Centene Corp. (NYSE: CNC) is facing mounting cost pressure in its Medicaid business, with rising behavioral health utilization – particularly in applied behavior analysis (ABA) services – emerging as a major driver.

As demand for autism-related services expands and oversight of clinical appropriateness tightens, ABA is becoming a flashpoint in payer efforts to manage behavioral health costs while ensuring quality outcomes. Centene is just the latest to spotlight the issue.

During Centene’s Q2 2025 earnings call on July 25, CEO Sarah London identified behavioral health as the single largest driver behind a spike in Medicaid health benefits ratio (HBR), which rose to an “unanticipated” and “unacceptable” 94.9%. And ABA services were cited as the most significant contributor.

“Behavioral health was the most significant driver of the quarter-over-quarter increase with ABA, or applied behavioral analysis, as an accelerating pressure point across a number of our markets,” London said.

She noted that the company has taken multiple measures in response to that trend.

“We have formed enterprise-wide behavioral health and ABA task forces to further support our markets in aggressively managing this trend,” London said. “Together, they are focused on aligning members to high-quality providers, educating state partners around evidence-based clinical guidelines, advocating for behavioral health specific rate adjustments and rooting out fraud, waste and abuse in service of better member outcomes.”

Other major cost drivers for Centene have been home health care and high-cost drugs, according to London.

The steepest concentration of ABA-related cost pressure came from a single state program: Florida’s Children’s Medical Services contract. Centene became the sole provider for this population earlier in 2025.

“That population transitioned with inadequate rates, and with the continuity of care provision, limiting the use of managed care strategies to effectively manage services and associated costs,” London explained.

That restriction was lifted on June 1.

“We are already seeing the impact of clinical and administrative interventions,” London said. “At the same time, we are also advocating with our state partner to address the underlying rate gap, both retroactively and prospectively.”

While the behavioral health cost spike in Medicaid was part of a broader trend that also included home- and community-based services (HCBS) and high-cost drugs, Centene leadership is laser focused on behavioral health as the most urgent priority.

“We’re optimizing networks, ensuring that we’ve got [the] highest-quality providers. We’re aligning members to those providers,” London said. “And then [we’re] pretty aggressively stamping out fraud, waste and abuse, which is not talked about as much, but we are seeing a much higher prevalence of that in the behavioral health space, partly because of the fragmented provider base.”

While ABA cost growth is not a new phenomenon in Medicaid, Centene’s experience, especially in Florida, may signal broader systemic challenges.

As more managed care organizations inherit specialized populations and face intensified state oversight, ABA reimbursement and utilization strategies are coming under greater scrutiny.

Centene reported that about 88% of its Medicaid contracts are scheduled to be rerated between July 2025 and January 2026. The company expects those rate updates to help offset rising acuity and restore margins over time.

Still, the trend is unlikely to reverse quickly. Executives warned of continued behavioral health cost pressure in the back half of 2025.

“We know where to focus in terms of where to significantly move the needle,” London said.

Total revenue for Centene came in at $48.74 billion for the second quarter of 2025, a more than 22% increase from the $39.84 billion the managed care organization reported the same period a year ago.