Q3 2019 Earnings Call
Okay and welcome to the Centene Corporation third quarter earnings Conference call, all participants will be any listen only mode. So do you need assistance.
The conference bypassing the Starkey followed by zero. After today's presentation, there will be an opportunity to ask question.
To ask a question you May press Star then one on your telephone keypad to withdraw your question. Please press Star then too. Please note. This event is being recorded.
I'd now like turn the conference over to add crop senior Vice President of Finance and Investor Relations. Please go ahead.
Thank you Alissa and good morning, everyone. Thank you for joining us on our third quarter 2019 earnings results Conference call, Michael Neidorff, Chairman, President and Chief Executive Officer of Centene, and just want to keep executive Vice President and Chief Financial Officer, Centene will host this morning's call, which can all.
So be access through our website Centene dot com.
A replay will be available shortly after the call's completion also available at 17 dot com or by dialing 87734475 to nine in the U.S. in Canada, where in other countries by dialing 412317 0088 the playback.
Number for both dial ins is 10135 to three five.
Any remarks, it 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 1990 Fives actual results may differ materially from those indicated by these forward looking statements as a result, a very simple.
Certain factors, including those discussed and sent teams. Most recent Form 10-Q filed October 22nd 2019 today and the fourth Form 10-K dated February 19th 2019, and other public FCC filings [noise].
[noise] 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 gap. That's generally accepted accounting principles measures. A reconciliation of these matters with these measures with the most directly comparable GAAP measures can be found in our third quarter 2019 press release, which is available on our website at 17 dot com under the Investor.
And finally, a reminder, that Centene will hold its next Investor day on Friday December 13th 2019 in New York City.
And host its fourth quarter year end 2019 earnings call on Tuesday February four 2020.
With that I'd like to turn the call over to our chairman President and CEO , Michael Neidorff Michael.
Thank you Ed.
Good morning, everyone and thank you joining sent teams third quarter 2019 earnings call.
During the course of this morning's call, we will discuss our third quarter results and provide update uncertainties markets in products.
We're also provide commentary around the health care legislative and regulatory environment as well as an update on the acquisition well.
Let me begin with the third quarter 2019 financials.
We are pleased with our third quarter results, which did deliver strong top and bottom line growth.
These results reflect the growth in our marketplace business, new Medicaid contracts in programs and demonstrate the benefits of our diversified healthcare enterprise.
Membership at quarter end was 15.3 million Cypriots.
This represents an increase of 884000 beneficiaries were 6% over the third quarter of 28 <unk>.
Third quarter revenues increased 17% year over year to $19 billion.
Adjusted third quarter diluted earnings per share where 96 cents.
This compares to 89 cents reported in that same period last year, representing 8% year over year growth.
The 96 cents excludes a 271 million or 57 cents per diluted share noncash impairment charge.
She all related to the write down of goodwill and intangible assets about U.S. medical management subsidies.
The third quarter H., we are was 88.2% representing an increase of 190 basis points feel the is [noise].
The H., we are was impacted by a number of non operational items, which accounted for 480 890 basis point increase year over year.
100 basis points or the increase was attributable to the California in home support services reconciliation in the quarter 2018.
This better they did last year third quarter okay.
HM H., we are by 100 basis sports.
The health insurance be more choice increase CHP or by 50 basis points quarter over quarter.
The impact on the activate state do like did pay when she California was 30 basis points this quarter.
I also remind you the third quarter 29, teenage be or reflects new contracts in Pennsylvania, Iowa, and new Mexico, which carry higher H.B. arch.
In the first use operation.
[noise] highly sequential basis, <unk> increased 150 basis points, which it was primarily attributable to the normal seasonality the marketplace business.
Consistent with prior years, our marketplace business has higher medical expenses as a year progressing as more members Leach <unk> out of pocket maxims.
As previously mentioned at this stage two active payments also contributed to this sequential increase each week.
[noise] Julie into markets in product updates first Medicare.
A Medicaid business continues to grow benefiting from new contracts, such as Iowa, New Mexico in Pennsylvania.
Are you getting membership grew approximately 3% sequentially and approximately 1% <unk> year over year to 8.7 million recipients [noise].
Our new business more than offset the enrollment and revenue headwinds caused by ongoing eligibility determinations in certain states.
The redetermination process can cause an adverse impact on acuity levels. As this is a little members tend to have a lot h. we are.
We view this as a temporary issue as we continue to work without a state partners to appropriately adjust our rates.
Next state updates.
Okay all right.
I'm pleased to announce since he was successful and its appeal of the North Carolina Medicaid managed care or see these already in an expansion of our North Carolina Medicaid contract.
I provided led North Carolina subsidiary was away this region, which includes the Raleigh Durham area.
With the addition of this weekend, we will now be body managed care services in three weeks.
As you see sagas area.
<unk> for Raleigh, Durham area, and recent by well we tend to stay at areas.
According to state did data.
These regions represented approximately 60% of total Medicaid beneficiaries covered under the program.
[noise], it's usually a contract is expected to commence February 1st 2020 and includes the option to renew up to two additional years.
Texas.
Exercise rescheduled star past, we put your announcement until sometime later this month.
Design chip leave the children announcement is expected in December [noise].
We remain confident that outperformance and value.
Yes utilized by the state.
The Louisiana, we were disappointed to not have been selected for the Medicaid contract in Louisiana and his recent we put your.
We will form and they extensively view of the scoring and evaluation process and as a result cloud a protest with the sale.
We anticipate a decision on appeal from the procurement officer later this month and remain cautiously optimistic.
The state is considering using emergency contracts with the incumbents to eliminate member disruption until the appeal is resolved.
You Hampshire.
On September one we commenced operations I do I knew Medicaid managed care contract in the state.
This was a successful the procurement of an existing contract.
We are now serving just under 80000 beneficiaries in New Hampshire, which is marginally higher year over year.
Now Medicare.
At September 30, we show was approximately 405000, Medicare and M. P beneficiaries across 20 states. This represents a year over year decline.
Actually 30000, incipient, which is the result of planned actions taken by Fidelis to reestablish forestar they.
On a sequential basis membership increased.
By 6000 Sip.
Next year, we plan on expanding into 100 counties in existing state and adding one new state Nevada.
Further centene will return to a forestar and they penetrating in 2020.
We will begin our joint venture with Ascension.
Four locations next year and look forward to developing this as another potential growth engine [noise].
Our their health insurance marketplace.
Marketplace business continued to perform well in the third quarter consistent with our expectations.
At September 30, we served approximately 1.9 million exchange members across 20 states.
This represents a sequential decline of approximately 51000 recipients. This is consistent with the higher member retention.
We haven't seen this year [noise].
Our marketplace margins continue to be within a range of 5% to 10%.
We anticipate another strong year of operations as a national either of the change quite.
We aim to grow the business in 2020, as we expand out footprint and 10 about existing state.
I'll now provide an update on the health care legislative and regulatory environment.
We continue to expect.
Most of the activity will be at this stage level and then the courts.
Earlier this month at the Federal Judge in New York blocked the implementation of the administration is public charter school. This rule would make it more difficult for legal immigrants to obtain green coffee.
If they have utilize certain benefits, including Medicaid and housing system [noise].
In addition, we are actively monitoring the pending decision from this this so thats related to the affordable care Act and the individual mandate.
[noise], even considering these potential issues, we remain focused on delivering against our vision, which is to be the leading provider of government sponsored health care.
We believe that demand both affordable high quality healthcare coverage will remain at constant and durable driver as long term growth for us [noise].
Over the last 30 plus years, we have remained focused on adding value to two movies and the various regulatory environments.
[noise], many stage always seeking to improve access and affordability.
We view this as an opportunity for 17 to be an innovative partner [noise] <unk>.
But the states.
We continue to work to ensure issues such as pharmaceutical costs.
Surprise billing and the health insurer fee recognized and alright focus for policymakers and regulators.
A quick so a quick excuse me a couple of quick comments.
Hi, medical costs, they remain stable and inline with expectations in the low single digits.
Oh no rate outlook, we expect a composite Medicaid rate increase of approximately 1.75 to 2.25, who said put 29 team [noise].
This is slightly higher than our previous expectations due to increases that mitigate the higher acuity levels associated with the eligibility Redeterminations I previously mentioned.
I will now provide an update on the acquisition of welcome.
The approval process continues to go well and is ahead of schedule.
Conditional approvals have been obtained in all but two states, Illinois and New Jersey.
Well here and Centene continue to work expeditiously and cooperatively with quite registers.
The divestiture process reached an important milestones to temper well Wellcare signed a definitive agreement to so it's really in Nebraska, Medicaid health plans to add to [noise].
The comprehensive integration planning process is well underway.
Both of these are fully engaged and they're doing extensive work to ensure a smooth and seamless combination.
We remain comfortable without previously communicated synergy and accretion targets.
We could do you believe we will we see all necessary approvals to close the transaction by the first half of 20 Twond.
Given the progress of activities to date, there may be an opportunity to close early June 2020.
Next I'd like to make some preliminary comments on 2020 <unk>.
No that my comments exclude the walk through acquisition and includes the Louisiana contract, which is currently being protest.
They also assume a higher tax rate due to the churn has a health insurance.
[noise], we're still finalizing our annual planning process.
Based on how do we used to date, we expect revenue and adjusted diluted earnings per share, we 2020 to be consistent with the forecast included in the form S. Four four out in conjunction with Wellcare acquisition.
As is our costs. It will provide full details on 2020 guidance at our Investor Day on December 17.
New York City [noise].
In summary, we continued to deliver against the strategy envisioned for centene to be the leading government sponsored health care providers.
The scale and diversity about enterprise allows us to absorb the ups and downs upgrade cycles Mark This in subsidiary before.
This is while simultaneously driving profitable growth, both organically and through M&A.
I'd targeted pipeline remains robust with more than ample opportunity [noise].
The Welker acquisition more hands, our ability to provide recipients with access to affordable high quality services and products as well as the live a fair compensation for providers and create shading who states.
In addition, technology and innovation remain key differentiators across our enterprise and we remain highly focused on furthering our capabilities and maximizing the impact how about investments in this area.
Fortune recently recognized Centene is number seven and a change the world list, who are go by the accessibility initiative.
Our recently announced strategic partnership with Walgreens, and Rx advance addresses the growing need for new approaches to pharmacy benefit management.
Particularly in Medicaid [noise] [noise].
This innovative model aims to increase transparency enhance customer experience and ultimately result in better health outcomes at low cost.
We remain focused on executing I should teach you priorities and a enthusiastic about the growth opportunities ahead.
We thank you for your continued interest in 17.
And I will now turn the call over to check.
Thank you Michael and good morning.
Let me reiterate some highlights of our third quarter results third quarter 2019 revenues were $19 billion, an increase of 17% over the third quarter 2018, and adjusted diluted earnings per share was 96 cents this quarter compared to 89 cents last year.
Total revenues grew approximately 2.8 billion over the third quarter 2018, primarily as a result of growth in the health insurance marketplace business expansions and new programs in many of our states in 2018, and 19, particularly Arkansas, Illinois, Iowa in New Mexico in Pennsylvania.
Ribeira salute acquisition in Spain and.
And approximately $440 million an at risk stay directed payments in California recorded in premium revenue.
This growth was partially offset by the health insurer fee moratorium in 2019.
Moving on to H.B.R.R. health benefits ratio was 88.2% in the third quarter this year compared to 86.3% in last year's third quarter and 86.7% in the second quarter of 2019.
There are a lot of moving parts and the Hbr for last year and this year that are non operational in nature and effect a year over year comparison.
In order to understand the changes more clearly for this quarter. We have included a reconciliation in our press release, we don't expect to provide an hbr reconciliation and future releases, but felt it was important in this quarter.
Let me explain a line items one by one first in the third quarter 2018, the Hbr benefited by 100 basis points due to the HSS reconciliation in California, we disclosed last year.
Second to third quarter 2019, Hbr was adversely affected by the health insurance fee moratorium, which accounts for 50 basis points.
And finally, the third quarter 2019, Hbr was adversely affected by approximately 440 million of state directed payments in California, which accounted for 30 basis points state directed payments are payments. It had minimal risk but are administered as a premium adjustment. These payments are recorded as premium revenue and medical expense at close to one.
Hundred percent Hbr.
In aggregate these items account for 180 basis points to the change from the third quarter of last year to this year.
Sequentially, the 150 basis point increase in Hbr from the second quarter. A 2019 is primarily due to the normal seasonality in the health insurance marketplace business and the state directed payments I previously mentioned.
Let me provide a quick update on the Medicaid performance and eligibility redeterminations.
The Medicaid Hbr was flat year over year improvements in the Medicaid Hbr, which were driven by network in medical management initiatives were offset by the effective membership reductions due to the eligibility redeterminations.
We have experienced continued membership declines as a result of redeterminations, resulting in an overall increase in the acuity of our remaining membership.
While states have responded with premium rate adjustments recognizing the change in acuity there can be a timing difference from an hbr perspective long term, we expect the eligibility reductions to subside in premium rates to align with the relative acuity of our membership.
Next marketplace.
The marketplace business continues to perform well in membership remains strong as we ended the quarter with approximately 1.9 million members. We continue to expect pre tax margins for the year to be within our stated 5% to 10% range.
Now onto SGN, a are selling general and administrative expense ratio was 8.8% and a third quarter. He this year compared to 10% last year and 9% in the second quarter 2019 year over year decrease was primarily driven by 70 basis point reduction related to the veterans affairs contract expiration and are committed.
Tour charitable foundation recognized in the third quarter of last year.
Third quarter 2019 ratio was also affected by the state directed payments and benefited from lower variable compensation costs for programs index to our stock performance.
Additionally, we spent two cents per diluted share on business expansion costs during the third quarter.
During the third quarter, we recorded $271 million or 57 cents per diluted share noncash goodwill and intangible asset impairment virtually all associated with our U.S. medical management business.
The impairment was identified as part of our quarterly review procedures, which included an analysis of new information related to our shared savings demonstration programs slower than expected penetration or the home health business model into our Medicaid population and the related impact to the revised forecast the business continues to be cash flow positive and remains an important part of.
Our care management programs, but it's fallen short of our profitability expectations at the time of acquisition.
Investment income was $98 million during the third quarter compared to $80 million last year, and a $120 million last quarter.
The increase year over year reflects increased investment balances and higher interest rates.
The sequential decrease is primarily related to our second quarter Ribeira salute acquisition gain.
Interest expense was $99 million for the third quarter 2019, compared to 97 million last year and 101 million last quarter in October we completed the refinancing of our 2021 senior debt securities to a floating rate term loan aid that has a three year maturity.
This lowers our interest cost creates demand for our wellcare transaction financing and aligns our short term interest rate risk with our investments.
Onetime refinancing costs associated with the transaction, including the call premium were $30 million and were incurred in the fourth quarter. These are excluded from our adjusted earnings per share guidance, which I will discuss in a few minutes.
Our effective tax rate for the third quarter was 45.1% compared to 33.3% and a third quarter 2018, the increase year over year is driven by the nondeductibility associated with the goodwill and intangibles impairment offset by the impact of the health insurer fee moratorium.
We have a strong balance sheet, our debt to capital ratio was 35.6%, excluding our nonrecourse debt improving 180 basis points from year end and 70 basis points from last quarter, We had 415 million borrowed on our revolving credit facility and our days in claims payable was up one day from last quarter to 48 days.
We continue to expect the DCP to be in the mid 40 range on a run rate basis.
Our cash flow for the nine months ended was 2.1 billion, representing 1.9 times net earnings cash flow used in operations was 99 million in the third quarter driven by the payment of approximately $1 billion related to the 2018 risk adjustment to CMS and minimum LR programs, partially offset by net earnings.
Before I get into our updated guidance, let me make a few comments on the Wellcare acquisition, we're pleased with the progress and the regulatory approval and have made significant progress on the integration planning based on the work performed to date, we continue to be comfortable with the synergy and accretion targets that we have previously communicated as we continue through the integration planning and get closer to the closing.
We will provide a complete update on the acquisition.
Additionally, as disclosed yesterday, our board of directors approved a 500 million dollar increase to the company stock repurchase program.
This together with the new term loan a provides flexibility to the company to either repay debt or repurchase equity with the net proceeds related to the wellcare transaction divestitures.
Now onto 2019 guidance, we are updating our GAAP diluted earnings per share and our tax rate to reflect the impairment charge and the refinancing cost that would be incurred in the fourth quarter.
Foreign adjusted tax rate the previous guidance range can still be used.
The remaining guidance metrics are unchanged and are included in this morning's earnings release.
One quick note, we expect our fourth quarter total revenues to be lower than the third quarter 2019 revenues as a result of the state directed payments previously mentioned our headline numbers for the full year remain unchanged.
Let me take a few minutes and discuss 2020 as Michael mentioned in his comments, we expect total revenues and adjusted earnings per diluted share for 2020 to be in line with what was filed in the S. Four registration statement associated with the welfare acquisition. This includes total revenues in excess of 79 billion and an adjusted earnings guidance range that.
Will encompass $4.79 per diluted share, which was in the filing. This of course includes Louisiana and excludes the welfare acquisition.
Overall, we were pleased with the performance during the quarter and the continued progress on the regulatory approval and integration planning associated with the Wellcare transaction, we're entering the fourth quarter with positive momentum looking ahead at next year, we remain focused on executing against our growth and diversification strategy delivering both top and bottom line growth.
Non successfully completing the integration of welfare.
That concludes my remarks, and operator, you may now open the line for questions.
Thank you I will now begin question.
You asked a question.
Then on you touched on.
If you are using speakerphone, please pick up your handset before passing the keys.
Your question. Please press Star then too.
Momentarily to assemble our roster.
The first question today comes from Matt Borsch with BMO capital markets. Please go ahead.
Oh, yes, if I could just I'm asking about the.
Reference to the S. Four forecasts for 2020.
So it looks like that is of course on an honest standalone basis before the impact of Wellcare.
Street asking there is for 92, you guys are pointing to 479, I know you're not answer bolt industry estimates and I don't know, which ones include wellcare and which ones don't.
You can you give us any more color on the moving parts that influence your view on 2020 at this point.
Yeah, I mean, I think a couple of things. We've obviously you mentioned a little bit today about the redeterminations.
And the reductions in membership obviously that would had a carryover effect.
Into 2020, we're not going to go through I would say all the headwinds and Tailwinds, we typically save that for our Investor day in a in December and I think also Michael highlighted in his prepared remarks, the tax rate just just as so everybody has a baseline here. We've historically commented that when the.
Return to the health insurer fee comes back it's usually you know 10% on the tax rate.
So I guess, what I would say as you know we're still in the early stages of our planning process and we're comfortable with the numbers that we communicated today for 2020 and will give an update a broader update on a I would say the puts and takes when we get to our December Investor Day, I think that.
I, just I might just that.
We look at that as the baseline and news thoughtful when we put it together.
It's a really good beginning point.
And we wanted to be very careful not to get ahead of ourselves.
Because we always go into great detail on the December 13th in this case meeting and so look at that as a baseline yep, which foolish weekend.
We can build guy got it makes sense. Thank you.
The next question today comes from Josh Raskin.
Please go ahead.
Hi, Thanks, Good morning, first and foremost congrats to add a and good luck.
In terms of my question I guess, the first one would be the catalyst for the buyback you know that seems to be a relatively new idea for centene you guys been rents in the past as being sort of so Guernsey what was the catalyst what was the decision now to decide okay. We can you know, especially in light of.
Some of the commentary that Wellcare, maybe coming.
The closing maybe coming sooner than expected [laughter], well I think there's a couple of factors. One you know what with the with a well who deal we treat that as a as a separate issue from the ongoing operations and buyback the stock, which as you correctly pointed out we have lots of applications for our cash and.
Our capital so that's it would treat it very separately because sand as part of this steel once we receive on this really in the buyback who stopped talking to some minimal degree help on the accretion things of that nature and treat the case as just isolated and very separate.
From the ongoing day to day business, just seemed the appropriate opportunity and we may use some of it to reduce debt. So I might also add that usually it to buy back stock at the levels of modal pose is trading at now also seems to make a lot of a good financial says I think usually somebody said I was I hope I have.
But we will so [laughter] it it just made sense Josh.
I knew I knew someone read one of our notes all right [laughter] as that was the Jesse ml. Our guidance you guys are running up about 100, and twentyish basis points year to date or so the fourth quarter, even at the high end would imply an M.L.R., that's only up 90 basis points and I say that because you've got.
Hey of headwinds and things like that that that impacted on a year over year basis, So what's but improves in for Q relative to what we've seen year to date and should we be thinking more about sort of that higher end to the M.L. our guidance. The range that you guys have provided.
Yeah, Yeah, just a couple I'm following your there Josh I think a a couple of things. We obviously did have some new programs that started in Iowa, I would mention would be one and some other new programs. It started this year and so those you know there's usually start out at higher Hbr is at the beginning of the year and you know by the time, we get to the ended the year for example, the Pennsylvania LTL.
Yes, we've had for.
Almost a full year by that time, so there are things like that that have.
I would say improvements.
In the fourth quarter.
From a seasonality in a new business perspective, so I think those are the things that that I would point to and you know the problem I think with looking at this year compared to last years Weve last year, we had some unique items. This year, we have some unique items. So it's it's kinda difficult to get the earnings progression, but again, we didnt change our guidance range and I think we're comfortable where it is right now.
Well I just had one one when in fact as you recall my.
Comments prepared comments I went to the hundred 80 basis points of or a change in what I could I just want to reemphasize that week within those numbers absorb the incremental costs associated with the new States study and suddenly you will remember going way back when we all.
These assume I very much higher medical loss ratio, 90% or something for the first so two three quarters of a new businesses things like that long term care you started looking even longer well you beyond its control and I also remind you that some states when you take on a new business. They have continuity of care you can.
Thank you pull them as a way so those things like that Josh that impacted all that was absorbed.
Within the state and the arc.
Perfect all right. Thanks.
Your next question today comes from George Hill with Deutsche Bank.
Good morning.
Taking a question I guess, one a different angle I wanted to dig a little bit on their risk Walgreens announcement in the pharmacy I guess can you talk about how much you've increased your stake in Rx advance and kind of what's different about the new relationship with Walgreens.
Does he want to talk about that.
Sure George I think we when we made the Rx advance investment initially we had contemplated a few different steps along the way and so I think this is really kind of the one year stopped and so we will get into a lot of specifics we increased the nominal amount, but I think it's representative of momentum and the trajectory of the work that we're doing together.
There are.
I think in terms of the Walgreens relationship Yeah. We have some of you may recall, when we had our Investor day in June we talked about the the work that we're doing on the enterprise partnership front identifying a few different categories retail was one and so weve see meaningful opportunities to engage on some of things that Michael.
I referenced in his comments, principally a transparency as it relates to pharmacy for that the Medicaid population and then ongoing opportunities for consumer engagement and enhance experience at the retail.
And I I want to emphasizing the various outlets, we pharmacy Walgreens has done a particularly good job in urban areas and its recognize floor.
And the inner cities, where we have a large population and so our working closely with them.
It's a it added plus while still maintaining relationships with the other large retail outlets.
So maybe if I could get a quick follow up then is this really just a tighter alignment around kind of networks and direction or is there any actual changed to how we should think about the reimbursement processing pharmacy.
Well I think you you know our <unk> I've stated our goal to try moves was that price has said that historically, we're still working on it will be working with them another partners, but they they have a lotta capabilities in that area, but I'm not prepared to get ahead of myself. Because these things are a process and it takes a certain amount of time there.
As you get there and it says it's not always a straight line, but it's it's moving into right direction.
Okay. Thank you.
Next question today comes from Scott.
Stephens. Please go ahead.
Opex and first of all just want to add my best wishes.
As well.
And first question is just on the.
2020, I started initial inside.
Clarify would that include the impact of the new buyback program that you just announced this morning or should we consider that being more sort of related to some of the wellcare deal dynamics, which are not included in the guidance.
That's really that wouldn't be related to the wellcare deal dynamics, which are not in the guidance.
Okay. Then hes also saw that you are reiterating your synergy views on Wellcare, often just wanted to clarify would that be inclusive of the lower stars that Wellcare will now see in 2021, and you feel that you could offset that in terms of synergy views and then.
Maybe just more generally if you can talk about you know sort of your assessment on on the stars results for 17 and and for wealth here. If you can and in terms of maybe some of the mitigation actions that you think that you can take and how that influences your views on.
2021, and a growth prospects for the combined company.
Ill ask Randy and Kevin to ER to comment on that.
So to start off with the from a star Sorta perspective, our current stars a you know we made significant progress and our quality at programs. This year. We've had two planes achieve a four and a half star rating and one of our largest plans as a at four star rating.
Although we made that progress one state has impacted our overall parent reading, a which will finalize in November we estimate and that's by less than <unk> 0.0 to a point when it comes to this but with all that said, we remain committed to our quality initiatives and believe that we can make up any.
Any differences, we might see from a premium sort of perspective or overtime. So look forward to thing the result side and the feature and Kevin anything you want to add related to just what I think we did it as brand. He said, we actually did expect for a we were less than two basis points away from getting it a we know what we need to do to fix it.
And we'll be on track to corrected.
Got it and just to clarify on just the Oh reiteration of Dyssynergy views that that would be inclusive or exclusive up wellcare starsight impact for 20 why don't you.
Yeah, I mean, I'm, not specifically going to come at it.
Our Wellcare stars at this point, but I would say the synergy comments I would still hold given what I know about that.
Okay. That's it.
Yeah.
Our next question today comes from Sarah James with Piper Jaffray. Please go ahead.
Thank you and congratulations.
Well certainly be.
So when you guys announced that deal you talked about assuming a certain amount of divestitures that went into that.
700 million have synergies than the divestiture package certainly came out.
Better than our expectations I'm, just wondering how it compare two years. The the fact that there aren't divestitures and Georgia and Florida was that initially contemplated in your synergy guidance.
Well I think you'll never let me say very bright light.
Careful not to get a lot of de too soon but.
No I think.
Some of you made some assumptions that we may not have but let's say that the divestitures to this point have been consistent with expectations seem reasonable inappropriate.
And Oh, there's still maybe in a couple of state some issues were working to with Justice and others were staying flexible on it you have to but.
It's I can't say, who I don't think they say a whole lot more because.
Hey, I'm not going to negotiate that type of thing.
In the press so to sweep.
I hope you understand what I'm trying to say.
Yeah, [laughter], absolutely fair enough and then just wanted to follow up last quarter, we talked a little bit about the tri care potential.
Version, and you guys left us off where he thought maybe there'll be some certainty.
In three months or so and so just wanted to follow back up is there any update on the [laughter] Tri care comparison to Resscan, how meaningful activity.
Uh huh.
Hi, Sarah it's Kevin.
So our relationships with Tri care continue to deepen we're in the midst right now of consulting with them on a variety of access and quality and actually I'm technology types of enhancements to the program, you're probably aware that there's a new a director of the.
Hey, there and Lieutenant General Ron place, who we've established a relationship with already and so we're we're in we're enthusiastic about the future of the program.
Thank you.
The next question today comes from Lance Wilkes of Bernstein. Please go ahead.
Yeah, good morning regarding that.
So my question was really on on the PBM business and trying to understand some of the state activities says, they're looking at changing relationships with Pbms and.
How that impacts kind of existing book of business and how ARX <unk> advance might play into that.
Well I think Oh, sorry says, we would add something but.
The phase one transparency, we agree with that.
We have moved more and more to actually I mean, so stays where we've already met and exceeded maybe their expectations on transparency I think our access dance.
We will only enhance that opportunity.
Some of the systems, they haven't into that information moves us in that direction.
Accelerated rate so oh, they have a out they have unique Brad floor, there will be very helpful. So the seasonally the transparency.
Okay administrative agent fees and when you have more trouble cheers, they're worried about.
How many people so to speak involved in.
In integrating that pie around so we were worth clarifying that and I.
I think it's a very close it would do that very openly.
Gotcha and just one more follow up on won the river Suffocation Redetermination.
Talk just a little bit about in the third quarter, maybe contrasting that with the second quarter. The magnitude of impact was third quarter sort of a larger impact that you were able to overcome in Myanmar or was it in line with second quarter, well I'll start with it and then and Jeff can pick up running on <unk> details.
But it's really it there's been a certain consistency and I think what's important here is the states or realize in as a couple of states that movie determination to others, but the states you realize the impact it has honey acuity and they're working with us on the rate adjustment there is a lag there and and that suddenly.
You work through it overtime as such the pace itself. So yeah, I guess last what I would say is it the it's different by state right.
So it just depends you know so and you know aggregating that I would I would say off the cuff that it's a it's consistent I mean, we've seen we've seen this but it it's different by state and the other thing to note is you know if you look at the third quarter. If you back out the New award in Iowa, Our Medicare.
Membership and totals are so essentially flat from Q2.
I also emphasize yes stage or looking to expand coverage. So we're looking at met a increasing the Medicaid I wish I look at long term care. So that I pay new we think we're delivering on new expectations in most cases and did we see it's a very viable strong growing business.
Okay. Thanks, guys.
Your next question today comes from Kevin Fischbeck of Bank of America. Please go ahead.
Great. Thanks, maybe I guess just following up on the state rates around in the Redeterminations.
What do you think you are in that process of the state's kind of adjusting.
The rates are we still kind of early in that process are we kind of.
Well look that way.
Hi, Jeff who yeah, Yeah, no I would say I would say the states had been quick to act, but they're they're really you know there they're acting on you know data from months ago, right and so <unk> I guess, what I would say is we're not we're not done.
And are they taking quick action, but is this continues and then we have to continue to see more rate adjustments and I think that's you know that's that's the plan obviously, but there is a timing difference there was a timing difference from when the data comes in to win the rate adjustment happens and that's really what we're seeing in the Hbr, there's a sound more competitive than I wish where we have.
Real time data.
They were able to give us a real time data that that's healthy us, but they need to get the collective data from all the or other plans. So that that's takes some time too. So it's it's a process and it's not a point in time is something that's moving then I think is faced with <unk>.
Recognize it is trying to accelerate it as fast as they get the necessary information to do so.
Okay and then.
Back to the divestitures and that using such as of this proceeds from share repurchase.
You guys mentioned that you already kind of assume some divestitures in your guidance I assume you would've assumed you'd gotten proceeds on those divestitures.
Trying to understand whether this signals that maybe you're willing to have a little bit higher pro forma leverage after the transaction is going to you.
Mr proceeds for share repo or how we should be thinking about that.
Yeah, I think the way to think about it now as we've positioned ourselves to have optionality right. So obviously when when the transaction closes and if there are divestitures, which there is already to that we've announced a then you know we would we would look at all the factors, including economic at the time of the at time of the that and just make it.
But the key here is I think we've we've now between the term loan aid that we now we can prepay without penalty and the share repurchase that we just increase today, we've put the company in a position to have optionality on what to do with the proceeds.
And in those proceeds you you're gonna have to wait for those proceeds to come in before you'd be able to exercise because to your point earlier I mean, the valuation today is pretty compelling my guess is on the deal closes the market will start to.
Change the valuation to the better so is there any thought about using if I hope you're right [laughter]. Obviously, yes. The you typically the way. These work is that the divestitures happen simultaneously with the transaction closing again, we'll just have to look it look at the economic factors and everything.
Timing will make a decision.
Okay, Great and then just say last question you know the impairment charge for U.S. and I'm, I mean, I'm pretty big impairment charge, obviously implies that the run rate earnings from that business are going to be lower than what you thought I guess, you're you're reaffirming your guidance for 2020 as far as yes for goes so I understand kind of what the.
In fact is there may be what is coming in better to to offset that.
Yeah, Let me say then Jeff can pick up it is large when you recognize over there all the is we've been in business, we haven't had too many impairment charges.
It's I believe we don't see it as overly dramatic in that when you and enterprise about scaling size. It is for the time things can happen.
We have been committed that at that point in time, we recognized something as necessary that investors and you. All that is the analysts can expect us to come forward with it immediately as quickly as it can be confirmed so this was just it it's a lot of my it's a large number it's like cash.
And it's these are the kinds of things I put we perceive that could happen when you consider how creatively our acquisitive we are.
And the total size of the company.
Yeah, Kevin the other thing I'd highlight it's really a magnitude issue. If you look at the the size of the U.S. and then business, it's roughly 300 million and revenue, let's say and are you know the piece that we were missing this quarter. We mentioned this is the shared savings and so if you look at the shared savings program. Yeah. It was half of what we expected which is.
And we expected roughly $20 million and shared savings this quarter, we got 10.
And so it's a magnitude issue as you look to 2020 as all I would say.
And the shared savings the CMS will really terminal every year, they decide what amount and one of the adjusted Baselines every every year to base.
Okay. Thank you.
Your next question today comes from Charles Rhyee with Cowen. Please go ahead.
Yeah, Thanks, and congrats as well.
Maybe just a follow up on that Michael.
You know what does that say about you know these the shift the value based care here.
You know the shared savings that you were kind of expecting came in half and you kind of talked about sort of baselines moving around is that a is that does that speak more to a fundamental problem with the structure. The programs. So youre what can be done to actually kind of move maybe so at this pace for the long I mean, you talk about <unk> net price.
And the drug side, though overall, we're trying to.
It seems like it overall trying to make a shift gears, there's more value these type of reimbursement model across healthcare.
But you know these kind of examples going to point to some challenge has challenges here.
Maybe you can give a sense I'm sure.
And yeah.
<unk>.
Oh I'm glad you raised the question one the value based we're doing with provider groups doctors hospitals pharmacies and others. That's something that's in our control we set baselines, we set the program we determine how it's going to work we have a model one that is our program we have the right.
Porting that can show the doctors real time, virtually how they're doing against.
How they should be before I mean, there appears on a lot of different things they.
Casey U.S.M. and this is something that was determined by CMS.
In the Grand scheme of things I think it's it's still worthwhile. It's it's a program that I think has legs and has helped save some other costs in Medicare and as our Medicare business grows well be even more important.
But.
It is weak I can say, that's where they agreed to a comfort because it's such a small portion of this total enterprise we've become.
So its absorbable and it's it's not it's not that major thing, but it's very distinct I can't emphasize that enough from the value based contracting that we determined set up and reporting units.
Thanks, that's helpful. Maybe Jeff I could follow but I want to question you guys talked about in the adjusted as gene a.
Partly lower due to sort of near stock compensation expense.
Maybe can you give us some sort of magnitude here if I mean, what you would have expected relative if let's say the share price was or flat year over year, just trying to get a sense for sort of a baseline as we think about modeling either for next year or the rest of this year. Thanks.
Yeah, you have to I'd say, it's it's probably less than a penny a share as what I would say because you have to remember these are long term, mostly long term plans that are built over a three year period, and it's obviously just one quarter one quarter effect. So.
I was I would make it would make it if you're looking at the DNA ratio you really have to look at the stepping off point from Q2 of this year and then if you factor in the 440 million of additional revenue that's roughly 20 basis points on the DNA ratio. So that kind of bridges you from Q2 to the 8.8, which is where we are in Q3.
Okay, great. Thank you.
Our next question today comes from Dave Windley with Jefferies. Please go ahead.
Hi, Thanks for taking the question one wondered if I can get you to size a couple of things I'm in the M.L.R. Bridge you didn't call out the Oh, what I think it was an extra business day, and maybe an extra important business day in the third quarter of this year I'm wondering is that in the 10 basis points of other or is it a bigger.
Call out than that and then following up on earlier question on kind of Redeterminations and stay rates is it possible. The you said the states have been pretty expeditious in responding better working on stale data.
Is the 2025 basis points that you're kind of lifting your composite rate.
Reflective of all the states, giving you some or half the stage, giving you some light just hoping to understand.
Essentially kind of what inning are we on how much have you gotten how much do you still have left to get.
I'll take the first one joking pick up the foot I'll take the second part you pick up the.
Question on the.
We made adjustments it staggered.
It's not every state to have some are larger than others. So the I can't point to a specific pattern.
It's not that.
It's not that it doesn't have that kind of live into it it's very episodic and there's a state that has I larger redetermination and they may be very quick and getting back to us. So it's.
There's no said pattern to it.
Yeah, that's correct that's correct and then the other thing Dave just on your first your first question with respect to.
With respect.
Yeah, the extra business day, I mean, we would we had that we would account for that in our forecasting process. So at the beginning of year I guess, what I would say is yes. There was an extra extra business day, a in the quarter and so a if that weren't the case then the you know our results probably would have been would've been better than they were but nonetheless, you know these are actually.
Results would include the business day.
If I could just thinking one more Michael <unk> are the.
The the state or the lawsuits related to Medicaid worker cryo requirements in a couple of states are those important to.
Your views around Medicaid program structure and longer term <unk> views on Medicaid.
Waiver programs and things like that no I think it's something that we adapt to work with then and deal with than it is various programs. Some some we support.
So it's a the most states are trying to do a responsible way and it and so no we find that.
Hey, does not have a significant impact on us we we've learned how to work with us they signed even support a minor.
Great. Thank you.
Your next question today comes from Peter Costa of Wells Fargo. Please go ahead.
Thanks, and good luck at.
Your adjusted EPS guidance for this year is still quite broad it.
29 to 449 pick the midpoint of that you're still 18 cents above where you're asked for guidance would be for 2019, So you're running well ahead this year and yet for next year you talked about the.
For 79 as being sort of the right number why are you not talking about being ahead, 4% and next worthwhile.
What I want you have to come in but I just want to I want to open it up by saying that go we comment we establish that as a baseline I think we recognize we like an abundance of conservative isn't going into it.
There are various issues we're dealing with.
And we will give you the full guidance at all the reasons in bridges.
Down otherwise on the 13th Jeff and yeah. They the thing I would point to Pete is if you go back and looked at DS four and look at the revenue number it was roughly $70 billion and we're almost at 74 now remember it was the open enrollment that kinda concluded in the first part of a this year on marketplace and the market.
Place member staying longer and all those phenomenon set or a I would say, causing additional topline growth this year, which is good.
And you know right now as we look to next year. We're still you know projecting to be around that 79 plus billion dollars range. So I think that's the difference that you're looking for if you recall we've increased the guidance early this year actually on our on our year end 2018 earnings call.
We increased the guidance because of the additional marketplace membership.
So you talked about exchange business, hopefully growing next year.
So what does the headwind to your top line that we should be thinking about.
Well, we've we've had our are no no no because remember we said louisiana's in part of it is the eligibility redeterminations that we talked about today. So you.
You know obviously you guys have seen the effect of that.
I did a lot of you've commented on it as far as percentage wise, but that is certainly a headwind from a run rate perspective exiting this year.
They try to get to have his house.
Now, let's have a lot of purpose admittedly, we we have a cadence to a week where would we give you an indication we try to be a baseline to think about but on the 13th will be at a position you have a better sense on market plays better sends a redetermination better sense on what states to do it rates a whole series.
Thanks.
And so why do I I'm not sure. It would serve anybody world is running ahead of ourselves and front run our own December 13th meeting, which is a couple months away.
Okay. Just last time out is the U.S.M.M. issue bigger next year than it is this year because of the rate cuts in home health or is there anything else impacting that.
No no I would expect it to be a flat year over year.
Thank you.
Your next question comes from Steve.
Goldman Sachs. Please go ahead.
Good morning, guys two questions for me and congrats as well just on the one more on the 2020 Allegan. They asked for a more of a simple question had that factored in centene forward.
Now that in May, but you told us about Centene, Florida in June , but presumably had that in the works earlier. So just want to understand that was kind of contemplated in a number that's there.
I think it was we contemplated and talked about before is that we're continue to use centene forward to rekynda reinvest in the business and so you know there's you know that that's the plan and as we continue to get to the half a billion dollars a savings is to reinvest in some of these things that we're working on our you know process automation it did.
<unk> digitization their heavier lift and they take a longer time to realize the efficiency. So I would say right now that that includes centene forward, but the benefit is minimal.
Okay Fair enough book more to come more to come on our December Investor Day.
Yeah, I point, they're going to that and just on H.B. are the at risk payments in Cali could you give us a little more on kind of the nature of that sounds like it was in Medicaid and then maybe just very specifically would you expect to get back to 30 best in Threeq. You 20, I was up for hey, perfectly clear on what did that as yeah, a couple of things what what.
I would say is the process is changing where states used to have these payments, where they would give us the cash and we would turn around and pay providers and that was a one for one and we recorded those in a premium tax revenue in premium tax expense. The process is changing to where are these have to have some form of risk and so they show up as.
Retroactive premium changes and so what I would say is you'll probably see less on the pass through lines and more in premium revenue, but we would anticipate that the level of these payments would probably continue but as you've seen they're very lumpy right.
Especially I mean these happened in other of our states there just a they're not as large as California.
Since I suppose that it's like a new baseline like you and just go in your model and assuming you get 30 Bips back in Threeq you. Tony That's that's that's right. We would anticipate a similar level of these type of payments in next year.
Got it okay all right. Thank you.
Your next question today comes from AJ Rice with Credit Suisse. Please go ahead.
Hello, everybody best wishes to add to a couple of quick things if I could get in here.
When you gave the outlook for rate increases next year and said it would be a little better you made the point to premium rate adjustments I was wondering obviously they have is coming back and the state Street last time it.
Came in and out they are they obviously that you didn't really mentioned that as part of the reason why the rates might be a little higher you just excluding that is there any movement on the part of states not to include that.
And then also I just on the exchanges sort of a interesting Beast are you feeling comfortable that you can.
Get compensated for the half coming back on your exchange business next year as well.
Yeah, Yeah, a couple of things on them on the Medicaid side, just to be clear and I think we've commented about this before the composite rate adjustment that we quote is net of what we would call fee skilled fee schedule changes and passers. So as the health insurer fee is predominantly a pass through in the Medicaid business. It's a specific add to the rate and then this grossed up for the tax.
Effect, then that's excluded from the the composite rate that Michael commented on today and had an has always been.
The second thing on the marketplace, we actually price for the health insurer fee. So that's included in the pricing.
Okay and then on another quick went on for Dallas.
You anniversary that this quarter I know when that came on line. The thought was their EMR was quite high you get some benefit over time from bringing that down.
Obviously, there are DNA was quite low that might creep up but there was the synergies can you just with all the moving parts, especially on the MSR today is that expectation on fidelis, playing out and have you pretty much normalized their MLL R. This warner's there's still more room to go.
Yeah, I'll handle the first part which is really around the transaction and then Dave Thomas is here. He could he could talk about you know the future I would say, yes. It has played out so we have seen a meaningful improvement and I would say the revenue and medical cost line.
And we did add DNA dollar. So we have seen a slight increase in DNA, which is what we anticipated making investments to bring down the medical costs and improve the revenue performance and that has happened and as far as you know what's what's remaining to go alternate over to today. So this is Dave Thomas.
As Jeff said I think we've been successful to this point.
We've done very very well with our synergies or that being said I do think a there is more real estate for US there. There's more that we can do and are doing from a medical management front.
We also are continuing to grow the plan, albeit not.
Not as quickly as we had it been growing historically.
So you know we look very good in terms of both continuing to Tamped down from a medical management perspective, and continuing to grow the plan and are continuing to grow revenue as well I think I'll remind you I said it was time and does today that if we did buy more fidelis isn't likely to do one in warning in one of the afternoon.
[laughter].
I remember that comment I remember that comment. This is late in the common to slip one more in if I could obviously, there's been so much focus on taxes and what's happening with that RFP.
I Wonder if you could give us any update on what's the RFP pipeline looks like right now over the next six to 12 months I haven't heard a lot other than Kentucky, which I guess, you have a history with that and I'm not sure you're bidding on that one but is there are there other near term to intermediate term RFP.
Is that are a focus right. So they did is one in Pennsylvania. Just came out we wanted a couple of times. If you do it. So we have that one is.
Oklahoma, Yeah is looking at considering one so I mean there.
The well in conversations with states and they may not have announced he had so I'm going to.
It's it's they haven't said, they're going to do it but I think it's it's appropriate for them to Oh, we still see as I said, a robust pipeline and and opportunities.
But I gave it to justify that I mentioned those too just to give you a sense its REO not just platitudes.
Right right.
[laughter].
Next anymore.
Your next question today comes from Justin Lake with Wolfe Research. Please go ahead.
Thanks, Good morning for sure sorry, and congrats again Ed.
So first question I think Josh asked as earlier and I didn't really no, but you know just given how a year is shaped up and some of the questions around the M.L.R. <unk> do you might be helpful. Just to give us an idea where youre expect to be within that range. The guidance that youve 86 six.
87, one just to help us understand how you're thinking about.
Our should we be towards the higher end of the range or towards the midpoint.
Yeah, Yeah, I mean, I guess that would Ah I mean, that's why we give a range Justin on the on the H.B.R.
So you know that would kind of debt if I pick the number that would defeat the purpose of the range. So again I think we're comfortable with the range where it is.
And I guess, that's my only comment on that.
I I just wanted that you'd I think anyways employees is there's no way said, yeah. There's if what's the flu seasons, though there's so many things that come into phase that can affect the veins Justin it's.
Let's let loose supported what Jeff said to age.
Got it and then just CMS, so looks like they probably put out the individual market kinda landscape filed today.
By about a chance to go out for yet, but it was hard was wondering if there's anything you would you would point to in terms of how you feel about your competitive positioning for 2021 and in that business in terms of membership in margin kind of thinking you're going in and out there I don't have that we've looked at it includes the ourselves is for him, but I would.
Tell you that we've talked when you have kind of competition. This phase we will they like that.
Because if it grows it goes categories when you.
We have to buy yourself, you're growing it as well if you get suddenly and in a and that type of situation. The a.
The larger player the number one player usually does better.
So I I see it is a week, we like competition that just makes is better than it had to even outgrow the market.
Got it thank you.
<unk>.
Your next question today comes from Ricky Goldwasser of Morgan Stanley . Please go ahead.
Yeah, Hi, good morning, I put it off.
Couple of thoughts questions here. So one what can you give us an update on the status of the I'll Wellcare ppm RFP process, how should we think about it in light of your partner Yeah, I Oh, we we can't come we cannot comment on well care business at this point.
Time, it's a it's still a very independent company publicly traded so I, we just can't get involved in that.
Okay. What will you give any will you provide additional color on the PBM RFP process on D. honesty I know in the past you said you would.
So I understand.
No no I every week, we can't really comment on the wilker business until the transaction close there are separate company standalone.
Okay and then another question regarding 2020, when we think about the 479 M.D.S. for I know you said that you are assuming too easy and is unchanged, but also higher tax rate. So as we think about the embedded assumptions that you had back when you provided.
He you know if we can only yes I was the higher tax rate included in it.
Yes. It was it's a direct result of the health insurer fee.
Okay, great. Thank you.
Thank you.
The next question today comes from Gary Taylor with JP Morgan. Please go ahead.
Hi, Good morning, just a few.
Quick ones. The first would be Michael you alluded to the fifth circuit briefly, but just wondering give any sense of timing.
On no yeah I mean.
Hey.
Everybody likes to say, it's imminent, but not today.
[laughter], so I'm not sure I see it some a defined imminent they say that in Texas RFP too but.
Oh, I think it's gonna come down, but I would I spent a lot of how to think about it if they reverse it so much the bad it Ah if they don't we believe it will go to Supreme Court quickly and we have not changed out point of view it won't be five will be 60 or seven to that.
The press it as will hold it will get reversed so it's not something we'll spend any time.
Worried about its it overhang and if it.
In somebody was mine so the sort of that gets resolved reversed.
The happy we'll all be.
Got it I don't mean to preempt Investor day, but you have talked about 2020, a little bit you have talked about exchanges and little bit probably one of the most common investor questions is whether the increased competition and lower premiums on exchanges, how much impact that might have on your margins as there is there anything you.
Willing to say about 2020 exchange margin outlook at this point.
I think it's a it's premature to say anything at this point in time, though we have.
Ooh I did.
Jeff's comment you know, where we've come to about 5% to 10% margin range in that business and ER as I've commented in the past that various meetings that doesn't mean, it's going to be seven having these moves up and down depending on the time of year and various issues, but we're still comfortable with that kind of arrangement, we still see it as it grows.
Im very viable business for us so we know how to manage a managed well.
Last question, sorry, if I could on the public charge rural obviously, an injunction was issued but to the extent that that rule does have drive any adverse selection and 2020 or even the fear of that rule has an impact is there any reason why the same ability youth.
I had to get these rate adjustments from states for the for the Redetermination adverse selection would not apply to the similar dynamic that might arise from the public charge rule do you do you believe you'll be able to go back to demonstrate that the states and largely well that what risk I think I'd say that because the thing will be a little more diverse.
One is probably has a bigger impact on the exchange business than on the up to a Medicaid to some degree but yeah. Yeah. It would follow the same it would follow the same process I mean, the way the way the state's view. It is are these are <unk>.
Eligibility redeterminations armed our members is leaving the program either way.
There's a shift then acuity that you would have to go back and recalculate the rates.
Got it thank you.
Your next question comes from Ralph Giacobbe with Citi. Please go ahead.
Thanks, Good morning, how little overlay. So apologies if you did if you want to answer any but did you actually quantify or what the impact on the EMR was from the terminations and then the second part of the question just want to kind of revisit the a and while our guidance you know he thought harp on it but.
I understand the ramp an improvement and the new business is sort of you move through the year, but you also have new business like Iowa that started mid year coming on and what I assume is sort of higher adelaar at the same time, you have sort of this the timing differences that you talked about related to the retirement redetermination.
And then the exchange business that works against you as well, so I guess I'm still having trouble reconciling the for UQM Allar is there anything else in terms of other payments or considerations for the fourth quarter that just gives comfort to the mid or high part of the range. Thanks.
Yes, So oh, I guess, what I would say is yet to remember like in Iowa, We're building margin in the first quarter right you build margin in the first quarter. After the after the plan goes live and that margin build in the fourth quarters lower that'd be another thing that I would point to and as far as the eligibility redeterminations impact on it and while our.
Did not we did not quote quote a number on that.
I guess, that's the only the only other other commentary I'd give you but.
Okay fair enough. Thank you.
[noise] question and answer session I would like to turn the conference back over to Chairman President.
Oh, Michael Neidorff for any closing remarks.
Well I just see I want to thank everybody for your participation with it turned out a little longer call in what are they looking forward to the a December 13th meeting, where we can get and it's even more of your questions and Oh, we're feeling good about where the businesses and we.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.