The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Robert Cyran

NEW YORK, July 2 (Reuters Breakingviews) - U.S. health insurers’ years of plenty are ending. Centene saw its shares tank some 40% on Wednesday morning after the provider of plans for government-backed healthcare programs yanked its financial forecasts amid a profit warning. It’s the latest sign of a mounting crisis for the industry, just as it braces for big spending cuts and rule changes under the Trump administration.

Government largesse supported a phenomenal run for insurers. Take Medicare, the universal U.S. coverage scheme for the elderly. Enrolment in Advantage plans, under which private-sector companies administer benefits, has more than doubled since 2010. Meanwhile, that year’s passage of the Affordable Care Act, a landmark reform, set up state-based marketplaces through which individuals could purchase subsidized insurance. It also helped states to expand Medicaid, a public program covering the poor that is often privately managed. The stocks of UnitedHealth, Humana and Elevance Health, formerly known as Anthem, all outperformed tech giant Alphabet over the following decade.

Of late, though, persistent woes at UnitedHealth, the industry’s standout giant, illustrate how a surprising rise in costs have wrong-footed Medicare Advantage providers. Centene’s announcement shows difficulties spreading to other programs.

A preliminary analysis of 22 of the 29 states in which Centene offers marketplace coverage showed that revenue growth was slower, and patients were sicker, than anticipated. That is expected to ding adjusted earnings per share by $2.75, nearly 40% of the sum the company originally thought it could manage in 2025.

Incoming changes will compound the pain. About 24 million people purchased insurance through state marketplaces. The administration now wants them to submit to more onerous income verification and tighter paperwork deadlines. Expanded subsidies passed under President Joe Biden, which bumped up enrolment, are also set to expire.

Then there’s Centene’s Medicaid business. Costs, again, exceeded expectations. Now consider effective cuts to the program in gigantic tax-and-spending legislation moving through Congress. While still in the air, the total impact might reach $1 trillion, according to a Congressional Budget Office estimate. Throw all these changes together, and the agency estimated in June that perhaps 16 million fewer people might have health coverage in 2034.

Investors realize that this problem is not limited to Centene. Various healthcare stocks, especially companies with large Medicaid and Marketplace businesses, dipped on Wednesday morning. Shares of Elevance Health fell 9%, while Molina Healthcare sank over 20%. Years of plenty may be followed by years of famine.

Follow Robert Cyran on Bluesky.

CONTEXT NEWS

Centene withdrew its guidance for expected 2025 financial results on July 1. The company, which largely operates healthcare plans tied to government programs, cited lower-than-expected revenue and sicker-than-expected patients in its business serving individuals who purchase insurance through subsidized state marketplaces. It also pointed to higher costs for patients it is serving through Medicaid, a public insurance plan for those on low incomes.

The company said that a preliminary analysis of 22 of the 29 states in which it offers marketplace plans suggested a $2.75 reduction in anticipated adjusted earnings per share.

The company’s previous guidance was for adjusted earnings exceeding $7.25 per share. Centene shares were down nearly 40% in mid-morning trading on July 2.

(Editing by Jonathan Guilford; Production by Maya Nandhini)

((For previous columns by the author, Reuters customers can click on CYRAN/robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))