Q3 2021 Anthem Inc Earnings Call

Yeah.

Ladies and gentlemen, thank you for standing by and welcome to anthem third quarter earnings Conference call. At this time, all participants are in a listen only.

Later, we will conduct a question and answer session, where participants are encouraged to present a single question.

If you wish to ask a question. Please press Star then one on your telephone keypad, you'll hear a prompt that you have in queue. You may withdraw your question at any time by pressing Star then two.

These instructions will be repeated prior to the question and answer portion of this call as.

Today's conference is being recorded I would now like to turn the conference over to the company's management. Please go ahead.

Good morning, and welcome to Anthony <unk> third quarter 2021 earnings call. This is Steve <unk>, Vice President of Investor Relations and with US. This morning on the earnings call are Gail Boudreaux, President and CEO.

As a reminder, galena, our CFO Peter <unk> President of our diversified business group <unk> Morgan Kendrick President of our commercial and specialty business Division and Felicia Norwood President of our government business Division.

Gail will begin the call with a brief discussion of the quarter recent progress against our strategic initiatives.

And closed on <unk> commitment to its mission.

John will then discuss our financial results and outlook in greater detail.

After our prepared remarks, the team will be available for Q&A.

During the call we will reference certain non-GAAP measures reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available on our website anthem.

<unk> com.

We will also be making some forward looking statements on this call listeners are cautioned that these statements are subject to certain risks and uncertainties many of which are difficult to predict and generally beyond the control of anthem. These.

These risks and uncertainties can cause actual results to differ materially from our current expectations we advise.

The carefully review the risk factors discussed in today's press release and in our quarterly filings with the SEC.

I'll now turn the call over to Gail.

Thanks, Steve and good morning, everyone. We're pleased to talk with you about another strong quarter.

This morning, we reported third quarter GAAP earnings per share of $6.

Listeners are keen sense.

And adjusted earnings per share of $6 79.

Ahead of expectation despite another surge in COVID-19 that created challenges throughout the country.

Once again anthem continues to deliver on stakeholder commitment.

Accelerate growth.

Every core benefits business and made considerable progress towards our long term strategy to transform from a health benefits company to a lifetime trusted partner in health.

Addressing the whole person is essential to becoming a trusted lifetime partner in health.

And finding to the pandemic has allowed us to instill new agility and innovation into the business.

Particularly around solutions for physical health pharmacy.

<unk> and social needs.

With an emphasis on maternal health.

Access to nutritious food and health dispatch.

Richard.

Ultimately.

We believe we're only as healthy as the communities we live in.

And recognize our important role in ensuring everyone has an opportunity to be and stay healthy.

As the health care paradigm.

Charity shifts.

We're accelerating work to simplify members and clients everyday experiences.

And meet their evolving needs to a personalized experience.

Moreover, there is abundant opportunity to modernize further.

And reinforced our position.

<unk>, leveraging our technology predictive analytics.

And innovative products and services.

To bring an enhanced experience.

Only anthem can offer.

We expect whole person health care powered by digital technologies to help us achieve our goal of driving commercial.

<unk> total cost trend down towards the rate of CPI by 2025.

Currently we're exploring more ways to drive differentiated value across medical and pharmacy.

Our insights driven approach is fueling new program.

That drive better cost and quality.

<unk> outcome for our members, including in the areas of behavioral health and autoimmune disease.

Additionally.

We recently launched a new offering to test the full suite of our capabilities in the form of a virtual primary care first product, which we expect to demonstrate meaningful reduction.

Not an overall cost of care.

And greater member satisfaction.

We are already selling virtual first risk based commercial plans in certain markets across each of anthem 14 Blue States for the 2022 plan year.

Featuring simplified plan design 20.

Seven service.

And leveraging our high performing networks that enable affordable price point.

We've also seen strong interest in these capabilities from our fee based clients.

And we will be embedding virtual primary care with several large fee based client throughout 2022.

For about the same time.

Innovative product offerings like Sydney preferred which allows employers to customize a digital first health care experience for their employees are gaining considerable momentum.

To date more than 50 national accounts have signed up for Sydney preferred representing nearly.

900000 commercial members.

To help accelerate our digital platform.

Elevated rajeev <unk> to president of digital platform.

Rajiv will drive the commercialization of our digital capabilities for consumers and care providers as we re imagine the.

<unk> Nikko system.

Now I'll share notable third quarter highlights and business driving initiatives for the balance of fiscal 2021.

Starting with our Medicaid business, which is performing well.

Our healthy Blue plan.

Partnership with Blue Cross Blue Shield of North Carolina.

The health has quickly become the largest Medicaid managed care plan by membership in North Carolina, and the leading choice for consumers.

Its success.

Coupled with the ongoing suspension of eligibility redetermination.

Drove anthem total Medicaid membership above 10.

Dana at quarter end exceeding our internal expectations.

Our commitment to members and their communities has never been stronger.

We continue to develop innovative solutions to meet their unique holistic health needs.

As a result, our focus on reducing.

Disparities and in equities remains vital to the value anthem offer state partners.

This is reflected in our momentum along with our 100% RFP win rate year to date.

Looking further ahead anthem will launch another new statewide Medicaid managed.

Cal contract in Ohio in the summer of 2022.

After earning the city of New York Group Medicare advantage contract last quarter.

We added several new group MA customers in the third quarter for January one 2022 start dates.

And having.

Care growing pipeline of new prospects.

As part of our strategy to deepen our Medicare advantage market penetration.

We remain focused on converting commercial age outs to M a relationship.

And preparing for a flawless January launch of our group Medicare advantage plan for New York.

Greece retirees.

Customized solutions at scale underpin our approach to individual Medicare advantage benefits for 2022.

Many of our MA plans will allow customers to choose what's best for them from a menu of innovative whole health benefits.

For.

Park City Hall in some areas. The program will include a kroger grocery cart.

Generous over the counter benefits.

And up to 60 hours of in home support to assist with light housekeeping Erin and companionship.

We expect these and other benefit enhancements.

For example drive another year of double digit growth in our individual Medicare advantage membership next year.

Medicare Star ratings continue to be a focused area cross the anthem.

And the ratings released two weeks ago show, we've made solid progress.

We're particularly proud.

<unk> Health Fund received a five star rating for the fifth consecutive year.

The only Medicare advantage health plan in Florida to accomplish such an achievement.

So the 2023 payment year.

We anticipate approximately 73% of members and plan that.

<unk> M S rated as four plus starts.

Up from 58% on a comparable basis a year ago.

That figure will move even higher with the city of New York's group Medicare advantage contract launch next year.

At the same time investments in provider partnerships are.

That's celebrating anthem evolution toward high quality value based care.

This is necessary to drive improved outcomes and cost of care across all of our benefits businesses.

And is critical in Medicare advantage, where it impacts reimbursement through star ratings.

This year more than 60% of our Medicare advantage spending will be in risk sharing arrangements.

Based on our current contract, we expect that to increase to more than 70% in 2022.

With approximately 30% of Medicare advantage spending in.

Selling capitate risk arrangements.

Investments in our primary care partnerships in.

In particular, we will support members and drive growth through the expansion of value based care.

Leading to an even larger proportion of our members in four plus star contracts over time.

We.

And fully ignite theres still more work to do.

And we will continue our efforts to raise customer satisfaction by aligning incentives with care providers to improve quality and medication adherence.

Simultaneously enhancing our member experience.

Accelerating our use of data and analytics.

Rex and.

And leveraging and Genie Rx as a pharmacy benefit manager.

Lastly, a few highlights of the strong growth, we see in our commercial business.

We're nearing the end of the most robust national account selling season and anthem history.

Volume of Rfps was down.

Analytics average size was up considerably and.

And we want a disproportionate share of new business and expanded surfaces with our existing clients.

In Jennie O. Rx is also showing exciting growth with more than five fold increase in new sales at this point in the selling season.

Compared to the relatively depressed base a year ago, when the pandemic weighed heavily unemployed or decision making.

Yeah.

The consistent theme across all of our businesses is that each continues to produce strong organic growth.

This drove medical enrollment to more than 45.

Million U S consumers.

Strengthening anthem to position as the largest health insurer in America by membership.

I am pleased with the progress, we're making towards delivering our strategy.

And want to share two recent leadership changes to accelerate our efforts.

P&I time.

Indeed, our diversified business group and in Jennie O Rx.

Of which are critical components of our growth strategy.

Pete has an impressive track record of growth and innovation.

In his previous role leading anthem commercial and government businesses.

With pizza transition.

We're confident our commercial and specialty business Division will maintain its strong momentum under the leadership of Morgan Kendrick.

Who's driven market, leading growth across critical lines of our commercial business.

Including National accounts.

Recently as president of anthem commercial.

West market, our largest region.

The breadth and depth of our collective leadership ensures we stand ready to deliver on our promises to stakeholders across all areas of our business.

And we'll guide anthem to long term sustainable growth.

It's a privilege to work alongside.

Alongside such a strong group of leaders committed to advancing our purpose and mission.

In summary.

Our actions and the focus and discipline, we brought to the business.

Position anthem for the next several years of growth.

Our strategy to extend our role from a partner.

Partner in health benefits.

For a lifetime trusted partner in health is resonating in the marketplace as evidenced by our growth.

Our response to Covid brings a new level of agility and speed to the business.

Along with more opportunities to reach consumers and care providers.

<unk> than ever before.

And we continue to simplify and personalize our member relationships with relevant benefits and enhanced innovative experiences.

Where and when they want.

With that I'll turn the call over to John to discuss our financial results.

In more detail.

Thank you Gail and good morning to everyone on the line.

As Gale mentioned earlier, we reported third quarter adjusted earnings per share of $6.79, an increase of approximately 62% year over year driven.

Driven by strong growth across all of our businesses.

This growth was a result of focused execution against our strategic priorities. Despite a challenging backdrop created by another surge in COVID-19.

Our third quarter results once again demonstrate.

It's a balance and resilience of our core benefit businesses and the strong growth momentum we are producing across the board.

We ended the quarter with $45 1 million members growth of two 4 million lives year over year or five.

Constraint, 7%.

Including growth of 730000 during the quarter.

Led by the successful launch of our healthy Blue Medicaid plan in North Carolina.

In addition to the 426000 members gained in that state.

We produced.

<unk> point mantle organic growth of nearly 380000 members during the quarter driven by strong growth in our Medicaid and commercial risk based businesses.

This growth was partially offset by continued in group attrition in our group fee base business consistent.

Increment their expectation.

Operating revenue in the third quarter was $35.5 billion.

An increase of 16% versus prior year quarter.

Nearly 18% on a hip adjusted basis.

The increase was driven by.

With premium revenue associated with strong membership growth in our Medicaid Medicare and commercial risk businesses.

As well as rate increases to cover cost trends.

Ongoing momentum in our diversified service businesses, including in gene you Rx.

A higher benefit expense ratio for the third quarter was 87, 7%.

An increase of 90 basis points compared to the prior year quarter.

Driven by the repeal of the health insurance tax in 2021.

Excluding the impact of the health or medical loss.

<unk> would have decreased by approximately 50 basis points driven by unfavorable rate adjustments in our Medicaid business in the third quarter of 2020.

All in the cost of care was above what we would consider be normalized baseline levels in the third quarter of this year.

Loss rate driven by higher Covid costs in the months of August and September.

Medical costs were nonetheless.

Other than we had expected for the quarter overall with lower non COVID-19 utilization, helping absorb the higher than expected COVID-19 related costs.

Our third quarter SG&A ratio was 11, 1%.

A decrease of 620 basis points from the 17, 3% in the prior year quarter.

Primarily due to the charges, we took last year related to business optimization, and the Blue Cross and Blue Shield.

Creation litigation settlement.

Excluding charges from the base year and the impact of the repeal of the health insurance tax.

SG&A ratio would have decreased by approximately 130 basis points.

Driven by leverage associated with growth in operating revenue.

So, it's partially offset by higher spending to support our growth and our transition to becoming a digital enterprise warehouse.

Operating cash flow during the quarter was $2 $5 billion.

Or one seven times net income.

Turning.

Balance sheet.

We ended the third quarter with a debt to capital ratio of 38, 9%.

Approximately 100 basis points from the 39, 9% as of the end of the second quarter.

The decrease was driven by growth in shareholders' equity.

So our best associated with our earnings in the quarter and a reduction in commercial paper outstanding.

We continue to maintain a prudent posture with respect to reserves given the ongoing uncertainty associated with the COVID-19 pandemic.

And lengthening and cycle times.

We have seen since the pandemic began.

We ended the third quarter with 46.8 days in claims payable a decrease of 1.3 days compared to the second quarter and an increase of five seven days as compared to the prior year.

Sure.

The timing of our acquisition of Mmm inflated days in claims payable in the second quarter and drove the sequential change.

Excluding timing related impacts associated with the acquisition our days in claims payable would've increased by two.

Here of course sequentially.

Given strong performance year to date, we are raising our guidance for full year adjusted earnings per share to greater than $25.85 from greater than $25 50.

Putting us at the high end of our long term annual adjusted earnings.

Des your growth targets of 12% to 15%.

Please note that this guidance continues to reflect the total COVID-19 and non COVID-19 costs combined exceeding baseline in every month of the fourth quarter.

And assumes a similar overall net headwind from Covid for the year.

Per share relative to our prior guidance.

Given significant outperformance in the third quarter on our investment income line.

We have increased our full year outlook for investment income by $100 million to approximately $1.2 billion.

<unk> $260 million above our initial outlook of $940 million.

Much of the outperformance in this area stems from stellar results in our alternative investment portfolio year to date that.

That we would not expect to recur.

Accordingly, we.

Which is that there is at least $200 million of nonrecurring upside in the investment income line it should be removed.

When assessing the appropriate base for earnings growth for 2022.

Equating to approximately 65 cents of earnings per share in 2020.

Believe it.

And implying a baseline for growth entering 2022 of $25 in 'twenty.

Most importantly, our businesses are performing well with strong growth momentum that we expect will carry into 2022.

Although we will not provide specific guidance for next year on this call.

I would now like to shift focus to the tailwind and headwinds that we are considering into next year.

Starting with the tailwind.

Recall that our 2021 guidance.

<unk> continues to embed a significant net headwind related to the effects of COVID-19.

While it is too early to declare how much of the overall net headwind, we will be able to earn back in 2022, we.

We do believe that we will recover a portion of it.

Solving and a year over.

A year tailwind.

Based on our strong competitive positioning we.

We expect another year of double digit membership growth in our individual Medicare advantage membership.

We also expect strong growth in our commercial membership aided by what is shaping up to be the.

August National account selling season in the history of the company.

We expect accretion from the annualized nation of earnings of our acquisitions of Mmm and my Nexis.

And.

We expect an EPS lift from our share repurchase program.

Which was opportunistic during recent periods of volatility in our stock price.

Our tail winds will be weighed against known headwinds and these include.

The dilution associated with the first year of operations of our New group Medicare advantage contract.

Serving New York city's retirees.

Which we continue to expect will launch on January one.

As well as dilution related to the start up and launch of our new Medicaid contract in Ohio, which we expect to begin on July one 2022.

In addition.

<unk> the resumption of Medicaid eligibility re determinations.

Assuming a return to a more normal operating environment.

And finally dinar.

The non recurrence of the upside in the investment income line. This year that I had described earlier.

Based on what we know today we.

We believe our tailwind will largely offset our headwinds, enabling us to reaffirm our commitment to growth and adjusted earnings per share of at least 12% in 2022.

After adjusting for the portion of investment income that we have identified.

<unk> is nonrecurring.

We look forward to providing more specific guidance on our fourth quarter earnings call. When we will discuss our 2022 outlook in more detail.

In closing.

We continue to execute against our strategic growth.

Priorities and are pleased to have delivered another quarter of strong growth and continued reinvestment in our business.

All while maintaining a solid balance sheet, given the ongoing uncertainties associated with the pandemic.

And with that operator.

Please open the line to questions.

Ladies and gentlemen.

Wish to ask a question. Please press Star then one on your telephone keypad, you'll hear a prompt that you have been Q you may withdraw your question at any time by pressing Star then two if you are using a speakerphone. Please pick up the handset before pressing the numbers once again, we ask.

That each participant limit themselves to a single question to allow ample time to respond to each participant that may wish to participate in this portion of the call for our first question will go to the line of a J Rice with credit Suisse. Please go ahead.

Thanks, Hi, everybody.

I appreciate the headwinds and tailwind for next year that you're offering I guess.

If you look at those items that you've delineated.

A lot of them look like they're pretty well set at this point.

What would be the ones, where there's the greatest potential variability.

I'm, assuming the COVID-19.

Related.

How much of that you get back next year is probably one but can you comment on that.

What's the greatest variability among those items.

Hi, good morning, a J and thank you for the question.

Associated with the headwinds and tailwind of course, we do want to look at them in their entirety, but as you think about the potential variability co.

Covid has the absolute most uncertainty of any.

Where theres something on there I mean, its been a incredible situation that we've been through as a country since March of 2020.

And Covid continues to have uncertainty associated with it.

The New York grew.

Our group retiree business are still going through their enrollment process. So we don't have the absolute exam.

<unk> number of lives lined up at this point in time and so there. There's some variability there but you are correct. We do have some pretty good line of sight on most of the rest of them, but COVID-19 is clearly the lion's share of the uncertainty at this point.

Yeah, a J I'd add to John's response, that's one of the things that we do feel.

Very good about the underlying strength in the core of our all of our benefits businesses.

Our growth has been strong and I think we've been performing very well in line with the expectations we set.

So next question. Please thanks for the question.

Next we'll go to the line of Justin Lake from Wolfe Research. Please go ahead.

Thanks, Good morning, just wanted to clarify something than a question.

The clarification is just wanted to make sure. John you were talking about 12% growth and you talked about that off of $25. When he said jump off point.

So that that's number one and then just the question is on <unk>.

Boyfriend looked like the government margins were materially stronger than commercial in the quarter.

<unk> you gave the overall heartburn commentary, but was hoping you could give us some trend.

Breakdown between commercial Medicaid and Medicare.

Outperformed in the quarter versus that you know.

Slightly above normal.

<unk> overall.

Overall.

You know discussion yet okay.

Yes, Thanks, Justin I appreciate the questions.

In terms of the jump off point for 2022, you are correct.

We've quantified our investment income outperformance for the year, we believe that there's at least.

$2 million, that's unlikely to recur.

And so that $200 million equates to approximately 65 of earnings per share and you take that off of our our updated guidance and we believe the appropriate jump off point for 2022 growth.

Is $25.20 so I appreciate.

The opportunity to clarify that.

Associated with the various lines of business.

The Oh, the commercial profitability you know, there's still very very good. However, commercial had the surge of Covid in August and September was really more significantly pronounced.

Just to understand the commercial line of business than it was in the other two lines of business.

We took the opportunity to reserve prudently.

Within the commercial line for that Spike and and to build commercial reserves as a result of what we're seeing at that point in time. Unfortunately, non COVID-19 came in much lower in September across.

<unk> business.

[noise] allowed our quarter to come out and a really really good place.

Medicare was very much consistent with expectations are Medicaid was actually a little bit better than expectations.

For the quarter and then just as a reminder, you know we had guided to be.

Above baseline cost for Covid and non Covid combined for each of the three months in the third quarter and we were we were just ended up being better than our expectations. So.

The commercial issue was really had to do with the Spike in August associated with Covid. Thank you for the question next.

Next question please.

All right next we'll go to the line of Lance Wilkes from Bernstein. Please go ahead.

Yeah, Thanks, a lot.

Could you talk a little bit about the strategy and vision for <unk>.

Diversified and in Jennie O with with people moving into that rule and maybe as part of that talking a little bit about the pipeline of opportunities in the diversified.

When you book as well as.

And government services.

They're blues thanks.

Thanks for the a multitude of questions I'll ask Pete in his new role two tiers pineland. Thanks.

Thanks, a lot it's not really appreciate it all I think I'll touch on the growth associated with engineer first and then and then referenced diversified.

And then just group and I do want to thank al and the team for putting in this position I do think I'm in a unique position.

Having run government and commercial to have a perspective on this and I think working collectively as an enterprise, we can do very well and penetrating the anthem portfolio to a much greater degree, but as it relates to your question on Jennie O and growth in Jennie O.

We work.

My business closely with the commercial business and as we've talked about before the greatest opportunity for US is penetrating the self funded business I'd say that.

Activity for US has really picked up this.

This year relative to last year, we're seeing really nice success lands down market.

On the smaller side of the business and in the middle market.

Definitely.

Seeing more activity there and we're also seeing a lot more wins from that perspective, and as we've talked about that's really a sweet spot from a financial and profitability perspective, whereas so it's a really good position for us to be in on the larger end of the market with some of the jumbo accounts. We are also seeing activity pick up as it relates to pharmacy.

But it is it is a COO.

Very good space and we see the power of incumbency I'm being a little more significant than a factor there so heading into 2022 as it relates to in Jennie O.

We feel really good about our growth trajectory and our performance in net membership growth will be improved relative to what we've seen in 2021 as it relates to the diversified.

Business group, and and our strategies and I'll also talk strategically about engineered.

I'm really excited about where we are I mean, if you think about where the puck is going in health care and you think about the significance of specialty pharmacy, you heard for Gale talked earlier about virtual and the opportunities for virtual even in pharmacy, there's tremendous.

Competitor entity for that business to continue to grow we're at the beginning of the evolution of I think that pharmacy business and Theres, a great opportunity there for us to penetrate the anthem business and then as it relates to the D. B G portfolio. If you think about the verticals that we talked about at Investor day, and the opportunity there are tremendous.

Opportunity. So you think about behavioral health.

And the opportunities there with beacon as a leading asset in the space and we think there's tremendous opportunity to grow that business and diversify that business. When you think about site of care and redirection. It becomes hugely important as it relates to the commercial business and cost of care and you think about assets like aim and my Nexis, our recent transaction, where we're seeing tremendous.

Tremendous asked.

And then you think about managing the chronically ill and and the great assets, we have there around care more and aspire.

I'd say this land that that my and I've only been on the job for about a week and a half so I don't want to be too presumptuous here, but the opportunity to penetrate anthem is very significant across our entire portfolio of Medicare.

Medicaid and commercial but I also think theres tremendous external opportunities. So I look forward to leading this and working with my colleagues Felicia and Morgan on growing the business together.

Pete Thanks for the question Lance I think come up what Pete has shared this really as part of our ongoing an ongoing journey and evolution and anthem.

We shared with you at our Investor day, and it really is part of our transformation from a health benefits company to truly a trusted lifetime partner in house, and we see significant opportunities and I think the show sort of the maturing of the strategy. We shared so thanks for the question and next question. Please.

Next we'll go to the line of Matthew Borsch from BMO capital markets.

Anthem go ahead.

Thank you.

Hoping you could comment on the aftermath of <unk>.

The blues.

Particularly as it relates to how you see competition among the balloons in Europe more with that.

Changing.

Please maybe maybe intensifying as we go into next year and after.

Yeah, Matt. Thanks for the question you know we are still in the midst of that litigation and the settlement is ongoing so I won't comment I think its inappropriate to comment at this time, but you know given the tone of your question I think it's really.

Important and we've had a long history quite frankly of partnering with Blues. In addition to working with them on accounts that are in our service area as part of the seeding process and so we expect that to continue expect obviously to offer the capabilities that we have pizza shared with you what we're doing within Genie O Rx.

I think our diversified business capabilities are going to be incredibly important in some of our digital platform capabilities that we've also offered to other blues. So I can't really comment on where we are in terms of that litigation because it's not finally settled yet, but we feel that there's a significant amount of opportunities for us.

We all outside of the settlement to work with Blue partners across the country.

Thanks for question and next question. Please.

Next we'll go to the line of Ralph Giacobbe from Citi. Please go ahead.

Great. Thanks, good morning.

I guess just wanted to go to membership.

ASO and you cited some of the economic backdrop, but you.

Commercial risk was up nicely sequentially. So is there some shift between the two or maybe just any thoughts around those dynamics and then I wanted to ask specifically around individual enrollment as well pretty nicely sequentially and John to your comments around higher COVID-19 costs.

Was there any disproportionate pressure on the exchanges.

Typically that sort of weighed on margins in the segment and then just hoping you could talk about your positioning on the exchanges for 2022 and expectations for growth. There. Thanks, Ralph Thanks for the question I'm going to ask Morgan Kendrick, who is leading our commercial business is also there've been intimately involved in these to respond to your questions.

Please Morgan Thanks, Joe and Ralph Thanks for the question.

There was a lot there and when you talk about your comments about the reductions in the large group business. That's certainly in line with our expectations. We were expecting a reduction of our fee based business. We've had as you indicated noted nice growth on the risk based business across the segments individually.

As you've noted has benefited from our long extending special enrollment period. So we've seen month over month growth. There also when you look at our large group small group business, we've seen month over month over month growth in sales exceeding lapses and notably our large group business has performed quite well in fact 23 of the last 25 quarters, our sales have exceeded lapses.

Looking forward into the new year, clearly, it's a competitive geography in a competitive market. When you look at individual at HCA.

It's one of those that I would characterize it as rational nonetheless.

Nonetheless.

And one that we've been on.

Not inconsistent with our strategies in the past we take a very disciplined approach we look at this market by market County by County.

In fact, as we expand next year for 2022, we're going to be an 83% of the counties that we can serve that's up from 71% from the prior year and this is most notably done by leveraging our unique provider partnerships leveraging the scale and density we have in our geographies to provide value for the market.

Again, the strategy is not a short sighted one and we're top of the pricing is appropriate.

And it.

Our modeling forward trends.

So thank you again for the question yeah.

And one last thing Ralph you asked the question about anything distinctive about the individual relative to Covid and I would say no I mean, our individual businesses performed in line.

Across the board, we saw as John shared.

Propraetor Covid spikes in commercial but individual is not unique or to think that we feel that were appropriately positioned in that market.

Next question please.

Next we'll go to the line of Lisa Gill from Jpmorgan. Please go ahead.

Thanks, very much and good morning, I just wanted to go back out to your thoughts on the virtual primary care offering so.

Hi can you talk about how that product will be priced and then secondly is there going to be in all 14 of your markets or would this be more of a limited type of offering initially and then lastly, as I think about virtual primary care, how do we think about the cost trends there and the potential savings.

When you think about those types of types of products.

Thanks for the question Lisa I think it's actually a really important one as we think about the next generation of where products are going to go now one of the things Thats happened is the pandemic has really highlighted the need for these virtual care services.

We shared with you quite some time ago, our JV with hydrogen health and we've been in the market actually working closely.

They want with our partners to deliver those services, particularly best in class urgent care primary care using chat and text and what we're talking about now is I'll call. It. The next generation of virtual primary care, we've gotten some experience in our early entre.

With virtual care over the last year and now we're continuing to evolve that.

Closely launch as I shared in my remarks. This virtual first services I think what's interesting and unique about this is they're integrated with our high performance networks and that's really important.

And we're seeing a lot of traction in our high performance network and I know we've shared previously our high performance network has anywhere from 12 to 15.

So we didnt cost structure differential and if you think about virtual primary care added to that we expect those to sort of be the starting point of what we can gain traction on so I'm really encouraged by this initial launch we were going to continue to.

I think innovate and evolve from that.

In terms of where we're doing it.

We are working in our Blue States.

We're in most of our markets right now we have offerings not in every county, but we're going to continue to expand that as we certainly learned about it look at the alignment a lot of this does as I said rely on our high performing networks and our ability to use both virtual care as well as our.

High performing networks and just to give you a sense of what it is I mean, we're looking at.

The offering to cover virtual visits with a zero co pay simplified plan design.

Four by seven service to leverage the network value based contracts are at the core of the two.

To drive that cost structure differential and again, we would expect at least 15.

Percent below traditional products, but again, that's a starting point, we're going to gain experience with this.

And theres been a lot of interest we have seen a significant amount of interest we offered a first in our fully insured risk based business and now our national fee accounts.

Interested in embedding them in their offerings and as you heard I think from.

Opening comments and then what Morgan said, we've had one of our strongest ever national account selling seasons, and again I I do credit the innovation, we're bringing around digital to the success, we're having there and just a fundamentally strong differentiated cost structure really driven by high performance networks. So thanks for the question. We are we're excited.

My optimistic about how we think that this can drive future trend and future opportunities for our clients. So again more to come on this but you'll be hearing a lot more about it in the coming months as we gain more traction with our employers.

For the question next question please.

Next we'll go to the line of Gary Taylor from Cowen. Please go ahead.

Hi, Good morning can you hear me.

We can't thank you okay sorry.

As I was thinking about 222022 I wanted to ask about something I thought would be a tailwind and something I thought would be a.

Headwind, but you didn't mention so just some color would be helpful.

We're thinking that the special enrollment period.

On exchanges.

If that were to eventually go away would potentially be a tailwind for that business, but you use.

You said you are performing in line there. So maybe maybe you don't see that as a material tailwind and then on the Medicaid side of the house.

You mentioned Redetermination says.

A headwind, but we certainly note for you in across the board.

That seems to be a population that's not just vaccine hesitant, but utilization hesitant in the MLR is look really.

Really strong there so I was thinking there could be headwind not just on redetermination, but on.

<unk> margin as well so just wanted some color on those two things.

Oh, yes sure Gary. Thank you for the question. So if I can address these appropriately you know with the special enrollment period in the exchanges.

We have talked about the fact that exchanges are a.

A nice strategy of ours, we're being very very.

And in terms of our approach.

Going from having a I think just a little bit over 70% of our counties covered just over 80% of our counties covered next year and we do expect some nice membership growth associated with the individual but yeah I would say that is all captured in just our core.

Prude underlying.

Growth in the fundamentals of the business performing extremely well, we expect all of our businesses to grow and individuals' is no different.

Alright in terms of the Medicaid and the Redetermination.

You know the.

The headwind that we referenced really has.

To do with Medicaid membership, but yeah. This is my opportunity to do again and talk about the balance and resilience of our membership in our catchers Mitt and we may be able to turn that tablet into a tailwind depending on where those folks go we do believe that once readers or terminations start.

That we will be able to maintain the.

A significant amount of that membership within an anthem product we offer a product for every American and every situation young old rich poor sick healthy we have a product for all of them right now there's a significant number of our members within.

Paid plans and after Redetermination occurs Medicaid may shrink a little bit but that means that there's really some significant growth opportunities in other lines of business. So you know I didn't spike it out specifically because we think it's a it's a driver and we could actually turn a headwind into a tailwind. So thank you for the question.

Our medic next question please.

Next we'll go to the line of Stephen Baxter from Wells Fargo. Please go ahead.

Yeah, Hi, Thanks, you touched on this a little bit, but I was hoping you could expand on the national account I'll look for next year.

Love to hear more about what you think is driving that growth and what youre seeing in terms of competitive dynamics in that market and then just to clarify was.

Monetary influenced at all by what insight you're getting from your clients and grew up expectations or is that purely a comment about the new accounts there when it I'll ask Morgan to address that.

Yes, Steve. Thank you for the question and you know as Gail noted I mean, the national business continues to perform exceptionally well and you know also noted there.

Its bit.

Have a dampening in the RFP activity was down but when you think about it it was down in numbers of Rfps. It was up in membership and anthem had a exceptionally successful year upmarket.

You did quite well I think one of the other things that was notably observed is we had a record number of customers that went out for.

That went from a multi partner health care solution to a single partner health care solution in selected anthem it to get directly to your question to me.

We have to earn the right to win every day and I think when you look at our assets and how they're resonating in the market you look at the <unk> the.

The advocacy based whole health digital solutions are winning.

When you think about Sidney Gale mentioned earlier that we'd have 50 customers.

Sydney preferred which is theoretically our digital front door or we could call. It our gateway to help it's the entry point for all the other assets that we deliver also when we think about 'twenty three I mean these assets continue to be innovated upon and like I said.

It's incumbent upon us to.

This right to win we don't take it lightly but the market is as loudly voting with their with their feet and so we're excited about where we're headed in 'twenty three.

Thank you next question please.

Next we'll go to the line of Rob Cottrell from Cleveland Research. Please go ahead.

Hi, Good morning wanted to ask about you mentioned behavioral briefly curious because provide a little bit more comment on.

And cross selling efforts and how that.

Going across both government and commercial businesses.

Great. Thank you I'll I'll offer a quick comment and then I'll ask Pete to comment on that because it fits within our diverse.

Diversified business group, but overall.

Know that theres been significant need for behavioral health and what I wanted to just touch on briefly is the tie that Morgan said to full health and we Beacon has always been a very strong player in the Medicaid space and we're continuing to integrate it into our overall government business, but it's got a big upside.

<unk> in the commercial space, So maybe Pete.

Early commentary from what you are saying no I appreciate Ralph.

Just to remind everybody be conserves about 40 44 million members 13 million of which is anthem.

Our services are very broad and as I said beacons and industry, leading assets been a leader in the Bay area warehouse space.

For a long time.

As it relates to some of the services from mild moderate to acute mental health treatment or family support crisis prevention opioid abuse semi EAP programs, it's a broad portfolio, which really will serve I think anthem anthem really well the other thing I'll say and this was you know.

Very important to us and really worked out from a strategic perspective, but the pandemic, obviously I'm really accentuated the need for behavioral health, what we experienced three times more people reporting symptoms of anxiety and depression in this period, two five times more people reporting suicidal ideation and you know with.

Oh <unk>.

Abuse.

A very significant increase.

So that that plays really well across our portfolio. We obviously have a broad portfolio across Medicare Medicaid and commercial the integration process is going really well between the parties. We actually you know as it relates to.

Penetrating the anthem business have embraced a lot of the clinical programs and expertise.

Beacon as we integrate we also in my old life on the commercial side worked on new product offerings.

A product called behavioral health advantage with being which is being deployed in 2022.

And then and then obviously as it relates.

Two our government program business, working very closely with Felicia and and the government team and the Medicare team on a post acute care product and this is just the beginning I think they will continue to be tremendous opportunities around behavior to one of the areas that I am very focused on is also virtual and and the importance of virtual we seen an exponential increase.

And virtual services as it relates to beacon and penetrating our portfolio in that regard will become very important going forward I. Appreciate the question yeah. Thanks, Pete the only thing I guess I would add is as you think about the commercial market. The next generation of EAP services, an area that we're highly focused on and you've heard us share our strategy that sub segment market.

Within the commercial business. So we see it clearly in the employer space expansion students based in military services space, where we.

We see the demand and need for behavioral health services dramatically, increasing as a result of the pandemic.

Next question please.

Next we'll go to the line of Ricky Goldwasser from Morgan Stanley. Please.

Go ahead, yeah, hi, good morning.

On utilization John you talked about.

I'm very sorry.

Non COVID-19 utilization, how is it trending Cobra and if I recall last quarter, you said it.

The MLR guidance at the low end of the range.

I think in the end of year.

<unk>.

Of baseline.

Baseline so how are we trending there.

And then in line with that if we think about sort of 2022 your commercial pricing.

What what did you embed in your assumptions regarding a return off of or utilization.

Thank you for the question, Ricky and Oh, maybe I'll talk a little bit about the fourth quarter, and then turn it over to Morgan to talk a little bit more about 2022.

But in terms of the fourth quarter, our expectations and our guidance is that the COVID-19 and non COVID-19 combined will continue to be above baseline.

Each month in the fourth quarter. So obviously, the entirety of the fourth quarter being above baseline.

We are seeing very.

Very good trends as I stated, we had the spike in August it started to decline coming into September non covered utilization was lower in September than.

Effective.

October is a relatively close to our expectations at this point, but theres a lot of uncertainties in the fourth quarter. The Delta Varian is still out there and we want to be very respectful for it as well as any other new variants that may or may not exist and we are expecting an increase in testing and increase in AR.

We had explanations and booster shots.

With the kids.

Unclear right now exactly when the five year olds will be eligible.

Eligible for vaccination, but we want to make sure that we're cautious in terms of our guidance associated with that cost structure, as well and and as you probably I'm sure you already know the fourth.

Quarter.

Just on a normal basis has a higher seasonality in terms of MLR and so that's obviously factored in as well, but yeah I'd say at the end of the end of the day, we've been very cautious and very prudent in our fourth quarter expectations with a combination of COVID-19 and non COVID-19 combined being above baseline.

Backup John Thank you and Ricky Thanks for the question I would.

John covered most of it I think I would say looking next year its not indifferent we remain confident in the approach and our disciplined.

And consistent with what we've done quarter over quarter year over year with pricing to forward view of trend certainly that's always respectful of market uncertainty and as John indicated COVID-19 is going to be around for.

While we have done extensive work to assess various scenarios and how that could play out but nonetheless, we feel quite confident in the way we price for 'twenty two business. So thank you again for the question.

Thank you next question please.

Next we'll go to the line of Kevin Fischbeck from Bank of America. Please go ahead.

Great. Thanks.

Wanted to dig in a little bit into the.

[noise] Redetermination headwind that you mentioned is there any way for you to kind of size how much membership today, you think you have.

Due to Redetermination, so youre thinking about.

Net losses like how much you might pick up on the exchanges or in the commercial market and then how has it been.

Relates to Medicaid rates, how do you feel that Medicaid rates broadly, particularly.

Again, the big terminations come again.

<unk> what rates are appropriate given the risk pool. So.

Three aspects.

Okay.

Yes, sure Kevin I'll see if I can start out and respond to your questions, but you know in terms of the Redetermination, we're really taking a look at where we think these members are going to go.

And theres been a lot of other studies out there that we think are relatively credible.

We believe that by the end of next year and that assumes that redetermination to started to occur.

Maybe late early second quarter of 2022.

That.

We'll still have a good 35% of those folks will still be maintained on the Medicaid roles.

Yeah, we're looking.

At about 45% of them going back into employer sponsored plans and that would take the about 20% being eligible for subsidized coverage on exchanges.

As I stated we.

Have products in all of those things and we expect to.

Sorry to keep and maintain our fair share. So we feel very good about our opportunity and our ability.

To keep the membership within an assay and some family over the course of the next year and then as it relates to the Medicaid pricing.

We learned a lot.

To go in terms of working with the states being very proactive and ensuring that we're having actuarially justified rates and we will certainly continue to do that.

It's very early in the rating season, but we're comfortable with what we're seeing to date in building our financial plan with prudent assumptions that we believe are well supported.

And the states are.

Very.

Yeah.

So we're having some very productive conversations with the states as well about ensuring that we get actuarially justified rates throughout the future yeah. The only other thing I'll say about the Medicaid as there are a lot of financial measures that are in place now that's far more of them.

Used to be in place in terms of collars corridors and things like that.

That Oh really.

Helped maintain the profitability and maintain the stability of that marketplace. So really need to look at Medicaid over a long period of time. Thank you Kevin.

Thanks for the question next question please.

Next we'll go to the line of.

David Windley from Jefferies. Please go ahead.

Hi, Thanks. Thanks for taking my question. My question is about kind of your strategic investment preference.

Gail you've emphasized that for anthem your preferences to partner.

Rather than own your your provider.

Works.

Im wondering if you could shine, maybe a brighter light on.

How your investments in behavioral and digital and some of the other areas that you've mentioned kind of accelerate your strategy and drive better return for anthem.

Then the possibility of of owning and controlling some.

<unk> network key providers, just I'm sure that those others are high return, but in what way are they.

France on thanks.

Thanks, Thanks for the question David a couple of things I think you've hit on many of the core drivers first and foremost as we've said because of the density that we have in our.

Yes, we believe that investing in partnerships makes the most sense because we believe we can drive.

Better membership better stars ratings and with one in eight patients being an anthem member the density of working with those providers provides us a good return and also remember we can participate in the profit.

Mark.

Stream, thereby embedding some of our dbg assets or other assets around and Jennie O. Our accident. So it's not that we're walking away from participating in those profit streams. We actually think we have a much more capitally efficient use by investing partnering and then pulling through the.

<unk> assets that we have invested in and so so that's the core of our strategy and it's worked really well and we're continuing to accelerate that strategy and as I shared.

We expect to have 70% in value based arrangements, 30% in full capitation arrangement, it's a big driver for our Medicare advantage business quite frankly, all of our benefits businesses are going to.

Have an opportunity there in terms of other areas that we're investing in you know we've said that we really want to transform ourselves and part of that transformation is building. This digital platform for health the opportunities are inside of anthem as well as with our Blue partners and we see again opportunities to commercialize that that's going to be over the.

The other eberle years, one of the reasons validated Rajiv or Nokia who has been leading this area.

Is to really explore those opportunities again, we've been doing that inside of anthem, but we think theres an opportunity with our partners to do more areas around Sydney for example, Sydney health, which is gaining great traction our health, though asked which we think.

Next a broader opportunity for the health ecosystem.

We've done quite a bit of investment in stars and heat as quality improvement AI and analytics digital therapeutics. So there's a there's a broad range of things around the digital capabilities and ecosystem, we're building, but in terms of the value again, we look at the most efficient.

To be able to deploy our capital where we have our strength, which is the density in the markets we serve.

And how it feels I think our strategy and then how we pull through in Jennie O D. B G and other services, which really are not those are still immature in the sense that we haven't pulled them through to the potential that they have an excited about.

Wait to ship there given his understanding of both commercial and the government business and the opportunities that exist, but thanks for the question again, we think it's a really strong future growth opportunity for us.

Next question please.

Next we'll go to the line of Steven Valiquette from Barclays. Please go ahead.

Great. Thanks.

Yeah.

So I have another question on the lower than expected non COVID-19 utilization for the third quarter I guess I was curious if you have any additional color by medical cost category, whether it's inpatient outpatient pharmacy et cetera.

I'm curious about is specifically whether any cost category had a more notable falloff versus.

<unk>.

When thinking about the sequential trend in <unk> versus the trends back in the June quarter.

Yeah. Thanks for your question Steve.

You know in terms of our of the specificity I would say that what we saw in September was.

Space impatient.

Non COVID-19 probably dropped the most of all of the different buckets that you stated.

Yeah, we don't view any of these things as being changing to the ultimate baseline. You know there were there were announcements that were made at the beginning of September that certain facilities. We're deferring.

Zhang or canceling some elective procedures in order to ensure that there's appropriate bed space.

So while certainly we saw the impact on the financials.

We do monitor pre asked research various other things and don't really view that.

That situation.

If you can change to the baseline going forward.

Thank you for the question.

Question. Please.

Next we'll go to the line of Scott Fidel from Stephens. Please go ahead.

Hi, Thanks, good morning.

Just wanted to ask about the additional group MA contracts that you called out that you've added in the fleet.

Hubert.

1022.

Any chance that you could maybe size the number of lives that youre expecting from those and then just on the group NYSE contract implementation I know, you're still working on membership and things like that but interested if you can maybe ring fence for Ross.

The dilution youre thinking about for.

We're going to against that.

<unk> percent EPS growth off of a baseline you talked about how.

That would be helpful as well thanks.

Oh go ahead, I was going to ask Felicia to to respond on your M&A question first and then we'll have John Thank you very much.

Good morning, and thank you for the question.

<unk> I'll say got that at the end of the day that the additional contracts at scale reference, we're certainly pleased with the opportunity to add those to our business for one 122.

They are not going to be material drivers up their own but what they do is that they represent the ability for.

US to continue to penetrate that pipeline that we have with our commercial customers.

Now our strategy has always been to be able to penetrate the inherent commercial pipeline that we have so that we're able to keep members blue for life and what we've done in terms of that third quarter is to have a very robust pipeline.

That gives us some very nice sized fruit certainly much smaller than anything you've seen around the city of New York or anything out, but they are not going to be material drivers and fit I would say very closely with what we consider the sweet spot when we look at the opportunities to grow it may going forward, we still consider this a very strategic asset for us and.

Being able to grow that business as we go forward.

Once again, we are very poised to deliver on the launch of the city of New York business for one 122 and are certainly pleased with the opportunity.

To be able to continue to support New York retiree, who have been customers for <unk>.

Empire for a long period of time.

This is another I would say affirmation of our strategy around what we're doing with respect to group MA business and Additionally, the pipeline for this business remains strong as we head into 2023 and with that I'll turn it over to John to talk about the dilution.

Thank you Alicia and Scott I. Appreciate the question. Unfortunately, this is the third quarter call I'm really not going to get into specificity associated with with guidance for 2022, I will talk in more detail about that and then the next quarter and as I said, you know the New York store going through.

Their enrollment process. So we don't have all of them.

All the information quite fine tune, but what I would ask you to do it.

Really evaluate the tailwind and headwinds that I provided in their entirety.

And then after you adjust for the outperformance in investment income.

But those headwinds and tail winds are pretty much offset.

Together and will allow us to achieve our 12% 15% growth for the future. Thank you.

Next question please.

Next we'll go to the line of George Hill from Deutsche Bank. Please go ahead.

Hey, good morning, guys and thanks for taking the question I guess this is probably going to be a 'twenty two question as well John but I was wondering if.

Said, he treme any numbers around the success in NGL given all the positive commentary I would just love any comments on how you guys are thinking about the opportunity with generic humira and Biosimilars in general.

Yeah, Thanks for that.

Thanks for that question, yes, as you referenced you know as it relates to.

If you could feel really pleased with the performance.

In large part the performance this year was due to.

Strong membership and volume across the entire portfolio. So all of our lines of business and utilization is also tracking to expectations. So we feel good about that heading into 2022 as well as the.

And you know what I talked about and our focus on on penetrating.

The ASO business so.

So we feel good about the engineered business heading into 2022 the growth and then the stability of the business in terms of its margin contribution.

Thank you next question please.

Next we'll go to the line of Joshua.

The growth from Nephron research. Please go ahead.

Alright, Thanks for squeezing me in here at the end.

How do you think about the no surprises act around sort of your strategy around network contracting and maybe potential changes in the balance of power between payers and providers in local markets and specific to anthem do you think sort of best.

Racemization biggest discounts is that helpful or harmful as you think about the future.

Well thanks for the question, Josh you know in terms of the overall our posture.

I've had a cost structure advantage unit cost structure advantage, but as you heard in my comments.

Given our market density we are moving heavily towards value.

Value based payment I mean that is at the core of our strategy. So that's an alignment of working with care providers in a much different way and again, we believe both the investments we're making in primary care the investments, we're making in downstream home care other things through our diversified business group in Jennie O. Our actually we have an opportunity to bring those assets.

Together uniquely and then leverage the density originally in our commercial business, but now our Medicaid business and our.

Medicare advantage business. So we feel we've made really good strides on that and we actually see a better alignment with care providers than we've ever had in the past. So I felt quite frankly, I'm optimistic about where we're heading and I think.

That's that really is the core of our strategy.

For the question and next question please.

Next we'll go to the line of Whit Mayo from SBB Leerink. Your line is open.

Hey, Thanks last year, you guys in the industry waived a lot of co insurance requirements and just remind.

Remind me what Youre doing now or are you are we back to 2019 Copay Coinsurance member requirements are we still waiting on MAA for primary care I guess really the question here is thinking through 2022, and any headwinds or tailwind as we think about any changes and member cost sharing.

Thanks.

Thanks, Thank you for the question Whit.

Certainly during the heart of the pandemic, where non COVID-19 utilization dropped significantly and we also want it to be you know a very thoughtful participant in what was happening a we did a number of waiving of co shares this unit with par.

Part of our response across all of our businesses.

As we headed into 2021.

Those are normal I'll call. It normal course came back into play mostly because non COVID-19 utilization returned back to normal levels in many instances.

In total and there wasn't significant drops so from that.

[noise] perspective, where following the policies that we have across the board right now and heading into 2022.

Thanks for the question next question.

And our final question will go to the line of Frank Morgan from RBC Capital markets. Please go ahead.

Yeah.

Good morning.

A lot.

A lot of discussions about labor with providers and I'm. Just curious are you starting to have discussions when.

When you start to negotiate with providers about their wage inflation and what they're seeing.

And what is your sense of that and then secondly, just any early initial insights into what might be rest of the day, so far in the annual enrollment period.

Thanks, Yeah. Thanks for the question the first one around the labor market clearly across all labor markets. You know people are seeing pressure on the ability to get.

Employment levels up to where they need to and then there is some pressure in terms of our negotiated contracts.

You know I, we do those over three year cycle and.

We're also very focused again on value based payments. So I think the big opportunity is to move away from individual unit cost increases, which has been the historical I guess trend in the industry to really bundling value based payment paying for episodes in procedures, and that's really where we've been so at this stage what I'd say is look we're always in a dynamic.

Environments are in terms of our negotiation, but we feel we've factored that into how we're looking at the forward view of everything that's going on and.

We just see the biggest opportunity is not just only managing unit cost, but really managing value in part of the value based payments because there's a much better alignment of taking doing the right.

Services at the right time and that that's our view, but in terms of our four review again, we're taking into consideration everything and again you know many of our largest contracts around a three year basis. So not all of them. Obviously are in play right now.

Thanks for the question I'm going to ask Felicia to talk a little bit about our annual enrollment period, which I think was your second.

Dynamic yeah. So good morning, Frank and thank you for the question you know as you know we're in the early days.

The annual enrollment period, and you know, we're actually very pleased with what we've seen so far with respect to how we are positioned competitively in terms of our benefits and the plans that we're offering and feel that we'll be able to produce another.

Other year of double digit growth in our individual Medicare products.

I'll say, we're especially pleased with our supplemental benefits and our over the counter offering. These are the things we call are essential for everyday extras, we give members an opportunity to choose from a portfolio of benefits that allows them to address their needs, particularly.

Clearly the social drivers of health.

The other thing I'll say is that we are also pleased with how we are position with respect to our D. SNP product, where we have a very strong value proposition, considering our deep knowledge and experience between Medicare and Medicaid and being able to serve chronic and complex population.

So when we think about where we are today, a little bit less than five days and we feel good about our positioning and look forward to having a very successful AEP.

Thank you Felicia and thank you again for your interest in anthem as we close the call I want to recognize our associates.

This continues to be a challenging year.

Each day, they step up and they step out to live our mission and values and serve our members and communities with care and compassion.

I'm impressed and grateful for what they do all the time, we work hard to create a culture at anthem, where everyone feels valued and their contributions make a difference so I'm, particularly proud to see us recently named amongst America's hundred.

Great places to work in it.

This 100 workplaces.

I'll leave you with this.

There's increasing opportunity for anthem to offer elevated personalized experiences as we holistically address what our society needs to be and stay healthy.

We're building for tomorrow and beyond evolving the business to be.

More digital moving fast thinking differently and operating with discipline personally I'm extremely optimistic for our future. Thank you.

Ladies and gentlemen, a recording of this conference will be available for replay after 11 am today through November 19, 2021, you may access the replay.

System at anytime by dialing 895.

7761, and international participants can dial 2033693.

3954 again those numbers are 800 <unk>.

94 five.

776, one and international participants.

<unk> dialed to 033693.

395, four this concludes our conference for today. Thank you for your participation and for using Verizon conferencing you may now disconnect.

Okay.

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to anthem third.

Earnings Conference call at this time, all participants are in a listen only mode. Later, we will conduct a question and answer session, where participants are encouraged to present a single question.

If you wish to ask a question. Please press Star then one on your telephone keypad, you'll hear a prompt that you have in queue. You may withdraw your question at any time by pressing Star then two.

These instructions.

<unk> will be repeated prior to the question and answer portion of this call.

As a reminder, today's conference is being recorded I would now like to turn the conference over to the company's management. Please go ahead.

Good morning, and welcome to anthems third quarter 2021 earnings call. This is Steve <unk>, Vice President of Investor Relations and with US. This.

On the earnings call are Gail Boudreaux, President and CEO, John Gallina, our CFO, Peter Hi, Italian President of our diversified business group and a junior Rx Morgan Kendrick President of our commercial and specialty business Division and Felicia Norwood President of our government business Division Gail.

Gail will begin the call.

<unk> with a brief discussion of the quarter recent progress against our strategic initiatives and closed on the <unk> commitment to its mission.

John will then discuss our financial results and outlook in greater detail.

After our prepared remarks, the team will be available for Q&A.

During the call we will reference certain non-GAAP measures reconciliations of these non.

GAAP measures to the most directly comparable GAAP measures are available on our website anthem, Inc. Dot com.

Also be making some forward looking statements on this call listeners are cautioned that these statements are subject to certain risks and uncertainties many of which are difficult to predict and generally beyond the control of anthem.

These risks and uncertainties can cause actual.

And results to differ materially from our current expectations, we advise listeners to carefully review the risk factors discussed in today's press release and in our quarterly filings with the SEC.

I'll now turn the call over to Gail.

Thanks, Steve and good morning, everyone. We're pleased to talk with you about another strong quarter.

This.

This morning, we reported third quarter GAAP earnings per share of $6 13.

And adjusted earnings per share of $6 79.

Ahead of expectation despite another surge in COVID-19 that created challenges throughout the country.

Once again anthem.

Actual used to deliver on stakeholder commitment.

Celebrate growth in every core benefits business.

Considerable progress towards our long term strategy to transform from a health benefits company to a lifetime trusted partner in health.

Addressing the whole person.

Container vessel to becoming a trusted lifetime partner in health.

Responding to the pandemic has allowed us to instill new agility and innovation into the business.

Particularly around solutions for physical health pharmacy, behavioral and social needs.

With an emphasis on mature.

This is Phil.

Access to nutritious foods and <unk>.

Health disparities.

Ultimately.

We believe we're only as healthy as the communities we live in and.

And recognize our important role in ensuring everyone has an opportunity to be.

Journal and stay healthy.

As the health care paradigm shifts.

We're accelerating work to simplify members and clients everyday experiences.

And meet their evolving needs to a personalized experience.

Moreover, there is abundant.

Entity to modernize further.

And reinforced our position.

Leveraging our technology predictive analytics.

And innovative products and services.

To bring an enhanced experience.

Only anthem can offer.

We expect whole person health care.

<unk> digital technologies.

To help us achieve our goal of driving commercial medical cost trend down towards the rate of CPI by 2025.

Currently we're exploring more ways to drive differentiated value across medical and pharmacy.

Our.

Our insights driven approach is fueling new programs that drive better cost and quality outcomes for our members, including in the areas of behavioral health and autoimmune disease.

Additionally.

We recently launched a new offering to test the full suite of our capabilities in the form of a virtual primary.

Powered their first product, which we expect to demonstrate meaningful reduction in overall cost of care.

And greater member satisfaction.

We are already selling virtual first risk based commercial plans in certain markets across each of anthem 14 Blue states for the 2000.

<unk> plan year.

Featuring simplified plan designs <unk>.

Four by seven service and leveraging our high performing networks that enable affordable price point.

We've also seen strong interest in these capabilities from our fee based clients.

And we will be embedding virtual primary.

'twenty with several large fee based client throughout 2022.

At the same time.

Innovative product offerings like Sydney preferred which allows employers to customize a digital first health care experience for their employees.

Gaining considerable momentum.

We care a date more than 50 national accounts have signed up for Sydney preferred representing nearly 900000 commercial members.

To help accelerate our digital platform.

Elevated rajeev for Nokia to president of digital platform.

Rajiv will drive the commercialization.

To digital capabilities for consumers and care providers as we re imagine the health ecosystem.

Now I'll share notable third quarter highlights and business driving initiatives for the balance of fiscal 2021.

Starting with our Medicaid business, which is performing.

Of our well.

Our healthy Blue plan in partnership with Blue Cross Blue Shield of North Carolina.

<unk> has quickly become the largest Medicaid managed care plan by membership in North Carolina.

The leading choice for consumers.

Its success.

Coupled with the ongoing suspension.

Of eligibility redetermination.

Drove anthem total Medicaid membership above 10 million at quarter end exceeding our internal expectations.

Our commitment to members and their communities has never been stronger and.

And we continue to develop innovative solutions.

To meet their unique holistic health needs.

As a result are focused on reducing health disparities in in equities remains vital to the value anthem offers de partners.

This is reflected in our momentum.

Along with our 100% RFP win rate.

Year to date.

Looking further ahead anthem will launch another new statewide Medicaid managed care contract in Ohio in the summer of 2022.

After earning the city of New York Group Medicare advantage contract last quarter.

We added several new group Ma.

Customers in the third quarter for January one 2022 start dates.

And have a growing pipeline of new prospects.

As part of our strategy to deepen our Medicare advantage market penetration.

We remain focused on converting commercial age outs to M a relationship.

Preparing for a flawless January launch of our group Medicare advantage plan for New York city's retirees.

Customized solutions at scale underpin our approach to individual Medicare advantage benefits for 2022.

Many of our MA plans will allow customers to choose.

What's best for them from a menu of innovative whole health benefits.

For example in some areas. The program will include a kroger grocery cart Jana.

Generous over the counter benefits.

And up to 60 hours of in home support to assist with light housekeeping.

Erin and companionship.

We expect these and other benefit enhancements to help drive another year of double digit growth in our individual Medicare advantage membership next year.

Medicare Star ratings continue to be a focused area across the anthem.

And the ratings.

<unk> released two weeks ago show, we've made solid progress.

We're particularly proud.

<unk> received a five star rating for the fifth consecutive year.

The only Medicare advantage health plan in Florida to accomplish such an achievement.

So the 2023 payment.

Are we.

We anticipate approximately 73% of members implants that CMS rated as four plus stars.

Up from 58% on a comparable basis a year ago.

That figure will move even higher with the city of New York's group Medicare advantage contract launch.

At year on year.

At the same time investments in provider partnerships are accelerating anthems evolution toward high quality value based care.

This is necessary to drive improved outcomes and cost of care across all of our benefits businesses.

Next critical in Medicare advantage, where it impacts reimbursement through star ratings.

This year more than 60% of our Medicare advantage spending will be in risk sharing arrangements.

Based on our current contract, we expect that to increase to more than 70.

And is 2022.

With approximately 30% of Medicare advantage spending and fully capitate risk arrangements.

Investments in our primary care partnerships.

In particular will support members and drive growth through the expansion of value based care.

Leading to.

Sent an even larger proportion of our members in four plus star contracts over time.

We recognize there's still more work to do.

And we will continue our efforts to raise customer satisfaction by aligning incentives with care providers to improve quality and medication adherence.

And EBIT simultaneously enhancing our member experience.

Accelerating our use of data and analytics and leveraging and Genie Rx as a pharmacy benefit manager.

Lastly, a few highlights of the strong growth, we see in our commercial business.

We're nearing the end of the most robust.

While accounts selling season and anthem history.

Volume of Rfps was down but average size was up considerably and we want a disproportionate share of new business and expanded surfaces with our existing clients.

In Jennie O Rx is also showing.

<unk> growth with a more than five fold increase in new sales at this point in the selling season.

Compared to the relatively depressed base a year ago, when the pandemic weighed heavily unemployed your decision making.

The consistent theme across all of our businesses is that each.

<unk> extend used to produce strong organic growth.

This drove medical enrollment to more than 45 million U S consumers.

Strengthening anthems position as the largest health insurer in America by membership.

I am pleased with the progress, we're making towards delivering our strategy.

I want to share two recent leadership changes to accelerate our efforts.

P&I tie and will lead our diversified business group and in Jennie O Rx.

Both of which are critical components of our growth strategy.

Pete has an impressive track record of growth and innovation and.

And as <unk>.

This role leading anthems commercial and government businesses.

With pizza transition, we're confident our commercial and specialty business Division will maintain its strong momentum under the leadership of Morgan Kendrick.

Who's driven market, leading growth across critical lines of our commercial.

Premium.

Including National accounts.

Most recently as president of anthem commercial west market, our largest region.

The breadth and depth of our collective leadership ensures we stand ready to deliver on our promises to stakeholders across all areas of.

Our business and.

And we will guide anthem to long term sustainable growth.

It's a privilege to work alongside such a strong group of leaders committed to advancing our purpose and mission.

In summary.

Our actions and the focus and discipline, we brought to the business.

<unk> busy anthem for the next several years of growth.

Our strategy to extend our role from a partner in health benefits.

So our lifetime trusted partner in health is resonating in the marketplace.

Evidenced by our growth.

Our response to Covid brings a new level.

Physician agility and speed to the business.

Along with more opportunities to reach consumers and care providers than ever before.

And we continue to simplify and personalize our member relationships with relevant benefits and enhanced innovative experiences where and when.

When they want.

With that I'll turn the call over to John to discuss our financial results in more detail.

Thank you Gail and good morning to everyone on the line.

As Gale mentioned earlier, we reported third quarter adjusted earnings per share of $6.

79 cents, an increase of approximately 62% year over year, driven by strong growth across all of our businesses.

This growth was a result of focused execution against our strategic priorities.

Fight a challenging backdrop created.

Another surge in Covid.

Our third quarter results once again demonstrate the balance and resilience of our core benefit businesses.

And the strong growth momentum, we are producing across the board.

We ended the quarter with 45.

$5 1 million members growth of 2.4 million lives year over year or five 7%.

Including growth of 730000 during the quarter.

Led by the successful launch of our healthy Blue Medicaid plan in North Carolina.

In addition to the 426000 members gained in that state.

We produced incremental organic growth of nearly 380000 members during the quarter driven by strong growth in our Medicaid and commercial risk based businesses.

This growth was partially offset.

Continued in group attrition in our group fee based business consistent with our expectations.

Operating revenue in the third quarter was $35.5 billion, an increase of 16% versus prior year quarter.

<unk> nearly 18% on a hip adjusted basis.

The increase was driven by higher premium revenue associated with strong membership growth in our Medicaid Medicare and commercial risk businesses.

As well as rate increases to cover cost trends.

And ongoing momentum.

And our diversified service businesses, including in gene you Rx.

The benefit expense ratio for the third quarter was 87, 7% an increase of 90 basis points compared to the prior year quarter.

Driven by the repeal of the health.

Into a French tax in 2021.

Excluding the impact of the half our medical loss ratio would have decreased by approximately 50 basis points driven by unfavorable rate adjustments in our Medicaid business in the third quarter of 2020.

All in the.

Cost of care was above what we would consider to be normalized baseline levels in the third quarter of this year driven by higher Covid cost in the month of August and September, but medical cost were nonetheless, better than we had expected for the quarter overall with lower.

The insurance Covid utilization, helping absorb the higher than expected COVID-19 related costs.

Our third quarter SG&A ratio was 11, 1%.

A decrease of 620 basis points from the 17, 3% in the prior year quarter, primarily.

Now to the charges, we took last year related to business optimization and the Blue Cross Blue Shield Association litigation settlement.

Excluding charges from the base year and the impact of the repeal of the health insurance tax.

Our SG&A ratio with a decrease.

Do I, approximately 130 basis points drill.

Driven by leverage associated with growth in operating revenue.

Partially offset by higher spending to support our growth and our transition to becoming a digital enterprise warehouse.

Operating cash flow.

<unk> quarter was $2 $5 billion.

Or one seven times net income.

Turning to our balance sheet.

We ended the third quarter with a debt to capital ratio of 38, 9%.

Down approximately 100 basis points from the 30.

During the nine 9% as of the end of the second quarter.

The decrease was driven by growth in shareholders equity associated with our earnings in the quarter and a reduction in commercial paper outstanding.

We continue to maintain a prudent posture with respect.

Nerves, given the ongoing uncertainty associated with the COVID-19 pandemic.

And lengthening and cycle times that we've seen since the pandemic began.

We ended the third quarter with 46.8 days in claims payable a decrease of one.

1.3 days compared to the second quarter and an increase of five seven days as compared to the prior year quarter.

The timing of our acquisition of Mmm inflated days in claims payable in the second quarter and drove the sequential change.

Exactly.

To reserving timing related impacts associated with the acquisition.

Our days in claims payable would have increased by <unk> two days sequentially.

Given strong performance year to date, we are raising our guidance for full year adjusted earnings per share to greater than $25 85.

From greater than $25 50.

Putting us at the high end of our long term annual adjusted earnings per share growth target of 12% to 15%.

Please note that this guidance continues to reflect the total COVID-19 and non COVID-19 costs combined exceeding.

Excluding this line in every month of the fourth quarter.

And assumes a similar overall net headwind from Covid for the year relative to our prior guidance.

Given significant outperformance in the third quarter on our investment income line.

We have increased our full year outlook.

<unk> investment income by $100 million to approximately $1.2 billion.

Which is $260 million above our initial outlook of $940 million.

Much of the outperformance in this area stems from stellar results and altered.

The investment portfolio year to date that.

That we would not expect to recur.

Accordingly, we believe that there is at least $200 million of nonrecurring upside in the investment income line it should be removed.

When assessing the appropriate base for <unk>.

Turning to growth for 2022.

Equating to approximately 65 cents of earnings per share in 2021.

And implying a baseline for growth entering 2022 of $25 in 'twenty.

Most important.

Earnings are.

Our businesses are performing well with strong growth momentum that we expect will carry into 2022.

Although we will not provide specific guidance for next year on this call.

Would now like to shift focus to the tailwind and headwinds that were considered.

Porting littering into next year.

Starting with the tailwind.

Recall that our 2021 guidance continues to embed a significant net headwind related to the effects of COVID-19.

While it is too early to declare how much of the overall net headwind we will be able.

Concern back in 2022.

We do believe that we will recover a portion of it <unk>.

Resulting in a year over year tailwind.

Based on our strong competitive positioning.

We expect another year of double digit membership growth in our individual Medicare.

Two advantage membership.

We also expect strong growth in our commercial membership aided by what is shaping up to be the strongest national account selling season in the history of the company.

We expect accretion from the annulus nation of earnings of our acquisitions.

Mmm and my Nexis.

And we expect an EPS lift from our share repurchase program.

Which was opportunistic during recent periods of volatility in our stock price.

Our tail winds will be weighed against known headwinds and these.

These include.

The dilution associated with the first year of operations of our New group Medicare advantage contract, serving New York city's retirees.

We continue to expect will launch on January one.

As well as dilution related to the start up and launch.

Of our new Medicaid contract in Ohio.

We expect to begin on July one 2022.

In addition.

The resumption of Medicaid eligibility redetermination.

Assuming a return to a more normal operating environment.

And fine.

<unk> dinar.

The non recurrence of the upside in the investment income line. This year than I had described earlier.

Based on what we know today we.

We believe our tailwind will largely offset our headwinds, enabling us to reaffirm our commitment to growth.

<unk> said earnings per share of at least 12% in 2022.

After adjusting for the portion of investment income that we have identified as nonrecurring.

We look forward to providing more specific guidance on our fourth quarter earnings call.

When we will discuss.

And adjust our 2022 outlook in more detail.

In closing.

We continue to execute against our strategic growth priorities and are pleased to have delivered another quarter of strong growth and continued reinvestment in our business.

Oh Wow.

Sending a solid balance sheet, given the ongoing uncertainties associated with the pandemic.

And with that operator.

Please open the line to questions.

Ladies and gentlemen, if you wish to ask a question. Please press Star then one on your telephone keypad, you'll hear a prompt.

Maintain Q you may withdraw your question at any time by pressing Star then Q. If you are using a speakerphone. Please pick up the handset before pressing the numbers. Once again, we ask that each participant limit themselves to a single question to allow ample time to respond to each participant that may wish to participate in this portion of the call for our first question will go to the line.

But you have J rice with credit Suisse. Please go ahead.

Thanks, Hi, everybody.

I appreciate the headwinds and tailwind for next year that you're offering I guess when you look at those items that you've delineated.

A lot of them look like they're pretty well set at this point.

What would be the ones, where there's the greatest.

Eight O variability.

Assuming the Covid.

Related issue.

How much of that you get back next year is probably one but can you comment on that where there's the greatest variability among those items.

Good morning, a J and thank you for the question.

Associated with the headwinds and tailwind of course.

Potentially want to look at them in their entirety, but as you think about the potential variability.

Covid has the absolute most uncertainty of any line item on there I mean, its been a incredible situation that we've been through as a country since March of 2020.

And Covid continues to have uncertainty.

We do associated with it.

The New York.

The group retiree business are still going through their enrollment process. So we don't have the absolute exact number of lives lined up at this point in time and so there. There's some variability there but you are correct. We do have some pretty good line of sight on most of the rest of them but.

Certainly that is clearly the lion's share of the uncertainty at this point.

Yeah, a J I would add to John's response, that's one of the things that we do feel very good about it but underlying strength in the core of our all of our benefits businesses.

Our growth has been strong and I think we've been performing very well in line with the expectations.

Coke.

Next question. Please thanks for the question.

Next we'll go to the line of Justin Lake from Wolfe Research. Please go ahead.

Thanks. Good morning, just wanted to clarify something and then a question. The clarification is just wanted to make sure. John you were talking about 12% growth.

And you talked about that off of $25. When he said jump off point.

So that that's number one and then just the question is on cost trend looked like the government margins were materially stronger than commercial in the quarter.

You gave some overall thoughts or commentary, but was hoping.

Give us some trend.

Breakdown between commercial Medicaid and Medicare how that performed in the quarter versus that you know.

Slightly above normal overall.

Discussion yet okay.

Yes, Thanks, Justin I appreciate the questions.

In terms of the jump off.

For 2022, you are correct.

<unk>.

<unk>, our investment income outperformance for the year, we believe that there's at least $200 million that's unlikely to recur.

And so that $200 million equates to approximately 65 of earnings per share and you take.

Off point of our updated guidance and we believe the appropriate jump off point for 2022 growth is $25 20.

I appreciate the opportunity to clarify that.

So stated with the various lines of business.

You know the Oh, the commercial profitability was still.

That all very good however, commercial.

Had the surge of Covid in August and September was really more significantly pronounced within the commercial line of business than it was in the other two lines of business, we took the opportunity to reserve prudently.

Within the commercial line for that Spike.

Mike and I and to build commercial reserves as a result of what we're seeing at that point in time. Unfortunately, non COVID-19 came in much lower in September across all lines of business.

Which allowed our quarter to come out and a really really good place.

Yes.

Medicare was very much consistent with.

Feel very patients Medicaid was actually a little bit better than expectations.

For the quarter and just as a reminder, we had guided to be above baseline costs for COVID-19 and non COVID-19 combined for each of the three months in the third quarter and we were we were just ended up being.

<unk> on our expectations, so, but the commercial issue was really had to do with the spike in August associated with Covid. Thank you for the question next.

Next question please.

Next we'll go to the line of Lance Wilkes from Bernstein. Please go ahead.

Yeah. Thanks, a lot could you talk a little bit about the strategy and vision.

Better or.

Diversified and in Jennie O with with people moving into that rule and maybe as part of that talking a little bit about the pipeline of opportunities in the diversified and in Jennie O book as well as.

Government services to other blues. Thanks.

Thanks for the a multitude of questions.

Pete in his new role to find land.

It's not really appreciate it I'll I'll think I'll touch on the growth associated with engineered first and then and then referenced diversified business group and I do want to thank al and the team for putting me in this position I do think I'm in a unique position.

Having him on government and commercial to have a perspective on.

On this and I think working collectively as an enterprise, we can do very well and penetrating the anthem portfolio to a much greater degree, but as it relates to your question on in Jennie O and growth in Jennie O.

We worked very closely with the commercial business and as we've talked about before the greatest opportunity for US is penetrating the self funded business I'd say that.

Activity for us.

I'll ask it picked up this.

This year relative to last year, we're seeing really nice success lands down market.

On the smaller side of the business and in the middle market.

We're definitely seeing more activity there and we're also seeing a lot more wins from that perspective, and as we've talked about that's really our sweet spot from a financial and profitability perspective.

<unk>, whereas so it's a really good position for us to be in on the larger end of the market with some of the Jumbo account. We are also seeing activity pick up as it relates to pharmacy, but.

But it is it is a competitive space and we see the power of incumbency I'm being a little more significant than a factor there so heading into 2022 as it.

It relates to in Jennie O.

We feel really good about our growth trajectory and our performance in net membership growth will be improved relative to what we've seen in 2020 one as it relates to the diversified business group and and our strategies and I'll also talk strategically about engineered but I'm really excited about where we are I mean, if you think about where.

The puck is going in health care.

About the significance of specialty pharmacy, you heard for Gale talked earlier about virtual and the opportunities for virtual even in pharmacy. There is tremendous opportunity for that business to continue to grow we're at the beginning of the evolution of I think that pharmacy business and Theres, a great opportunity there for us to penetrate the anthem.

In business and then as it relates to the D. B G portfolio. If you think about the verticals that we talked about at Investor day, and the opportunity there.

A tremendous opportunity. So you think about behavioral health and the opportunities there with beacon as a leading asset in the space and we think there's tremendous opportunity to grow that business and diversify that business.

When you think about site of care and redirection it becomes hugely important as it relates to the commercial business and cost of care and you think about assets like aim and my nexis. Our recent transaction when we're seeing tremendous success.

And then you think about managing the chronically ill and and the great assets, we have there around care more and aspire.

I would say this.

That my and I've only been on the job for about a week and a half so I don't want to be too presumptuous here, but the opportunity to penetrate anthem is very significant across our entire portfolio of Medicare.

Medicaid and commercial but I also think theres tremendous external opportunity. So I look forward to leading this and working with my colleague.

It's land and Morgan on growing the business together.

Thank you Pete and thanks for the question Lance I think you know that's come up.

What Pete has shared this really as part of our ongoing ongoing journey in evolution and anthem that we shared with you at our Investor day, and it really is part of our transformation from a health benefits company to truly a trusted lifetime partner in house that we see.

Felicia <unk> opportunities and I think the show sort of the maturing of the strategy. We shared so thanks for the question and next question. Please.

Next we'll go to the line of Matthew Borsch from BMO capital markets. Please go ahead.

Thank you.

Hoping you could comment on the aftermath of <unk>.

The blues.

Particularly as it relates to how you see competition among the balloons and your role in that.

Changing.

Maybe maybe intensifying as we go into next year and after.

Yeah, Matt Thanks for the question.

So we are still in the midst of that litigation and the settlement is ongoing so I won't comment I think its inappropriate to comment at this time, but you know given that the tone of your question I think it's really important.

We've had a long history quite frankly of partnering with Blue in addition to working with them on accounts that are in our service areas.

Seeding process.

And so we expect that to continue expect obviously to offer the capabilities that we have pizza shared with you what we're doing within Genie O. Rx. We also thank our diversified business capabilities are going to be incredibly important in some of our digital platform capabilities that we've also offered.

As part of Blues, So I can't really comment on where we are in terms of that litigation because it's not finally settled yet, but we feel that there's a significant amount of opportunities for us.

Even outside of the settlement to work with Blue partners across the country.

Thanks for the question and next question. Please.

Next we'll go to the line of Ralph <unk>.

The other from Citi. Please go ahead.

Great. Thanks, good morning.

I guess just wanted to go to membership.

So that and you cited some of the economic backdrop, but you know commercial risk was up nicely sequentially. So is there some shift between the two or maybe just any thoughts around those dynamics and then I wanted to ask specifically.

Kobe individual enrollment as well pretty nicely sequentially and John to your comment around higher COVID-19 costs.

Is there any disproportionate pressure on the exchanges, specifically that sort of weighed on margins in the segment and then just hoping you could talk about your positioning on the exchanges for 2022 and expecting.

Ever since we were out there. Thanks, Ralph Thanks for the question I'm going to ask Morgan Kendrick, who is leading our commercial business is also there've been intimately involved in these to respond to your questions. Please Morgan Thanks, Joe and Ralph Thanks for the question.

Yeah, there was a lot there and when you talk about your comments about the reductions in the large group business.

Expecting that certainly in line with our expectations, we were expecting reduction of our fee based business. We've had as you indicated noted nice growth on the risk based business across the segment individual as you've noted has benefited from our long extending special enrollment period. So we've seen month over month growth. There also when you look at our large group small group business.

This month or month over month growth in sales exceeding lapses.

Notably our large group business has performed quite well in fact 23 of the last 25 quarters, our sales have exceeded lapses.

Looking forward into the new year, clearly, it's a competitive geography in a competitive market when you look at individual and HCA.

It's one of those what I would characterize.

We've seen rational.

Nonetheless.

And one that we've not inconsistent with our strategies in the past we take a very disciplined approach. We look at this market by market County by County.

And in fact, as we expand next year for 2022, we're going to be an 83% of the counties that we can serve that's up from 71% from the prior year.

And this is most notably done by leveraging our unique provider partnerships leveraging the scale and density we have in our geographies to provide value for the market.

Again, the strategy is not a shortsighted money and we're top of the pricing is appropriate.

On our modeling forward trends.

So thank you again for the question.

And one last thing Ralph you asked the question about anything.

Is it just rank Dave about the individual relative to Covid and I would say no I mean, our individual business has performed in line. So across the board we saw as John shared.

Higher COVID-19 spikes in commercial but individual is not unique or to think that we feel that were appropriately positioned in that market.

Next question please.

Next we'll go to the line of Lisa Gill from J P. Morgan. Please go ahead.

Thanks, very much and good morning.

I just wanted to go back out to hear your thoughts on the virtual primary care offering. So one can you talk about how that product will be priced and then secondly is it going to be in all 14 of your markets or will this be more of a limited type of.

Initially and then lastly, as I think about virtual primary care, how do we think about you know the cost trends there and the potential savings.

Do you think about those types of types of products.

Thanks for the question Lisa I think it's actually a really important one as we think about the next generation of where products are going to go one of the things.

Things Thats happened is the pandemic has really highlighted the need for these virtual care services.

We shared with you quite some time ago, our JV with hydrogen health and we've been in the market actually working closely with our partners to deliver those services, particularly best in class urgent care primary care using chat and text and what we're talking.

Came back now is I'll call. It the next generation of virtual primary care, we've gotten some experience in our early entre.

With virtual care over the last year and now we're continuing to evolve that so we did launch as I shared in my remarks. This virtual first services I think what's interesting and unique about this is they're integrated with our high performance.

And that's really important and we're seeing a lot of traction in our high performance network and I know we've shared previously.

Our high performance network has anywhere from 12% to 15% cost structure differential and as you think about virtual primary care added to that we expect those to sort of be the starting point.

<unk> now of what we can gain traction on so I'm really encouraged by this initial launch we were going to continue to innovate.

Innovate and evolve from that.

In terms of where we're doing it.

Our working in our Blue States.

We're in most of our markets right now we have offerings not in every county, but we're going to continue to expand.

Point that as we certainly learned about it look at the alignment a lot of this does as I said rely on our high performing networks and our ability to use both virtual care as well as our high performing networks and just to give you a sense of what it is I mean, we're looking at the offerings to cover virtual visits with a zero co pay simplified plan.

Spanning 24 by seven service to leverage the network value based contracts are at the core of this.

To drive that cost structure differential and again, we would expect at least 15% below traditional products, but again, that's a starting point, we're going to gain experience with this and theres been a lot of interest we have seen a significant amount.

A interests we've offered at first in our fully insured risk based business and now our national key accounts are.

Interested in embedding them in their offerings and as you heard I think from my opening comments and then what Morgan said, we've had one of our strongest ever national account selling seasons, and again I do credit the innovation.

We're bringing around digital to the success, we're having there and just a fundamentally strong differentiated cost structure really driven by high performance networks. So thanks for the question. We are we're excited and optimistic about how we think that this can drive future trend and future opportunities for our clients. So again more to come on this but.

You'll be.

Hearing a lot more about it in the coming months as we gain more traction with our employers, but thanks for the question next question. Please.

Next we'll go to the line of Gary Taylor from Cowen. Please go ahead.

Hi, Good morning can you hear me.

You can thank you.

Okay sorry.

And so I was.

Thinking about 222022 I wanted to ask about something I thought would be a tailwind and something I thought it would be.

Headwind, but you didn't mention so just some color would be helpful with thinking that the special enrollment period on exchanges.

If that were to eventually go away would potentially be a tailwind for that business, but you.

You said you're performing in line there. So maybe maybe you don't see that as a material tailwind and then on the Medicaid side of the House you did mentioned Redetermination does.

A headwind, but we certainly note for you in across the board.

That seems to be a population that is not just vaccine hesitant, but utilization hesitant in the MLR looked really strong there. So I was thinking there could be headwind not just on redetermination, but on on margin as well. So just wanted some color on those two things.

Yes sure Gary Thank you for the questions.

So if I can address these appropriately you know with the special enrollment period and the exchanges. We have talked about the fact that exchanges are a.

Nice strategy of ours, we're being very very prudent in terms of our approach.

Going from having a I think just a little bit over 70% of our county.

<unk>, sorry, just over 80% of our counties covered next year and we do expect some nice membership growth associated with the individual but yeah I would say that is all captured in just our core underlying.

Growth in the fundamentals of the business performing extremely well we expect Oliver.

All of our businesses to grow.

Individuals' is no different.

In terms of the Medicaid and the re determinations.

You know the.

The headwind that we referenced really has to do with Medicaid membership, but you know this is my opportunity to do again talk about the balance and resilience of our membership.

As covered in our catcher's Mitt.

And we may be able to turn that tablet into a tailwind depending on where those folks go we do believe that once readers or terminations stars that we will be able to maintain a significant.

What amount of that membership within an anthem product wheel.

<unk> a product for every American and every situation young old rich poor sick healthy we have a product for all of them.

Now, there's a significant number of our members within our Medicaid plans and after Redetermination occurs Medicaid may shrink a little bit but that means that there's really.

Some significant growth opportunities in other lines of business. So you know I didn't spike it out specifically because we think it's a it's a driver and we could actually turn a headwind into a tailwind. So thank you for the question next question. Please.

Next we'll go to the line of Stephen Baxter from Wells Fargo. Please go ahead.

Yeah, Hi, Thanks, and you touched on this a little bit but was hoping you could expand on the national account I'll look for next year I would love to hear more about what you think is driving that growth and what youre seeing in terms of competitive dynamics of that market and then just to clarify was that commentary influenced at all by what insight you're getting from your clients and grew up expectations or is that purely a comment.

About the new accounts there.

I'll ask Morgan to address that.

Yes, Steve. Thank you for the question and you know as Gail noted I mean, the national business continues to perform exceptionally well and you know also noted there was a bit of a dampening in the RFP activity was down but when you think about it it was down in numbers of Rfps. It was up in membership.

Anthem had a exceptionally successful year upmarket.

Did quite well I think one of the other things that was notably observed is we had a record number of customers that went out for a that went from a multi partner healthcare solution to a single partner health care solution in selected anthem it to get directly.

To your question.

To me.

We have to earn the right to win every day and I think when you look at our assets and how they're resonating in the market you look at the.

The advocacy based whole health digital solutions are winning.

When you think about Sidney Gale mentioned earlier that we'd have 50 customers that are there with Sydney preferred which is theoretically.

Our digital front door or we could call it our gateway to help it's the entry point for all the other assets that we deliver also when we think about 'twenty three I mean these assets continue to.

Innovated upon and like I said, it's incumbent upon us to earn the right to win we don't take it lightly but the market is as loudly voting.

With their with their feet and so were excited about where we're headed in 2003.

Thank you next question please.

Next we'll go to the line of Rob Cottrell from Cleveland Research. Please go ahead.

Hi, Good morning wanted to ask about <unk>.

<unk> behavioral briefly curious because provide a little bit more comment.

Comment on the Beacon cross selling efforts and how that.

Going across both government and commercial businesses.

Great. Thank you I'll I'll offer a quick comment and then I'll ask Pete to comment on that because it fits within our diversified business group, but overall, we know that there's been significant need for behavioral health and.

What I wanted to just touch on briefly is the tie that Morgan said to full health and we Beacon has always been a very strong player in the Medicaid space and we're continuing to integrate it into our overall government business, but it's got a big upside in the commercial space. So maybe Pete.

Early commentary from what you are saying no I appreciate it Ralph.

Yeah.

Just to remind everybody be concerns about 40 44 million members 13 million of which is anthem.

The services are very broad as I said beacons and industry, leading asset has been a leader in the Bay area, All health space for a long time.

As it relates to some of the services from mild moderate to acute mental health treatment.

And we support crisis prevention.

Abuse semi EAP programs, it's a broad portfolio, which really will serve I think anthem anthem really well the other thing I'll say and this was you know.

Very important to us and really worked out from a strategic perspective, but the pandemic obviously.

For family accentuated the need for behavioral health, but we experienced three times more people reporting symptoms of anxiety and depression in this period, two five times more people reporting suicidal ideation.

With open opioid abuse.

It was a very significant increase.

So that that plays really.

Across our portfolio, we obviously have a broad portfolio across Medicare Medicaid and commercial the integration process is going really well between the parties.

We actually as it relates to penetrating the anthem business have embraced a lot of the clinical programs and expertise.

Beacon.

Really what integrate we also in my old life on the commercial side worked on new product offerings.

A product called behavioral health advantage, what's being which is being deployed in 2022.

And then and then obviously as it relates to our government program business, working very closely with Felicia and and the government team.

As we care team on a post acute care product.

Just the beginning I think they will continue to be tremendous opportunities around behavioral one of the areas that I am very focused on is also virtual and and the importance of virtual we seen an exponential increase in virtual services as it relates to beacon and penetrating our portfolio in that regard will become very.

And our meddling forward I appreciate the question yeah. Thanks, Pete the only thing I guess I would add is if you think about the commercial market that next generation of EAP services, an area that we're highly focused on and you've heard us share our strategy that sub segment market within the commercial business. So we see it clearly in the employer space expansion Didnt space and.

Military services space, where we.

We see the demand and need for behavioral health services dramatically, increasing as a result of the pandemic.

Next question please.

Next we'll go to the line of Ricky Goldwasser from Morgan Stanley. Please go ahead.

Yeah, Hi, good morning.

A question on utilization.

Important John you talked about September you saw.

Non COVID-19 utilization how is it trending.

And if I recall last quarter, you said it.

MLR guidance at the low end of the range.

I think going to end the year above above.

Baseline so how are we trending there.

And then in line with that if we think about 2022.

Commercial pricing.

What did you embed in your assumptions regarding a return off of <unk>.

Our utilization.

Thank you for the question Ricky and Oh.

Maybe I'll talk a little bit.

Fourth quarter, and then turn it over to Morgan to talk a little bit more about 2022.

But in terms of the fourth quarter, our expectations and our guidance is that the COVID-19 and non COVID-19 combined will continue to be above baseline each month in the fourth quarter. So obviously the entirety of the fourth.

Quarter.

Being above baseline.

We are seeing.

Very good trends as I stated, we had the spike in August it started to decline coming into September non covered utilization was lower in September than we had expected.

Tober is relatively close to expect.

Expectations at this point, but there's a lot of uncertainties in the fourth quarter. The Delta Varian is still out there and we wanted to be very respectful for it as well as any other new variance it may or may not exist and we are expecting an increase in testing and increase in some of the vaccinations and booster shots.

Especially with the kids.

It's unclear right now exactly when the five year olds will be.

Eligible for vaccination, but we want to make sure that we're cautious in terms of our guidance associated with that cost structure, as well and and as you probably I'm sure you already know the fourth quarter.

Just on a normal basis has a higher seasonality.

Now in terms of MLR and so that's obviously factored in as well, but yeah I'd say at the end of the end of the day, we've been very cautious and very prudent in our fourth quarter expectations with a combination of COVID-19 and non COVID-19 combined being above baseline.

Morgan Yeah, John Thank you and Ricky Thanks for the question I would.

John covered most of it I think I would say looking next year its not indifferent we remain confident in the approach and our discipline.

And consistent with what we've done quarter over quarter year over year, we're pricing to forward view of trend certainly that's always respectful of market uncertainty and as John indicated COVID-19 is going to be around for a while we've done extensive work to assess various scenarios and how that could play.

But nonetheless, we feel quite confident in the way we price for 'twenty two business. So thank you again for the question.

Next question please.

Next we'll go to the line of Kevin Fischbeck from Bank of America. Please go ahead.

Great. Thanks good.

I wanted to dig in a little bit into the.

Redetermination headwind that you mentioned is there any way.

For you to kind of size how much membership today do you think you have.

Do the Redetermination, so youre thinking about.

Net losses like how much you might pick up on the exchanges or in the commercial market and then as it relates to Medicaid rates and how you feel that Medicaid rates broadly, particularly again terminations.

Terminations coming in that can influence what.

Where appropriate given the risk pool so.

Those three aspects.

Yes, sure Kevin I'll see if I can start out and respond to your questions, but you know in terms of the redetermination.

We're really taking a look at where we think these members are gonna go and Theres been a lot of other studies out there that we.

We think are relatively credible.

We believe that by the end of next year and that assumes that redetermination do start to occur.

Maybe late early second quarter of 2022.

That will still have a good 35% of those folks are still.

Rates maintained on the Medicaid roles.

Yeah, we're looking at.

About 45% of them going back into employer sponsored plans and that would take the about 20% being eligible for subsidized coverage on exchanges and as I stated we have products in all of those things and we expect to try to keep.

B maintain our fair share so we feel very good about our opportunity and our ability.

To keep the membership within and that's the anthem family over the course of the next year and then as it relates to the Medicaid pricing.

We learned a lot a few years ago in terms of working with the states being Barry.

Proactive.

And ensuring that we're having actuarially justified rates.

We will certainly continue to do that.

Very early in the rating season, but we're comfortable with what we're seeing to date in building our financial plan with prudent assumptions that we believe are well supported and the state's R. R.

Very.

Yeah.

Say, we're having some very productive conversations with the states as well about ensuring that we get actuarially justified rates throughout the future.

The other thing I'll say about the Medicaid as there are a lot of financial measures that are in place now that.

Far more than it used to be in place in terms of collars corridors and things like that.

You know that really.

It really helped maintain the profitability and maintain the stability of that marketplace. So really need to look at Medicaid over a long period of time. Thank you Kevin.

Thanks for the question next question please.

Next we'll go to the line of sampling.

David Windley from.

Please go ahead hi.

Hi, Thanks. Thanks for taking my question. My question is about kind of your strategic investment preference.

<unk> emphasized that for anthem your preferences to partner.

Rather than own your provider networks.

I'm wondering if you could shine maybe.

I'm, Jeff Miller Lite on.

How your investments in behavioral and digital and some of the other areas that you've mentioned kind of accelerate your strategy and drive better return for anthem.

Dan.

Possibility of of owning and controlling some of your key providers just I'm sure that those.

Those others are high return, but in what way are they.

France on thanks.

Thanks, Thanks for the question David.

A couple of things I think you've hit on many of the core drivers first and foremost as we've said because of the density that we have in our markets. We believe that investing in partnerships makes the most sense.

Because we believe we can drive.

Better membership better stars ratings and with one in eight patients being an anthem member the density of working with those providers provides us a good return and also remember we can participate in the profit.

Stream, thereby embedded.

Embedding some of our dbg assets are or other asset surrounding Jennie O. Our accident. So it's not that we're walking away from participating in those profit chimps, we actually think we have a much more capital efficient use by investing partnering and then pulling through the other assets that we have invested in and so so that's.

That's the core of our strategy and it's worked really well and we're continuing to accelerate that strategy and as I shared.

We expect to have 70% in value based arrangements, 30% in full capitation arrangement, it's a big driver for our Medicare advantage business, but quite frankly, all of our benefits businesses are going to have an opportunity there.

Some other areas.

That we're investing in you know we've said that we really wanted to transform ourselves and part of that transformation is building the digital platform for health the opportunities are inside of anthem as well as with our Blue partners and we see again opportunities to commercialize that that's going to be over the next several years one of the reasons validated rajeev for Nokia.

Been leading this area.

Is to really explore those opportunities again, we've been doing that inside of anthem, but we think theres an opportunity with our partners to do more areas around Sydney for example, Sydney health, which is gaining great traction our health <unk>, which we think could be a broader opportunity for the health ecosystem.

We've done quite a bit of investment in.

Stars and heat as quality improvement AI and analytics digital therapeutics. So there's a there's a broad range of things around the digital capabilities and ecosystem we're building.

But in terms of the value again, we look at the most efficient way to deploy our capital where we have our strength, which is the dense.

Within the markets we serve.

And how it scales I think our strategy and then how we pull through in Jennie O D. B G and other services, which really are not those are still immature in the sense that we haven't pulled them through to the potential that they have an excited about pizza leadership there given his understanding of both commercial and the.

Citi is this and the opportunities that exist. So thanks for the question again, we think it's a really strong future growth opportunity for us.

Next question please.

Next we'll go to the line of Steven Valiquette from Barclays. Please go ahead.

Great. Thanks.

So I have another question on the lower than expected.

Government and non Covid utilization for the third quarter I guess I was curious if you have any additional color by medical cost category, whether it's inpatient outpatient pharmacy et cetera, but I'm really curious about is specifically whether any cost category had a more notable falloff versus baseline.

When thinking about the sequential trends.

<unk> versus the trends back in the June quarter.

Yes, Thanks for your question Steve.

Now in terms of our of the specificity.

I would say that what we saw in September was that inpatient non COVID-19 probably.

And dropped the most of all of the different buckets that you stated.

Yeah, we don't view any of these things as being changing to your ultimate baseline. You know there are there were announcements that were made at the beginning of September that certain facilities, we're deferring or canceling some elective procedures in order to ensure.

We drove an appropriate bed space.

Well certainly we saw the impact on the financials.

We do monitor pre asked research various other things and don't really view that.

That situation is a significant change to the baseline going forward.

Thank you for that.

Next question please.

Next we'll go to the line of Scott Fidel from Stephens. Please go ahead.

Hi, Thanks, good morning.

Just wanted to ask about the additional group MA contracts that you called out that you've added in the <unk> for 2022.

Any chance that you could maybe size.

The number of lives that you're expecting from those and then just on the group N Y C contract implementation I know, you're still working on membership and things like that but I'm interested if you can maybe ring fence for Ross.

The dilution youre thinking about for 2022 against that 12% EPS.

Mike you talked about.

That would be helpful as well thanks.

Yes.

Go ahead, I was going to ask Felicia to to respond on your MA questions first and then we'll have John Thank you very much.

Good morning, and thank you for the question you know I'll say Scott that at the end of the day that the.

Cash flow no contracts that Gail referenced we're certainly pleased with the opportunity to add those to our business for 122, they are not going to be material drivers up their own but what they do is that they represent the ability for us to continue to penetrate that pipeline that we have with our commercial.

Additionally, do you.

You know our strategy has always been to be able to penetrate the inherent commercial pipeline that we have so that we're able to keep members blue for life and what we've done in terms of that third quarter is to have a very robust pipeline that gives us some very nice sized groups certainly much smaller than anything.

You've seen around the city of New York or anything else, but they are not going to be material drivers and fit I would say very closely with what we consider the sweet spot when we look at the opportunities to grow <unk> going forward.

We still consider this a very strategic asset for us and being able to grow that business as we go forward.

You know once again.

Again, we are very poised to deliver on the launch of the city of New York business for one 122 and are certainly pleased with the opportunity.

To be able to continue to support New York retirees, who have been customers for Empire for a long period of time.

This is another.

I would say affirmation of our strategy around what we're doing with respect to group MA business and Additionally, the pipeline for this business remains strong as we head into 2023 and with that I'll turn it over to John to talk about and dilution.

Thank you Felicia and Scott I appreciate the question.

Unfortunately, this is the third quarter call I'm really not going to get into specificity associated with with guidance for 2022.

In more detail about that and then the next quarter and as I said you know the new.

New York still going through the enrollment process. So we don't have all the all.

All the information.

Quite fine tune, but what I would ask you to do.

We're really evaluating the tailwind and headwinds that I provided in their entirety and then after you adjust for the outperformance in investment income.

But those headwinds and tail winds are pretty much offset each other and will allow us to achieve our 12 to 15.

For the future. Thank you.

Next question please.

Next we'll go to the line of George Hill from Deutsche Bank. Please go ahead.

Hey, good morning, guys and thanks for taking the question I guess this is probably going to be at 22 question as well John but I was wondering if you could frame any numbers around the success in NGL given all the positive commentary.

I would just love any comments on how you guys are thinking about the opportunity with generic Humira Biosimilars in general.

Yes, thanks for that.

For that question, Yeah, as you referenced as it relates to engineer, we're really pleased with the performance.

In large part the performance.

Percentages this year was due to.

Strong membership and volume across the entire portfolio. So all of our lines of business and utilization is also tracking to expectations. So we feel good about that heading into 2022 as well as the growth that I talked about and our focus on on penetrating the.

The ISO business.

So we feel good about the engineered business heading into 2022 the growth and then the stability of the business in terms of its margin contribution.

Thank you next question please.

Next we'll go to the line of Joshua Raskin from Nephron Research. Please go ahead.

Alright. Thanks.

Thanks for squeezing me in here at the end.

How do you think about the no surprises at around sort of your strategy around network contracting and maybe potential changes in the balance of power between payers and providers in local markets and specific to anthem. You know do you think sort of best cost position biggest discounts is that helpful or harmful I should think.

Gotcha.

Well thanks for the question Josh you know in terms of the overall our posture. You know we have had a cost structure advantage unit cost structure advantage, but as you heard in my comments.

Given our market density we are moving heavily towards value based payment I mean that is at the core of our strategy. So that's in.

Net of working with care providers in a much different way and again, we believe you know about the investments we're making in primary care the investments, we're making in downstream home care other things through our diversified business group.

<unk> actually we have an opportunity to bring those assets together uniquely and then leverage the density originally.

In our commercial business, but now our Medicaid business and our.

Medicare advantage business. So we feel we've made really good strides on that and we actually see a better alignment with care providers than we've ever had in the past so.

Quite frankly, I'm optimistic about where we're heading and I think that that that really is the core of our strategy.

So thank you for the quest.

Question and next question please.

Next we'll go to the line of Whit Mayo from SBB Leerink. Your line is open.

Hey, Thanks last year, you guys in the industry waived a lot of co insurance requirements and just remind me what youre doing now or are you are we back to 2019 copay.

Copay Coinsurance member requirements are we still waiting on MAA for primary care.

Really the question here is thinking through.

2022, and any headwinds or tailwind as we think about any changes in.

Member cost sharing thanks.

Thank you for the question Whit.

With certainly during the heart of the pandemic, where non COVID-19 utilization dropped significantly and we also want it to be you know a very thoughtful participant in what was happening we did a number of waiving of kosher. So she now as part of our response across all of our businesses.

As we headed.

Into 2021 those.

Those are normal I'll call. It normal course came back into play mostly because non COVID-19 utilization returned back to normal levels in many instances are in.

Total and there wasn't significant drops so from that perspective.

You know we're following the policies that we have.

Across the board right now and heading into 2022.

Thanks for the question next question.

And our final question will go to the line of Frank Morgan from RBC Capital markets. Please go ahead.

Good morning.

A lot of discussions about labor with providers and I'm. Just curious are you starting to.

Have discussions.

When you start to negotiate with providers about their wage inflation outlook, they're seeing.

And what is your sense of that and then secondly, just any early initial insights into what might be resonating so far in the annual enrollment period.

Yeah. Thanks for the question the first.

One around the labor market clearly across all labor markets. You know people are seeing pressure on the ability to get.

Employment levels up to where they need to and then there is some pressure in terms of our negotiated contracts.

You know I, we do those over three year cycle and we're also very focused again on value based payments. So I think the.

Per community is to move away from individual unit cost increases, which has been the historical I guess trend in the industry to really bundling value based payment paying for episodes in procedures, and that's really where we've been so at this stage. What I'd say is look we're always in a dynamic environment in terms of our negotiation.

But we feel we've factored that into how we're looking at the forward view of everything that's going on and.

We do see the biggest opportunity is not just only managing unit cogs, but really managing value in part of the value based payments because there's a much better alignment of taking doing the right services at the right time and that that's.

That's our view, but in terms of our four review again, we're taking into consideration everything and again you know many of our largest contracts are on a three year basis. So not all of them. Obviously are in play right now.

Thanks for the question I'm going to ask Felicia to talk a little bit about our annual enrollment period, which I think was your second question.

So good morning, Frank and thank.

Thank you for the question you know as you know we're in the early days of the annual enrollment period and you know we're actually very pleased with what we've seen so far with respect to how we are positioned competitively in terms of our benefit and the plans that we're offering and feel that we'll be able to produce another year of double digit growth in our individual Medicare.

Product I'll say, we're especially pleased with our supplemental benefits and our over the counter offering. These are the things we call are essential for everyday extras, we give members an opportunity to choose from a portfolio of benefits that allows them to address their needs, particularly the social drivers of health.

I will say is that we are also pleased with how we're positioned with respect to our D. SNP product, where we have a very strong value proposition, considering our deep knowledge and experience between Medicare and Medicaid and being able to serve chronic and complex population.

So when we think about where we are today.

The other thing a little bit less than five days and we feel good about our positioning and look forward to having a very successful AEP.

Thank you Felicia and thank you again for your interest in anthem as we close the call I want to recognize our associates.

This continues to be a challenging year each day, they step up and they step out too.

Shouldn't and values and serve our members and communities with care and compassion I'm.

I'm impressed and grateful for what they do all the time, we work hard to create a culture at anthem, where everyone feels valued and their contributions make a difference.

So I'm, particularly proud to see US recently named amongst America's hundred Great places to work and healthiest.

<unk> <unk> hundred workplaces.

I'll leave you with this.

There's increasing opportunity for anthem to offer elevated personalized experiences as we holistically address what our society needs to be and stay healthy.

We're building for tomorrow and beyond evolving the business to be more digital moving fast.

One differently and operating with discipline personally I'm extremely optimistic for our future. Thank you.

Ladies and gentlemen, a recording of this conference will be available for replay. After 11 am today through November 19, 2021, you may access the replay system at anytime by dialing eight.

Thinking at 945.

7761, and international participants can dial 2033693.

3954 again those numbers are 800 <unk>.

945.

776, one and international participants can dial 20336.

693.

395, four this concludes our conference for today. Thank you for your participation and for using Verizon conferencing you may now disconnect.