while we strive to publish and prominently display privacy policies that are accurate, comprehensive, and compliant with applicable laws, regulations, rules and industry standards, we cannot ensure that our privacy policies and other statements regarding our practices will be sufficient to protect us from claims, proceedings, liability or adverse publicity relating to data privacy and security.
If an event or events occur that would cause us to revise our estimates and assumptions used in analyzing the value of our goodwill and other intangible assets, such revision could result in a non-cash impairment charge that could have a material impact on our results of operations and shareholders' equity in the period in which the impairment occurs. 27 Table of Contents Risks Relating to Regulatory and Legal Matters If eligibility for the enhanced advance premium tax credit for Marketplace members expires without renewal or the eligibility for the credit is modified or delayed, our results of operations, financial condition, and cash flows could be materially and adversely affected.
If an event or events occur that would cause us to revise our estimates and assumptions used in analyzing the value of our goodwill and other intangible assets, such revision could result in a non-cash impairment charge that could have a material impact on our results of operations and shareholders' equity in the period in which the impairment occurs.
Some of the health plans with which we compete have greater financial and other resources and offer a broader scope of products than we do. In addition, significant merger and acquisition activity continues to occur in the managed care industry, as well as complementary industries, such as the hospital, physician, pharmaceutical, medical device and health information systems businesses.
In addition, significant merger and acquisition activity continues to occur in the managed care industry, as well as complementary industries, such as the hospital, physician, pharmaceutical, medical device and health information systems businesses.
If we are unable to attract, retain and effectively manage the succession plans for key personnel, executives and senior management, our business and financial condition, results of operations or cash flows could be harmed.
If we are unable to attract, retain and effectively manage the succession plans for key personnel, executives and senior management, our business and financial condition, results of operations or cash flows could be harmed. 28 Table of Contents An impairment charge with respect to our recorded goodwill, intangible assets and real estate portfolio could have a material impact on our results of operations and shareholders' equity .
In 2023, CMS announced the removal of the fee-for-service adjuster from the risk adjustment data validation audit methodology beginning for audit year 2018, which could increase our audit error scores. We anticipate that CMS will continue to conduct audits of our Medicare contracts and contract years on an on-going basis.
In 2023, CMS announced the removal of the fee-for-service adjuster from the risk adjustment data validation audit methodology beginning for audit year 2018, which could increase our audit error scores. Additionally in 2025, CMS announced the intent to accelerate the timing and expand the scope of risk adjustment data validation audits.
Our profitability depends to a significant degree on our ability to accurately estimate and effectively manage expenses related to health benefits through, among other things, our ability to contract favorably with hospitals, physicians and other healthcare providers. For example, our government-sponsored health programs revenue is often based on bids submitted before the start of the initial contract year.
Our profitability depends to a significant degree on our ability to accurately estimate and effectively manage expenses related to health benefits through, among other things, our ability to contract favorably with hospitals, physicians and other healthcare providers, as well as related administrative costs.
If it is determined that our estimates are significantly different than actual results, our results of operations and financial condition could be materially adversely affected. In addition, if there is a significant delay in our receipt of premiums, our business operations, cash flows or earnings could be negatively impacted.
In addition, if there is a significant delay in our receipt of premiums, our business operations, cash flows or earnings could be negatively impacted.
Such factors could have an adverse effect on our premium revenues and results of operations, financial condition and cash flows. If state regulators do not approve payments of dividends and distributions by our subsidiaries to us, we may not have sufficient funds to implement our business strategy. We principally operate through our health plan subsidiaries.
If state regulators do not approve payments of dividends and distributions by our subsidiaries to us, we may not have sufficient funds to implement our business strategy. We principally operate through our health plan subsidiaries. As part of normal operations, we may make requests for dividends and distributions from our subsidiaries to fund our operations.
Our failure to anticipate or appropriately adapt to changes in the industry could negatively impact our competitive position and adversely affect our business and results of operations.
Our failure to anticipate or appropriately adapt to changes in the industry could negatively impact our competitive position and adversely affect our business and results of operations. If we are unable to maintain relationships with our provider networks and timely update our provider directories, our profitability may be materially adversely affected.
Additionally, the taxes and fees paid to federal, state, local and international governments may increase due to several factors, including: enactment of, changes to or interpretations of tax laws and regulations, audits by government authorities, geographic expansions into higher taxing jurisdictions and the effect of expansions into international markets.
Additionally, the taxes and fees paid to federal, state, and local governments may increase due to several factors, including: enactment of, changes to or interpretations of tax laws and regulations, audits by government authorities, and geographic expansions into higher taxing jurisdictions. 32 Table of Contents We are often required to maintain a minimum medical loss ratio (MLR) or share profits in excess of certain levels, which may be retroactive.
Additionally, when we commence operations in a new state or region or launch a new product, we have limited information with which to estimate our medical claims liability. For a period of time after the inception of the new business, we base our estimates on government-provided historical actuarial data and limited actual incurred and received claims and inpatient acuity information.
For a period of time after the inception of the new business, we base our estimates on government-provided historical actuarial data and limited actual incurred and received claims and inpatient acuity information. In addition, we have limited ability to manage the utilization of services until continuity of care requirements expire.
Regulators require numerous steps for continued implementation of the ACA, including the promulgation of a substantial number of potentially more onerous federal regulations.
The governmental healthcare programs in which we participate are subject to the satisfaction of certain regulations and performance standards. Regulators require numerous steps for continued implementation of the ACA, including the promulgation of a substantial number of potentially more onerous federal regulations.
Our assumptions and judgments regarding the existence of impairment indicators are based on, among other things, legal factors, contract terms, market conditions and operational performance.
We may have additional impairment charges in connection with our periodic evaluation of our goodwill and intangible assets using assumptions and judgments regarding the estimated fair value of our reporting units. Our assumptions and judgments regarding the existence of impairment indicators are based on, among other things, legal factors, contract terms, market conditions and operational performance.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+0 added−0 removed17 unchanged
Biggest changeWhile we have not identified any cybersecurity threats that have materially affected or that we believe are reasonably likely to materially affect our business strategy, results of operations, or financial condition, our cybersecurity risk management program cannot eliminate all risks from cybersecurity threats or provide assurances that we have not experienced an undetected material cybersecurity incident or will not experience a material cybersecurity incident in the future.
Biggest changeIn addition, elements of the program are subject to Service Organization Control Type 2 (SOC 2) and ISO 27001 audits by a third party. 38 Table of Contents While we have not identified any cybersecurity threats that have materially affected or that we believe are reasonably likely to materially affect our business strategy, results of operations, or financial condition, our cybersecurity risk management program cannot eliminate all risks from cybersecurity threats or provide assurances that we have not experienced an undetected material cybersecurity incident or will not experience a material cybersecurity incident in the future.
Such reporting includes providing regular updates to the Board Audit and Compliance Committee regarding the evolving cybersecurity threat environment, updates to our cybersecurity risk management program to address and mitigate such threats and providing quarterly reports to the Quality Committee on the Company's execution of its data and technology strategy.
Such reporting includes providing quarterly updates to the Board Audit and Compliance Committee regarding the evolving cybersecurity threat environment, updates to our cybersecurity risk management program to address and mitigate such threats and providing regular reports to the Quality Committee on the Company's execution of its data and technology strategy.
Based on that rating, we employ an escalation matrix that provides appropriate notifications to management, as well as to our Board of Directors. The cybersecurity incident response plan is integrated into our overall crisis management plan and process, for which our CSPO has ultimate day-to-day responsibility.
Based on that rating, we employ an escalation matrix that provides appropriate notifications to management, as well as to our Board of Directors. 39 Table of Contents The cybersecurity incident response plan is integrated into our overall crisis management plan and process, for which our CSPO has ultimate day-to-day responsibility.
Our CISO, who has over 34 years of experience in cyber operations, communications, crisis management and command and control, holds multiple graduate degrees, obtained the Certified Information Systems Security Professional certification from ISC2 and holds the Qualified Technical Expert certification from the Digital Director's Network. 38 Table of Contents
Our CISO, who has over 34 years of experience in cyber operations, communications, crisis management and command and control, holds multiple graduate degrees, obtained the Certified Information Systems Security Professional certification from ISC2 and holds the Qualified Technical Expert certification from the Digital Director's Network.
Management also escalates significant cybersecurity events to the Audit and Compliance Committee and the Board on a real time basis, as appropriate. Further, our Board also receives enterprise-wide risk management reports, which include significant cybersecurity risks, from our risk department multiple times per year. In addition, our Board and management have conducted tabletop cybersecurity crisis simulation exercises.
Management also escalates significant cybersecurity events to the Audit and Compliance Committee and the Board on a real time basis, as appropriate. Further, our Board also receives quarterly enterprise-wide risk management reports, which include significant cybersecurity risks, from our risk department. In addition, our Board and management have conducted tabletop cybersecurity crisis simulation exercises.
Each committee reports to the full Board on a regular basis. 37 Table of Contents The oversight responsibility of our Board of Directors and its committees is facilitated through quarterly management-reporting processes designed to provide visibility to the Board and its committees on the processes for the identification, assessment, prioritization and management of critical risks and management's risk mitigation strategies.
The oversight responsibility of our Board of Directors and its committees is facilitated through quarterly management risk reporting designed to provide visibility to the Board and its committees on the processes for the identification, assessment, prioritization and management of critical risks and management's risk mitigation strategies, including those related to cybersecurity.
On a bi-annual schedule, we use an external firm to assess our cybersecurity risk management program using the Capability Maturity Model Integration (CMMI) process and behavioral model. In addition, elements of the program are subject to Service Organization Control Type 2 (SOC 2) and ISO 27001 audits by a third party.
On a bi-annual schedule, we use an external firm to assess our cybersecurity risk management program using the Capability Maturity Model Integration (CMMI) process and behavioral model.
Our Board Quality Committee has oversight responsibility for overall data and technology strategy.
Our Board Quality Committee has oversight responsibility for overall data and technology strategy. Each committee reports to the full Board on a regular basis.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−2 removed0 unchanged
Biggest changeWe believe our current facilities are adequate to meet our operational needs for the foreseeable future.
Biggest changeWe are required by various insurance and regulatory authorities to have offices in the service areas where we provide benefits. We believe our current facilities are adequate to meet our operational needs for the foreseeable future.
Item 2. Properties We own our corporate office headquarters buildings and land located in St. Louis, Missouri, which are used by each of our reportable segments. We generally lease space in the states where our health plans, specialty companies and claims processing facilities operate.
Item 2. Properties We own our corporate office headquarters buildings and land located in St. Louis, Missouri, which are used by each of our reportable segments. We generally lease space in the states where our health plans and claims processing facilities operate.
Removed
We are required by various insurance and regulatory authorities to have offices in the service areas where we provide benefits. In connection with the adoption of a more modern, flexible work environment, we undertook a real estate optimization initiative in 2022 to evaluate future real estate needs and downsize our real estate footprint for owned and leased properties.
Removed
As a result of this evaluation, we substantially changed the use of, or abandoned, various properties and recognized impairment charges for the years ended December 31, 2023 and 2022. No significant impairment charges were recognized related to the real estate optimization initiative in the year ended December 31, 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities Fourth Quarter 2024 (Shares in thousands) Execution Date Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ($ in millions) (3) October 1, 2024 - October 31, 2024 7,368 $ 69.48 7,360 $ 2,649 November 1, 2024 - November 30, 2024 7,060 59.61 7,032 2,230 December 1, 2024 - December 31, 2024 14 59.45 — 2,230 Total 14,442 $ 64.64 14,392 $ 2,230 (1) Includes 29 thousand shares relinquished to the Company by certain employees for payment of taxes; an open market purchase of 4 thousand shares by Sarah London, the Company's CEO, at a weighted average price of $60.80 which was previously disclosed on the Form 4 filed with the SEC on November 8, 2024; and an open market purchase of 17 thousand shares by Andrew Asher, the Company's CFO, at a weighted average price of $58.14 which was previously disclosed on the Form 4 filed with the SEC on November 13, 2024.
Biggest changeIssuer Purchases of Equity Securities Fourth Quarter 2025 (Shares in thousands) Execution Date Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ($ in millions) (2) October 1, 2025 - October 31, 2025 47 $ 33.58 — $ 1,830 November 1, 2025 - November 30, 2025 5 34.93 — 1,830 December 1, 2025 - December 31, 2025 8 39.62 — 1,830 Total 60 $ 34.53 — $ 1,830 (1) Includes 60 thousand shares relinquished to the Company by certain employees for payment of taxes.
No duration has been placed on the repurchase program. We reserve the right to discontinue the repurchase program at any time. The following table discloses purchases of our common stock for the quarter ended December 31, 2024.
No duration has been placed on the repurchase program. We reserve the right to discontinue the repurchase program at any time. The following table discloses purchases of our common stock for the quarter ended December 31, 2025.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Common Stock Our common stock has been traded and quoted on the New York Stock Exchange (NYSE) under the symbol "CNC" since October 16, 2003. Stockholders As of February 14, 2025, there were 980 holders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Common Stock Our common stock has been traded and quoted on the New York Stock Exchange (NYSE) under the symbol "CNC" since October 16, 2003. Stockholders As of February 13, 2026, there were 944 holders of record of our common stock.
(3) A remaining amount of $2.2 billion is available under the stock repurchase program as of December 31, 2024. 40 Table of Contents Stock Performance Graph The graph below compares the cumulative total stockholder return on our common stock for the period from December 31, 2019 to December 31, 2024, with the cumulative total return of the NYSE Composite Index, the Standard & Poor's (S&P) Health Care Index and the S&P 500 over the same period.
(2) A remaining amount of $1.8 billion is available under the stock repurchase program as of December 31, 2025. 41 Table of Contents Stock Performance Graph The graph below compares the cumulative total stockholder return on our common stock for the period from December 31, 2020 to December 31, 2025, with the cumulative total return of the NYSE Composite Index, the Standard & Poor's (S&P) Health Care Index and the S&P 500 over the same period.
Issuer Purchases of Equity Securities In November 2005, the Company's Board of Directors announced a stock repurchase program, which was most recently increased in December 2023. The Company is authorized to repurchase up to $10.0 billion, inclusive of past authorizations, of which $2.2 billion remains as of December 31, 2024.
Issuer Purchases of Equity Securities In November 2005, our Board of Directors announced a stock repurchase program, which was most recently increased in December 2023. We are authorized to repurchase up to $10.0 billion, inclusive of past authorizations, of which $1.8 billion remains as of December 31, 2025.
The graph assumes an investment of $100 on December 31, 2019 in our common stock (at the last reported sale price on such day), the NYSE Composite Index, the S&P Health Care Index and the S&P 500 and assumes the reinvestment of any dividends. 2019 2020 2021 2022 2023 2024 Centene Corporation $ 100.00 $ 95.48 $ 131.06 $ 130.44 $ 118.04 $ 96.36 NYSE Composite Index 100.00 106.99 129.11 117.04 133.20 154.36 S&P Health Care Index 100.00 113.45 143.09 140.29 143.18 146.87 S&P 500 100.00 118.40 152.39 124.79 157.60 196.99 Centene Corporation closing stock price $ 62.87 $ 60.03 $ 82.40 $ 82.01 $ 74.21 $ 60.58 Centene Corporation annual stockholder return 9.1% (4.5)% 37.3% (0.5)% (9.5)% (18.4)% In accordance with the rules of the Securities and Exchange Commission (SEC), the information contained in the Stock Performance Graph on this page shall not be deemed to be "soliciting material," or to be "filed" with the SEC or subject to the SEC's Regulation 14A or to the liabilities of Section 18 of the Exchange Act, except to the extent that Centene specifically requests that the information be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act. 41 Table of Contents Item 6.
The graph assumes an investment of $100 on December 31, 2020 in our common stock (at the last reported sale price on such day), the NYSE Composite Index, the S&P Health Care Index and the S&P 500 and assumes the reinvestment of any dividends. 2020 2021 2022 2023 2024 2025 Centene Corporation $ 100.00 $ 137.26 $ 136.62 $ 123.62 $ 100.92 $ 68.55 NYSE Composite Index 100.00 120.68 109.39 124.50 144.28 169.87 S&P Health Care Index 100.00 126.13 123.67 126.21 129.47 148.37 S&P 500 100.00 128.71 105.40 133.11 166.38 196.10 Centene Corporation closing stock price $ 60.03 $ 82.40 $ 82.01 $ 74.21 $ 60.58 $ 41.15 Centene Corporation annual stockholder return (4.5)% 37.3% (0.5)% (9.5)% (18.4)% (32.1)% In accordance with the rules of the Securities and Exchange Commission (SEC), the information contained in the Stock Performance Graph on this page shall not be deemed to be "soliciting material," or to be "filed" with the SEC or subject to the SEC's Regulation 14A or to the liabilities of Section 18 of the Exchange Act, except to the extent that Centene specifically requests that the information be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act. 42 Table of Contents Item 6.
Removed
(2) Average price paid per share excludes quarter-to-date accrued share repurchase excise tax of approximately $10 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2024 2023 GAAP diluted EPS attributable to Centene $ 6.31 $ 4.95 Amortization of acquired intangible assets 1.32 1.32 Acquisition and divestiture related expenses 0.16 0.13 Other adjustments (1) (0.22) 0.85 Income tax effects of adjustments (2) (0.40) (0.57) Adjusted diluted EPS $ 7.17 $ 6.68 (1) Other adjustments include the following pre-tax items: 2024 : (a) net gain on the previously reported divestiture of Magellan Specialty Health due to the achievement of contingent consideration and finalization of working capital adjustments of $83 million, or $0.16 per share ($0.12 after-tax), net gain on the sale of property of $24 million, or $0.04 per share ($0.03 after-tax), gain on the previously reported divestiture of Circle Health of $20 million, or $0.04 per share ($0.12 after-tax), gain on the sale of CHS of $17 million, or $0.03 per share ($0.02 after-tax), Health Net Federal Services asset impairment due to the 2024 final ruling on the TRICARE Managed Care Support Contract of $14 million, or $0.03 per share ($0.02 after-tax), severance costs due to a restructuring of $13 million, or $0.02 per share ($0.01 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) and gain on the previously reported divestiture of HealthSmart due to the finalization of working capital adjustments of $7 million, or $0.01 per share ($0.01 after-tax). 2023 : (b) Circle Health impairment of $292 million, or $0.53 per share ($0.47 after-tax), Operose Health impairment of $140 million, or $0.26 per share ($0.24 after-tax), real estate impairments of $105 million, or $0.19 per share ($0.16 after-tax), gain on the sale of Apixio of $93 million, or $0.17 per share ($0.12 after-tax), severance costs due to a restructuring of $79 million, or $0.15 per share ($0.11 after-tax), gain on the sale of Magellan Specialty Health of $79 million, or $0.14 per share ($0.11 after-tax), a reduction to the previously reported gain on the sale of Magellan Rx of $22 million, or $0.04 per share ($0.02 after-tax), gain on the previously reported divestiture of Centurion of $15 million, or $0.03 per share ($0.02 after-tax) and 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).
Biggest changeYear Ended December 31, 2025 2024 GAAP diluted earnings (loss) per share attributable to Centene $ (13.53) $ 6.31 Amortization of acquired intangible assets 1.39 1.32 Acquisition and divestiture related expenses 0.01 0.16 Other adjustments (1) 14.86 (0.22) Income tax effects of adjustments (2) (0.64) (0.40) Effect of basic to diluted shares (3) (0.01) — Adjusted diluted EPS $ 2.08 $ 7.17 (1) Other adjustments include the following pre-tax items: 2025 : (a) goodwill impairment of $6,723 million, or $13.63 per share ($13.62 after-tax), Magellan Health impairment of $513 million, or $1.04 per share ($0.79 after-tax), intangible asset impairment related to the wind-down of certain contracts in the Other segment of $55 million, or $0.11 per share ($0.08 after-tax), exit costs related to the wind-down of certain contracts in the Other segment of $22 million, or $0.04 per share ($0.03 after-tax), a net loss on real estate transactions of $18 million, or $0.04 per share ($0.03 after-tax), a favorable adjustment to the gain on sale of Magellan Rx of $2 million, or $0.00 per share ($0.00 after-tax), and net gain on debt extinguishment of $1 million, or $0.00 per share ($0.00 after-tax). 48 Table of Contents 2024 : (b) net gain on the previously reported divestiture of Magellan Specialty Health due to the achievement of contingent consideration and finalization of working capital adjustments of $83 million, or $0.16 per share ($0.12 after-tax), net gain on the sale of property of $24 million, or $0.04 per share ($0.03 after-tax), gain on the previously reported divestiture of Circle Health of $20 million, or $0.04 per share ($0.12 after-tax), gain on the sale of CHS of $17 million, or $0.03 per share ($0.02 after-tax), Health Net Federal Services asset impairment due to the 2024 final ruling on the TRICARE Managed Care Support Contract of $14 million, or $0.03 per share ($0.02 after-tax), severance costs due to a restructuring of $13 million, or $0.02 per share ($0.01 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) and gain on the previously reported divestiture of HealthSmart due to the finalization of working capital adjustments of $7 million, or $0.01 per share ($0.01 after-tax).
Cash flows used in investing activities in 2024 and 2023 primarily consisted of net additions to the investment portfolio of our regulated subsidiaries (including transfers from cash and cash equivalents to long-term investments) and capital expenditures, partially offset by divestiture proceeds.
Cash flows used in investing activities in 2024 primarily consisted of net additions to the investment portfolio of our regulated subsidiaries (including transfers from cash and cash equivalents to long-term investments) and capital expenditures, partially offset by divestiture proceeds.
We consistently apply our reserving methodology from period to period. As additional information becomes known to us, we adjust our actuarial models accordingly to establish medical claims liability estimates. We review actual and anticipated experience compared to the assumptions used to establish medical costs.
We consistently apply our reserving methodology from period to period. As additional information becomes known to us, we adjust our actuarial models accordingly to establish medical claims liability estimates. We review actual and anticipated experience compared to the assumptions used to record medical costs.
Cash flows provided by operations in 2024 was primarily driven by net earnings, almost entirely offset by an increase in pharmacy receivables driven by pharmacy rebate remittance timing associated with our transition to a new third-party PBM in January 2024, a decrease in net risk adjustment payables and higher state premium receivables for recent rate increases.
Cash flows provided by operations in 2024 were primarily driven by net earnings, almost entirely offset by an increase in pharmacy receivables driven by pharmacy rebate remittance timing associated with our transition to a new third-party PBM in January 2024, a decrease in net risk adjustment payables and higher state premium receivables for recent rate increases.
We believe that the vast majority of the development of the estimate of medical claims liability as of December 31, 2024 will be known by the end of 2025. Changes in estimates of incurred claims for prior years are primarily attributable to reserving under moderately adverse conditions.
We believe that the vast majority of the development of the estimate of medical claims liability as of December 31, 2025 will be known by the end of 2026. Changes in estimates of incurred claims for prior years are primarily attributable to reserving under moderately adverse conditions.
Our contracts with states and CMS may require us to maintain a minimum MLR or may require us to share cost-savings in excess of certain levels. In certain circumstances, including commercial plans, our plans may be required to return premium to the state or policyholders in the event costs are below established levels.
Our contracts with states and CMS may require us to maintain a minimum MLR or may require us to share cost-savings in excess of certain levels. In certain circumstances our plans may be required to return premium to the state or policyholders in the event costs are below established levels.
The following discussion and analysis does not include certain items related to the year ended December 31, 2022, including year-to-year comparisons between the year ended December 31, 2023 and the year ended December 31, 2022. For a comparison of our results of operations for the fiscal years ended December 31, 2023 and December 31, 2022, see Item 7.
The following discussion and analysis does not include certain items related to the year ended December 31, 2023, including year-to-year comparisons between the year ended December 31, 2024 and the year ended December 31, 2023. For a comparison of our results of operations for the fiscal years ended December 31, 2024 and December 31, 2023, see Item 7.
The contract has a six-year term with a maximum of three additional two-year extensions. • 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.
The contract has a six-year term with a maximum of three additional two-year extensions. 49 Table of Contents • 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.
Summary of Significant Accounting Policies , in the Notes to the Consolidated Financial Statements, included herein. CRITICAL ACCOUNTING ESTIMATES Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements which have been prepared in accordance with GAAP. Our significant accounting policies are more fully described in Note 2.
CRITICAL ACCOUNTING ESTIMATES Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements which have been prepared in accordance with GAAP. Our significant accounting policies are more fully described in Note 2. Summary of Significant Accounting Policies, to our consolidated financial statements included elsewhere herein.
While we are currently in a strong liquidity position and believe we have adequate access to capital, we may elect to increase borrowings on our Revolving Credit Facility, which matures in August 2026. Additionally, our senior notes mature between December 2027 and August 2031.
While we are currently in a strong liquidity position and believe we have adequate access to capital, we may elect to increase borrowings on our Revolving Credit Facility, which matures in March 2030. Additionally, our senior notes mature between December 2027 and August 2031.
(2) Reflects estimated potential changes in medical claims liability caused by changes in cost trend factors for the most recent periods. While we believe our estimates are appropriate, it is possible future events could require us to make significant adjustments for revisions to these estimates.
(2) Reflects estimated potential changes in medical claims liability caused by changes in cost trend factors for the most recent periods. 63 Table of Contents While we believe our estimates are appropriate, it is possible future events could require us to make significant adjustments for revisions to these estimates.
For example, a 1% increase or decrease in our estimated medical claims liability would have affected net earnings by $142 million for the year ended December 31, 2024, excluding the effect of any return of premium, risk corridor or minimum medical loss ratio (MLR) programs.
For example, a 1% increase or decrease in our estimated medical claims liability would have affected net earnings by $204 million for the year ended December 31, 2025, excluding the effect of any return of premium, risk corridor or minimum medical loss ratio (MLR) programs.
We utilize the debt-to-capital ratio as a measure, among others, of our leverage and financial flexibility. At December 31, 2024, we had working capital, defined as current assets less current liabilities, of $3.7 billion, compared to $4.0 billion at December 31, 2023.
We utilize the debt-to-capital ratio as a measure, among others, of our leverage and financial flexibility. At December 31, 2025, we had working capital, defined as current assets less current liabilities, of $3.7 billion, compared to $3.7 billion at December 31, 2024.
As of December 31, 2024, we had an aggregate principal amount of $15.7 billion of senior notes issued and outstanding. The indentures governing our various maturities of senior notes contain limited restrictive covenants. As of December 31, 2024, we were in compliance with all covenants.
As of December 31, 2025, we had an aggregate principal amount of $15.5 billion of senior notes issued and outstanding. The indentures governing our various maturities of senior notes contain limited restrictive covenants. As of December 31, 2025, we were in compliance with all covenants.
Additionally, as a result of minimum MLR and other return of premium programs, approximately $243 million, $382 million and $198 million of the "Incurred related to: Prior years" was recorded as a reduction to premium revenues in 2024, 2023 and 2022, respectively.
Additionally, as a result of minimum MLR and other return of premium programs, approximately $93 million, $243 million and $382 million of the "Incurred related to: Prior years" was recorded as a reduction to premium revenues in 2025, 2024 and 2023, respectively.
We spent $644 million and $799 million in the years ended December 31, 2024 and 2023, respectively, on capital expenditures primarily for system enhancements and computer hardware. As of December 31, 2024, our investment portfolio consisted primarily of fixed-income securities with a weighted average duration of 3.4 years.
We spent $767 million and $644 million in the years ended December 31, 2025 and 2024, respectively, on capital expenditures primarily for system enhancements and computer hardware. As of December 31, 2025, our investment portfolio consisted primarily of fixed-income securities with a weighted average duration of 3.3 years.
We receive certain Part D prospective subsidy payments from CMS for these members as a fixed monthly per member amount, based on the estimated costs of providing prescription drug benefits over the plan year, as reflected in our bids.
We receive certain Part D prospective subsidy payments from CMS for these members as a fixed monthly per-member amount, based on the estimated costs of providing prescription drug benefits over the plan year, as reflected in our bids. No prospective payments are received for risk sharing.
We have $2.2 billion remaining under the program as of December 31, 2024. No duration has been placed on the repurchase program. We reserve the right to discontinue the repurchase program at any time. Refer to Note 12. Stockholders' Equity for further information on stock repurchases.
We have $1.8 billion remaining under the program as of December 31, 2025. No duration has been placed on the repurchase program. We reserve the right to discontinue the repurchase program at any time. Refer to Note 12. Stockholders' Equity for further information on stock repurchases.
When we commence operations in a new state or region, we have limited information with which to estimate our medical claims liability.
When we commence operations in a new state or region or for new product offerings, we have limited information with which to estimate our medical claims liability.
Incurred hospital inpatient claims are estimated based on known inpatient utilization data and prior claims experience adjusted for known factors. For older periods, we utilize an estimated completion factor based on our historical experience to develop IBNR estimates.
Incurred hospital inpatient claims are estimated based on known inpatient utilization data and prior claims experience adjusted for known factors. We utilize estimated completion factors based on our historical experience to develop IBNR estimates.
As of December 31, 2024, we had $950 million of borrowings outstanding under our Revolving Credit Facility, $2.0 billion of borrowings outstanding under our Term Loan Facility and we were in compliance with all covenants. As of December 31, 2024, there were no limitations on the availability of our Revolving Credit Facility as a result of the debt-to-EBITDA ratio.
As of December 31, 2025, we had no borrowings outstanding under our Revolving Credit Facility, $2.0 billion of borrowings under our Term Loan Facility, and we were in compliance with all covenants. As of December 31, 2025, there were no limitations on the availability of our Revolving Credit Facility as a result of the debt-to-capital ratio.
In December 2022, we completed the divestiture of Magellan Rx for $1.3 billion and recognized a gain of $269 million, or $99 million after-tax. During 2023, we recorded a reduction to the previously reported gain of $22 million, or $10 million after-tax, due to the finalization of working capital adjustments.
Divestitures In December 2022, we completed the divestiture of Magellan Rx for $1.3 billion and recognized a gain of $269 million, or $99 million after-tax. During 2023, we recorded a reduction to the previously reported gain of $22 million, or $10 million after-tax.
Cash Flows Used in Financing Activities Financing activities used cash of $2.4 billion in the year ended December 31, 2024, compared to using cash of $1.7 billion in the comparable period in 2023.
Cash Flows (Used in) Financing Activities Financing activities used cash of $1.6 billion in the year ended December 31, 2025, compared to using cash of $2.4 billion in the comparable period in 2024.
The contract is expected to begin in July 2025 and has a four-year term, with an optional two-year extension, for a total of six possible contract years. • 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 has a five-year term, with the option of a two-year extension, for a total of seven possible contract years. • 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.
In 2023, the Company's Board of Directors authorized up to a cumulative total of $10.0 billion of repurchases under the program. In 2024, we repurchased a total of 42.0 million shares of common stock for $3.0 billion under the stock repurchase program, primarily funded through divestiture proceeds and free cash flow generated from operations.
In 2023, our Board of Directors authorized up to a cumulative total of $10.0 billion of repurchases under the program. In 2025, we repurchased a total of 6.7 million shares of common stock for $400 million under the stock repurchase program, primarily funded through divestiture proceeds and free cash flow generated from operations.
Based on our operating plan, we expect that our available cash, cash equivalents and short-term investments, cash from our operations and cash available under our Revolving Credit Facility will be sufficient to finance our general operations and capital expenditures for at least 12 months from the date of this filing.
Leases, respectively , for further information. 59 Table of Contents Based on our operating plan, we expect that our available cash, cash equivalents and investments, cash from our operations and cash available under our Revolving Credit Facility will be sufficient to finance our general operations and capital expenditures for at least 12 months from the date of this filing.
(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. In addition, the year ended December 31, 2024, includes a tax benefit of $1 million, or $0.00 per share, related to tax adjustments on previously reported divestitures.
(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. In addition, the year ended December 31, 2025, includes a tax benefit of $4 million, or $0.01 per share, related to tax adjustments on previously reported divestitures and impacts of the OBBBA.
In addition, newly finalized Centers for Medicare and Medicaid Services (CMS) regulations will require beneficiaries dually enrolled in Medicare and in a Medicaid Managed Care Plan to receive integrated care through the Medicaid company's Medicare Advantage Dual Eligible Special Needs Plans (D-SNPs) beginning in 2030, with certain restrictions beginning in 2027.
Regulatory: Dual-Eligible In addition, the CMS calendar year 2025 Medicare and Part D policy rule and finalized regulations will require beneficiaries dually enrolled in Medicare and in a Medicaid managed care plan to receive integrated care through the Medicaid company's Medicare Advantage Dual Eligible Special Needs Plans (D-SNPs) beginning in 2030, with certain restrictions beginning in 2027.
We generally receive a fixed premium per member per month pursuant to our contracts and recognize premium revenues during the period in which we are obligated to provide services to our members at the amount reasonably estimable.
In addition to member premium payments, our Marketplace contracts also generate revenues from subsidies received from CMS. We generally receive a fixed premium per member per month pursuant to our contracts and recognize premium revenues during the period in which we are obligated to provide services to our members at the amount reasonably estimable.
We had outstanding letters of credit of $145 million as of December 31, 2024, which were not part of our Revolving Credit Facility. The letters of credit bore weighted interest of 0.7% as of December 31, 2024. In addition, we had outstanding surety bonds of $844 million as of December 31, 2024.
We had outstanding letters of credit of $120 million as of December 31, 2025, which were not part of our Revolving Credit Facility. The letters of credit bore weighted interest of 0.8% as of December 31, 2025. In addition, we had outstanding surety bonds of $784 million as of December 31, 2025.
Our uniquely local approach – with local brands and local teams who live in, care about and directly influence the communities they serve – is a key differentiator in our ability to provide access to quality care to our members.
We believe the best way to deliver healthcare is with a personal approach, with local brands and local teams who live in, care about and directly influence the communities they serve – a key differentiator in our ability to provide access to quality care for our members.
Selling, General & Administrative Expenses The SG&A expense ratio was 8.5% for the year ended December 31, 2024, compared to 9.0% for the year ended December 31, 2023. The adjusted SG&A expense ratio was 8.5% for the year ended December 31, 2024, compared to 8.9% for the year ended December 31, 2023.
Selling, General and Administrative Expenses The SG&A expense ratio was 7.4% for the year ended December 31, 2025, compared to 8.5% for the year ended December 31, 2024. The adjusted SG&A expense ratio was 7.4% for the year ended December 31, 2025, compared to 8.5% for the year ended December 31, 2024.
As of December 31, 2024, our subsidiaries had aggregate statutory capital and surplus of $20.3 billion, compared with the required minimum aggregate statutory capital and surplus requirements of $9.1 billion. During the year ended December 31, 2024, we received dividends of $3.2 billion from and made $752 million of capital contributions to our regulated subsidiaries.
As of December 31, 2025, our subsidiaries had aggregate statutory capital and surplus of $19.7 billion, compared with the required minimum aggregate statutory capital and surplus requirements of $11.3 billion. During the year ended December 31, 2025, we received dividends of $3.2 billion from and made $2.0 billion of capital contributions to our regulated subsidiaries.
The benefits of successful execution of our value creation initiatives have impacted our current results of operations and will continue to impact future results of operations, including the implementation of our new third-party pharmacy benefits management (PBM) contract, which commenced in January 2024.
The implementation of our third-party pharmacy benefits management (PBM) contract, which commenced in January 2024, along with SG&A initiatives have impacted our current results of operations and will continue to impact future results of operations.
Medicare Total revenues increased 3% in the year ended December 31, 2024, compared to the corresponding period in 2023, primarily driven by increased PDP membership of 50%, partially offset by lower Medicare Advantage membership.
Medicare Total revenues increased 62% in the year ended December 31, 2025, compared to the corresponding period in 2024, primarily driven by increased PDP premium yield and membership, partially offset by lower Medicare Advantage membership.
The following table sets forth our membership by line of business: December 31, 2024 2023 Traditional Medicaid (1) 11,408,100 12,754,000 High Acuity Medicaid (2) 1,595,400 1,718,000 Total Medicaid 13,003,500 14,472,000 Commercial Marketplace 4,382,100 3,900,100 Commercial Group 431,400 427,500 Total Commercial 4,813,500 4,327,600 Medicare (3) 1,110,900 1,284,200 Medicare PDP 6,925,700 4,617,800 Total at-risk membership 25,853,600 24,701,600 TRICARE eligibles 2,747,000 2,773,200 Total 28,600,600 27,474,800 (1) Membership includes Temporary Assistance for Needy Families (TANF), Medicaid Expansion, Children's Health Insurance Program (CHIP), Foster Care and Behavioral Health.
The following table sets forth our membership by line of business: December 31, 2025 2024 Traditional Medicaid (1) 10,932,600 11,408,100 High Acuity Medicaid (2) 1,585,800 1,595,400 Total Medicaid 12,518,400 13,003,500 Marketplace 5,541,400 4,382,100 Individual and Commercial Group (3) 452,500 431,400 Total Commercial 5,993,900 4,813,500 Medicare (4) 1,002,600 1,110,900 Medicare PDP 8,118,600 6,925,700 Total at-risk membership 27,633,500 25,853,600 TRICARE eligibles — 2,747,000 Total 27,633,500 28,600,600 (1) Membership includes Temporary Assistance for Needy Families (TANF), Medicaid Expansion, Children's Health Insurance Program (CHIP), Foster Care and Behavioral Health.
In January 2023, we sold Magellan Specialty Health for $646 million in cash and stock, including an estimated working capital adjustment, and recognized a gain of $79 million, or $63 million after-tax.
During 2025, we recorded a favorable adjustment to the gain on sale of Magellan Rx of $2 million, or $1 million after-tax. In January 2023, we sold Magellan Specialty Health for $646 million in cash and stock, including an estimated working capital adjustment, and recognized a gain of $79 million, or $63 million after-tax.
Upon closing the divestiture, we settled the foreign currency swap associated with the divestiture and recorded a corresponding gain of $20 million. In October 2024, we completed the divestiture of Collaborative Health Systems (CHS) and recognized a pre-tax gain of $17 million, or $13 million after-tax. The above-noted divestitures are drivers of certain year-over-year variances discussed throughout this section.
Upon closing the divestiture, we settled the foreign currency swap associated with the divestiture and recorded a corresponding gain of $20 million. In October 2024, we completed the divestiture of Collaborative Health Systems (CHS) and recognized a pre-tax gain of $17 million, or $13 million after-tax.
The IRA changes effective for 2025 result in a meaningful shift in cost-sharing responsibilities between members, drug companies, CMS, and PDPs and will result in a significant increase in our premiums in consideration for our PDPs responsibility for a larger portion of total Part D benefit costs. The COVID-19 pandemic impacted our business as it relates to Medicaid eligibility changes.
Additionally, the IRA changes effective for 2025 result in a meaningful shift in cost-sharing responsibilities between members, drug companies, CMS, and PDPs and have led to a significant increase in our premiums in consideration for our PDPs responsibility for a larger portion of total Part D benefit costs.
Consistent with our strategy, we have reduced our Medicare Advantage footprint to 32 states as of January 1, 2025. General Our results of operations depend on our ability to manage expenses associated with health benefits (including estimated costs incurred) and selling, general and administrative (SG&A) costs. We measure operating performance based upon two key ratios.
Our results of operations depend on our ability to manage expenses associated with health benefits (including estimated costs incurred) and selling, general and administrative (SG&A) costs. We measure operating performance based upon two key ratios.
Some states require state directed payments that have minimal risk, but are administered as a premium adjustment. These payments are recorded as premium revenue and medical costs at close to a 100% HBR. In many instances, we have little visibility to the timing of these payments until they are paid by the state. 63 Table of Contents
These payments are recorded as premium revenue and medical costs at close to a 100% HBR. In many instances, we have little visibility to the timing of these payments until they are paid by the state.
We continue to believe we have both the capacity and capability to successfully navigate industry changes to the benefit of our members, customers, providers and shareholders.
We continue to believe we have both the capacity and capability to successfully navigate industry changes to the benefit of our members, customers, providers and shareholders through program and bid design, product placement and other strategic factors.
We first assess qualitative factors to determine if a quantitative impairment test is necessary. We generally do not calculate the fair value of a reporting unit unless we determine, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount.
We generally do not calculate the fair value of a reporting unit unless we determine, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. However, in certain circumstances we may elect to perform a quantitative assessment without first assessing qualitative factors.
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 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. A prolonged bid protest has led the agency to cancel the original awards and issue a rebid.
The credit agreement underlying our Revolving Credit Facility and Term Loan Facility contains customary covenants, as well as financial covenants, including, a minimum fixed charge coverage ratio and a maximum debt-to-EBITDA ratio. Our maximum debt-to-EBITDA ratio under the credit agreement may not exceed 4.0 to 1.0.
The credit agreement underlying our Revolving Credit Facility, in the principal amount of $4.0 billion, and Term Loan Facility, in the principal amount of $2.0 billion, contains customary covenants as well as financial covenants including a debt-to-capital ratio. Our maximum debt-to-capital ratio under the credit agreement may not exceed 0.6 to 1.0.
We do not believe any of our reporting units are currently at risk for impairment. 59 Table of Contents Medical Claims Liability Our medical claims liability includes claims reported but not yet paid, or claims inventory, estimates for claims incurred but not reported (IBNR) and estimates for the costs necessary to process unpaid claims at the end of each period.
Medical Claims Liability Our medical claims liability includes claims reported but not yet paid, or claims inventory, estimates for claims incurred but not reported (IBNR) and estimates for the costs necessary to process unpaid claims at the end of each period.
As a result, the liability generally is described as having a "short-tail," which causes less than 10% of our medical claims liability as of the end of any given year to be outstanding the following year.
Medical claims are usually paid within a few months of the member receiving service from the healthcare provider. As a result, the liability generally is described as having a "short-tail," which typically causes less than 10% of our medical claims liability as of the end of any given year to be outstanding the following year.
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.
Medicaid Total revenues increased 9% in the year ended December 31, 2025, compared to the corresponding period in 2024. 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.
Financing activities in 2024 were driven by stock repurchases of $3.1 billion, which included $3.0 billion under the stock repurchase program and $114 million of repurchases related to income tax withholding upon the vesting of previously awarded stock grants, partially offset by net proceeds from long-term debt.
Financing activities in 2025 were driven by stock repurchases of $475 million, which included $400 million under the stock repurchase program and $48 million of repurchases related to income tax withholding upon the vesting of previously awarded stock grants, and net reduction of long-term debt.
From the onset of the public health emergency (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). Since March 31, 2023, redeterminations are the primary driver of our Medicaid membership decline.
Regulatory: Medicaid The COVID-19 pandemic impacted our business as it relates to Medicaid eligibility changes. From the onset of the public health emergency (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 decrease in the adjusted SG&A expense ratio was primarily driven by the divestiture of Circle Health, which operated at a higher SG&A expense ratio, lower Medicare SG&A, and continued leveraging of expenses over higher revenues. The decrease was partially offset by growth in the Marketplace business, which operates at a meaningfully higher SG&A expense ratio as compared to Medicaid.
The decreases were primarily driven by continued discipline, leveraging of expenses over higher revenues, and growth in the PDP business, which operates at a meaningfully lower SG&A expense ratio as compared to the overall company. The decreases were partially offset by growth in the Marketplace business, which operates at a meaningfully higher SG&A expense ratio.
The change in medical claims liability is summarized as follows (in millions): Year Ended December 31, 2024 2023 2022 Balance, January 1, $ 18,000 $ 16,745 $ 14,243 Less: Reinsurance recoverables 49 26 23 Balance, January 1, net 17,951 16,719 14,220 Acquisitions and divestitures — — 105 Incurred related to: Current year 128,312 120,680 112,896 Prior years (2,447) (2,036) (1,367) Total incurred 125,865 118,644 111,529 Paid related to: Current year 111,456 104,725 97,799 Prior years 13,959 12,937 11,336 Total paid 125,415 117,662 109,135 Plus: Premium deficiency reserve (158) 250 — Balance, December 31, net 18,243 17,951 16,719 Plus: Reinsurance recoverables 65 49 26 Balance, December 31, $ 18,308 $ 18,000 $ 16,745 Days in claims payable (1) 53 54 54 (1) Days in claims payable is a calculation of medical claims liability at the end of the period divided by average expense per calendar day for the fourth quarter of each year. 61 Table of Contents Medical claims are usually paid within a few months of the member receiving service from the physician or other healthcare provider.
The change in medical claims liability is summarized as follows (in millions): Year Ended December 31, 2025 2024 2023 Balance, January 1, $ 18,308 $ 18,000 $ 16,745 Less: Reinsurance recoverables 65 49 26 Balance, January 1, net 18,243 17,951 16,719 Incurred related to: Current year 160,109 128,312 120,680 Prior years (2,315) (2,447) (2,036) Total incurred 157,794 125,865 118,644 Paid related to: Current year 140,691 111,456 104,725 Prior years 14,677 13,959 12,937 Total paid 155,368 125,415 117,662 Plus: Premium deficiency reserve (92) (158) 250 Plus: Divestitures (109) — — Balance, December 31, net 20,468 18,243 17,951 Plus: Reinsurance recoverables 76 65 49 Balance, December 31, $ 20,544 $ 18,308 $ 18,000 Days in claims payable (1) 46 53 54 (1) Days in claims payable is a calculation of medical claims liability at the end of the period divided by average expense per calendar day for the fourth quarter of each year.
Summary of Significant Accounting Policies, to our consolidated financial statements included elsewhere herein. Our accounting policies regarding intangible assets, medical claims liability and revenue recognition are particularly important to the portrayal of our financial condition and results of operations and require the application of significant judgment by our management.
Our accounting policies regarding intangible assets, medical claims liability and revenue recognition are particularly important to the portrayal of our financial condition and results of operations and require the application of significant judgment by our management. As a result, they are subject to an inherent degree of uncertainty.
Based on the data as well as our successful appeal of the initial scoring of our TTY (Text-to-Voice teletypewriter services for the hearing impaired), we had approximately 55% of our Medicare Advantage membership enrolled in plans rated 3.5 stars or higher – compared to approximately 23% in the prior year.
Based on the data, we had approximately 55% of our Medicare Advantage membership enrolled in plans rated 3.5 stars or higher – compared to approximately 23% in the prior year.
Some states enact premium taxes, similar assessments and provider pass-through payments, collectively premium taxes, and these taxes are recorded as a separate component of both revenues and operating expenses. For certain products, premium taxes and state assessments are not pass-through payments and are recorded as premium revenue and premium tax expense in the Consolidated Statements of Operations.
Some states enact premium taxes, similar assessments and provider pass-through payments, collectively premium taxes, and these taxes are recorded as a separate component of both revenues and operating expenses.
(2) Membership includes Aged, Blind or Disabled (ABD), Intellectual and Developmental Disabilities (IDD), Long-Term Services and Supports (LTSS) and Medicare-Medicaid Plans (MMP) Duals.
(2) Membership includes Aged, Blind or Disabled (ABD), Intellectual and Developmental Disabilities (IDD), Long-Term Services and Supports (LTSS) and Medicare-Medicaid Plans (MMP) Duals. (3) Membership includes Commercial Group, Individual Coverage Health Reimbursement Arrangement (ICHRA) and Other Off-Exchange Individual.
Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024. EXECUTIVE OVERVIEW We are a leading healthcare enterprise that is committed to helping people live healthier lives.
Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 18, 2025. EXECUTIVE OVERVIEW General As the nation's largest managed care company focused on underserved populations, we are committed to helping people live healthier lives.
For the year ended December 31, 2023, we recorded income tax expense of $899 million on pre-tax earnings of $3.6 billion, or an effective tax rate of 25.0%.
Income Tax Expense For the year ended December 31, 2025, we recorded an income tax benefit of $51 million on a pre-tax loss of $6.7 billion, or an effective tax rate of 0.8%.
As part of our capital allocation strategy, we may decide to repurchase debt or raise capital through the issuance of debt in the form of senior notes. In 2022, the Company's Board of Directors authorized a $1.0 billion senior note debt repurchase program. No repurchases were made during the year ended December 31, 2024.
As part of our capital allocation strategy, we may decide to repurchase debt or raise capital through the issuance of debt in the form of senior notes. In 2022, our Board of Directors authorized a $1.0 billion senior note debt repurchase program. During 2025, we repurchased $189 million of our par value senior notes for $187 million.
As of December 31, 2024, the amount of capital and surplus or net worth that was unavailable for the payment of dividends or return of capital to us was $9.1 billion in the aggregate. 58 Table of Contents RECENT ACCOUNTING PRONOUNCEMENTS For this information, refer to Note 2.
As of December 31, 2025, the amount of capital and surplus or net worth that was unavailable for the payment of dividends or return of capital to us was $11.3 billion in the aggregate. RECENT ACCOUNTING PRONOUNCEMENTS For this information, refer to Note 2. Summary of Significant Accounting Policies , in the Notes to the Consolidated Financial Statements, included herein.
Impairment During the year ended December 31, 2024, we recorded total impairment charges of $13 million driven by Health Net Federal Services property, software and equipment related to the TRICARE Managed Care Support Contract that was no longer recoverable following the 2024 final ruling.
During the year ended December 31, 2024, we recorded total impairment charges of $13 million driven by Health Net Federal Services property, software and equipment related to the TRICARE Managed Care Support Contract that was no longer recoverable following the 2024 final ruling. 55 Table of Contents Other Income (Expense) The following table summarizes the components of other income (expense) for the year ended December 31, ($ in millions): 2025 2024 Investment and other income $ 1,572 $ 1,784 Debt extinguishment 1 — Interest expense (678) (702) Other income (expense), net $ 895 $ 1,082 Investment and other income.
For the year ended December 31, 2023, our effective tax rate on adjusted earnings was 24.9%. 53 Table of Contents Segment Results The following table summarizes our consolidated operating results by segment for the year ended December 31, ($ in millions): 2024 2023 % Change 2023-2024 Total Revenues Medicaid $ 101,417 $ 100,759 1 % Medicare 23,032 22,261 3 % Commercial 33,702 24,845 36 % Other 4,920 6,134 (20) % Consolidated Total $ 163,071 $ 153,999 6 % Gross Margin (1) Medicaid $ 6,246 $ 8,641 (28) % Medicare 2,595 2,867 (9) % Commercial 7,663 5,029 52 % Other 565 1,100 (49) % Consolidated Total $ 17,069 $ 17,637 (3) % (1) Gross margin represents premium and service revenues less medical costs and cost of services.
For the year ended December 31, 2024, our effective tax rate on adjusted earnings was 23.8%. 56 Table of Contents Segment Results The following table summarizes our consolidated operating results by segment for the year ended December 31, ($ in millions): 2025 2024 % Change 2024-2025 Total Revenues Medicaid $ 110,434 $ 101,417 9 % Medicare 37,210 23,032 62 % Commercial 42,003 33,702 25 % Other 5,130 4,920 4 % Consolidated Total $ 194,777 $ 163,071 19 % Gross Margin (1) Medicaid $ 5,690 $ 6,246 (9) % Medicare 2,983 2,595 15 % Commercial 5,101 7,663 (33) % Other 435 565 (23) % Consolidated Total $ 14,209 $ 17,069 (17) % (1) Gross margin represents premium and service revenues less medical costs and cost of services.
The following table illustrates the sensitivity of these factors and the estimated potential impact on our operating results caused by changes in these factors based on December 31, 2024 data: Completion Factors: (1) Cost Trend Factors: (2) (Decrease) Increase in Factors Increase (Decrease) in Medical Claims Liabilities (Decrease) Increase in Factors Increase (Decrease) in Medical Claims Liabilities (In millions) (In millions) (1.00) % $ 1,221 (1.00) % $ (240) (0.75) 912 (0.75) (180) (0.50) 605 (0.50) (120) (0.25) 301 (0.25) (60) 0.25 (299) 0.25 60 0.50 (596) 0.50 120 0.75 (890) 0.75 180 1.00 (1,181) 1.00 240 (1) Reflects estimated potential changes in medical claims liability caused by changes in completion factors.
The following table illustrates the sensitivity of these factors and the estimated potential impact on our operating results caused by changes in these factors based on December 31, 2025 data: Completion Factors: (1) Cost Trend Factors: (2) (Decrease) Increase in Factors Increase (Decrease) in Medical Claims Liabilities (Decrease) Increase in Factors Increase (Decrease) in Medical Claims Liabilities (In millions) (In millions) (1.00) % $ 1,364 (1.00) % $ (276) (0.75) 1,019 (0.75) (207) (0.50) 677 (0.50) (138) (0.25) 337 (0.25) (69) 0.25 (334) 0.25 69 0.50 (666) 0.50 138 0.75 (996) 0.75 207 1.00 (1,323) 1.00 276 (1) Reflects estimated potential changes in medical claims liability caused by changes in completion factors.
The decreases were primarily due to divestitures. 54 Table of Contents LIQUIDITY AND CAPITAL RESOURCES The following table is a condensed schedule of cash flows used in the discussion of liquidity and capital resources ($ in millions): Year Ended December 31, 2024 2023 Net cash provided by operating activities $ 154 $ 8,053 Net cash used in investing activities (1,052) (1,191) Net cash used in financing activities (2,406) (1,658) Effect of exchange rate changes on cash, cash equivalents and restricted cash 8 (32) Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents $ (3,296) $ 5,172 Cash Flows Provided by Operating Activities Normal operations are funded primarily through operating cash flows and borrowings under our Revolving Credit Facility.
Gross margin decreased $130 million in the year ended December 31, 2025, compared to the corresponding period in 2024 driven by the Circle Health divestiture in the first quarter of 2024 along with the expiration of the TRICARE Managed Care Support Contract in December 2024. 57 Table of Contents LIQUIDITY AND CAPITAL RESOURCES The following table is a condensed schedule of cash flows used in the discussion of liquidity and capital resources ($ in millions): Year Ended December 31, 2025 2024 Net cash provided by operating activities $ 5,088 $ 154 Net cash provided by (used in) investing activities 472 (1,052) Net cash (used in) financing activities (1,621) (2,406) Effect of exchange rate changes on cash, cash equivalents and restricted cash — 8 Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents $ 3,939 $ (3,296) Cash Flows Provided by Operating Activities Normal operations are funded primarily through operating cash flows and borrowings under our Revolving Credit Facility.
As a result of the above requirements and other regulatory requirements, certain of our subsidiaries are subject to restrictions on their ability to make dividend payments, loans or other transfers of cash to their parent companies.
As of December 31, 2025, each of our health plans was in compliance with the risk-based capital requirements enacted in those states. 60 Table of Contents As a result of the above requirements and other regulatory requirements, certain of our subsidiaries are subject to restrictions on their ability to make dividend payments, loans or other transfers of cash to their parent companies.
Because of the complexity of our business, the number of states in which we operate and the volume of claims that we process, we are unable to practically quantify the impact of these initiatives on our changes in estimates of IBNR.
Because of the complexity of our business, the number of states in which we operate and the volume of claims that we process, we are unable to practically quantify the impact of these initiatives on our changes in estimates of IBNR. 64 Table of Contents Revenue Recognition Our health plans generate revenues primarily from premiums received from the states in which we operate health plans, premiums received from our members and CMS for our Medicare products and premiums from members of our commercial health plans.
Approximately nine to ten months subsequent to the end of the plan year, or later in the case of the coverage gap discount subsidy, a settlement payment is made between CMS and our plans based on the difference between the prospective payments and actual claims experience.
Approximately one year subsequent to the end of the plan year, or later in the case of the drug manufacturer discount subsidy, a settlement payment is made between CMS and our plans based on the difference between the earned premium, risk corridor, reinsurance and subsidies compared to monthly prospective payments.
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 and has a four-year term, with two optional one-year extensions, for a total of six possible contract years.
The contract has a four-year term, with an optional two-year extension, for a total of six possible contract years. • In July 2025, our subsidiary, Magnolia Health Plan, commenced the Mississippi Division of Medicaid contract to continue serving the state's Coordinated Care Organization Program consisting of the Mississippi Coordinated Access Network and the Mississippi Children's Health Insurance Program (CHIP).
Medicaid Total revenues increased 1% in the year ended December 31, 2024, compared to the corresponding period in 2023. Gross margin decreased $2.4 billion in the year ended December 31, 2024, compared to the corresponding period in 2023.
Other Total revenues increased 4% in the year ended December 31, 2025, compared to the corresponding period in 2024.
As of December 31, 2024, there was $700 million available under the senior note debt repurchase program. Refer to Note 10. Debt for further information regarding the issuance and redemption of senior notes.
As of December 31, 2025, there was $513 million available under the senior note debt repurchase program. Refer to Note 10. Debt for further information regarding the issuance and redemption of senior notes. In January 2026, we repurchased an additional $29 million of our par value Senior Notes due 2027 through the debt repurchase program.
See "Risk Factors - Failure to accurately estimate and price our medical expenses or effectively manage our medical costs or related administrative costs could have a material adverse effect on our results of operations, financial condition and cash flows. " These approaches are consistently applied to each period presented.
See "Risk Factors - Failure to timely and effectively identify and mitigate medical cost trends and receive adequate rate adjustments to account for increased acuity could have a material adverse effect on our results of operations, financial condition and cash flows. " These approaches are consistently applied to each period presented.
During 2024, we recorded an additional gain on sale of $83 million for achievement of contingent consideration related to the sale and finalization of working capital adjustments. 43 Table of Contents In January 2023, we also completed the divestitures of Centurion and HealthSmart and recorded impairments of $259 million ($181 million after-tax) and $36 million ($27 million after-tax), respectively, in 2022.
During 2024, we recorded an additional gain on sale of $83 million for achievement of contingent consideration related to the sale and finalization of working capital adjustments. 44 Table of Contents In January 2024, we completed the divestiture of Circle Health Group (Circle Health) for $931 million.
The NAIC has adopted rules which set minimum risk-based capital requirements for insurance companies, MCOs and other entities bearing risk for healthcare coverage. As of December 31, 2024, each of our health plans was in compliance with the risk-based capital requirements enacted in those states.
The NAIC has adopted rules which set minimum risk-based capital requirements for insurance companies, MCOs and other entities bearing risk for healthcare coverage.
Goodwill is generally attributable to the value of the synergies between the combined companies and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset. At December 31, 2024, we had $17.6 billion of goodwill and $5.4 billion of other intangible assets.
The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Goodwill is generally attributable to the value of the synergies between the combined companies and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset.
(3) Membership includes Medicare Advantage and Medicare Supplement. 50 Table of Contents RESULTS OF OPERATIONS The following discussion and analysis is based on our Consolidated Statements of Operations, which reflect our results of operations for years ended December 31, 2024 and 2023, respectively, prepared in accordance with generally accepted accounting principles in the United States (GAAP) ($ in millions, except per share data in dollars): 2024 2023 % Change 2023-2024 Premium $ 142,303 $ 135,636 5 % Service 3,202 4,459 (28) % Premium and service revenues 145,505 140,095 4 % Premium tax 17,566 13,904 26 % Total revenues 163,071 153,999 6 % Medical costs 125,707 118,894 6 % Cost of services 2,729 3,564 (23) % Selling, general and administrative expenses 12,400 12,563 (1) % Depreciation expense 549 575 (5) % Amortization of acquired intangible assets 692 718 (4) % Premium tax expense 17,806 14,226 25 % Impairment 13 529 (98) % Earnings from operations 3,175 2,930 8 % Investment and other income 1,784 1,393 28 % Interest expense (702) (725) (3) % Earnings before income tax expense 4,257 3,598 18 % Income tax expense 963 899 7 % Net earnings 3,294 2,699 22 % Loss attributable to noncontrolling interests 11 3 n.m.
(4) Membership includes Medicare Advantage and Medicare Supplement. 53 Table of Contents RESULTS OF OPERATIONS The following discussion and analysis is based on our Consolidated Statements of Operations, which reflect our results of operations for years ended December 31, 2025 and 2024, respectively, prepared in accordance with generally accepted accounting principles in the United States (GAAP) ($ in millions, except per share data in dollars): 2025 2024 % Change 2024-2025 Premium $ 171,556 $ 142,303 21 % Service 3,025 3,202 (6) % Premium and service revenues 174,581 145,505 20 % Premium tax 20,196 17,566 15 % Total revenues 194,777 163,071 19 % Medical costs 157,702 125,707 25 % Cost of services 2,670 2,729 (2) % Selling, general and administrative expenses 12,904 12,400 4 % Depreciation expense 590 549 7 % Amortization of acquired intangible assets 685 692 (1) % Premium tax expense 20,538 17,806 15 % Impairment 7,311 13 n.m.
The contract has a three-year term, with two optional one-year extensions, for a total of five possible contract years. • In November 2024, our subsidiary, Buckeye Health Plan, was selected by the Ohio Department of Medicaid to continue providing Medicare and Medicaid services for dually eligible individuals through a Fully Integrated Dual Eligible Special Needs Plan (FIDE SNP).
The contract has a four-year term, with optional extensions of six months to five and a half years. 51 Table of Contents • In January 2026, our subsidiary, Buckeye Health Plan, commenced the contract with the Ohio Department of Medicaid to continue providing Medicare and Medicaid services for dually eligible individuals through a FIDE SNP.
We define our reporting units as our operating segments or one level below the operating segment. If a reporting unit's carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit.
If a reporting unit's carrying amount exceeds its fair value, we will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. We first assess qualitative factors to determine if a quantitative impairment test is necessary.
Investment and other income increased by $391 million for the year ended December 31, 2024 compared to 2023, driven by higher interest rates on larger investment balances. The year ended December 31, 2024 also included net gains on divestitures described above, partially offset by a private equity investment reduction.
The year ended December 31, 2024 included net gains on divestitures described above, partially offset by a private equity investment reduction. Interest expense. Interest expense for the year ended December 31, 2025 was $678 million compared to $702 million for the corresponding period in 2024.
The contract has a six-year term. • In January 2025, our subsidiary, Sunflower Health Plan, commenced the contract to continue providing managed health care services through KanCare, the State of Kansas' Medicaid and Children's Health Insurance Program.
Additionally, coverage for Behavior Analysis services was also added to the existing Children's Medical Services contract beginning February 2025. • In January 2025, our subsidiary, Sunflower Health Plan, commenced the contract to continue providing managed health care services through KanCare, the State of Kansas' Medicaid and CHIP.
For additional information regarding regulatory trends and uncertainties, see Part I, Item 1 " Business - Regulation " and Item 1A, " Risk Factors ." 2024 Highlights Our financial performance for 2024 is summarized as follows: • Year-end membership of 28.6 million, an increase of 1.1 million members, or 4% over 2023. • Total revenues of $163.1 billion, representing 6% growth year-over-year. • Premium and service revenues of $145.5 billion, representing 4% growth year-over-year. • HBR of 88.3% for 2024, compared to 87.7% for 2023. • SG&A expense ratio of 8.5% for 2024, compared to 9.0% for 2023. • Adjusted SG&A expense ratio of 8.5% for 2024, compared to 8.9% for 2023. • Diluted earnings per share (EPS) of $6.31 for 2024, compared to $4.95 for 2023. • Adjusted diluted EPS of $7.17 for 2024, compared to $6.68 for 2023, representing 7% growth year-over-year. • Operating cash flows of $154 million for 2024, compared to $8.1 billion for 2023. 45 Table of Contents A reconciliation from GAAP diluted EPS to Adjusted Diluted EPS is highlighted below, and additional detail is provided under the heading " Non-GAAP Financial Presentation ": We reference adjusted SG&A expense ratio defined as adjusted SG&A expenses, which excludes acquisition and divestiture related expenses and other items, divided by premium and service revenues.
For additional information regarding regulatory trends and uncertainties, see Part I, Item 1 " Business - Regulation " and Item 1A, " Risk Factors ." 47 Table of Contents 2025 Highlights Our financial performance for 2025 is summarized as follows: • Year-end membership of 27.6 million, a decrease of 967 thousand members, or 3% over 2024. • Total revenues of $194.8 billion, representing 19% growth year-over-year. • Premium and service revenues of $174.6 billion, representing 20% growth year-over-year. • HBR of 91.9% for 2025, compared to 88.3% for 2024. • SG&A expense ratio of 7.4% for 2025, compared to 8.5% for 2024. • Adjusted SG&A expense ratio of 7.4% for 2025, compared to 8.5% for 2024. • Operating cash flows of $5.1 billion for 2025, compared to $154 million for 2024. • In October 2025, we completed our quantitative goodwill impairment analysis and recorded a non-cash goodwill impairment of $6.7 billion in the third quarter of 2025. • GAAP diluted loss per share of $(13.53) for 2025, driven by the goodwill impairment. • Adjusted diluted earnings per share (EPS) of $2.08 for 2025.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeINVESTMENTS AND DEBT As of December 31, 2024, we had short-term investments of $2.6 billion and long-term investments of $18.8 billion, including restricted deposits of $1.4 billion. The short-term investments generally consist of highly liquid securities with maturities between three and 12 months. The long-term investments consist of municipal, corporate and U.S.
Biggest changeINVESTMENTS AND DEBT As of December 31, 2025, we had short-term investments of $2.4 billion and long-term investments of $18.4 billion, including restricted deposits of $1.4 billion. The short-term investments generally consist of highly liquid securities with maturities between three and 12 months. The long-term investments consist of municipal, corporate and U.S.
For a discussion of the interest rate risk that our investments are subject to, see "Risk Factors - Our investment portfolio may suffer losses which could materially and adversely affect our results of operations or liquidity. " 64 Table of Contents
For a discussion of the interest rate risk that our investments are subject to, see "Risk Factors - Our investment portfolio may suffer losses which could materially and adversely affect our results of operations or liquidity. " 66 Table of Contents
Assuming a hypothetical and immediate 1% increase in market interest rates at December 31, 2024, the fair value of our fixed income investments would decrease by approximately $665 million. Declines in interest rates over time will reduce our investment income.
Assuming a hypothetical and immediate 1% increase in market interest rates at December 31, 2025, the fair value of our fixed income investments would decrease by approximately $650 million. Declines in interest rates over time will reduce our investment income.