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Centene Corp (CNC 1.90%)
Q1Â 2020 Earnings Call
Apr 28, 2020, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and welcome to the Centene Corporation First Quarter 2020 Financial Results. [Operator Instructions]
I would now like to turn the conference over to Jen Gilligan. Please go ahead.
Jennifer Gilligan -- Senior Vice President, Finance & Investor Relations
Thank you, and good morning, everyone. Thank you for joining us on our first quarter 2020 earnings results conference call. Michael Neidorff, Chairman, President and Chief Executive Officer and Jeff Schwaneke, Executive Vice President and Chief Financial Officer of Centene will host this morning's call, which also can be accessed through our website at centene.com. A replay will be available shortly after the call's completion also at centene.com or by dialing 877-344-7529 in the U.S. and Canada or in other countries by dialing 412-317-0088. The playback number for both dial-ins is 10141297.
Any remarks that Centene may make about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in Centene's most recent Form 10-Q filed today, April 28 and the Form 10-K, dated February 18, 2020 and other public SEC filings, including the risks and uncertainties described with respect to the potential impact of COVID-19 on our business and results of operations. Centene anticipates that subsequent events and developments will cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.
The call will also refer to certain non-GAAP measures. A reconciliation of these measures with the most directly comparable GAAP measures can be found in our first quarter 2020 press release, which is available on the company's website at centene.com under the Investors section. Additionally, I'd like to highlight Centene's upcoming Investor Day scheduled for Friday, June 12, 2020. This will use a virtual format, and we will provide more information as we get closer to the date.
With that, I would like to turn the call over to our Chairman, President and CEO, Michael Neidorff. Michael?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Thank you, Jennifer. Good morning, and thank you for joining Centene's first quarter 2020 earnings call. I'd like to welcome Jennifer to Centene as Senior Vice President of Finance and Investor Relations. She has taken the reigns from Ed Kroll, who many of you know so well. We'd like to congratulate Ed on his retirement and thank him for his impactful contribution over the years. We look forward to celebrating him in person when gathering together is considered safe.
Let me start by saying I hope you, your families and loved ones are all staying safe and healthy. Our hearts go out to all that have been impacted by the crisis and we are thankful to the essential workers on the front lines and the family supporting them for fighting the pandemic every day. We believe we are in a strong financial position, with a solid balance sheet and abundant liquidity. We have always been effective managers of our balance sheet, which has become more important than ever, as it enables us to fund our priorities, as well as respond to the pandemic.
With that, let me start with our response to COVID-19 crisis. Our mission at Centene is clear. We have to provide accessible, high-quality, affordable healthcare to our members, some of whom are among the nation's most vulnerable population. As we have seen both the public health and an economic crisis of unprecedented nature and scale unfold, we are acutely aware of the vital role we must play. We have never been more resolute in serving our members, as well as supporting our providers. We will maintain our approach, which focuses on our members core health, with exceptionally local and provider-led.
Looking at these critical challenges in front of us, our priorities are as follows. First and foremost, is the health and safety of our employees. We have taken significant steps to support our employees and are doing everything we can to protect their health and safety, while ensuring continuity of our operations. To this end, we have implemented our business continuity plans and have taken actions to support our workforce. I am proud that we are able to transition approximately 90% of our workforce to work remotely within just three days. This allowed Centene to continue to operate at close to full capacity without disruption. I'd like to give a special thanks to the remaining 10% whose roles are critical and cannot be performed outside the office.
Second, it is critically important that we safeguard people's access to high quality healthcare, especially the most vulnerable in our society. It is with this in mind that we have taken important steps to support our members during the pandemic, including cost waivers for both testing and treatment and increased access to our health services. We also announced a series of investments that build on the long-standing commitment to address broader social determinants of health. We continue to support initiatives that address hunger, connectivity, and increased demand for healthcare and educational supplies to name just a few. For example, we are donating 1 million meals a month for 12 months to feed our neighbors and communities all over the country and delivering 50,000 gift cards to be used to purchase essential healthcare and educational items.
And our third priority is to support the organizations and our partners on the front lines. As you saw of our exceptionally local provider line approach, Centene has long-standing deep relationships across our provider network. We have initiated a broad range of efforts to support those on the front lines. These include, provision of PPE and facilitation of additional medical personnel across virus hotspots, relaxation of administrative burdens for physicians and access to financial resources. We will continue to be proactive in thinking through how we can best contribute as the situation evolves.
To that end, let me touch on how we're thinking through the trajectory of this pandemic. We are preparing for a range of scenarios relating to the shape, intensity and duration of the pandemic. We are in close contact with developing health authorities and we are closely tracking the data and organizations such as the Institute for Health Metrics and Evaluation, the CDC and the World Health Organization are providing on an ongoing basis.
While it is difficult to predict precisely what future weeks or months will bring, we are prepared for the scenarios, which incorporate a number of key considerations, including the potential for multiple peaks as local, federal and state government balance the need to reopen economies with the risk of increased viral transmission. And a return to normalization may take some time until we have widely available testing, effective medications or a safe vaccine.
Next, let me provide a brief overview of our performance in the first quarter. Overall, we delivered solid results, including adjusted diluted EPS of $0.86. First quarter revenues were $26 billion, representing a 41% increase on the prior year, primarily driven by the acquisition of WellCare, organic growth from our marketplace business and the addition of new members through expansion and new programs across our states.
Our managed care membership now stands at $23.8 million, including $11.8 million in our Medicaid business, $2.2 million in marketplace and $5.4 million across our Medicare products. As I mentioned, our financial position is robust. We remain focused on ensuring we have the right capital structure and capital allocation policies in place that ensure we'll continue to effectively manage through this crisis.
Now on our full year outlook. Our earnings trajectory remains consistent, as you can see from the unchanged adjusted EPS guidance range. That said, there will be some variability when it comes to how we get there. We expect our results to be choppy from quarter-to-quarter. But overall, we continue to view our prior guidance range as the most reliable baseline.
Let me offer a few other variables that we continue to monitor. First, membership. We expect economic impact and resulting unemployment to drive increases to members. These increases will be partially reversed as and when the economy reaches the recovery stage.
Second, utilization. There have been and are expected to be continued declines in general types of deferrable services, for example, dental and optical business, mostly in the second quarter. Large provider groups expect pent-up demand to return early in the third quarter and continue into our fourth quarter. We expect utilization to increase as restrictions are lifted and members return to more normal pre-pandemic behavior.
Third, costs related to COVID-19. We expect to see an impact from the cost waivers for COVID-related testing and treatment during the second quarter, which could continue throughout the balance of the year. The way this dynamic materializes will be dependent on how the pandemic evolves. We also expect costs to be significantly greater in the third quarter and fourth quarter as the intensity of utilization rates increase, especially for members with chronic conditions and other medical needs, which may not have been met during this period of uncertainty.
Fourth, intensity and duration of the pandemic. Working with leading epidemiologist, we continue to monitor closely the potential for multiple infection rate. As we prepare for significant levels of seasonality and choppiness, we continue to work with our state partners and other stakeholders, including regulators such as CMS, to establish holistic ways to address these different cost dynamics.
We continue to apply an abundance of conservatism to our outlook. We anticipate an increase in membership, but at the same time, acknowledge the fluid nature of the employment landscape. It is prudent to recognize the various unknowns this operating environment creates. We will continue to update you as the impact from the pandemic takes shape. If we see developments that materially change our guidance assumptions, we commit to updating you on those immediately outside our regular calendar.
Turning to WellCare. The integration remains a positive and important aspect of our operations. The team continues to focus on education and the execution of a seamless transition and delivery of synergies. While our view of the total run rate opportunity remains unchanged, the current operating environment could generate some variability in the timing of synergy capture. For example, in Georgia, the timeline to combine the two plants has been delayed from 2020 to 2021 by the state, recognizing the economic environment and the difficulty of finding new physicians, we are offering extended benefits to those impacted by the integration of such a daunting time for our nation. Jeff, will discuss these dynamics in further detail.
In closing, our mission has never been more vital. To date, we have taken significant actions to ensure we serve the most vulnerable during this time of need. We are undergoing rigorous planning processes and will continue to be guided by the facts as we know them, while remaining flexible in this dynamic environment. Our organization is united and our focus to deliver for our members, providers, state partners and shareholders as we face this pandemic together. As noted by our press release, we have raised our revenue guidance. We continue to make significant progress on the WellCare integration, and our balance sheet remains very strong.
Now I'd like to turn the call over to Jeff who will provide the financial details.
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Thank you, Michael, and good morning. Let me just start by echoing Michael's comments. I hope you and your families are all staying safe and healthy. Today I'd like to keep our discussion of the quarter's performance relatively brief and we'll spend more time on our outlook in light of the extraordinary circumstances we are facing and provide you with more detail on our expectations for the year.
Overall, it was a good start to the year. We reported first quarter revenues of $26 billion, an increase of $7.6 billion or 41% over the first quarter of 2019. As a reminder, we also closed the WellCare acquisition this quarter and completed several other capital structure items that are included in our first quarterly report as a combined company. The closure of the acquisition and the inclusion of WellCare and the results beginning January 23 has impacted a lot of the usual metrics. I'd also refer you to the detailed explanations in our press release.
We reported adjusted diluted earnings per share of $0.86 compared to $1.39 last year. Both diluted earnings per share and adjusted diluted earnings per share for the first quarter were negatively affected by approximately $0.05 associated with lower investment income and higher interest expense. Our investment and other income was $167 million during the first quarter compared to $99 million last year and $126 million last quarter. The increase over last year reflects the gain on the divestiture of our Illinois business as well as higher investment balances, partially offset by the sharp decline in interest rates in March, which negatively affected the fair values of some of our bond portfolios that flow through earnings and our deferred compensation investment portfolio, which fluctuates with its underlying investments.
Interest expense was $180 million for the first quarter 2020 compared to $99 million last year and $113 million last quarter. The increase reflects a net increase in borrowings related to the issuance of an additional $7 billion in senior notes in December 2019 to finance the cash consideration of the WellCare acquisition, and the $2 billion in senior notes issued in February 2020. We decided to defer the redemption of the 2022 senior notes as a result of the COVID pandemic to maintain further flexibility.
Operating cash flow used in operations was $240 million in the first quarter. Operating cash flow was negatively affected by a delay in premium payment in New York of approximately $700 million and the growth in the PDP business, which used working capital. Given that the COVID pandemic did not accelerate in the United States until the second half of March, we experienced a minimal impact during the quarter in terms of claims. We did experience a significant drop in dental and vision claims, which was offset by investments in our technology and employee infrastructure to support a work from home environment and higher COVID costs in our international operations, primarily in Spain, which was affected much earlier in March.
Turning now to our outlook for 2020. Broadly, we are maintaining our guidance for the bottom-line, demonstrating our ability to navigate this environment. That said, the pandemic has impacted the various dynamics that affect our business. I want to take a few minutes and highlight the headwinds and tailwinds of the current environment on the top-line and bottom-line to provide as much transparency as possible in terms of how we believe these dynamics could potentially play out through the remainder of the year.
First, total revenues. Setting aside the effects of the pandemic, we are increasing our total revenue guidance by $2 billion at the midpoint. This is driven by an increase in pass through payments of $1.3 billion and $700 million due to actual membership and premium changes as we exited the first quarter. Second, as a result of the higher unemployment rate in the U.S., the suspension of eligibility redeterminations and our product mix, we are increasing our total revenue guidance by an additional $4 billion at the midpoint, bringing our total guidance increase to $6 billion at the midpoint.
We are also widening our guidance range, reflecting the lack of visibility with regard to the magnitude and duration of the high unemployment rate in the U.S. We have seen early evidence of membership growth in April, driven primarily by states suspending eligibility redeterminations and special enrollment periods for marketplace businesses in some states. However, we are also conscious that some of these trends may lessen significantly as economic conditions improve. We now expect our total revenues for 2020 to be in the range of $110 billion to $112 billion.
Next, GAAP and adjusted diluted earnings per share. There are numerous items that affect the bottom-line, and I'm going to highlight those that are most material. As I just discussed, the additional membership will be a tailwind to 2020 earnings, particularly in our Medicaid business, although we expect normalization of enrollment during the second half of the year as the economic recovery progresses.
Next, utilization. While we saw a minor effect of lower utilization in the first quarter's results, we expect to see a significant impact of shelter in place policies on utilization rates during the second quarter. We also expect a potential reversal of these trends during the second half of the year. While we cannot at this stage predict the exact scale and scope of normalization as this will be highly dependent on where we will be in the economic recovery at that time, we expect that there will be pent-up demand for medical services in the back half of the year. We also expect that the deferral of medical services may lead to higher cost of treatment once members return to seeking medical care as their health issues may have become more acute.
In terms of the cost impact of COVID-19 and the waivers for test and treatments, we expect the bulk of those costs to begin in the second quarter and continue through the second half of the year. We also expect lower investment income and higher interest expense due to the lower interest rates and maintaining the 2022 notes. On another note, we expect our marketplace risk adjustment efforts for 2019 to be lower than our previous expectations as a result of the current environment.
Finally, while we continue to expect to achieve our run rate synergy target of $700 million associated with the WellCare acquisition, the timing of synergy capture will be affected due to shifting regulatory timelines and relax provider policies in the current environment. We expect our synergies to be lower than our previous expectations in year one.
At this point, it is too early to predict the effect on synergies for 2021, but we continue to drive to the $500 million net synergy target. When you combine all these items, we continue to expect adjusted diluted earnings per share to be in the same range as our previous guidance. We have a strong balance sheet and are well positioned to meet our operational and strategic needs from a liquidity perspective. We have taken proactive measures to strengthen our liquidity even further in this environment. We had approximately $2 billion of unregulated cash on hand at the end of the first quarter and approximately $1.4 billion available on our revolving credit facility, creating almost $3.5 billion of immediate liquidity.
The increase in leverage at quarter end was intentional, driven by the decision to defer the redemption of our 2022 senior notes. This increased our cash on hand and our debt by $1 billion each at quarter end, driving our debt to capital ratio to 41.9% excluding our non-recourse debt. Our debt to capital ratio would be 38.9% when netting our unregulated cash with our debt at quarter end.
In addition, as we highlighted at our earnings guidance call in early March, we utilized $500 million of the divestiture proceeds to repurchase shares at a weighted average price of $57.66 during the quarter. As we progress through this year, we will continue to revisit our capital structure and adjust as appropriate. Overall, we had a good start to the year and have a strong balance sheet and liquidity position for the environment we are dealing with today.
That concludes my remarks. And operator, you may now open the line for questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] And our first question today will come from Kevin Fischbeck with Bank of America. Please go ahead, sir.
Kevin Fischbeck -- BofA Global Research -- Analyst
Great. Thanks. I want to -- I appreciate the EPS bridge that you guys walked through. I would love to get a little more color though about how much of what you are seeing as kind of an impact is going to flow through into next year? I guess, the expectation, if we assume that COVID is -- you think rate will be back to normal next year, would you assume, how much of that interest headwind is going to persist into next year versus paying it down the synergy capture? Do you get back to normal a year or two achievement or does that -- has everything kind of get pushed back six months to 12 months? I just love to go through those items and kind of see which ones are kind of more this year versus maybe have an impact beyond 2020?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Kevin, I'll start off. I think the biggest issue we have is, we've never seen it like this before. We have seen all the models. We -- it's difficult to model when you have no prior experience. And the biggest issue I see is, for example, unemployment, it could reach as high as 20%. It's right now around 15%. That's depression level. And the forecast I see, say that in the first quarter, first half of next year, you're not going to see a normalized return, even if they have the vaccine because you're going to have probably 7%, 9% unemployment. And so what the various programs are -- so while we would love to be able to say, this is what it is.
Our planning assumptions have to be to take it quarter-by-quarter. And that's why we thought it's very important to maintain guidance because we really believe that's achievable. But that's a baseline from, which we can judge when you have nothing out there, what's the baseline for what you compare and look at. And so I wish I could say what I think 2021 will be. I'm hoping if it to be improved. We don't even know how many peaks we're going to have this year. We're trying to return to work. We understand. I'm giving a long-winded answer. It's the things we talk about.
And I work with epidemiologists. And they keep telling me that the return to work before we have the -- in a massive sort of way, the vaccine, it's unpredictable where this is going to go. And I think the earliest we hear, hopefully, vaccine sooner, but first half of next year is probably the earliest we'll see an effective well-tested vaccine. So I guess, what I'm saying is, as we plan through this, we're going to do rolling quarters and try and get a sense as we look at the models of what unemployment is going to be and what's that mean to our business, what support the states will be able to provide. I wish I could be more definitive.
Kevin Fischbeck -- BofA Global Research -- Analyst
No, that's fair. And then maybe you mentioned the $4 billion of extra revenue. I guess, how do you think about the MLR on that business? I guess, the last time, if I remember correctly, there was some pent-up demand on the new Medicaid enrollment for the first six months to nine months. And obviously, on exchanges, you might get some of that COBRA membership that was high MLR dripping onto the exchanges. How do you think about the MLR of that new $4 billion?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Well, I think the MLR, I mean from the new membership, I think I have to take the approach that it's fairly normalized. But at the same time, these are people who have just lost the jobs than they may have had insurance previously. So they may not have a lot of pent-up demand and maybe some. That's part of the variable we're dealing with. But the biggest issue is when are people returning to work? We -- everybody believes that we -- our visual planning was that the second quarter, we would see reduced utilization.
Now the issue there is, I am talking to major hospitals, went just right here in St. Louis, [Indecipherable] Barnes and others. They are doing everything they can to get things back to normal today and get people back in because of their income and everything is being affected by it. And they don't want people to lose confidence in the hospitals. So while I thought we may not see any until July, third quarter. We're now -- we may now see it well in May and June starting to return, which means it will be a more normalized MLR.
So we are typically, and Jeff can go into more detail, we are typically booking from historical levels, expecting that because -- I'll give you one more big variable and that said. That was true when we looked at the first quarter. The submission of bills does not have a normal pattern because the people who do it and physician and other offices who are working from home are not doing it. And so I -- being our lag team, we have the finest. I've had the greatest confidence in them. It's all predicated on data service to submission of bill. And that's been thrown out of whack and will be for 12 months until it normalizes. So it's a long-winded answer again, but this the toughest thing. So I think the MLRs will normalize, and Jeff can talk about why the increase in Q1, which was anticipated, and we talked about it historically. But Jeff, why don't you give a little more color on the MLRs.
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah. I think we highlighted in the press release, obviously, the Q1 MLR and exchange normalization. Obviously, the addition of WellCare and the blending of the two companies. WellCare has a higher HBR in the first quarter because they don't have a significant marketplace business. And then obviously, they had a lot of growth in the PDP business this year, and that's the highest MLR for the PDP businesses in Q1. We had new markets with the start-up of the LTSS in Pennsylvania and obviously, Iowa carrying over from last year, we had leap year; we had the effect of New York rates. So I guess, a lot of things that were driving the MLR in -- on a year-over-year basis higher, partial -- part of that was offset by the health insurer fee, but...
Michael Neidorff -- Chairman, President, and Chief Executive Officer
I think what I'll just add is, I think we've talked to people recognize our systems and it's allowed us to be on top of it to the maximum extent possible. And I think we'll -- as we go through the quarters, we'll be able to give more color. But that's why I made the statement because it is unusual to do that. But this is so variable that if we see some trend develop that we have some confidence and is real and realistic and material, we are not going to wait to the next earnings call to tell you. We're going to issue the 8-K or whatever, I set up a call, whatever because that's the world we're living in. It requires a different approach. And you can count on us continue to keep you informed as quickly as we know things.
Operator
Thank you. Our next question will come from Matthew Borsch of BMO Capital Markets. Please go ahead with your question.
Matt Borsch -- BMO Capital Markets -- Analyst
Hi. I just -- as we try to better understand how the patterns of behavior and care changed. What -- is there anything you can spike out in terms of the care patterns that you're seeing between Medicaid, commercial, marketplace and Medicaid?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
I'm not sure that there is a lot of differences right now. I think everybody is very much focused on the safety, home avoidant. The biggest issue we see right now is delayed services. And I am very candid, Matt, what worries me is there is some -- and I'll give you just -- this is anecdotal, but I was talking to the head of the Pancreatic Cancer at Washu and surgeon. And he was saying how hospitals are not so much and that they're doing surgery where it's emerging and necessary. But there are people that are saying, in other locations, non-specific, well, we have to do maybe chemo before we do the surgery, because of the surgical suites and things. So the patterns of care are going to be adjusted based on what the availability is of hospitals and the PPE, etc. So it's difficult, and I don't think we can call out a difference in the various populations because it's the pandemic kind of overrides it all.
Matt Borsch -- BMO Capital Markets -- Analyst
And maybe just one more on pent-up demand. Some experience, maybe this is anecdotal, suggests that the delayed care doesn't necessarily flow through that may be more than half of it goes away. I realize we certainly don't have budgeted for this experience, but I'm just wondering if you could comment on that?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Well, I'll make two comments. While it seems like ER utilization that won't mean -- when that's not -- ER that's gone, but that's a small percentage of it. It's -- because there's still people going in ER because they worry about the pandemic and that type of thing. But I can't say that other care will not return. In other words, if someone needs back surgery, they may have delayed it in the -- to an exercise thing, but it's going to come back. And there's a balance, there may be some cases that they say, well, I'd lived with that, I can do without it. But there's some with the intensity and they probably be more acute. So as you summarize it, we've never lived this way. I always tell people, experience is a sum of experiences and nobody's had any experience in this to where they can rely on anything. So it's you're guess or my guess.
Matt Borsch -- BMO Capital Markets -- Analyst
Right. Okay. Thank you.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Thank you.
Operator
Our next question will come from Josh Raskin of Nephron Research. Please go ahead with your question.
Josh Raskin -- Nephron Research -- Analyst
Hi, thanks. Good morning. Good morning, Michael.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Good morning.
Josh Raskin -- Nephron Research -- Analyst
So the first question is just on the headwinds that you spoke about. I'm curious if we could get a little bit more color on the sizing. And I know it's imperfect and there is no experience. But even just relative magnitude of what's biggest versus smallest, etc. on the WellCare synergies and the COVID costs and maybe any color on states are talking about direct reimbursement sort of kick payments as we've done in the past?
And then if you could just talk a little bit more about those risk adjustment initiatives, I'm not sure I fully understood that?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Okay. I'll let Jeff respond. So I'll just talk a little bit to give you an example of the WellCare synergies. I mean, the State of Georgia is -- because of their capability to do the readiness and everything else, they delayed the combination of the two plans for a year. We can live with that and it doesn't mean that citizens won't be, it will just be delayed. Another thing we've done, and I alluded to is with the unemployment rate being what it is in individuals who -- where we done and just through the sheer combination, we've extended their severance pay and their benefits. You just don't -- that's just the humanistic side of things. It's not their fault. They are a very capable people. But -- so we've extended that. And that's a few million dollars here and there, but it's that type of thing. And then Jeff can comment on the others.
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah. Josh, this is Jeff. Just a couple of quick things. Obviously we've sized the revenue piece in our revenue guidance. And you can imagine, as with our income statement, the sizing of the categories is revenue and cost would be the -- from a dollar perspective just because they're the largest dollar captions on the financial statement. So real quick on the risk adjustment initiatives, I mentioned in my prepared remarks around 2019 risk adjustment, as you may be aware, usually in the first half of 2020 or the first half of every year, there is a significant amount of chart chase effort that goes on. Even though risk adjustment is relative to your competition, we have data that would indicate that we're disproportionately affected because we do a better job of capturing codes. And so because of what happened in March, that submission date goes through May. Because of what happened in March, we think there is going to be an effect there on the 2019 risk adjustment, and it's kind of hard to size the magnitude at this point, but you can think about it in that context.
Delay in WellCare synergies, again, I think we've mentioned in the past that the WellCare transaction was effectively breakeven without the share repurchase. I think we'd still be at breakeven if you would include the share repurchase this year. So I think from a transaction perspective, that can give you a relative size on the synergy shift. And again, we're still trying to capture those synergies. But as Michael mentioned, there's obviously some regulatory changes that will delay some of that capture.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Yeah. I think Josh, I just want to make one other comment. We put in the press release some of the things that have impacted the pluses and minuses. And we didn't put -- we put the one place we had the knowledge of the interest, we put the $0.17 a share. But we wanted to give investors the sense that these are the things we're watching. And the order of magnitude in this current environment is yet to be fully determined.
Josh Raskin -- Nephron Research -- Analyst
And then are the states reimbursing for COVID treatment costs? Are you having discussions, and I understand you're now in literally dozens and dozens of states, but then it's all sort of individual. But are you getting feedback from states who are going to pay for their treatment costs?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Well, I mean it's going to be within our premium. It's a -- we have the premium and we have to look and see where the whole total, which will see how many of our members actually have the costs. And so it is an issue, we'll sit down with the states, and that's going to vary state by state.
Josh Raskin -- Nephron Research -- Analyst
All right. And I'm sorry, last one. Just on the $4 billion of higher revenues, not the pass through, the actual high revenues, how much of that is Medicaid versus exchanges in terms of the expected growth?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah. Josh, I mean it's hard to bifurcate. I will tell you on the Medicaid piece, I would say, the large portion of that's in the Medicaid side because the eligibility redetermination is suspension, right? So in order for states to get the FMAP, the enhanced FMAP, they have to suspend the eligibility redetermination process. And so when I mentioned that we've already seen increases in April, part of that's because of the eligibility redetermination suspension.
Josh Raskin -- Nephron Research -- Analyst
Okay, perfect. Thank you.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Thank you.
Operator
Our next question comes from Sarah James of Piper Sandler. Please proceed with your question.
Sarah James -- Piper Sandler & Co. -- Analyst
Thank you. Can you provide us some color on your conversations with states around budget pressure and whether that could impact rates or program changes?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Obviously states have budget pressures. I mean, municipalities, everything with reduced tax revenues. But in our conversations, we remind them that the FMAP was 6% in recent legislation,you're going to talk about moving it to 12%. So their revenue and their cost of the sharing for these premiums will be absorbed more by the federal government. So we have to work and see how it all plays out. But I -- we're confident that the revenue will be there. Most states understand the cost and the need to still be. And CMS has been very clear, some states have asked for -- they asked for a waiver change and an actuarial soundness. And CMS said clearly no, they understand that. So the basic principles, Sarah, is still there. And that's where the strength of our balance sheet comes in handy that we can -- we have the strength and wherewithal to work with them and yet get issues resolved.
Sarah James -- Piper Sandler & Co. -- Analyst
And can you just remind us from the last recession, I know that there is more actuarial soundness by a rate sell level, protection that came in, there is other Obama Care protections that came in. So if we went back to last time, were there program cuts and would that even be possible at this time or is there too much for the states to lease?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Yeah. I don't really recall program cuts. I think the states are doing everything they can to normalize these types of things. So -- and I feel for them. I mean, their biggest pressure right now is on education system more so than our system. And of course, schools are out of session, there's that type of thing. But I don't think we're at risk there. I think healthcare is something that needs there, and they realize that actions that reduce it and reduce the programs, really come back to haunt them very quickly.
Sarah James -- Piper Sandler & Co. -- Analyst
Thank you.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Thank you.
Operator
Our next question will come from Charles Rhyee of Cowen. Please proceed with your question.
Charles Rhyee -- Cowen -- Analyst
Yeah. Thanks for the taking the question here. I just wanted to maybe touch on, you were talking about earlier about the potential for multiple peaks. And just kind of thinking about when you were thinking about the -- your guidance, particularly as we get to the end of the year, are you anticipating sort of a second wave for COVID-19 to recur as you think about some of the delays you're expecting particularly in WellCare synergies, etc? Are you assuming that sort of COVID-19 is more of a regular occurrence as we kind of go forward. So as we think about 2021, should we be thinking about sort of this recurring it becomes more normalized I guess? Thanks.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Well, I'll tell you the factors we're thinking about. I feel like I'm being two for both, so I'll try and keep it. The epidemiologist, I'll give you a factor. I haven't seen much -- having much about, there is a factor that measures the intensity of the virus in somebody. And what people don't realize is that in the first three days if somebody has contracted the virus, it is at the highest acuity and intensity.
So you have people walking around that have the virus, who don't know they have it and spreading it more. I really remember, I think it was one person came from China, got this whole thing started here. And so when we look at the peaks, what we worry about is that kind of factor and to what extent people take the steps to protect themselves. We're planning on -- we've said -- we're telling employees let us going out today that we expect that -- we know we will not open before the end of May, and that may be pushed back another 30 days. Just in the abundance of conservatism and caution. But we're installing equipment that will measure employees' temperatures when they come through the turnstyles that go to work. We're working hard to get what we call seat partitions, a six-foot high partitions in. We're working to figure out how we get random testing in.
Those are the kinds of things that you do to try and minimize it. And somebody seems asymptomatic or symptomatic, send them home. But we don't know, but we are saying that if there is a second and -- peak, we have to be ready for it in terms of PPE, what we're going to do, working at home. So we want to get people back in the office because it's more efficient because you develop people more and we're a high-growth industry. But we have to be ready as we were last time. And I am very proud of the IS people. They say, in three days had 66,000 people working at home with the training, everything on iPad just got it all set up.
So when we talk about planning for it, we plan to say, OK, what can we do to improve it? And they make it more -- even more productive at home and protect those essential workers as they come. So I don't have an answer. We just have to figure out what happens if we do and what's our response going to be. And pray it doesn't -- pray they have medicines that protect and cure this thing until we get a vaccine.
Charles Rhyee -- Cowen -- Analyst
Thank you. Maybe if I could just add one more. To an early question you talked about delays in the WellCare synergy capture. I think you previously indicated that synergies would be split between sort of 50-50 between medical costs and SG&A. When you consider sort of delays that are you expecting now, does that skew to one or the other more so? Thanks.
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah. I would say, the delay would skew more to the medical, the medical line is what I would say. Not much, but a little bit.
Charles Rhyee -- Cowen -- Analyst
Okay.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
But you also -- Jeff said, there's some offsets there, so that our breakeven in the first 12 months is still there. I mean, we tell people we're -- we like to do ourselves as managers not [Indecipherable].
Charles Rhyee -- Cowen -- Analyst
Thank you.
Operator
Our next question will come from Scott Fidel of Stephens. Please proceed with your question.
Scott Fidel -- Stephens -- Analyst
Hi, thanks. Good morning, everyone.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Good morning.
Scott Fidel -- Stephens -- Analyst
First question. Just interested if you could maybe help us just walk through some of the key dynamics that you're seeing in the New York market, just given obviously how much more disrupted the dynamics have been there. So specifically, obviously there were the delayed payments, what's the visibility you have on getting paid in New York? The final rate updates that you saw on the budget from New York. I think it ended up, down 1.5%, but interested in what you're seeing there and then also just from the member perspective in terms of sort of COVID cost impacts and just what you're seeing with the membership base in New York?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Jeff, do you want to start there?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah, I'll start on a couple of things. So on the late payments, as you all may be aware, it's New York's fiscal year end, so it's not uncommon for states to delay their payment for a few days at the end of their fiscal years, which is what happened. So we've subsequently been paid on the rates, the rates still our final. So we really don't have any update, I would say that's with some finality base compared to what we said on the March 3 and March 4 when we gave guidance. So there is no real change there from that perspective.
And what was the -- your last one?
Scott Fidel -- Stephens -- Analyst
Just medical cost, essentially, Jeff, just in terms of sort of COVID members being impacted, things like that.
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah. We've certainly seen some costs from New York as compared to our other states. But in general, and this is no different than I guess what I mentioned in the prepared remarks, as we sit here today, the amount of I would call it paid dollars associated with COVID has not been substantial. All right? So there is obviously a delay from when the people seek services and when we obviously get the bills in-house. And so we haven't seen a large amount sitting here today.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Yeah. I mean the normal submission patterns just aren't there right now. That's part of the variables. I mean, it's things we haven't seen before.
Operator
Thank you. Our next question will come from Steve Valiquette of Barclays. Please proceed with your question.
Steve Valiquette -- Barclays -- Analyst
Okay, great. Thanks. Good morning, everybody. So a couple of questions here. I guess, first from an actuarial perspective. I don't know how much you can dive into this or not, but I guess I'm curious if you're able to give a little more color just on how you've approached the medical reserve process for the full year calendar 2020 just in relation to COVID-19 medical costs? And was there any bias to potentially over-reserve just out of an abundance of caution? And then we'll all just obviously see how the prior period reserve develops later this year and early next year? And also I tied to that, I'm curious, just big picture. Did medical reserves for the full year for COVID-19 have any material impact on the MLR that was reported in 1Q 20 in particular, just to clarify that as well? Thanks.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
I'll start off a little bit and then let Jeff give you a little more color on it. But we are looking at what is a normal reserve, and that's our starting point. Now I will say that I'd use the words, abundance self-conservativism, I would hope that we're going to be somewhat conservative in our bookings where there's all these variables because I've often said, I mean, I'd much rather come back to you in 12 months, nine months, whatever and say we had a prior period positive adjustment than a negative adjustment. And that's -- but even that it's just because these are things we've not seen before, submission pattern, so many variables here that we're using historic patterns. I think it's fair to say, Jeff, this is a starting point, and try to use any variable, but that's been the basic approach. I don't know, you want to add to that?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah, yeah. Just in general, just to maybe get a grounding point. The actuarial standards require reserving under moderately adverse conditions. And anytime there uncertainty, generally, you would add additional margin or additional cushion, if you will, because of the uncertainty of the environment you're in. So two things. We can only accrue for and record our best estimate of what we think our claims liability is going to be under the accounting standards. And that best estimate would only be for claims that we believe have occurred prior to quarter month or year end. And so at the end of the first quarter, that's what we did.
To Michael's point, early -- in the first quarter as we close the books, we did not really see any difference in the claim submission patterns. It looked like the claims that we received were in line with our forecast. And so we recorded a normal level of reserve. That's why we indicated that in the first quarter, the COVID didn't really have an effect. And that's because in a normal month, we really only receive a very small percentage of the claims for the last two weeks of the month. So hopefully that gives you a little insight on Q1, and kind of how the reserving process works.
Steve Valiquette -- Barclays -- Analyst
Okay, that's perfect. Yeah, I appreciate the extra color. Thanks.
Operator
Our next question will come from Dave Windley of Jefferies. Please proceed with your question.
David Styblo -- Jefferies & Company, Inc. -- Analyst
Hi there. Good morning. It's Dave Styblo in for Dave Windley. Just a follow-up on the first quarter MLR to understand -- I think previously you guys had indicated that the MLR would be up year-over-year, and I think consensus maybe took that to be about 50 basis points, and obviously it was up over 200 basis points. I just want to make sure that there weren't any other major differences that came up during the quarter that affected it, whether that would be a mix issue for more PDP lives in the WellCare book or some of the investments that you might have made in the quarter knowing that the volumes were going to be a little bit lighter going forward, just to help understand the delta again between consensus and what you were previously talking about?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah. I appreciate the difficulty in modeling the Q1 MLR, HBR. Obviously we had a lot of moving parts, specifically with the closure of the WellCare transaction and the proration of their results. We also divested a three businesses, two legacy WellCare, one legacy Centene. And so it became challenging. We did not give a MLR Q1. What we did do was in early March when we gave our guidance, we indicated that the high-$0.80 to low $0.90 range from an adjusted earnings perspective. And the way I would think about that is if you look at the $0.86, we had $0.05 that was purely driven by what happened in the second half of March with interest rates. And so that was unknown to us at the beginning of March when we gave our guidance.
And so I guess from that perspective, we would kind of view we were in line with what we told people at the beginning of the month. And obviously we said COVID costs were neutral. And so that's where we were from our perspective. We didn't give really any guidance on the Q1 MLR. We appreciate it's higher, but a lot of the things that I think I highlighted earlier were really the drivers. We previously talked about exchange normalization.
Yeah, the addition of WellCare, which runs a higher MLR in the first quarter, and specifically, they did have significant PDP growth, which it's the highest MLR for the quarter. New markets in Pennsylvania. We have leap year and then of course the New York rate effect. And so I guess from our perspective, it's kind of where we thought it would be.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
I'm going to jump in. We have an annual meeting coming up in a few minutes, so I'm going to ask everybody to try and limit the questions because we're going to run out of time here in about 10 minutes. Please continue.
Operator
Thank you. Our next question will come from A.J. Rice of Credit Suisse. Please proceed with your question.
A.J. Rice -- Credit Suisse -- Analyst
Hi, everybody. Just a real quick, one point of clarification on the enrollment -- on the revenue increase. You referenced the special enrollment for the public exchanges and the lack of predeterminations. Does that account in your mind for the full $4 billion increase? Are you assuming as the year progresses you will see incremental Medicaid enrollment due to the weakness in the economy? And maybe split that out between which actually have in hand now and what you're sort of anticipating as the year progresses? And then just real quick. Any update on North Carolina or other states that are either in the RFP process or in the rollout phase on new business?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah. A.J., you're spot on. It would include both our prediction on the higher unemployment as well. So it's both components, eligibility, redetermination suspension and higher unemployment. I'm not going to split those out at this point in time because I think as Michael mentioned, there is a lot of uncertainty here. So we were comfortable with the number. In aggregate, I think that's what we're going to stick to at this point. As far as state updates, I'm not aware of any significant updates. I think we still have North Carolina in for 10.1, we'll have to see how that plays out.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Yeah. States right now aren't talking a lot about the rollouts of that. So I mean, we're waiting to still hear from several, but I'll call in saying what's new, they are going to say, have you just played bit and week will have just woken up?
A.J. Rice -- Credit Suisse -- Analyst
Yeah. Okay, thanks.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Thanks, A.J.
Operator
Our next question will come from Justin Lake of Wolfe Research. Please proceed with your question.
Justin Lake -- Wolfe Research -- Analyst
Thank you. Good morning. Just two things here. One quick follow-up on MLR question. The MLR for the full year, can you give us any color in terms of where you think about that directionally relative to the previous guidance of I think it was 85.9%, 86.3%?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah, yeah. I guess, here's what I would say, Justin. I mean, obviously there is a lot of uncertainty here with respect to the cost line and the pandemic and everything. I would say, excluding the effect of the pandemic, our range would still hold. The real variable is going to be how the costs play out for the year, both the revenue and the cost play out for the year associated with the pandemic care.
Justin Lake -- Wolfe Research -- Analyst
Sure. But within -- you took up the top-line, you took down investment income, I assume SG&A benefits a little bit and hits it a little bit. But in terms of the MLR, you're just saying, we still think that number is good relative to the EPS guidance or do you think it's higher or lower?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
It would still it would still be within the range. But again, I mean there's just a lot of uncertainty here.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
It is certainly plus and minus, Justin.
Justin Lake -- Wolfe Research -- Analyst
Yeah, yeah. I don't know about that. But -- and then just my question, just a quick follow-up on this FMAP and the redeterminations and the lack thereof. I'm curious, I know you don't want to delineate the exact revenue benefit from this, but can you share with us what the typical turnover is or churn rate is, the redeterminations that's not going to happen now for some level of some period of time? On a monthly basis, I've heard numbers like 3% to 5%. I'm just curious, what you have experienced overtime?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
We said -- we had commented prior to all this that the redeterminations were tailing off because they have gone through it. So redeterminations right now would be very difficult if they wanted to do it because of the number of people have lost jobs and where we are. So to try and put any percentage on it, we just -- when we had our White House meetings, we raised the redeterminations and balanced billing is two things that the regulations had to deal with and I guess they heard us.
Justin Lake -- Wolfe Research -- Analyst
Okay. Thanks for the color.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Thank you.
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Thanks.
Operator
Our next question will come from Ricky Goldwasser with Morgan Stanley. Please proceed with your question.
Ricky Goldwasser -- Morgan Stanley -- Analyst
Yeah, hi. Good morning, and thank you for the comments. A couple of questions here. First of all, obviously, a lot of uncertainty, but MA bids are due soon in June. So how are you thinking about those? And then the second one, Michael, more kind of...
Michael Neidorff -- Chairman, President, and Chief Executive Officer
I'm sorry. I missed that first one, Ricky. Could you repeat the first question? I didn't hear it?
Ricky Goldwasser -- Morgan Stanley -- Analyst
Yeah. The first one is just on the MA bids and how are you thinking about pricing for next year given all the uncertainty? And then the second one. When you just think longer term given that this pandemic and the public health crisis, how do you think about expanded government role in healthcare as a result of this?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Well, I think there's two aspects of it. One, on the bids, our group will continue to work through the normal process and they have to go through and look at their -- as they always do. So I see no change there. The government's role, I don't think this is a time that politically, economically, socially or any other way that I see a shift there. I think this is a time when you want to keep as much constant as you can because there is enough variables out there. So I don't see any real shifting taking place there.
Ricky Goldwasser -- Morgan Stanley -- Analyst
And then just lastly on the MLR. I know a lot of uncertainty. And I think -- thank you for the comment and what you are seeing in St. Louis and in terms of hospitals are actually starting to potentially go back to a more normalized environment or a new normal in May and June versus July. But within the MLR guidance that you provided, you said that obviously, second quarter is going to be meaningfully below the second half. Should we think right now with current guidance that second half is going to be in line with what we've seen in the first quarter or higher than that? Just that we have some context.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Well, I think I said that we anticipated the MLR would be lower in the second quarter, but even that's now up for a change as people are trying to come back. So I think all I can really say is it's going to be lumpy from quarter-to-quarter, and it's going to be very difficult to project it. I mean, it's just -- as we see something that we can say, we'll tell you, but it's just going to be very lumpy. And tell me how it researches. I mean it's just -- I don't want to predict something when we -- when the uncertainty is so great. We're just managing through it.
Operator
Thank you. Our next question will come from Lance Wilkes of Bernstein. Please proceed with your question.
Lance Wilkes -- Bernstein -- Analyst
Yeah, morning. Just wanted to talk about kind of balance sheet impacts and the flow through in net investment income. And I was just interested if you could talk to both what regulators are having to do and what you guys are doing with respect to premium payments from states, allowing delays in that, premium payments from individuals and public exchange? And then on the payables side, what you're doing as far as extending or accelerating payables? And what kind of impact that's having on that $0.17 for the full year impact on net investment income?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah. Just -- this is Jeff. Just real quick. It's not really having an effect. I mean, the $0.17 is really just driven by the lower interest rates. I mean, half of our investment portfolio is effectively set aside to pay claims and it's invested in short-term daily liquidity instruments. And so when you lower the short-term interest rates substantially, that just has an effect, right?
And then the other piece of that number would be the higher interest cost. We were going to redeem our 2022 bonds. Instead, we've decided to defer that redemption and leave those -- leave that cash on the books. And so there is a higher interest cost there. And those were 4.75% notes. And so that's really what's driving the $0.17.
On the provider front, we have historically and continued to pay claims as fast as we can. So I think Michael historically has told stories if a claim comes in today and it's a clean claim, it's automatically adjudicated, it's ready to be paid the next day. And so that's -- we've run it that way for a long time. So it hasn't had any impact, if you will, on the payable side.
Lance Wilkes -- Bernstein -- Analyst
And any impact on the receivable side on the individual or anything?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
No, no. I mean, certainly, we've seen some members have delayed payments, but we just haven't made it that far yet, right? I mean it's been 30, 40 days or so here, so we'll just have to see how that plays out.
Lance Wilkes -- Bernstein -- Analyst
Got you. Thanks.
Operator
Our next question will come from Mike Newshel of Evercore ISI. Please proceed with your question.
Michael Newshel -- Evercore ISI -- Analyst
Thanks. I wanted to follow-up on the Medicaid rate situation in New York. Earlier, Jeff, I think you were referring to the rate cuts that were already implemented in January and can there's still some discussions so a possibility that will be adjusted, is that right? And then in addition to that, for the Medicaid cuts in budget for the new fiscal year, is there any update on where things stand with the redesign team that's figure out the details there, whether premium cuts or other changes affecting you or the mix of what they're considering?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Yeah. Thanks, Mike. I think that's the kind of the point I was making is that from our perspective, I think that's still open. And so we really are just waiting to get a final resolution there on what the effect is and then ultimately discuss that when it happens. But right now, I'd say they're still open at this point and so more to come.
Michael Newshel -- Evercore ISI -- Analyst
And just like -- I mean, it's all very highly dependent on the outcome here on just whether a federal funding bill come through for the states? Just the states have a better idea of what the budget is going to be?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
I mean, that could be a driver. But in general, I think it's just process-related right now, meaning, I think the Medicaid review task force came out with recommendations and I think we've had one meeting with the states since then maybe. So it's just -- there's a long way to go, I think before those get finalized.
Michael Newshel -- Evercore ISI -- Analyst
Thank you very much.
Operator
Our next question will come from Ralph Giacobbe of Citi. Please proceed with your question.
Ralph Giacobbe -- Citi -- Analyst
Thanks. Good morning. Just a quick one for me. Can you just give us a sense of average claim cost of COVID on a Medicaid patient? And does the 20% higher Medicaid rate apply in Medicaid as well? Thanks.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Well, so I mean, we have not seen enough claims. As we said, there's been -- we don't know what degree is lack of claims on what degree is -- they haven't had time to submit them. So, we have not seen enough to see the average cost, but it's not been significant. It's been more the testing and -- we haven't seen a lot. We know there's some creeping out there with the number of members we have, but we just haven't seen that. Jeff?
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
No, I think Michael is right. I mean we've certainly paid some claims. But I would not want to give an average cost because we just don't have the volume yet to give a credible number is what I would say.
Ralph Giacobbe -- Citi -- Analyst
Fair enough. And then just real quick, I may have misunderstood. Did you say you're assuming normal or normalized MLR on new HICS members? And why wouldn't it be higher just considering what could be adverse risk sort of coming on to the exchange? Thanks.
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
No, no. We didn't get into the specifics on the product level as far as going forward. Again, I think that's part of the uncertainty that we're dealing with.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
I think what I said is, I'm not going to anticipate that these are all new members that have had no healthcare. These are people who have lost their jobs and maybe chose not to go through the other process to keep insurance with the company. So, it's not like that somebody has had no insurance at all. So there's a balance. I'm just trying to give a balance just to give you a sense of how we're looking at it.
Ralph Giacobbe -- Citi -- Analyst
Got it. Okay, fair enough. Thank you.
Operator
Our final question today will come from George Hill of Deutsche Bank. Please proceed with your question.
George Hill -- Deutsche Bank -- Analyst
Hey. Good morning, guys, and thanks for squeezing me at the end. I guess, Mike and Jeff, if you think about the conversations that you're having around the various state program changes, are you seeing any changes that you think could become permanent after the crisis and whether they could meaningfully impact the business?
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Well, we're not seeing that. We're not -- the states right now, we're talking about things if we can get to get their PPEs for the state troopers and a lot of other things to just be supportive of the environment we're in and they are pleased with the coverage of what we're doing, and I don't see any major changes now or in the future.
George Hill -- Deutsche Bank -- Analyst
Okay. Thank you.
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Well, I guess we've done with the questions, I just want to -- just in closing, I want to help everyone understand that this is -- this business is as vital and viable as it's ever been. We are comfortable we have the systems and capabilities to manage through the uncertainty. And the key here is that while we, at this point, are confident on our guidance for the year, I cannot emphasize nothing. It's going to be lumpy. It's not going to be a normal progression depending on how people come back, how the intensity, how are the services. These are the things we're managing through, and we have managed through in the past -- this past so far this year.
And so our employees are in sound working conditions. The business continuity is there. The growth is there. Our ability to work on the cost is there. So going forward, we'll continue to keep you informed, and we're going at this with full confidence that we'll get through this and continue to be very successful for our shareholders. I thank you for your interest. Look forward to talking to you soon.
Operator
[Operator Closing Remarks]
Duration: 72 minutes
Call participants:
Jennifer Gilligan -- Senior Vice President, Finance & Investor Relations
Michael Neidorff -- Chairman, President, and Chief Executive Officer
Jeffrey Schwaneke -- Executive Vice President and Chief Financial Officer
Kevin Fischbeck -- BofA Global Research -- Analyst
Matt Borsch -- BMO Capital Markets -- Analyst
Josh Raskin -- Nephron Research -- Analyst
Sarah James -- Piper Sandler & Co. -- Analyst
Charles Rhyee -- Cowen -- Analyst
Scott Fidel -- Stephens -- Analyst
Steve Valiquette -- Barclays -- Analyst
David Styblo -- Jefferies & Company, Inc. -- Analyst
A.J. Rice -- Credit Suisse -- Analyst
Justin Lake -- Wolfe Research -- Analyst
Ricky Goldwasser -- Morgan Stanley -- Analyst
Lance Wilkes -- Bernstein -- Analyst
Michael Newshel -- Evercore ISI -- Analyst
Ralph Giacobbe -- Citi -- Analyst
George Hill -- Deutsche Bank -- Analyst
