Centene CEO Michael Neidorff joined Yahoo Finance Live to discuss his outlook for the healthcare sector under a Biden Presidency and the future of the Affordable Care Act.
JULIE HYMAN: As we know, the Supreme Court is considering a case involving the Affordable Care Act. And legal analysts who have been listening to the preliminary arguments think that it's unlikely that we will see a throwing out of the entire act, perhaps just a [INAUDIBLE] of the mandate. We want to bring in someone whose business is very affected by the Affordable Care Act, that's Michael Neidorff. He is a CEO of Centene, which is a health care insurance company that manages many of those plans, as well as many Medicaid plans.
And Michael, it's great to see you. You recently said on your third quarter earnings call that you didn't think the ACA was going anywhere. It looks like, at least initially here, that you are correct. What do you expect, though, in the coming months from-- and from the next administration in terms of tweaks, changes, expansions, Medicaid, for example, and how that's going to affect your business?
MICHAEL NEIDORFF: Yeah, I think it's a very different environment. First of all, I've said for some time that I thought the court case-- because severability's the issue. So I think we're headed that way. It's not-- and I don't think it's going to be 5:4. It could be 6:3 or even 7:2.
So it's-- I think that's a good thing. And that's an important stability factor. Look, the new administration is very much concerned about the health care delivery, access to health care, and they're going to work collaboratively with the industry, I believe, and across the aisle to get something that makes sense for all Americans.
Everybody's aware we have a medical emergency right now, and this is the time that systems like we have in place should be working for everybody. And when we-- everything we're hearing, whether it be expansion of Medicaid, whether it be increasing the subsidies for people above 400% of the federal poverty level for the marketplace, ensuring that government.gov that helps people enroll, it functions more effectively. We're going to see a whole series of things, I believe, that are going to improve access. And the fact that it's called Obamacare is not going to bother him.
JULIE HYMAN: What about on a state by state level, because you have a couple of different factors in play? One, you have the elections, of course, that just happened. But two, you also have state budgets, in some cases, are stretched by what's going on with the coronavirus. How is that going to play into Medicaid funding and Medicaid plans in various states?
MICHAEL NEIDORFF: Well, we're working with states, and there's a couple of examples of that. I won't give specifics, but we've talked with the governors, and the Medicaid directors, and Health and Human Services, and we're talking about saying, let's expand the coverage we give people. If we move into the ABD, the long-term care and others, the higher acuity cases, we can save you a lot of money and improve quality at the same time.
So sometimes necessity really helps. And we're going to end up, I believe, with a stronger system in those states with them effectively putting their money to use. We're also going to be working with Congress on the next-- on the next bill and talking about the FMAP. And an important factor there for the states is that the FMAP be continued to a date certain, as opposed to when the emergency's declared over.
Because Medicaid directors and people we talked to believe that they need that so they can have the right kind of planning. So you're going to see a series of things. We're going to work very constructively. And I see it as a very positive environment and the beneficiaries-- well, everybody said, well, it's good for you. No, but what's important is it's good for the people who need health care.
BRIAN SOZZI: Michael, just given the uncertainty with regards to the ACA, what is the 12-month outlook for the average customer in terms of health care plan costs?
MICHAEL NEIDORFF: Well, it will vary state by state and the various products. But we see the costs coming down. I don't have an actual number in front of me. I can get it for you. But it's-- our premium increases have been somewhat low.
And you know, we've retained 80% to 90% of our customers. A lot of it's subsidized. And so-- and we ate a lot of costs during the pandemic, co-payments and things of that nature, to ensure that doctors didn't take a hit.
We continue subsidies for the recipients to ensure that they were able to stay in and didn't-- we didn't terminate them. So when I look at the costs, there's the actual premium that's paid, but there's also the costs we've absorbed to try and smooth things as we go through this issue. Because this is something where it requires everybody working together against the same objective, high-quality, effective care for people when they need it most.
MYLES UDLAND: And Mr. Neidorff, we're talking at a very interesting time for health care, where we have an administration change. We are in the midst of a health emergency in the country. But I know that, certainly my peers in the millennial generation are very concerned about the long-term trajectory of costs related to health care here in the US. And I'm curious how you see that evolving. Will this be a moment that we look back on and people change-- you know, things are rightsized, I suppose, within the industry to address those concerns?
MICHAEL NEIDORFF: I can give you-- excuse me-- I can give you some examples. I think we're-- I think we're going to see costs really be brought under control. And we're becoming a health-- a technology company that's health care. I'm going to give you one small example we tested in Florida and it's worked and we'll expand it.
It typically takes 18 minutes for a pre-authorization. We now have artificial intelligence and the capability to where we're giving approvals in 3 and 1/2 seconds. Now, think about what that means in terms of the manpower and things sitting there having to go through that detail, having people wait.
What we want-- as our new IT people and our current IT people like to say, we want a delighted receiver of the health care and a provider. So there's going to be-- you're going to see more and more technology. We have technology-- and to the extent of which I'll not go into it.
But we have technology we've developed that we can-- it's becomes preventive. We can identify somebody who might have a heart attack before they do. Now, think about what that saves in costs. So you're going to see technology moving ahead with better outcomes, and lower costs, and a big-- and a major function on it. I mean, we now have predictive models.
We have artificial intelligence with our recent acquisition that can read an electronic file, put it together on an interpretive predictive model and the claims record, and give the physician the most complete view of that patient that really helps them in their diagnostic work. So I think-- I see technology-- as in every industry, when costs get out of control, technology usually comes in and starts to reduce it. I'm anticipating our costs over the next five years going down as a result of it, with better outcomes, which is even more important.