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By Sneha S K, Amina Niasse

April 25 (Reuters) - Centene CNC.N beat quarterly profit estimates and raised its annual revenue forecast on Friday due to strong enrolment in Obamacare plans, but the insurer's shares fell about 8% in early trading due to high costs tied to its Medicaid plans.

The company's medical spending came in slightly above Street estimates, as it faces elevated costs in its government-backed Medicaid plans for lower-income groups.

Insurers who offer Medicaid plans have seen elevated costs over the past few quarters after the end of a pandemic-era policy. As states re-determined eligibility for the plans, healthier members fell off the rolls, leaving behind those who require more medical services.

Centene reported a medical loss ratio — the percentage of premiums spent on medical care — of 87.5% during the first quarter, compared to analysts' average estimate of 87.44%, according to data compiled by LSEG.

The company's first-quarter medical loss ratio in its Medicaid business of 93.6% was also above estimates, Mizuho analysts said in a note.

Centene mainly manages government-sponsored plans and said during an earlier investor conference it expects its Medicare business to break even by 2027. The company expects a favorable political landscape for its Medicaid business, due to recent bipartisan support for enhanced premium tax credits, set to expire at the end of 2025 after extensions under former President Joe Biden's Inflation Reduction Act.

“The criticality of these tax credits for Republican voters, small business owners and our existing rural healthcare infrastructure, as well as potential [for the] individual marketplace to serve as a platform for incorporation has taken root for many Republican congressional leaders,” said Sarah London, CEO of Centene.

Centene shares fell 8% in early morning trading following the call. Rivals UnitedHealth UNH.N, Cigna CI.N and CVS Health CVS.N were down between 0.8% and 2%

Its total Medicaid memberships fell 2.5% to about 13 million members during the reported quarter from a year earlier, while its commercial plan memberships grew 27.3% to 6.07 million.

OUTSIZED GROWTH IN MARKETPLACE PLANS

Jefferies analyst David Windley said in a note that the company's pricing strategy "means more of its plans were priced at or below the benchmark, that is, the company offered more $0 premium plans in 2025 versus last year," leading to outsized membership growth in its marketplace plans during the enrollment period.

The company, however, raised its full-year forecast for health insurance premiums and revenue, helped by strength in its commercial health insurance plans.

The insurer said its new forecast accounted for $5 billion in premium revenue from the commercial plans it sells under the Affordable Care Act, also known as Obamacare, as it outperformed enrolment estimates for the first quarter.

The company said its premium and services revenue increased 17% to $42.5 billion during the quarter, above estimates of $39.56 billion, driven by membership growth in its commercial plans.

On an adjusted basis, it reported a profit of $2.90 per share, beating analysts' estimate of $2.54 per share.

Centene raised its 2025 forecast for premium and service revenue to a range of $164 billion to $166 billion, from between $158 billion and $160 billion previously.

(Reporting by Sneha S K in Bengaluru and Amina Niasse in New York; Editing by Pooja Desai and Sharon Singleton)

((Sneha.SK@thomsonreuters.com;))