Q4 2021 Molina Healthcare Inc Earnings Call
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I'd now like to turn the conference over to Joe Chris Yucky Kruszewski.
<unk> Investor Relations. Please go ahead.
Speaker 2: Good morning and welcome to Molina Healthcare's fourth quarter 2021 earnings call. Joining me today are Molina's President and CEO Joseph Reske and our CFO Mark Cott.
Good morning, and welcome to Molina Healthcare's fourth quarter 2021 earnings call.
Joining me today on the latest president and CEO Joseph <unk>.
CFO Mark Com.
A press release announcing our fourth quarter earnings was distributed after the market closed yesterday.
Speaker 2: A press release announcing our fourth quarter earnings was distributed after the market closed yesterday and is available on our investment platform.
Available on our Investor Relations website.
Shortly after the conclusion of this call a replay will be available for 30 days.
Speaker 2: Shortly after the conclusion of this call, a replay will be available for 30 days. The numbers to access the replay are individually...
The numbers to access the replay.
Earnings release.
For those who listen to the rebroadcast of this presentation. We remind you that the remarks made are as of today Thursday February 10, 2022 and have not been updated subsequent to the initial earnings call.
Speaker 2: For those who listened to the rebroadcast of this presentation, we remind you that the remarks made are as of today, Thursday, February 10, 2022, and have not been updated subsequent to the initial earnings call.
Speaker 2: In this call, we'll refer to certain non-GAAP measures. A reconciliation of these measures with the most directly comparable GAAP measures can be found in our fourth quarter 2021 press conference.
In this call we will refer to certain non-GAAP measures.
A reconciliation of these measures with the most directly comparable GAAP measures can be found in our fourth quarter 2021.
During our call, we will be making certain forward looking statements, including but not limited to statements regarding the COVID-19 pandemic.
Speaker 2: During our follow-up, we will be making certain forward-looking statements, including but not limited to statements regarding the COVID-19 pandemic, the current environment, recent acquisitions, 2022 guidance, our embedded governance power, and our long-term health.
Current environment.
Recent acquisitions.
'twenty two guidance that the earnings power and our long term outlook.
Speaker 2: listeners are cautioned that all of our forward-looking statements are subject to certain risks and uncertainty.
Listeners are cautioned that all of our forward looking statements are subject to certain risks and uncertainties.
Speaker 2: that could cause our actual results to differ materially from our current expectations.
That could cause our actual results to differ materially from our current expectations.
Speaker 2: We advise listeners to review the risk factors discussed in our Form 10-K annual report filed with the FCC, as well as risk factors listed in our Form 10-Q and Form 8-K filings with the FCC.
We advise listeners to review the risk factors discussed in our Form 10-K annual report filed with the SEC.
As well as risk factors listed in our Form 10-Q , and form 8-K filings with the SEC.
Speaker 2: After the completion of our prepared remarks, we will open the call to take your questions.
After the completion of our prepared remarks, we will open the call to take your questions.
Speaker 2: I will now send a call over to our Chief Executive Officer, Joseph Rector. Joe.
I will now turn the call, which are our chief Executive Officer Joseph.
Joe.
Thank you Joe and good morning.
Speaker 3: Today, we will provide updates on several topics.
We will provide updates on several topics.
Speaker 3: Our financial results for the fourth quarter in full year 2021.
Our financial results for the fourth quarter and full year 2021.
Speaker 3: Our initial 2022 revenue and earnings guidance.
Our initial 2022 revenue and earnings guidance.
Speaker 3: and our growth initiatives and re-information of our sustaining profitable growth strategy.
And our growth initiatives and reaffirmation of our sustaining profitable growth strategy.
Let me start with the fourth quarter highlights.
Speaker 3: Last night, we reported adjusted earnings per limited share for the fourth quarter of $2.88.
Last night, we reported adjusted earnings per diluted share for the fourth quarter of $2 88.
Speaker 3: with adjusted debt income of $170 million and premium revenue of $7.2 billion and increase of 48% over the prior year.
With adjusted net income of $170 million.
And premium revenue of $7 2 billion.
An increase of 48% over the prior year.
Speaker 3: The 88.8% consolidated medical care ratio demonstrates solid performance while managing through pandemic-related challenges.
The 88, 8% consolidated medical care ratio demonstrates solid performance, while managing through pandemic related challenges.
The net effect of Covid increased our consolidated medical care ratio by 150 basis points.
Speaker 3: The net effective COVID increased our consolidated medical care ratio by 150 basis.
Speaker 3: decreasing net income per diluted share by approximately $1.50, which is 50 cents more than previously expected.
Decreasing net income per diluted share by approximately $1 50.
Which is 50 more than previously expected.
Speaker 3: We managed to a 7.4% adjusted GNA ratio, reflecting continued discipline and cost management while making the appropriate investments in our business to fuel growth.
We managed to a seven 4% adjusted G&A ratio, reflecting continued discipline in cost management, while making the appropriate investments in our business to fuel growth.
Speaker 3: We produced an adjusted after-tax margin of 2.3%.
We produced an adjusted after tax margin of two 3%.
Speaker 3: excluding the net effective COVID are adjusted after tax margin with 3.5% squarely in line with our long-term target.
Excluding the net effect of Covid, our adjusted after tax margin was three 5%.
Squarely in line with our long term target.
Speaker 3: We are very pleased with our fourth quarter performance with respect to both the delivery of solid earnings and the focused execution of our profitable growth strategy.
We are very pleased with our fourth quarter performance with respect to both the delivery of solid earnings and the focused execution of our profitable growth strategy.
This quarter marks the end of yet another very successful year, a year in which we continued to produce a high level of financial performance while.
Speaker 3: The quarter marks the end of yet another very successful year, a year in which we continue to produce a high level of financial performance, while navigating the effects of the global pandemic.
While navigating the effects of the global pandemic.
Speaker 3: We execute it well and sustain solid operating margins while driving significant revenue growth. and
We executed well and sustained solid operating margins, while driving significant revenue growth.
Now turning to full year highlights.
Speaker 3: We reported full year 2021 adjusted earnings per diluted share of $13.54.
We reported full year 2021, adjusted earnings per diluted share of $13 54.
Speaker 3: a 6% increase over initial full year guidance.
A 6% increase over our initial full year guidance.
We absorbed $3 50 of costs related to the net effect of Covid.
Speaker 3: We absorbed $3.50 of costs related to the net effect of COVID, which was $2 higher than initial guidance, implying $2.80 of improved underlying performance.
Which was $2 higher than initial guidance, implying $2 80.
Of improved underlying performance.
Speaker 3: excluding the net effective COVID, our after-tax margin was 3.6% consistent with our long-term target.
Excluding the net effect of Covid, our after tax margin was three 6% consistent with our long term target.
Speaker 3: We generated premium revenue of $26.9 billion, an increase of 47% over our full year 2020 premium revenue, and $3.9 billion above our initial 2021 guide.
We generated premium revenue of $26 9 billion.
An increase of 47% over our full year 2020 premium revenue and $3 9 billion.
Above our initial 2021 guidance.
Speaker 3: This strong premium revenue growth was well balanced between organic growth and both on acquisition and as a testament to our successful transition to sustained profitable growth.
This strong premium revenue growth was well balanced between organic growth and bolt on acquisition.
And as a testament to our successful transition to sustained profitable growth.
Speaker 3: From a membership perspective, we ended the year with 5.2 million members, a 1.2 million member increase year over year.
From a membership perspective, we ended the year with $5 2 million members, a $1 2 million member increase year over year.
Speaker 3: Notably, this 29% growth across all three segments was enhanced by the suspension of Medicaid re-determination and the Special Enrollment Period in March.
Notably this 29% growth across all three segments was enhanced by the suspension of Medicaid Redetermination and the special enrollment period and marketplace.
Turning now to our full year performance highlights by line of business.
Speaker 3: Turning now to our full year performance highlight by line of business.
Speaker 3: Medicaid, our flagship business, representing 76% of total company premium, produced long premium revenue growth and stable earnings as we continue to execute on the underlying fundamental.
Medicaid our flagship business, representing 76% of total company premium.
Strong premium revenue growth and stable earnings.
As we continue to execute on the underlying fundamentals.
For the full year, our Medicaid business achieved a medical care ratio of 88, 7%.
Speaker 3: For the full year, our Medicaid business achieved a medical care ratio of 88.7%. Consistent with our long-term MCR target, as moderate net effective COVID, was offset by strong medical cost management.
<unk> with our long term MCR targets as moderate net effect of Covid was offset by strong medical cost management.
For the year, our diversified portfolio of state contracts performed well across all dimensions.
Speaker 3: For the year, our diversified portfolio of state contracts performed well across all dimensions.
Speaker 3: underlying medical cost trend was stable and well-controlled, particularly within our growing population of high-acuity members, while we continued to deliver high-quality care.
Underlying medical cost trend was stable and well control, particularly within our growing population of high acuity members, while we continued to deliver high quality care.
Speaker 3: The rate environment was stable. And risk sharing corridors, we captured some of our outperformance, but many already have been, and will continue to be eliminated.
The rate environment was stable.
And risk sharing corridors recaptured some of our outperformance, but many already have been and will continue to be eliminated.
Speaker 3: For the year, our Medicare Medical Care Ratio was 87.2%, a very strong result.
For the year, our Medicare medical care ratio was 87, 2% a very strong results.
Speaker 3: squarely in line with our long-term target range, and demonstrating our ability to clinically and financially manage the high-QD members in both our D-SNIP and MMP program.
Squarely in line with our long term target range, and demonstrating our ability to clinically and financially manage the high acuity members in both our D SNP and MMP program.
This line of business plays an important role in the portfolio as each year over 30000 of our Medicaid members turn age 65.
Speaker 3: This line of business plays an important role in the portfolio. As each year, over 30,000 of our Medicaid members turned age 65.
Speaker 3: Our marketplace medical care ratio for the full year was 86.9%. Well above our long-term target.
Our our marketplace medical care ratio for the full year was 86, 9% well above our long term target.
Speaker 3: This reflects the significant cost related to the net effect of COVID in our largest geographies and the high cost impact of the adverse selection related to the special enrollment.
This reflects the significant cost related to the net effect of Covid in our largest geographies and the high cost impact of the adverse selection related to the special enrollment period.
Speaker 3: Approximately 300,000 members were attracted to our product during the special enrollment period, accounting for 25% of full-year marketplace members.
Approximately 300000 members were attracted to our product during the special enrollment period accounting for 25% of full year marketplace member months.
All told our marketplace performance has been a disappointment.
Speaker 3: All told, our marketplace performance has been a disappointment.
Speaker 3: Later, Mark will summarize the steps we have taken in the environmental factors, which will allow us to restore margins to our mid-single-digit target in 2022.
Later, Mark will summarize the steps, we have taken and the environmental factors, which will allow us to restore margins to our mid single digit target in 2022.
You will hear that included in our revenue guidance is a planned reduction in marketplace membership and a related 38% decrease in 2022 marketplace revenue.
Speaker 3: You will hear that included in our revenue guidance is a planned reduction in marketplace members.
Speaker 3: and a related 38% decrease in 2022 marketplace revenue.
However, we expect this repositioning of our product to be significantly accretive to 2022 earnings and establish a strong foundation for this business going forward.
Speaker 3: However, we expect this repositioning of our product to be significantly accreted to 2022 earnings and establish a strong foundation for this business going full.
2021 was also a very successful year across multiple dimensions of our profitable growth strategy.
Speaker 3: 2021 was also a very successful year across multiple dimensions of our profitable growth stress.
Speaker 3: Specifically, we successfully re-precured our Ohio Medicaid contract and were awarded a new state contract in Nevada, validating our ability to regain existing state contracts, as well as win new business in new states.
Specifically we.
We successfully re procured our Ohio Medicaid contract and were awarded a new state contract in Nevada, validating our ability to retain existing state contracts as well as win new business in new states.
Speaker 3: Our M&A engine continued to execute at a high level. During the year, we announced...
Our M&A engine continued to execute at a high level.
During the year, we announced two new acquisition.
Speaker 3: FIgnus Texas Medicaid business and age well in New York for combined premium revenue of approximately $1.7 billion. In October .
Cigna's, Texas Medicaid business and.
And as well in New York.
For combined premium revenue of approximately $1 7 billion.
In October we closed a new York based affinity acquisition, adding over 300000 members and approximately $1 6 billion.
Speaker 3: adding over 300,000 members and approximately $1.5 billion of annual premium revenue.
Of annual premium revenue.
Speaker 3: And we successfully integrated three previously closed acquisition, representing approximately $5 billion in annual revenue, which continued to provide burning secretions.
And we successfully integrated three previously closed acquisition, representing approximately $5 billion in annual revenue, which continue to provide earnings accretion.
Speaker 3: In summary, our full year 2021 enterprise results continue to demonstrate our ability to produce excellent margins while growing premium revenue and successfully managing through the ongoing clinical and financial impacts of the pandemic.
In summary, our full year 2021 enterprise results continued to demonstrate our ability to produce excellent margins, while growing premium revenue and successfully managing through the ongoing clinical and financial impacts of the pandemic.
Speaker 3: Turning to our 2022 guide, beginning with Premium Reps.
Turning to our 2022 guidance beginning with premium revenue.
Speaker 3: We are very pleased with the continued success of our profitable growth strategy.
We are very pleased with the continued success of our profitable growth strategy.
Speaker 3: In 2022, we project premium revenue of approximately $28.5 billion.
In 2022, we project premium revenue of approximately $28 5 billion.
A 6% year over year increase on a reported basis and 14% growth before the effect of regulatory headwinds and the planned decline in marketplace revenue.
Speaker 3: 6% year-over-year increase on a reported basis, and 14% growth before the effect of regulatory headwinds and the planned decline in marketplace revenue.
Speaker 3: This is consistent with the initial outlook provided on our 3rd quarter 2021 earnings.
This is consistent with the initial outlook provided on our third quarter 2021 earnings call.
Speaker 3: This growth is well balanced between the new contract win, organic growth in our current footprint, and the full annual one rate of our recent acquisition.
This growth is well balanced between the new contract win organic growth in our current footprint and the full annual run rate of our recent acquisition.
Speaker 3: incremental to our revenue guidance will be the age well acquisition when closed any further extension of the public health emergency and the resulting suspension in Medicaid re-determinations beyond April .
Incremental to our revenue guidance will be the <unk> acquisition when closed.
And any further extension of the public health emergency and the resulting suspension and Medicaid Redetermination beyond April .
Moving to earnings guidance.
Speaker 3: Our initial full year 2022 adjusted earnings guidance per share is no less than $17 or 26% growth year over year.
Our initial full year 2022, adjusted earnings guidance per share is no less than $17 or 26% growth year over year.
Speaker 3: We project a 3.4% adjusted aftertack margin consistent with our
We project a three 4% adjusted after tax margin consistent with our long term targets.
Speaker 3: Our 2022 earnings profile reflects durable and sustainable operating improvements and earnings.
Our 2022 earnings profile reflects a durable and sustainable operating improvements and earnings growth.
Speaker 3: Included in our 2022 guidance is the realization of $3.50 per share of our 2021 embedded earnings.
Included in our 2022 guidance is the realization of $3 50 per share of our 2021 embedded earnings power.
Speaker 3: and additional organic earnings growth partially offset by the effects of regulatory headwinds.
And additional organic earnings growth, partially offset by the effects of regulatory headwinds.
Speaker 3: With COVID still providing $2 a variance per share pressure in 2022, and a few of our acquisition integration, not yet fully matured, we still have embedded earnings power remaining to support future earnings.
With Covid still providing $2 of earnings per share pressure in 2022, and a few of our acquisition integration not yet fully matured, we still have embedded earnings power remaining to support future earnings growth.
Speaker 3: In summary, our 2022 guidance features premium revenue growth of 14% before regulatory headwind and the marketplace reset. And strong earnings per shared growth of 26% with key up-
In summary, our 2022 guidance features premium revenue growth of 14% before regulatory headwinds in the marketplace reset and strong earnings per share growth of 26% with.
With key operating and margin metrics.
Speaker 3: squarely in line with the long-term targets we shared at our September 2021 investment.
Squarely in line with our long term targets, we shared at our September 2021 Investor Conference.
Speaker 3: I will now provide a few concluding comments that frame our profitable growth strategy. We remain.
I will now provide a few concluding comments that frame our profitable growth strategy.
We remain committed to staying close to the core.
Speaker 3: We intend to remain a pure play government managed care business, which has very attractive growth characteristics.
We intend to remain a pure play government managed care business.
Which has very attractive growth characteristics demographically and politically.
Speaker 3: We aspire to provide high quality care to our members, while driving to the lowest cost of delivery to produce attractive margins.
We aspire to provide high quality care to our members, while driving to the lowest cost of delivery to produce attractive margins.
Speaker 3: We believe we have the right strategy and the right team.
We believe we have the right strategy and the right team to execute it are.
Speaker 3: Our strong finish to 2021 and our 2022 guidance, position as well, and give us great confidence we can achieve our long-term target.
Our strong finish to 2021, and our 2022 guidance.
Position as well to give us great confidence, we can achieve our long term target of 13% to 15% premium revenue growth and 15% to 18% earnings per share growth on.
Speaker 3: 13 to 15% premium revenue growth and 15 to 18% earnings for share growth on average over
On average over time.
Speaker 3: As I conclude my remarks, I want to express my gratitude to our management team and our nearly 14,000 Malina cops.
As I conclude my remarks, I want to express my gratitude to our management team and our nearly 14000 Molina colleague.
Speaker 3: Their skill, dedication, and steadfast service continue to form the foundation for everything we have achieved and everything we will achieve in the years.
Their skill dedication and steadfast service continued to form the foundation for everything we have achieved and everything we will achieve in the years to come.
With that I will turn the call over to Mark for some additional color on the financials and 2022 guidance.
Speaker 3: With that, I will turn the call over to Mark for some additional color on the financials and 2022 guide. Mark?
Mark.
Thank you Joe good morning, everyone.
Speaker 4: This morning I will discuss some additional details of our fourth quarter and full year performance.
This morning, I will discuss some additional details of our fourth quarter and full year performance.
Speaker 4: I will then turn to the balance sheet and some thoughts on our 2022 guidance. Beginning.
I will then turn to the balance sheet and some thoughts on our 2022 guidance.
Beginning with our fourth quarter results by segment.
Speaker 4: In Medicaid, we reported an 88.3% MCR, a strong result that included continuation of costs from the net effect of COVID, offset by strong medical costs matters.
In Medicaid we reported an 88, 3% MCR a strong result that included continuation of costs from the net effect of Covid offset by strong medical cost management.
In Medicare our reported MCR was 88, 3%.
Speaker 4: In Medicare, a reported MCR was 88.3%.
Speaker 4: During the quarter, the emergence of the Omnichran variant had a greater impact on our Medicare population than on our other segments.
During the quarter the emergence of the AUM decline Varian had a greater impact on our Medicare population than our other segments.
Focused medical cost management and better than expected risk adjustment offset the net effect of COVID-19 in the quarter.
Speaker 4: Focus medical cost management and better than expected risk adjustment offset the net effect of COVID in the quarter.
In marketplace, our reported MCR was 92, 1%.
Speaker 4: In Marketplace, a reported MCR was 92.1%.
Speaker 4: While COVID infection rates in our marketplace population declined from the peak of the Delta variant in August , the net effect of COVID continued to press results in the fourth quarter.
While COVID-19 infection rates in our marketplace population declined from the peak of the Delta valued in August the net effect of Covid continued to pressure results in the fourth quarter.
Speaker 4: The Special Enrollment Period Membership, which grew to almost 40% of our Marketplace book in the quarter, also contributed to the elevated Marketplace MCR. The Special Enrollment Period
The special enrollment period membership, which grew to almost 40% of our marketplace book in the quarter also contributed to the elevated marketplace MCR.
Turning to full year results.
Speaker 4: Our four-year consolidated MCR was 88.3%.
Our full year consolidated MCR was 88, 3%.
Speaker 4: This result is modestly above our long-term target as strong performance in our Medicaid and Medicare businesses was offset by the performance of our marketplace.
This result is modestly above our long term target as strong performance in our Medicaid and Medicare businesses was offset by the performance of our marketplace business.
Speaker 4: Specifically, our full year Medicaid MCR was 88.7% in line with our 88 to 89% long-term target.
Specifically, our full year Medicaid MCR was 88, 7% in.
In line with our 88% to 89% long term target.
Speaker 4: Our four-year Medicare MCR was 87.2% in line with our 87 to 88% long-term target.
Our full year Medicare MCR was 87, 2%.
In line with our 87% to 88% long term target.
Speaker 4: in both Medicaid and Medicare, strong medical cost management, offset the net effect of COVID.
In both Medicaid and Medicare strong medical cost management.
Offset the net effect of Covid.
Our full year marketplace MCR of 86, 9% is well above our 78% to 80% long term target.
Speaker 4: Our four-year marketplace MCR of 86.9% is well above our 78-80% long-term target.
Speaker 4: and includes approximately 430 basis points of the net effect of COVID.
That includes approximately 430 basis points of the net effect of Covid.
Speaker 4: as well as approximately 360 basis points from the impact of the special enrollment period. Turning now.
As well as approximately 360 basis points from the impact of the special enrollment period.
Turning now to our balance sheet.
Our capital Foundation remains strong.
Speaker 4: We harvest the $218 million of subsidiary dividends in the quarter, which brought our year-end 2021 parent company cash balance to 348 million.
We harvested $218 million of subsidiary dividends in the quarter, which brought our year end 2021 parent company cash balance to $348 million.
Speaker 4: debt at the end of the quarter is 2.1 times trailing 12-month-eva-daw.
Debt at the end of the quarter at two one times trailing 12 month EBITDA.
Speaker 4: Our death to total cap ratio is 47.8%.
Our debt to total cap ratio at 47, 8%.
Speaker 4: However, on a net debt basis, net apparent company cash.
However, on a net debt basis net of parent company cash.
Speaker 4: These ratios fall to 1.8 times and 43.9% respect.
These ratios fall to one eight times and 43, 9% respectively.
Speaker 4: These metrics reflect the conservative leverage position and ample cash capacity for additional growth and investments.
These metrics reflect our conservative leverage position and ample cash capacity for additional growth and investment.
Speaker 4: During the quarter, we redeemed our senior node stew 2022 using the proceeds of our November debt offering of node stew 2032.
During the quarter, we redeemed our senior notes due 2022, using the proceeds of our November debt offering of notes due 2032.
Speaker 4: This refinancing will lower our total interest expense by 50 basis points and extend our debt maturity towers to 2028 to 2032.
This refinancing will lower our total interest expense by 50 basis points and extend our debt maturity towers to 2028 to 2032.
Speaker 4: More importantly, the transaction marks the final step in our capital restructuring strategy.
More importantly, the transaction marks the final step in our capital restructuring strategy.
We have eliminated the costly convertible bonds and.
Speaker 4: We have eliminated the costly convertible bonds and addressed all near-term majorities at coupon rates well below similarly rated issuers.
And address all near term maturities at coupon rates well below similarly rated issuers.
Turning to reserves.
Our reserve approach remains consistent with prior quarters, and we continue to be confident in our reserve position.
Speaker 4: Our reserve approach remains consistent with prior quarters and we continue to be confident in our reserve position.
Days and claims payable at the end of the quarter Rep.
Speaker 4: Days inclaimed payable at the end of the quarter represented 51 days of medical cost expense, an increase of two days sequentially.
<unk> represented 51 days of medical cost expense.
An increase of two days sequentially.
Now turning to guidance beginning with membership.
Speaker 4: We ended 2021 with approximately 4.3 million Medicaid members.
We ended 2021 with approximately $4 3 million Medicaid members.
Speaker 4: As discussed, our 2022 guidance reflects the resumption of redeterminations, which we expect will more than offset Medicaid growth drivers.
As discussed our 2022 guidance reflects the resumption of re determinations, which we expect will more than offset Medicaid growth drivers.
Speaker 4: and result in 2022 year-end membership of approximately 4.1 million members.
And result in 2022 year end membership of approximately $4 1 million members.
Speaker 4: In Medicare, we ended 2021 with 142,000 members.
In Medicare we ended 2021 with a 142000 members.
We expect year end 2022 total Medicare membership of approximately 150000 members.
Speaker 4: We spec year end 2022 total Medicare membership of approximately 150,000 members.
Speaker 4: This reflects strong AEP growth in our MAPD and DSNIP products.
This reflects strong AEP growth in our MA PD in D SNP products.
Speaker 4: and the addition of members from our Signet Texas Medicaid acquisition.
And the addition of members from our Cigna, Texas Medicaid acquisition.
Speaker 4: In marketplace, we ended 2021 with 728,000 members.
And marketplace. We ended 2021 with 728000 members.
Based on open enrollment, we expect to begin 2022 with approximately 320000 members.
Speaker 4: Based on open enrollment, we expect to begin 2022 with approximately 320,000 members.
Speaker 4: reflecting our strategy to achieve target margins in this business for 2022.
Reflecting our strategy to achieve target margins in this business for 2022.
Speaker 4: accounting for a limited SEP and normal levels of attrition through the year.
Accounting for a limited SVP and.
And normal levels of attrition through the year.
Speaker 4: We expect to end 2022 with approximately 250,000 members.
We expect to end 2022 with approximately 250000 members.
Turning now to premium revenue guidance.
Speaker 4: We expect premium revenue of approximately $28.5 billion, or 6% growth.
We expect premium revenue of approximately $28 5 billion.
Our 6% growth.
Excluding regulatory headwinds and our marketplace reset this represents 14% growth over 2021.
Speaker 4: excluding regulatory headwinds and our marketplace reset, this represents 14% growth over 2021.
Speaker 4: Specifically, our premium revenue guidance includes the following growth driver.
Specifically, our premium revenue guidance includes the following growth drivers.
Speaker 4: a full year of the acquired affinity business, which closed October 25th.
A full year of the acquired affinity business, which closed October 25th.
Speaker 4: and the Signetectus Medicaid business which closed on January 1st, for a combined $2.2 billion.
And the Cigna, Texas, Medicaid business, which closed on January one.
For a combined $2 2 billion.
Speaker 4: approximately 1.1 billion dollars of organic Medicaid and Medicare growth in our current footprint.
Approximately $1 1 billion of.
Organic Medicaid and Medicare growth in our current footprint.
And approximately $400 million.
Speaker 4: and approximately $400 million for the Nevada Medicaid contract, which began on January 1st.
For the Nevada, Medicaid contract, which began on January one.
Speaker 4: Partially offsetting these growth drivers are several headwinds to 2022 revenue growth.
Partially offsetting these growth drivers are several headwinds to 2022 revenue growth.
Speaker 4: 1.2 billion of lower marketplace premium revenue, reflecting our strategy to restore target margins in this business.
$1 2 billion of lower marketplace premium revenue, reflecting our strategy to restore target margins in this business.
Speaker 4: Approximately 400 million related to the resumption of redetermination.
Approximately $400 million related to the resumption of Redetermination.
And $500 million from the carve out of pharmacy benefits in our California, and Ohio Medicaid contracts.
Speaker 4: and 500 million from the Carvoud of Pharmacy Benefits in our California and Ohio Medicaid Contracts.
Speaker 4: consistent with past practice, age well is excluded from our 2022 guide.
Consistent with past practice age well is excluded from our 2022 guidance.
Speaker 4: We continue to expect this acquisition to close in the third quarter of this year.
We continue to expect this acquisition to close in the third quarter of this year.
Speaker 4: and will provide $200 million or more of additional premium revenue in 2022 when closed.
And we will provide $200 million or more of additional premium revenue in 2022 when closed.
Turning now to earnings guidance.
Speaker 4: We introduced our initial full year 2022 adjusted earnings guidance of no less than $17 per share, reflecting 26% growth over 2021.
We introduced our initial full year 2022, adjusted earnings guidance of no less than $17 per share.
Reflecting 26% growth over 2021.
Speaker 4: Our APS guidance reflects the realization of approximately $3.50 per share of 2021 embedded earnings.
Our EPS guidance reflects the realization of approximately $3 50 per share of 2021 embedded earnings.
Consisting of.
Speaker 4: approximately $1.50 per share of lower net effective COVID.
Approximately $1 50 per share of lower net effect of Covid.
Roughly <unk> 50 per share for improvement in Medicare risk adjustment.
Speaker 4: Roughly 50 cents per share for improvement in Medicare Ritga judge.
Speaker 4: approximately a dollar per share as we attain target margins in Magellan complete care and passport.
Approximately $1 per share as we attained target margins and Magellan complete care and passport.
Speaker 4: and approximately 50 cents per share for the recently closed affinity and signet Texas Medicaid acquisition.
And approximately <unk> 50 per share for the recently closed affinity and Signet, Texas Medicaid acquisitions.
Speaker 4: Our 2022 guidance also includes approximately 80 cents per share of marketplace margin improvement not captured in the lower net effective COVID.
Our 2022 guidance also includes approximately <unk> <unk> per share of marketplace margin improvement not captured in the lower net effect of Covid.
Speaker 4: This is offset by the net impact of organic earnings growth and the resumption of redeterminations and the previously discussed pharmacy benefit carve-out.
This is offset by the net impact of organic earnings growth and the resumption of Redetermination.
And the previously discussed pharmacy benefit carve outs.
Speaker 4: The restoration of marketplace margins to mid-single digits in 2022 will be accomplished through actions already taken.
The restoration of marketplace margins to mid single digits in 2022 will be accomplished through actions already taken.
Specifically.
Speaker 4: We pray to a higher medical cost trend, anticipating a more moderate COVID and SEPM.
We price to a higher medical cost trend.
Anticipating a more moderate COVID-19 impact.
Speaker 4: We redesigned our product offerings, focusing on the sober tier in response to the increased member premium subsidy.
We redesigned our product offerings, focusing on the silver tier in response to the increased member premium subsidies.
Speaker 4: Based on recently concluded open enrollment period, we expect to have a higher percentage of renewing members.
Based on recently concluded open enrollment period, we expect to have a higher percentage of renewing members.
Speaker 4: We also expect a lower mix of special enrollment membership in 2022, based on the revised eligibility rules and our revised product design and distribution strategy.
We also expect a lower mix of special enrollment membership in 2022 based on the revised eligibility rules and our revised product design and distribution strategies.
We expect many of these changes will also improve our risk adjustment results.
Speaker 4: We expect many of these changes will also improve our risk adjustment result.
Moving on to select P&L guidance metrics.
Speaker 4: We expect our medical care ratio to be approximately 88%.
We expect our medical care ratio to be approximately 88%.
Speaker 4: The MCR improvement over 2021 is primarily due to lower net effect of COVID. Our actions to improve marketplace performance in 2022.
The MCR improvement over 2021 is primarily due to lower net effect of Covid.
Our actions to improve marketplace performance in 2022.
Speaker 4: continued progress in medical cost management in our legacy in acquired businesses and improvement
Continued progress in medical cost management, and our legacy and acquired businesses.
An improvement in Medicare risk scores.
We expect our adjusted G&A ratio to improve to six 8%.
Speaker 4: We expect our adjusted GNA ratio to improve to 6.8%. This reflects discipline cost management, fixed cost leverage from our revenue growth and mix.
This reflects disciplined cost management.
<unk> cost leverage from our revenue growth and mix.
Offset by continued investment in growth and capabilities.
The effective tax rate is expected to be 25, 4%.
Speaker 4: The effective tax rate is expected to be 25.4%.
Speaker 4: Adjusted after tax margin is expected to be 3.4% consistent with our long-term targeted range.
Adjusted after tax margin is expected to be three 4% consistent with our long term targeted range.
Speaker 4: We did average share count is expected to remain flat at 58.4 million shares.
Weighted average share count is expected to remain flat at $58 4 million shares.
And we expect that just over 50% of our full year earnings will be produced in the first half of the year.
Speaker 4: And we expect that just over 50% of our full year earnings will be produced in the first half of the year.
As mentioned our 2022 guidance includes the realization of $3 50, a share of 2021 embedded earnings, leaving approximately $2 50, a share of embedded earnings power in 2022, comprising.
Speaker 4: As mentioned, our 2022 guidance includes the realization of $3.50 a share of 2021 embedded earnings, leaving approximately $2.50 a share of a better earnings power in 2022. Comprising.
Speaker 4: the net effective COVID of approximately $2 per share, which shouldn't continue to dissipate.
The net effect of Covid of approximately $2 per share, which should continue to dissipate.
Speaker 4: and approximately $1 per share as we attain our target margins on closed deals, including affinity, thickness, Texas Medicaid business, and our pending acquisition of agent.
And approximately one dollar per share as we attain our target margins on closed deals, including affinity Cigna, Texas, Medicaid business and our pending acquisition of AGL.
Speaker 4: partially offset by roughly 50 cents per share of projected Medicaid redetermination impact in 2023.
Partially offset by roughly <unk> 50 per share a projected Medicaid redetermination impact in 2023.
Speaker 4: As a reminder, this embedded earnings power does not represent 2023 guidance, but rather an accounting of drivers that are temporarily suppressing our earnings profile and our current projection of the impact of Medicaid re-determinations post 2020.
As a reminder, this embedded earnings power does not represent 2023 guidance, but rather an accounting of drivers that are temporarily depressing our earnings profile and our current projection of the impact of Medicaid Redetermination post 2022.
This concludes our prepared remarks.
Speaker 4: This concludes our prepared remarks. Operator, we are now ready to take questions.
Operator, we are now ready to take questions.
Speaker 1: We will now begin the question and answer session. To ask a question you may press star then one on your touchtone sound. If you're using a speaker phone, please pick up your hands that be compressing the key. To withdraw from the question queue, please press star then two.
Yeah.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the kidney.
To withdraw from the question queue. Please press Star then two.
Speaker 1: The first question is from Kevin Fishback, a Bank of America. Please go ahead.
The first question is from Kevin Fischbeck of Bank of America. Please go ahead.
Speaker 5: Great, thanks. I just wanted to ask about the exchange.
Okay great.
<unk>.
I just wanted to ask about.
The exchange Okay.
Speaker 5: I think that was a surprise for me in this guidance. She talked a little bit about how you think about this business, I think, and I believe it was just looking back. And I guess for the last eight years, chicks for those years, you either grew that business by over 50% or you drop that business by over 50%.
I guess that was a surprise for me.
Guidance.
Can you talk a little bit about how you think about this business sustainably just looking back I.
I guess the last eight years six of those years, either grew that business by over 50% or you drop that business by over 50%.
Speaker 5: and to give a year, so very volatile from year to year. It's hard to see kind of what the strategy is long-term. How comfortable are you that this is actually a base that you can grow off of in that, you know, a little mid-pig of, sorry, mid-pig of high-shadowed the picture, forecasting long-term. Thanks, sir.
In a given year, so very volatile from year to year, it's hard to see kind of what the what the strategy is long term how comfortable are you that this is actually a base that you can grow off of.
And that yes.
Low to mid single mid to high single digit next year.
The long term.
Sure.
Speaker 3: George Evan, go. The strategic positioning of the business really hasn't changed. This is an adjunct to Medicare.
Sure Kevin.
Joe.
The strategic positioning of the business really hasnt changed.
This is an adjunct to Medicaid.
Speaker 3: We serve the working poor, we leverage our Medicaid network, we leverage our Medicaid network pricing and our Medicaid footprint. So the strategy hasn't changed. 90% of our members are fully or partially subsidized. That is the market segment we are approaching.
We serve the working poor we leverage our Medicaid network, we leverage our Medicaid network pricing in our Medicaid footprint. So the strategy Hasnt changed 90% of our members are fully or partially subsidized that is the market segment, we are approaching.
What you are observing this year is really a capital allocation decision.
Speaker 3: What you're observing this year is really a capital allocation.
Speaker 3: We never intended to have 728,000 members. That was a function of the special enrollment period, which not only grew membership beyond what anybody expected, but added a significant element of adverse.
We never intended to have 728000 members that was a function of the special enrollment period, which not only grew membership beyond what anybody expected, but added a significant element of adverse selection.
Speaker 3: really what you're seeing this year is the repositioning of the product as Mark suggested in his comments, from a pricing perspective, from a structuring perspective, from a metallic tier perspective, and from a distribution.
Really what Youre seeing this year is the repositioning of the product as Mark suggested in his comments.
From a pricing perspective from a structuring perspective from a metallic peer perspective and from a distribution perspective.
Speaker 3: to continue to target the working poor and to more emphasize the silver tier that is much easier to price to and to financially manage.
To continue to target the working poor.
And two more emphasize the silver tier that is much easier to price to into financially manage.
Speaker 3: This is a business where we're more focused on margin than we are membership and we will let membership float up and down with our ability to obtain mid-single-digit margin.
So this is a business where we're more focused on margin and we are a membership and we will let membership load up and down with our ability to obtain mid single digit margin.
Mark anything to add.
Speaker 4: I think that's right, Joe. If you look back to 2020, we were about 318,000 members at the end of the year. 2021 probably would have looked a lot more like 2020 if it wasn't for the SEP that Joe talked about, which almost none of us in the space knew pretty much this time last year.
That's right Joe.
You look back to 2020.
We were about 318000 members at the end of the year 2021, probably would have looked a lot more like 2020, if it wasn't for the S&P that Joe talked about which almost none of us in this space new pretty much. This time last year backing out that S&P 2021 would have looked a lot like 2020.
Speaker 4: backing out that SEP 2021 would have looked a lot like 2020. Here we are in 22 with an outlook that's a lot like 2020 and 2021 before the SEP. So I think this level in our portfolio is about the right level, but as Joe mentioned, we'll be entirely pricing for margin, not for volume.
Here, we are in 22 with an outlook that is a lot like 2020 and.
<unk> 2021 before the S&P.
So I think.
This level and our portfolio is about the right level, but as Joe mentioned will be will be entirely pricing for margin not for volume.
Kevin Youre not tough.
Speaker 5: You're not talking about increased competition or irrational pricing here. This is more of a company specific decision. I just want to make sure I understand.
Youre not talking about increased competition or irrational pricing here. This is more of a company specific decision that I just want to make sure I understand.
Speaker 5: There's a market issue or there's just Melina's straddings.
Is this a market issue or is it.
Strategy.
Speaker 3: Our strategy is to focus on our Medicaid footprint and to capture individuals who at times income out of Medicaid and have a marketplace product buy from us at zero premium. That's always been the strategy. And again, if you look back just a year ago, we were at 300,000 members. And then of course, the Special Women Period had 20 to 40,000 members a month were coming on to the marketplace. So
Our strategy is to focus on our Medicaid footprint and to capture individuals who at times income out of Medicaid and have a marketplace product to buy from us at zero premium that's always been the strategy and again, if you look back just a year ago, we were at 300000 members and.
And then of course, the special enrollment period.
Added $20 to 40000 members a month, we're coming on to the.
To the marketplace.
Speaker 3: at a higher acuity. So this is a capital allocation decision. It's a function of the SEP. It's a function of the pandemic. And we are comfortable with this business at roughly seven to eight percent of revenue leveraging our Medicaid footprint. And we think our capital allocation is appropriate as we've now repositioned the risk profile of this business.
At a higher acuity. So this is a capital allocation decision.
A function of the S&P, it's a function of the pandemic.
And we are comfortable with this business at roughly 7% to 8% of revenue leveraging our Medicaid footprint.
And we think our capital allocation is appropriate as we have now repositioned the risk profile of this business.
Alright Thats helpful. Thank you.
The next question is from Matt Borsch of BMO capital markets. Please go ahead.
Speaker 1: The next question is from that Borscht of VMO capital market. Please go ahead.
Good morning. This is oriented Brady on for Matt Borsch I was wondering if you could give more detail on the expected timing of the Medicaid redetermination.
Speaker 1: This is Ariana Brady on Fromat Borsch. I was wondering if you could give more detail on the expected timing of the Medicaid redetermination and how much certainty and visibility you have around the process. Thanks.
How much certainty and visibility you have around that thanks.
Sure.
Speaker 3: Sure, with the public health emergency now having been extended to April .
With the.
Public health emergency now having been extended to April .
Speaker 3: given the notification periods that are required. The first members will not be re-determining re-establishing eligibility until July 1st.
Given the notification periods that are required.
First members will not be re determining reestablishing eligibility until July one.
Speaker 3: We estimate that given that we grew organically approximately 750,000 members.
We estimate that given that we grew organically approximately 750000 members.
Speaker 3: since the beginning of the pandemic. That equates to approximately $2.9 billion of red...
Since the beginning of the pandemic that equates to approximately $2 $9 billion of revenue.
Speaker 3: We believe that $2.9 billion of revenue will
We believe that $2 $9 billion of revenue.
<unk> decreased.
Speaker 3: by 1.3 billion to a 1.6 billion dollar residual tariff.
By $1 3 billion to a $1 $6 billion residual target and that will happen partially over 2022, and then partially over 2023, Mark do you want to go through the numbers, yes, just to build on that so thats, a $1 3 billion decline over time.
Speaker 4: And that will happen partially over 2022 and then partially over 2023. Mark, do you want to go to the numbers? Yeah, just to build on that. So that's a 1.3 billion decline over time. But that's going to happen over a couple of years. So in my prepared remarks, I mentioned 400 million impacting our 2022 outlook and the additional 900 million in 23.
But thats going to happen over a couple of years. So in my prepared remarks, I mentioned $400 million impacting our 2022 outlook and the additional $900 million in 'twenty three.
Speaker 4: So our target was an expectation that we would keep half of these members gains since the start of the pandemic. They'll come off over time for the public healthy emergency and the revenue impacts across the two years are as I mentioned.
So our target was expectation that we would keep half of these members gain since the start of the pandemic they'll come off over time part of the public health emergency.
And the revenue impacts across the two years are as I mentioned.
Great. Thank you.
Yes.
Speaker 1: The next question is from Nathan Rick of Goldman Sachs. Please go ahead.
The next question is from Nathan Rich of Goldman Sachs. Please go ahead.
Speaker 6: Hi, good morning. Thanks for the questions. I wanted to follow up on the member attrition and marketplace. I guess I'm just trying to think about the 475,000 member decline for 2022 and how that's balanced between member attrition potentially due to SAP and maybe the adverse selection that you mentioned. I think that 300,000 that you saw sign up during that period and any competitive factors that you may have seen in the market. Could you help us think about how much marketplace margins were impacted by that adverse selection dynamic in 2021 as we think about where marketplace margins ended the year and the improvements that's contemplated to get to mid-single digit margins for 2022?
Hi, good morning, Thanks for the questions.
I wanted to follow up on the member attrition in marketplace.
I guess I'm, just trying to think about the 475000 member decline.
For 2022, and how that is balanced between.
Member attrition potentially due to the S&P and you know maybe the adverse selection that you mentioned I think the 300000 that you saw sign up during that period.
Any competitive factors that you may have seen in the in the market.
And.
Mark maybe you could help.
Help us think about how much marketplace and margins were impacted by that adverse selection dynamic in 2021.
As we think about where kind of marketplace margins ended the year and the improvement that contemplated to get to mid single digit margins for 2022.
Speaker 3: Well, first on the membership and revenue question, what's interesting and should be noted that although membership is down by over 60%, revenue is down by less than 40%, because we shifted the book to the silver tier. The silver tier has a much richer product design and therefore revenue.
Well first on the membership and revenue question.
What's interesting and it should be noted that although membership is down by over 60% revenue is down by less than 40% because we shifted the book to the silver tier the silver tier has a much richer product design and therefore revenue flow.
Speaker 3: So the PM PM revenue on silver is much higher. So the operating leverage is very positive. With respect to the margin, we are very confident in a return to mid-single digit. This produced, this business due to the SEP and the pandemic, this business produced a low single digit margin loss on $3 billion of revenue in 2021.
The <unk> revenue.
Silver is much higher.
So the operating leverage is very positive.
With respect to the margin.
We are very confident and returned to mid single digit.
This produced this business due to the SVP and the pandemic. This business produced a low single digit margin loss on $3 billion of revenue in 2021, we.
Speaker 3: We expect now to return that to a mid-single digit margin gained on $2 billion of revenue in 2022. So sort of a 7 to 8 point increase in margins. A lot of it due to the...
We expect now to return that to a mid single digit margin gain on $2 billion of revenue in 2022.
Sort.
A 7% to eight point.
Increase in margins a lot of it due to the.
Speaker 4: elimination of the COVID pandemic and much of it also do do the adverse selection that the SDP produced. Mark the numbers. Yeah, absolutely. So if you look at our membership, as you point out, we're down some 60% end of 21 versus 22. But as Joe mentioned, our revenues in marketplace are down 38%.
Elimination of the Covid pandemic and much of it also due to the adverse selection that the SVP produced Mark the numbers, yes, absolutely. So if you look at our membership as you point out we're down some 60%.
End of 'twenty, one versus 'twenty, two but as Joe mentioned.
Our revenues in marketplace are down 38%.
Speaker 4: why the disconnect within our new membership is a very different mix of bronze versus silver.
Why the disconnect.
Within our new membership is a very different mix of brands versus silver.
Speaker 4: Last year, 2021, we had about 41% of our portfolio in bronze. That'll be down to 15% in 2022. As I'm sure you know, the PMPMs, the revenue PMPMs, are quite different between bronze and silver. They're about 300 in bronze.
Last year 2021, we had about 41% of our portfolio and brands that will be down to 15% in 2022 as I'm sure you know the <unk>. The revenue <unk> are quite different between bronze and silver there are about 300 and brands and about $5 50 and silver.
Speaker 4: and about 550 in silver on an average across the portfolio. So that kind of offsets a lot of the volume decline just on higher PMPM is on those members.
On average across the portfolio, so that kind of offsets a lot of the volume decline just on higher PMT Amazon those members.
Speaker 4: Now on the margins, Joe mentioned last year 86.9 MCR. We're tracking this year to a 79, which is back in the middle of our long-term guidance for marketplace MLR.
Now on the margins.
Joe mentioned.
Last year's $86 nine MCR.
Tracking this year two of 79, which is smack in the middle of our long term guidance for market marketplace MLR Cup.
Speaker 4: A couple of things that Bridges from last year to this year. Obviously, we took significant pricing as we looked into the new year. Your specific question around what did SEP and COVID cost us? I think we mentioned at a high level in our prepared remarks. We carried across marketplace 430 basis points of COVID last year.
Couple of things that bridge us from last year to this year, obviously, we took significant pricing.
As we looked into the new year.
Your specific question around what did SVP and Covid caused us I think we mentioned at a high level on our prepared remarks.
Carried across marketplace of 430 basis points of Covid last year.
Speaker 4: and 360 basis points from the SEP. So you put those two together. That's 8% of headwind that I'm not expecting in the new year. COVID, we all have a more optimistic outlook for COVID in the new year. And SEP, the market will behave differently this year. The regulations are different. Fewer people can sign up. And our distribution strategy puts us in a different place. I just don't think we'll have that exposure.
And 360 basis points from the S&P. So you put those two together that's 8% of headwind that I'm not expecting in the new year Covid. We all have in a more optimistic outlook for COVID-19 in the new year and SVP.
The market will behave differently. This year. The regulations are different fewer people can sign up and our distribution strategy puts us in a different place I. Just don't think we will have that exposure.
Speaker 4: So you get the 8% pricing coming into the new year. You remove that headwind of COVID and SEP. Throw a trend assumption on there for what a normalized trend assumption could be. And you have a very clear path to that high 70, 79% MLR I'm talking about.
So you get the 8% pricing coming into the new year.
Or remove that headwind of Covid and SVP throw a trend assumption on there for what a normalized trend assumption could be and you have a very clear path to that high $70, 79% MLR I am talking about.
Thanks, I appreciate the detail.
The next question is from Stephen Baxter Wells Fargo. Please go ahead.
Speaker 1: The next question is from Stephen Baxter, Wells Fargo. Please go ahead.
Hi, Thanks for the updated view on earnings power I guess just first.
Speaker 7: Hi, thanks for the updated view on earnings power. I guess just first, you know, appreciate actions were required on the exchange business. I guess how should we think about the foregone membership there is impacting the earnings power dynamics you've talked about through 2021?
I appreciate actions where required on the exchange business I guess, how should we think about the foregone membership there is impacting the earnings power dynamics, you've talked about through 2021 it.
Speaker 7: It seems like in aggregate you're kind of at the same ballpark as you were before just trying to make sure I can follow that
It seems like in aggregate Youre kind of at the same ballpark as you work forward just trying to make sure I can follow that.
Speaker 7: And second, just to appreciate, you know, if you could provide a little more detail on what's still in the $2 of COVID pressure at this point, it sounds like maybe you're getting back 50 cents as a dollar of risk scores. Maybe that's half, or excuse me, a quarter of it.
And then second just would appreciate if you could provide a little more detail on what's still in the $2 of Covid pressure at this point it sounds like maybe youre getting back to <unk>.
For scores, maybe that path or excuse me a quarter of it but when you think about the balance it sounds like youre, saying that all three businesses I think will be roughly at target margins, just trying to understand where you feel like the opportunity to sell it.
Speaker 7: But when we think about the balance, you know, it sounds like you're saying that all three businesses, you know, I think will be roughly a target margin. Just try not to understand where you feel like the opportunity still is. Thanks.
Speaker 3: Sure, Steven, you mentioned the embedded earnings power, which is not a theoretical construct. We didn't construct it in the abstract. It's real. And as we previously disclosed.
Sure.
Stephen you mentioned the embedded earnings power.
Which is.
Is not a theoretical construct we didnt constructed in the abstract is real.
And as we previously disclosed.
Speaker 3: Fitting on top of our $13.50 actual result for 2021. Well, it's $6.50 of embedded earnings.
Sitting on top of our $13 50 actual results for 2021.
It was $6 50 of embedded earnings power.
Speaker 3: clearly with the significant impact of the pandemic was something reasonable to account for and because we've been so acquisitive, we thought it was also helpful to account for the growing accretion of our closed acquisition.
Clearly with the significant impact of the pandemic with something.
Reasonable to account for that because we've been so acquisitive. We thought it was also helpful to account for the growing accretion of our closed the acquisition.
Speaker 3: So, sitting on top of our $13.50 result for $21, was an additional $6.50 to embedded earning. We have harvested $3.50.
So <unk>.
Sitting on top of our $13 50 results through 'twenty, one was an additional $6 50 and embedded Ernie.
We have harvested $3 50.
Speaker 3: of that embedded earnings inside our $17, at least $17 plan with 2022.
Of that embedded earnings inside or $17.
At least $17 plan for 2022.
Speaker 3: Also, as you suggested, sitting on top of the $17 is an additional $2.50 of continued embedded earnings power due to the net effect of COVID, due to the affinity and synatexis acquisitions, which are new to the portfolio, and age well will add a little bit of...
Also as you suggested.
Sitting on top of the $17 is an additional $2 50, a continued embedded earnings power due to the net effect of Covid.
Due to the affinity and Cigna, Texas acquisitions, which are new to the portfolio and as well to add a little bit as well.
Speaker 3: So it's a real construct. The embedded earnings have been harvested inside the 2022 plan and some still exist to add to future earnings both here.
<unk>.
It's a it's a real construct the embedded earnings have been harvested inside the 2022 plan and some still exist to add.
Add to future earnings growth year over time.
Speaker 3: In the net effective COVID, we account for three things. We account for the direct cost of COVID related care. We attempt to estimate the effect of utilization curtailment due to the pandemic. And then we account for the effects of the portal.
And the net effect of Covid, we account for three things we account for the direct cost of Covid related care, we attempt to estimate the effect of utilization curtailment due to the pandemic.
And then we.
We account for the effects of the corridor.
Speaker 3: As we previously suggested, the corridors were significant in 2021.
As we previously suggested.
Corridors were significant in 2021.
Speaker 3: We had nine of them that were financially significant. That has been reduced to three for 2022. So they linger on into 22 in the state of Washington, Ohio and Mississippi. We have every confidence when the PhD ends, they too will be eliminated. That's really what's in the $2 net effective COVID for 2020.
We had nine of them that we're financially significant that has been reduced to three for 2022.
So they linger on into 'twenty, two and the state of Washington, Ohio in Mississippi, We have every confidence when the Phd and phase II will be eliminated.
Really what's in the $2 net effect of Covid.
420 <unk>.
Speaker 3: 22 are the lingering effects of three quarter.
<unk> 22, or the lingering effects of three corridor.
Thanks for the color.
Speaker 1: The next question is from Michael Hall of Morgan Stanley . Leave go ahead.
The next question is from Michael Hall of Morgan Stanley . Please go ahead.
Hey, Thank you guys.
Speaker 8: Hey, thank you guys. I appreciate the color on the exchanges. I understand you're pretty confident on this single digit margin this year, but just wanted to clarify, a large percent of these lives that were lost. Basically, they were very low to no margin, maybe the negative margin, so earnings impact was basically negligible. And looking forward, are you now at a place where the portfolio is fully right-sized?
I appreciate the color on the exchanges I understand you're pretty confident on mid single digit margin.
Just wanted to clarify it largely kind of these lives that were lost.
Anywhere.
Very low to no margin and maybe even negative margin so.
Earnings impact was basically negligible and looking forward are you now at a place where the portfolio of Chipotle right side.
Speaker 8: You're ready to charge ahead at 5% long-term growth of the year.
Youre ready to charge ahead at 5% to 8% long term growth a year.
Speaker 3: Yes, just against an additional color, the answer is yes, that special enrollment membership, you know, ran at a very high loss ratio in fact.
Yes.
Just again some additional color. The answer is yes that special enrollment membership ran at a very high loss ratio in fact.
Speaker 3: The volume, it represented about 40% of the member month volume in the fourth quarter alone.
The volume it represented about 40% of the.
Member month volume in the fourth quarter alone.
Speaker 3: and 25% of the year. RANN had 105% MCR in the fourth quarter, and just about 100% for the full year.
And 25% for the year ran at 105% MCR in the fourth quarter and just about a 100% for the full year.
Speaker 3: So that was a significant contribution to our issues this year. As Mark suggested, blended over the entire year, it was 260 basis points of MCR.
So that was a significant contribution to our issue this year as Mark suggested blended over the entire year. It was 260 basis points of MCR pressure.
Speaker 3: So we expect that to completely reverse into next year. The business is positioned where it should have been, pre-SEP. As I said, we follow our Medicaid footprint. We sell to highly subsidized members. Now that we've repositioned the mix to more silver than bronze, we have every component that this is the solid baseline, mid single digit margins, and probably mid to low single digit growth here over the windshield.
So we expect that to completely reverse into next year.
The business is positioned where it should've been pre S&P.
As I said, we follow our Medicaid footprint, we sell to highly subsidized members now that we've repositioned the mix to more silver than brands. We have every confidence that this is a solid baseline mid single digit margins and probably mid to low single digit growth year over the foreseeable future.
The next question is from Josh Raskin of Nephron Research. Please go ahead.
Speaker 1: The next question is from Josh Raskin of Neffron Research. Please go ahead.
Speaker 9: Thanks, good morning. I've been a bigger picture question around where Malena is in their corporate life cycle. Obviously, to turn around, Joseph, you've got there about four years ago. It's been much more successful than I think anyone expected. And feels mainly driven by this big margin improvement and some opportunistic M&A. But teams as though we're getting to a point where there are some top line headwinds and it's sort of edging and flowing. And as you look over the next few years, I'm curious about the plan to extract.
Thanks, Good morning, I have been a bigger picture question around where Molina as domestic corporate lifecycle up obviously the turnaround Joe since you got there about four years ago has been much more successful than I think anyone expected in sales, mainly driven by this big margin improvement and some opportunistic M&A, but it seems as though we're getting to a point where there are some topline.
Headwinds and it sort of ebbs and flow Inc. And as you look over the next few years I'm curious about the plan to extract more value from that membership not just the embedded earnings that you talked about but real value over the long term and are we at a point where scale and maybe.
Speaker 9: more value from that membership, not just the embedded earnings that you talk about, but real value over the long term. And are we at a point where scale and maybe...
Speaker 9: you know, other non-insurance-based capabilities become more important.
Other non insurance space capabilities become more important.
Speaker 3: You know, it certainly is part of our strategic planning process to look at all opportunities for allocation of capital. And yes, we're well aware of the capability bills that happen in other companies. We're well aware of vertical integration with providers.
It certainly is.
Part of our strategic planning process to look at all opportunities for allocation of capital.
And yes, we're well aware of the capability builds that happen in other companies, we are well aware of vertical integration with providers.
Speaker 3: We believe for the foreseeable future, there is so much growth both in the demographic actual membership growth, particularly in the high-acuity segment, that we don't have to look far beyond our ability to take capitated risks.
We believe for the foreseeable future there is so much growth.
Both in the demographics demographics actual membership growth, particularly in the high acuity segment that we don't have to look far beyond.
Our ability to take capital risk, particularly.
Speaker 3: particularly with high-acuity members, manage it really well, be a rate taker in Medicaid, grow Medicare, and use this ballast of marketplace as this residual mechanism that we don't need to do much beyond that to sustain the growth around. We never would have suggested a 13 to 15% revenue growth in 15 to 18% EPS growth.
Particularly with high acuity members manage it really well.
B a rate taker in Medicaid.
Grow Medicare and use this ballast of marketplace as this residual mechanism that we don't need to do much beyond that to sustain the growth around we'd never would have suggested a 13% to 15% revenue growth at 15% to 18% EPS growth.
Speaker 3: 5 2025 if we didn't see enough runway to continue growing the business.
By 2025, if we didn't see enough runway.
To continue growing the business and the swim lanes we're in.
Speaker 3: and the swim lanes we're in. So certainly in our strategic planning process, we always look at capability builds. We are not going to allocate capital to vertically integrate with providers. For us, we do not think that's a good deployment of capital, but there's so much runway with the wide, the number of lives that will go managed and particularly the high-acuity lives that we don't need to do much beyond that.
So certainly in our strategic planning process, we always look at capability build.
We're not going to allocate capital to vertically integrate with providers for us we do not think that's a good.
Deployment of capital.
But there is so much.
Runway with the wide the number of lives that will go managed and particularly the high acuity lives.
We don't need to do much beyond that.
Very helpful. Thanks.
Speaker 1: The next question is from Justin Lake of Wolf Research. Please go ahead.
The next question is from Justin Lake of Wolfe Research. Please go ahead.
Speaker 10: Thank you. Good morning. A couple questions here on the exchanges. First, Joe, go back to the third quarter.
Thanks, Good morning couple of questions here on the exchanges first Joe go back going back to the third quarter.
Speaker 10: You had talked about exchange membership being blasted down. So you certainly indicated that there could be some pressure here. But the fact that flat was in the ballpark, potentially, the 60% decline is certainly more than, I think, any of us expected. So I was hoping you could tell us a little bit more about what happened between the third quarter and today.
You had talked about exchange membership being flat to down. So you certainly indicated that there could be some pressure here, but the fact that flat was in the ballpark potentially right, 60% decline is certainly more than I think any of US expected. So I was hoping you could tell us a little bit more about what <unk>.
But between the third quarter and today.
Speaker 10: that you know, so significantly change the outlook for the exchanges. Like did you, did you cut commissions or something? Is there, is there something structural that you did? Uh, or is it just higher turn? What can you tell?
That significantly changed the outlook for the savings like did you did you cut commissions or something is there is there something structural that you did.
Or is this just higher churn.
What can adult.
Speaker 3: Well, certainly all the strategies that we were executing for 2022 were in place during the third quarter they had to be as we're going into open enrollment. Yes, membership is down, but we withdrew in just about all of our markets, the Bronx.
Well certainly all the strategies that we were executing for 2022 were in place during the third quarter they had to be.
As we're going into open enrollment.
Yes membership is down, but we withdrew and just about all of our markets the bronze product.
Speaker 3: Now, how many of those members were going to then take up a Molina-based silver product? Was a matter of estimation. Would I have hoped to end up with more membership if it was silver? Sure. But 320,000 out of the gate is just...
Now how many of those members were going to then take up a Marina Bay silver product was a matter of destination.
Would I have hoped to end up with more membership if it was silver short.
But 320000 out of the gate is just fine.
Speaker 3: So as you take a complete product set off the shelf, except in free states where the circumstances are quite different. Basically pull it off the shelf. It was hard to know how much of that membership would have stayed in a Malina product with silver. But the good news is the members we do have, most of them are renewal members, and 85% of them are silver. So. So.
So as you take a complete product set off the shelf, except in three states, where the circumstances are quite different but basically pull off the shelf. It was hard to know how much of that membership would have stayed in a molina product with silver.
But the good news is the members that we do have most of them are renewal members and 85% of them are silver.
<unk>.
Speaker 3: Irrespective of where we started and where we ended up, we're ending up in a really, really good place. That foretens well for the production of the mid-single.
Irrespective of where we started and where we ended up we're ending up in a really really good place that portends well for the production of the mid single digit margin.
Great and then I'd love to get your opinion on a couple of things you talked about the impact.
Speaker 10: And then, you know, I'd love to get your opinion on a couple things. You talked about the impact.
Speaker 10: of the Special Enrollment Periods, both the margins and membership.
The special enrollment period, both the margins and membership.
Speaker 10: I'd love to hear your view on how sticky do you think that membership is in terms of?
I'd love to hear your view on like how sticky do you think that membership is in terms of.
In terms of 2022 right. If we don't have those personal enrollment periods like what do you think happens with those members also theres a lot of talk about the fact that with Medicaid Redetermination, we could see a lot of those members move.
Speaker 10: In terms of 2022, right, is if we don't have those personal role in fear, it's like, what do you think happens with those members? Also, there's a lot of talk about the fact that, you know, with Medicaid determination, we could see a lot of those members move.
Speaker 10: from Medicaid over to the exchanges.
Rob.
Medicaid over to the exchanges.
Speaker 10: So what do you think happens with those two things specifically and then you know maybe you can give us your kind of view of what you think the Marketplace is going to do in terms of enrollment overall Given all those different swing factors In 2022 versus 2021. Do you think it grows or shrink?
So what do you think happens with those two things specifically and then maybe you could give us your kind of view.
Thank the marketplace is going to do in terms of enrollment overall.
Given all of those different swing factors.
In 2022 versus 2021, do you think it grows or shrinks.
Speaker 3: Well, certainly, when insurance is available to you, anytime you need it, you buy it. And it should be no surprise that the effects of the adverse selection were significant.
Sure well certainly.
When insurance is available to you any time you need it.
By it and it should be no surprise that the effects of the adverse selection where significant.
Speaker 3: So the question then becomes, what happens to that cohort? A lot of the uptake during the special enrollment period was brought.
So the question then becomes what happens to that cohort a lot of the uptake during the special enrollment period was Brian .
Speaker 3: So to the extent that that product was the one that was affordable and no Malina bronze product was available They either renewed with us into silver. It didn't renew with us
So to the extent that that product was the one that was affordable and no Molina bronze product was available.
With a renewed with us into silver didn't renew with us at all.
Speaker 3: The other fact that's really important is if the acuity of the member didn't change, there's still high acuity, but now we still have...
The other fact, that's really important is if the acuity of the member Didnt change Theres still high acuity, but now we still have them.
Speaker 3: The fact that we've now had them for over a year means that we'll be able to capture restoring more.
The fact that we've now had them for over a year means that we'll be able to capture risk scoring more.
Appropriately.
Speaker 3: appropriately and the fact that the Ren Silver means the risk or will count for more revenue. So the fact that some of these members renewed into the renewal book into 2022 is fine. The numbers not very high, but now we have visibility into their acuity, we'll be able to capture the risk or, and at least they're in a silver product.
And the fact that the RIN silver it means the risk score will account for more revenue.
So the fact that some of these members renewed into the renewable book into 2022 is fine. The number is not very high but now we have visibility into their acuity will be able to capture the risk score and at least they are in a silver product.
Long term.
My comments are going to really extend to our strategy, which is this is a high subsidy strategy to follow our Medicaid footprint. My view of this has always been and Im looking I was always looking for the right word it's a residual market for Medicaid.
Speaker 3: My comments are going to really extend to our strategy, which is this is a high-stubbed city strategy to follow our Medicaid foot.
Speaker 3: My view of this has always been, and I was always looking for the right words. It's a residual market for medicine.
Speaker 3: As members get part-time jobs and have an income level just above Medicaid, they're probably eligible for highly subsidized market...
As members get part time jobs and have an income level, just above Medicaid that probably eligible for highly subsidized marketplace product our strategy has always been to.
Speaker 3: Our strategy has always been to target that market. Now our execution has been less than perfect on that. But that's always been the...
To target that market.
Our execution.
It's been less than perfect on that.
But thats always been the strategy so.
Speaker 3: This is going to grow with the working poor, with the Medicaid population as people flexed up and down. So we think they're, as we said in a yesterday, most single digit growth rate mid to, I think it's 5 to 8%, I think it's the right number. And we're confident that that's the way the business will grow with a yield that's probably half of that and membership growth that's another half.
This is going to grow with the working poor with the Medicaid population as people flex up and down so.
We think there as we said in Investor day, low single digit growth rate mid to I think it's 5% to 8% I think is the right number.
And were confident that thats the way the business will grow with a yield thats, probably half of that membership growth thats growth thats another half of that.
Speaker 3: But it's a product that should flex up and down with Medicaid as the Medicaid role. Move up.
But.
It's a product that should flex up and down with Medicaid as the Medicaid roles.
I'll move up and down.
Speaker 4: And Justin, it's Mark, the only thing I'd add to that is I think you asked about redetermination as well. As you know, we have the projections for some revenue coming off and some members through redetermination. What we don't have is those members picked up in our marketplace product. At the margins, we expect to drive here that is all upside to our projections.
And Justin it's Mark the only thing I'd add to that is I think you asked about redetermination as well.
As you know we have the projections for some revenue coming off and some members through Redetermination. What we don't have is those members picked up in our marketplace product.
At the margins, we expect to drive here that is all upside to our <unk>.
<unk>, but.
Speaker 4: but we have a meaningful effort out there to pick up the redetermination members in our marketplace and Medicare in some case products through Cross Del, which is meaningful upside to the numbers we've talked about today.
But we have a meaningful effort out there to pick up the redetermination members in our marketplace and Medicare in some case products through cross sell which is meaningful upside to the numbers we've talked about today.
Great. Thanks.
Speaker 1: The next question is from AJ Rice of Credit's Police. Please go ahead.
The next question is from a J rice of credit Suisse. Please go ahead.
Hi, everybody.
Speaker 10: Let me just ask you about the Medicaid business. So can you comment on what the RFP pipeline looks like where the opportunities are, where the defending requirements might be, and just in a way may be comment on California that's been in the press lately with discussion about potentially a side deal with kinds of permanency. Do you think that's gonna be a normal RFP process from your perspective or their nuances of difference? And I don't think you've commented on
Let me just ask you about the Medicaid business. So can you.
You comment on what the RFP pipeline it looks like where the opportunities are where the defending re procurements might be and specifically may be comment on.
California.
Lately with Bob.
Discussion about is this ideal with Kaiser Permanente do you think thats going to be a normal RFP process from your perspective are there.
There is a difference and I don't think you've commented on.
Speaker 10: your expectations for the 22 average composite rate increase across your state.
Your expectations for the 22 average composite rate increase across your states.
Speaker 10: that you're seeing in Medicaid, and I wanted to, if I'm missed that, or if you would give that.
You are seeing in Medicaid I wanted it.
I missed that or.
If you would give that.
Well, hi, Jay Thanks for asking about Medicaid, obviously, 80% of the revenue base.
Speaker 3: Well, AJ, first thanks for asking about Medicaid. It's obviously 80% of the revenue base. And we couldn't be more pleased with the result that the Medicaid team produced in 2021 and the plan for 22. I mean, it's now a total of nearly a $24 billion of revenue, $23 billion of premium revenue. And it's gonna operate north of a 3% affi-tech margin.
We couldnt be more pleased with the result that the Medicaid team produced in 2021 and the plan for 'twenty. Two I mean, it's now a total of nearly $24 billion of revenue and $23 billion of premium revenue and it is going to operate north of a 3% after tax margin.
Speaker 3: We continue to win new business. And yes, we do have to retain and defend our existing contract as you suggest.
We continue to win new business.
And yes, we do have to retain and defend our existing contract as you suggested.
Speaker 3: on the California RFC was distributed just yesterday.
The California RFP.
With.
Distributed just yesterday.
Speaker 3: We believe the Texas RFP will be distributed late in the first quarter. And Mississippi is in the middle of a proposal writing effort as we sit here today. Most of the other repercurements are longer dated. But those are the three. We have a high confidence in all three of them.
We believe the Texas RFP will be distributed late in the first quarter.
And Mississippi is in the middle of a proposal writing effort as we sit here today most of the other re procurements are longer dated but those are the three we have a high confidence in all three of them.
Speaker 3: We run a really well-run business in California. We have a great team. As you know, it's a pretty complex state with respect to how the regions work. And yes, I think us and the rest of the managed care industry were disappointed that Kaiser was awarded a no-bid contract. But it's not a, it's not as though it's some transformational event that's going to reshape the entire Medi-Cal landscape. It's incremental.
One a really well run business in California, we have a great team as you know, it's a pretty complex state with respect to how the regions work and yes, I think us and the rest of the managed care industry. We're disappointed that Kaiser was awarded.
A no bid contract, but it's not a it's not as though it's been transformational.
And that's going to reshape the entire medical landscape it's incremental.
Speaker 3: In fact, most of the impact will be in the two plan regions where the
Most of the impact will be.
The two planned regions.
Where the.
The local health plans have major share.
Speaker 3: the local out plans have major share. So high confidence in California, high confidence in Texas, in fact, we say that the fact that the regulatory process for the SIGMA acquisition went so well that it is testimony to the high regard the state holds us in with respect to the Star Plus.
So high confidence in California high confidence in Texas in fact, we say that the fact that the regulatory process for the Sigma acquisition went so well that it is testimony to the high regard the state holds us in with respect to the starplex popular.
Population.
Speaker 3: With respect to new states, as you know, there's a $108 billion pipeline over four to five years.
With respect to new States as you know there is a $108 billion pipeline over four to five years.
Speaker 3: We certainly won't chase every opportunity in every state. We are very selective as to where we think we can win evaluating a series of criteria. But our proposal writing team, our business development team, our extremely active and to date have demonstrated a great deal of success with a Kentucky win and Nevada win and defending the Ohio P.S.
We certainly won't chase every opportunity and every state.
We are very selective as to where we think we can win evaluating a series of criteria.
But our proposal writing team our business development team.
Our extremely active and to date have demonstrated a great deal of success with the Kentucky win in Nevada win.
And defending the Ohio contract.
Speaker 3: So the business is performing extremely well and at 80% of revenue it needs to and has. And the outlook for growth both organically and inorganically is pretty robust.
So the business is performing extremely well and at 80% of revenue it needs to and has.
And the outlook for growth, both organically and Inorganically is pretty robust.
Speaker 10: Okay, any thoughts on the rate increase for 22 on average?
Okay any thoughts on the rate increase for <unk> on average.
Speaker 3: I don't think we've given a specific percentage, but the rate increase was low single digit in Medicaid across the book. We are comfortable with its actuarial soundness. It is generally kept paced with our view of normalized medical cost trend, which also was low single digit.
Yes, I don't think we've given a specific percentage, but the rate increase was low single digit.
In Medicaid across the book.
We are comfortable with its actuarial soundness. It has generally kept pace with our view of normalized medical cost trend, which also was low single digit.
Speaker 3: So the rate environment is stable, is rational, the principle of actual real soundness, and the return to a prospective setting of rates.
So the rate environment is stable, it's rational the principle of actuarial soundness and the return to a prospective setting up rates based on our sound medical baseline and the removal of these corridors seems to be happening as quickly as we originally estimated.
Speaker 3: based on a sound medical baseline of the removal of these corridors, seems to be happening as quickly as we originally estimated.
Okay, great. Thanks, a lot.
The next question is from Steven Valiquette of Barclays. Please go ahead.
Speaker 1: The next question is from Stephen Zallow's Cut of Barclays. Please go ahead.
Speaker 5: Great, thanks. Good morning. I guess few more interrelated questions on marketplace. You know, first just with the drop-off in membership by 65%.
Great. Thanks, good morning.
I guess two are interrelated questions on marketplace.
First just with the.
Drop off in membership by 65% from $7 28 to $2 50, as we think about the quarterly cadence around that.
Speaker 6: 728-250. As we think about the quarterly cadence around this.
Speaker 5: Do you have any sense where that'll shake out at the end of the first quarter in particular? And then is it possible that the 250 year-end number maybe is just conservative, you know, around the progression around all?
Do you have any sense of where that will shake out at the end of the first quarter in particular, and then is it possible that the $2 50 year end number maybe it's just conservative around the progression around all this.
And then the second question, maybe just ask it now to you.
Speaker 5: Then the second question, maybe just ask it now too, because it's kind of interrelated with the 65% decline in membership, but revenues expected to decline 38%. As we think about the delta between those two numbers, how much of that is just driven by that shift from bronze to silver versus just premium increases, just trying to get a proxy for what drives the delta between that two a little more color?
They are interrelated with the 65% decline in membership revenues.
Revenue is expected to decline 38, 38% as we can.
Think about the delta between those two numbers how much of that is just driven by that shift from brands to silver.
Versus just premium increases just trying to get a proxy for.
What drives the delta between that to you a little more color on that thanks.
Speaker 3: Most of it is the shift from Bront to Silver, which is a very significant differential in the PMPM revenues that those products generate. But we did go for in a tame a highest single digit rate increase in that business.
Most of it is the shift from Brian to silver.
Which is a very significant.
Differential in the P. NPM revenues that those products generate but we did go for it and attain a high single digit rate increase in that business.
In terms of where we start and where we end.
Speaker 3: In terms of where we start and where we end, I think we said we started with 323 and 30,000 members after the whole annual enrollment period.
I think we said we started with 323% to 30000 members after the whole annual enrollment period.
Speaker 3: We are projecting pre-pandemic levels of attrition, which average 1.5 to 2% a month. Now, if that doesn't happen, we'll end up with more than 250,000 members by year end. We're also expecting not to pick up many members during special enrollment. As you know, the special enrollment period still exists.
We are projecting pre pandemic levels of attrition, which average one 5% to 2% a month now if that doesn't happen, we'll end up with more than 250000 members by year end. We're also expecting not to pick up many members during special enrollment as you know the special enrollment period.
Still exists.
Speaker 3: But the eligibility requirements have been significantly reduced to where only people at less than 150% of federal poverty level income are eligible.
The eligibility requirements have been significantly reduced.
To wear only people at less than 150% of federal poverty level income are eligible.
Speaker 3: So if we won't pick up SAP members, we're confident in that. And if a tradition is at 1.5 to 2% a year, the 250,000 number by year end is about where we went. The
If we were.
Won't pick up.
Members, we're confident in that and if attrition is at one 5% to 2% a year to 250000 number by year end is about where we win.
Okay, Alright got it thanks.
Speaker 1: The next question is from Scott Siddell of Steven. Please go ahead.
The next question is from Scott Fidel of Stephens. Please go ahead.
Hi, Thanks, good morning.
Speaker 9: Hi, thanks. Good morning. Just interested if you can give us your initial thoughts on the 2023 MA Advanced Noted. And then just walk us through your capital priorities and how you think about capital deployment this year in terms of M&A opportunity, buybacks, et cetera. Thanks.
Just interested if you can give us your initial thoughts on the 2023.
As noted.
And then just walk us through your capital.
<unk>, how are you thinking about capital appointment to geron charges.
M&A opportunity buybacks et cetera. Thanks.
Speaker 3: or obviously like the rest of the industry, we were pleased.
Sure obviously like the rest of the industry we were pleased.
Speaker 3: with the advanced notice. Second year in a row that it looked very attractive on its surface.
With the advanced notice.
A second year in a row that it looked very attractive on its surface.
Speaker 3: You know, we've grown our Medicare business, even though half of it is demonstrations which likely won't grow, the other half is marketed business in the DeSnet product that will grow.
We've grown our Medicare business, even though half of it is demonstrations, which likely won't grow. The other half is is marketed business into D. SNP product that will grow and the fact that we are growing from 142 to 152000 members.
Speaker 3: The fact that we are growing from 142 to 152,000 members.
Speaker 3: is significant. So we're really happy with the growth characteristics of the business. We think two years straight of rate increases give us a lot of room to put the right benefits in the product.
Is significant.
So we're really happy with the growth characteristics of the business, we think two years right.
Rate increases give us a lot of room to put the right benefit and the product too.
Speaker 3: to rate it appropriately and to win new business and have margins in the mid-stingled digit after tax territory where we're positioned today. So we're really bullish on our Medicare business and we have a great team that will grow that business here over the foreseeable future, as we said in our investments.
To rate it appropriately and to win new business and have margins in the mid single digit after tax territory, where we're positioned today. So we're really bullish on our Medicare business and we have a great team that we'll grow that business here over the foreseeable future as we said at our Investor day.
Speaker 4: Capital deployment mark. So on the capital side, I feel really good about our dry powder. We're starting off the year with a good cash balance that the parents are projected cash flow for the year is strong and you can see the leverage metrics gives me a lot of room to raise more if I need it.
Capital deployment, Mark so on the capital side I feel really good about our dry powder, we're starting off the year with.
A good cash balance at the parent.
Our projected cash flow for the year is strong and you can see the leverage metrics gives me a lot of room to raise more if I need it.
Speaker 4: On the M&A side, I'm encouraged by what we're seeing for the year. A number of things in the hopper right now. Of course, they all move at their own speed. We never make commitments about when they might happen. But good align a site on a number of targets, which I'm hoping to deploy the capital again.
On the M&A side.
Encouraged by what we're seeing for the year.
Number of things in the Hopper right now of course, they all move at their own speed, we never make commitments about when they might happen, but good line of sight on a number of targets.
I am hoping to deploy the capital against.
Speaker 4: What Joe and I have always been adamant about though is share with purchases when and where appropriate. There's some small amount that is just part of our normal hygiene that we would probably do during the course of the year, not a big commitment by any means. But just on an annual basis, there is some small amount we like to do. Part of that, though, a function of what the M&A pipeline turns out on. We'll have to see how that plays out on the year.
What Joe and I have always been adamant about though is.
Share repurchases.
When and where appropriate there is some small amount that is just not part of our normal hygiene that we would probably do during the course of the year not a big commitment by any means but just on an annual basis. There is some small amount we'd like to do part of Thats, though a function of what the M&A pipeline turns out on we'll have to see how that plays out on the year.
The next question is from George Hill of Deutsche Bank. Please go ahead.
Speaker 1: The next question is from George Hill of Deutsche Bank. Please go ahead.
Speaker 2: Hey, good morning guys and thanks for taking the question. I know a lot's been covered here, so I just was gonna ask one about the PBM Carbons. And I guess, could you talk about is the impact of that meaningful at all? I didn't hear you guys called out in the prepared commentary and I didn't have anything on it in my notes. So maybe just kind of maybe walk through the mechanics. How does it impact the income statement? Is there any meaningful impact of the financials from the PBM Carbons?
Hey, good morning, guys and thanks for taking the question I know a lot's been covered here. So I just was going to ask one about the TBM carve ins and I guess could you talk about is the is the impact of that meaningful at all I Didnt hear you guys called out.
In the prepared commentary and I don't have anything on at my notes.
So maybe just kind of maybe walk through the mechanics, how does it impact. The income statement is the is there any meaningful impact to the financials from the ppm carbon.
Okay.
Speaker 3: I think you're George Frunc to the PBM Carbouds. Yes. In California. I think you guys carve into the safe.
I think Georgia for him to the.
TBM carve outs, yes.
How about you guys carved into the state okay. Okay. Thank you.
Speaker 3: Okay, thank you. You want to make sure we're talking about the same thing. Sure, we have a $500 million revenue decrement in our forecast of the year due to the car box, which is a full year of California and a half a year of Ohio.
Just wanted to make sure we're talking about the same thing.
Sure we have a $500 million revenue decrement in our forecast for the year due to the carve out which is a full year of California, and the half a year of Ohio.
Speaker 3: And obviously, there's margin implications to that. These revenues that are taken out into a fee-for-service environment generally carry with them the average Medicaid margins. So think of it as the loss of the average Medicaid margins on $500 million.
And obviously there.
Theres margin implications of that.
These revenues that are taken out into a fee for service environment generally carry with them. The average Medicaid margins. So think of it as the loss of the average Medicaid margins on $500 million of revenue.
Helpful. Thank you.
Speaker 1: And the last question comes from Gary Taylor of Colin. Please go ahead.
And the last question comes from Gary Taylor of Cowen. Please go ahead.
Okay.
Speaker 11: Hi, good morning. Most of my questions sort of touched on one way or the other, but just refining a little bit. You have any on the non,
Hi, Good morning, most of my questions sort of touched on one way or the other such as refining a little bit.
Do you have any on the on the non FTE.
Speaker 11: extreme population. Do you have any retention figures on that piece for what it historically looks like?
Okay.
Population do you have any.
<unk> figures.
Figures on on that versus what it's historically looked like.
That's too early.
Speaker 3: Gary, want to make sure we answer any questions. When you say retention, you're talking about throughout the year, our lapse rate, or you're talking about how many members review from the prior year.
Gary you want to make sure we answered your question when you say retention you're talking about throughout the year, our lapse rate or you're talking about how many members renew from the prior year.
The latter.
Speaker 4: Yeah, we do have pretty good insight at this point. A much better proportion of our starting membership this year is renewal, meaningfully better than say even last year.
Yes.
We do have pretty good insight at this at this point.
A much better proportion of our starting membership this year is renewal meaningfully better.
Then say even last year.
Speaker 4: Part of that is with the smaller book, a number of our members rolled over with us.
Part of that is with the smaller book a number of our members rolled over with us.
Speaker 4: So we kept a much higher percentage of renewal members this year. And that's a really good thing because we know those members better. We have the history on them and that converts right into risk adjustment and starting the year with a much better risk adjustment position and obviously being able to code those members right out of the gate.
So we kept a much higher percentage of renewal members. This year and that's a really good thing because we know those members better we have the history on them and that converts right into risk adjustment and starting the year with a much better risk adjustment position and obviously being able to code those members right out of the gate. So we feel good.
Speaker 4: So we feel good about that higher level of renewals and it does translate into risk justice.
About that higher level of renewals and it does translate into risk adjustment.
Great and then my second one was on the Medicare risk adjustment.
Speaker 11: Right. And then my second one was on the Medicare risk adjustment, you know, headwind related to...
Headwinds related to.
Speaker 11: pandemic. I thought at one point you had stated that.
And then Mike I thought.
I thought at one point you had cited that Oh.
Speaker 11: dollar it sounds like you're saying you're you're gonna recoup 50 cents of that in 2000 and
Dollar it sounds like Youre, saying youre going to recoup.
Of that 2000.
Speaker 11: Does it still mean there's another 50 cents for that and that's maybe kind of embedded in your
22 does that still mean theres another 50.
That and that may be kind of embedded in your.
Your remaining COVID-19 recapture rmi.
Speaker 11: you remaining COVID recapture, or have the dollar change for our public money?
<unk> changed our mind.
Speaker 4: No, it's Mark. Your memory is quite good. We used to talk about a dollar of Medicare risk or in our embedded earnings. That is, we just weren't able to get out there and do the in-home assessments and the risk-goring during the pandemic the way we had historically.
No.
It's Mark your memory is quite good.
We used to talk about a dollar of Medicare risk score in our embedded earnings that is we just weren't able to get out there and do the in home assessment and the risk scoring during the pandemic. The way we had historically so we were carrying a dollar now the good news is late in the third quarter, especially in the fourth quarter.
Speaker 4: that we were carrying a dollar. Now the good news is late in the third quarter, especially in the fourth quarter, we were actually able to realize part of that. CMS extended the window for submissions from 20.
We were actually able to realize part of that.
CMS extended the window for submissions from 2020, which meant we were able to get a little bit more of that into the back half of 'twenty. One as a result that dollar fell to 50 at the end of the year and we'll realize that 50 in our guidance. So the dollar we.
Speaker 4: which meant we were able to get a little bit more of that into the back half of 21. As a result, that dollar fell to 50 cents at the end of the year and we'll realize that 50 cents in our guidance.
Speaker 4: So the dollar we used to talk about, 50 cents you got in third and fourth quarters, the other 50 cents you're getting in guidance. percent of it
Used to talk about 50 cents you got in third and fourth quarters. The other 50 youre getting in guidance.
Got it okay. Thank you.
This concludes our question and answer session and today's conference. Thank you for attending today's presentation. You may now disconnect.
Speaker 1: This concludes our question and answer session and today's conference. Thank you for attending today's presentation. You may now disconnect.
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Speaker 1: Good morning and welcome to the Molina Healthcare 4th Quarter earnings conference call. All participants will be in listen only mode. Should you need assistance please signal a conference specialist by pressing the star key followed by
Good morning, and welcome to the Molina Healthcare fourth quarter earnings Conference call, all participants will be in listen only mode.
Please signal a conference specialist by pressing the star key followed by DRAM. After today's presentation, there will be an opportunity to ask question to ask a question you May Press Star then one on your Touchtone phone.
Speaker 1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please note this event is being reported. I would now like to turn the conference over to Joe Krachevki. Krachevki, SEP investor relations. Please go ahead.
Draw. Your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Joe Chris Jackie Kruszewski SVP Investor Relations. Please go ahead.
Speaker 2: Good morning and welcome to Molina Health Care's fourth quarter 2021 early fall. Joining me today are Molina's president and CEO Joseph Ruskey and our CFO Mark time.
Good morning, and welcome to Molina Healthcare's fourth quarter of 2021 earnings call joining.
Joining me today are Molina, as president and CEO , Joseph <unk>, and our CFO Mark <unk>.
Speaker 2: A press release announcing our fourth quarter earnings was distributed after the mark closed yesterday and is available on our
A press release announcing our fourth quarter earnings was distributed after the market closed yesterday and is available on our Investor Relations website.
Shortly after the conclusion of this call a replay will be available for 30 days.
Speaker 2: Surely after the conclusion of this call, if replay will be available for 30 days. The numbers to access the replay are in the current release.
The numbers to access the replay.
Earnings release.
For those who listen to the rebroadcast of this presentation. We remind you that the remarks made are as of today Thursday February 10, 2022 and have not been updated subsequent to the initial earnings call.
Speaker 2: For those who listen to the rebroadcast of this presentation, we remind you that the remarks made are out of today. Thursday, February 10, 2022, and have not yet updated subsequent to the initial learning talk.
Speaker 2: In this call, we refer to certain non- GAAP measures . A reconciliation of these measures with the most directly comparable GAAP measures can be found in our fourth quarter 2021 press.
In this call we will refer to certain non-GAAP measures are.
A reconciliation of these measures with the most directly comparable GAAP measures can be found in our fourth quarter of 2021.
During our call, we will be making certain forward looking statements, including but not limited to statements regarding the COVID-19 pandemic.
Speaker 2: During our follow-up, we will be making certain forward looking statement, including but not limited to statements regarding the COVID-19 pandemic, the current environment, recent acquisitions, 2022 guidance, our embedded earns power, and our long-term
Current environment.
Recent acquisition.
Turning to guidance.
Earnings power and our long term outlook.
Speaker 12: Listeners are caution that all of our Gordon statements are subject to certain risks and uncertain
Listeners are cautioned that all of our forward looking statements are subject to certain risks and uncertainties.
Speaker 12: that could cause our actual results to different, surely from our current expectation.
That could cause our actual results to differ materially from our current expectations.
Speaker 12: We advise listeners to review their respectors, discuss in our form 10K in the report, file for the FEC, as well as respectors listed in our form 10Q and 48K fileings for the FEC.
We advise listeners to review the risk factors discussed in our Form 10-K annual report filed with the SEC as well as risk factors listed in our Form 10-Q , and form 8-K filings with the SEC.
Speaker 12: After the completion of our prepared remarks, we will open the call to take your questions.
After the completion of our prepared remarks, we will open the call to take your questions.
Speaker 12: I will now send a call over to our chief executive officer, Joseph Racken. Joe.
I will now turn the call over to our Chief Executive Officer Joseph.
Joe.
Thank you Joe and good morning.
Speaker 3: Today, we will provide updates on several topics.
We will provide updates on several topics.
Speaker 3: our financial results for the fourth quarter in full year 2021.
Our financial results for the fourth quarter and full year 2021.
Speaker 3: Our initial 2022 revenue and earnings guidance.
Our initial 2022 revenue and earnings guidance.
Speaker 3: and our growth initiatives and re-adformation of our sustaining profitable growth strategy.
And our growth initiatives and reaffirmation of our sustaining profitable growth strategy.
Let me start with the fourth quarter highlights.
Speaker 3: Last night, we reported the adjusted earnings for the alluded share for the fourth quarter of $2.88.
Last night, we reported adjusted earnings per diluted share for the fourth quarter of $2 88.
Speaker 3: with adjusted debt income of $170 million and premium revenue of $7.2 billion and increase of 48% over the prior year.
With adjusted net income of $170 million.
And premium revenue of $7 2 billion.
An increase of 48% over the prior year.
Speaker 3: The 88.8% consolidated medical care ratio demonstrates solid performance while managing through a pandemic-related challenge.
The 88, 8% consolidated medical care ratio demonstrates solid performance, while managing through pandemic related challenges.
Speaker 3: The net effective COVID increased our consolidated medical care ratio by 150 basis.
The net effect of Covid increased our consolidated medical care ratio by 150 basis points.
Decreasing net income per diluted share by approximately $1 50.
Speaker 3: decreasing net income per diluted share by approximately $1.50, which is 50 cents more than previously expected.
Which is 50 more than previously expected.
Speaker 3: We managed to a 7.4% adjusted GNA ratio, reflecting continued discipline and cost management while making the appropriate investments in our business to fuel growth.
We managed to a seven 4% adjusted G&A ratio, reflecting continued discipline in cost management, while making the appropriate investments in our business to fuel growth.
Speaker 3: We produced an adjusted after-tax margin of 2.3%.
We produced an adjusted after tax margin of two 3%.
Speaker 3: excluding the net effective COVID are adjusted after tax margin with 3.5% squarely in line with our long-term target.
Excluding the net effect of Covid, our adjusted after tax margin was three 5%.
Squarely in line with our long term target.
Speaker 3: We are very pleased with our fourth quarter performance, with respect to both the delivery of solid earnings and the focused execution of our profitable growth strategy.
We are very pleased with our fourth quarter performance with respect to both the delivery of solid earnings and the focused execution of our profitable growth strategy.
This quarter marks the end of yet another very successful year, a year in which we continued to produce a high level of financial performance while.
Speaker 3: The quarter marks the end of yet another very successful year, a year in which we continue to produce a high level of financial performance, while navigating the effects of the global pandemic.
While navigating the effects of the global pandemic.
Speaker 3: We execute it well and sustain solid operating margins while driving significant revenue growth.rous.
We executed well and sustained solid operating margins, while driving significant revenue growth.
Now turning to full year highlights.
Speaker 3: We reported full year 2021 adjusted earnings per diluted share of $13.54.
We reported full year 2021, adjusted earnings per diluted share of $13 54.
Speaker 3: a 6% increase over initial school year guidance.
A 6% increase over our initial full year guidance.
Speaker 3: We absorbed $3.50 of costs related to the net effect of COVID, which was $2 higher than initial guidance, implying $2.80 of improved underlying performance.
We absorbed $3 50 of costs related to the net effect of Covid.
Which was $2 higher than initial guidance.
<unk> $2 80.
Of improved underlying performance.
Speaker 3: excluding the net effective COVID, our after-tax margin was 3.6% consistent with our long-term target.
Excluding the net effect of Covid, our after tax margin was three 6%.
<unk> with our long term target.
We generated premium revenue of $26 9 billion, an increase of 47% over our full year 2020 premium revenue and $3 9 billion.
Speaker 3: We generated premium revenue of $26.9 billion, an increase of 47% over our full year 2020 premium revenue, and $3.9 billion above our initial 2021 guide.
Above our initial 2021 guidance.
Speaker 3: This strong premium revenue growth was well balanced between organic growth and both on acquisition and as a testament to our successful transition to sustained profitable growth.
This strong premium revenue growth was well balanced between organic growth and bolt on acquisitions and.
And as a testament to our successful transition to sustained profitable growth.
Speaker 3: From a membership perspective, we ended the year with 5.2 million members, a 1.2 million member increase year over year.
From a membership perspective, we ended the year with $5 2 million members, a $1 2 million member increase year over year.
Speaker 3: Notably, this 29% growth across all three segments was enhanced by the suspension of Medicaid re-determination and the Special Enrollment period in market.
Notably this 29% growth across all three segments was enhanced by the suspension of Medicaid Redetermination and the special enrollment period and marketplace.
Speaker 3: Turning now to our full year performance highlight by line of business.
Turning now to our full year performance highlights by line of business.
Speaker 3: Medicaid, our flagship business, representing 76% of total company premium, produced long premium revenue growth and stable earnings as we continue to execute on the underlying fundamental.
Medicaid our flagship business, representing 76% of total company premium <unk>.
Produced strong premium revenue growth and stable earnings as we continue to execute on the underlying fundamentals.
For the full year, our Medicaid business achieved a medical care ratio of 88, 7%.
Speaker 3: For the full year, our Medicaid business achieved a medical care ratio of 88.7%. Consistent with our long-term MCR target, as moderate net effective COVID was offset by strong medical cost management.
Consistent with our long term MCR target as moderate net effect of Covid was offset by strong medical cost management.
Speaker 3: For the year, our diversified portfolio of state contracts performed well across all dimensions.
For the year, our diversified portfolio of state contracts performed well across all dimensions.
Speaker 3: underlying medical cost trend was stable and well-controlled, particularly within our growing population of high-acuity members, while we continued to deliver high-quality care.
Underlying medical cost trend was stable and well control, particularly within our growing population of high acuity members, while we continued to deliver high quality care.
Speaker 3: The rate environment was stable. And risk sharing corridors, we captured some of our outperformance, but many already have been and will continue to be eliminated.
The rate environment with stable.
And risk sharing corridors recaptured some of our outperformance, but many already have been and will continue to be eliminated.
Speaker 3: For the year, our Medicare Medical Care Ratio was 87.2%, a very strong result.
For the year, our Medicare medical care ratio was 87, 2% a very strong results.
Speaker 3: squarely in line with our long-term target range, and demonstrating our ability to clinically and financially manage the high-QD members in both our D-SNIP and MMP program.
Squarely in line with our long term target range, and demonstrating our ability to clinically and financially manage the high acuity members in both our D SNP and.
MMP program.
This line of business plays an important role in the portfolio as each year over 30000 of our Medicaid members.
Speaker 3: This line of business plays an important role in the portfolio. As each year, over 30,000 of our Medicaid members turn age 65.
<unk> <unk> hundred 65.
Speaker 3: Our marketplace medical care ratio for the full year was 86.9%. Well above our long-term target.
Our our marketplace medical care ratio for the full year was 86, 9% well above our long term target.
Speaker 3: This reflects the significant cost related to the net effect of COVID in our largest geographies and the high cost impact of the adverse selection related to the special enrollment.
This reflects the significant cost related to the net effect of Covid in our largest geographies.
And the high cost impact of the adverse selection related to the special enrollment period.
Approximately 300000 members were attracted to our product during the special enrollment period.
Speaker 3: Approximately 300,000 members were attracted to our product during the special enrollment period, accounting for 25% of full-year marketplace members.
Counting for 25% of full year marketplace member months.
All told our marketplace performance has been a disappointment.
Speaker 3: All told, our marketplace performance has been a disappointment.
Speaker 3: Later, Mark will summarize the steps we have taken in the environmental factors, which will allow us to restore margins to our mid-single-digit target in 2022.
Later, Mark will summarize the steps, we have taken and the environmental factors, which will allow us to restore margins to our mid single digit target in 2022.
You will hear that included in our revenue guidance is a planned reduction in marketplace membership.
Speaker 3: You will hear that included in our revenue guidance is a planned reduction in marketplace members.
Speaker 3: And a related 38% decrease in 2022 marketplace revenue.
A related 38% decrease in 2022 marketplace revenue.
However, we expect this repositioning of our product to be significantly accretive to 2022 earnings and establish a strong foundation for this business going forward.
Speaker 3: However, we expect this repositioning of our product to be significantly accreted to 2022 earnings and establish a strong foundation for this business going full.
2021 was also a very successful year across multiple dimensions of our profitable growth strategy.
Speaker 3: 2021 was also a very successful year across multiple dimensions of our profitable growth stress.
Speaker 3: Specifically, we successfully re-precured our Ohio Medicaid contract and were awarded a new state contract in Nevada, validating our ability to retain existing state contracts as well as win new business in new state.
Specifically.
We successfully re procured our Ohio Medicaid contract and were awarded a new state contract in Nevada, validating our ability to retain existing state contracts as well as win new business in new states.
Speaker 3: Our M&A engine continued to execute at a high level. During the year, we announced...
Our M&A engine continued to execute at a high level.
During the year, we announced two new acquisitions.
Speaker 3: Figna's Texas Medicaid business and age well in New York for combined premium revenue of approximately $1.7 billion. In October .
Cigna's, Texas Medicaid business and.
And age well in New York.
For combined premium revenue of approximately $1 7 billion.
In October we closed a new York based affinity acquisition, adding over 300000 members and approximately $1 6 billion.
Speaker 3: adding over 300,000 members and approximately $1.6 billion of annual premium revenue.
Of annual premium revenue.
Speaker 3: And we successfully integrated three previously closed acquisitions representing approximately $5 billion annual revenue, which continued to provide earnings accruesions.
And we successfully integrated three previously closed acquisition, representing approximately $5 billion in annual revenue, which continue to provide earnings accretion.
Speaker 3: In summary, our full year 2021 enterprise results continued to demonstrate our ability to produce excellent margin while growing premium revenue and successfully managing through the ongoing clinical and financial impacts of the pandemic.
In summary, our full year 2021 enterprise results continued to demonstrate our ability to produce excellent margins, while growing premium revenue and successfully managing through the ongoing clinical and financial impacts of the pandemic.
Turning to our 2022 guidance beginning with premium revenue.
Speaker 3: Turning to our 2022 guide, beginning with premium reps.
Speaker 3: We are very pleased with the continued success of our profitable growth strategy.
We are very pleased with the continued success of our profitable growth strategy.
Speaker 3: In 2022, we project premium revenue of approximately $28.5 billion.
In 2022, we project premium revenue of approximately $28 5 billion.
A 6% year over year increase on a reported basis and 14% growth before the effect of regulatory headwinds and the planned decline in marketplace revenue.
Speaker 3: 6% year-over-year increase on a reported basis, and 14% growth before the effect of regulatory headwinds and the planned decline in marketplace revenue.
Speaker 3: This is consistent with the initial outlook provided at our 3rd quarter 2021 earnings.
This is consistent with the initial outlook provided on our third quarter 2021 earnings call.
Speaker 3: This growth is well balanced between the new contract win, organic growth in our current footprint, and the full annual one rate of our recent acquisition.
This growth is well balanced between the new contract win organic growth in our current footprint and the full annual run rate of our recent acquisitions.
Speaker 3: incremental to our revenue guidance will be the age well acquisition when closed. Any further extension of the public health emergency and the resulting suspension in Medicaid redeterminations beyond April .
Incremental to our revenue guidance will be the <unk> acquisition when closed.
And any further extension of the public health emergency and the resulting suspension and Medicaid Redetermination beyond April .
Moving to earnings guidance.
Speaker 3: Our initial full year 2022 adjusted earnings guidance per share is no less than $17 or 26% growth year over year.
Our initial full year 2022, adjusted earnings guidance per share is no less than $17.
Or 26% growth year over year.
Speaker 3: We project a 3.4% adjusted after-attack margin. Consistent with our-
We project a three 4% adjusted after tax margin.
Consistent with our long term target.
Speaker 3: Our 2022 earnings profile, we select durable and sustainable operating improvements and earnings.
Our 2022 earnings profile reflects a durable and sustainable operating improvements and earnings growth.
Speaker 3: Included in our 2022 guidance is the realization of three dollars and 50 cents per share of our 2021 embedded earnings.
Included in our 2022 guidance is the realization of $3 50 per share of our 2021 embedded earnings power.
Speaker 3: and additional organic earnings growth partially offset by the effects of regulatory head.
And additional organic earnings growth.
Partially offset by the effects of regulatory headwinds.
Speaker 3: With COVID still providing $2 a variance per share pressure in 2022, and a few of our acquisition integration, not yet fully matured, we still have embedded earns power remaining to support future earnings.
With Covid still providing $2 of earnings per share pressure in 2022, and a few of our acquisition integration not yet fully matured.
Still have embedded earnings power remaining to support future earnings growth.
Speaker 3: In summary, our 2022 guidance features premium revenue growth of 14% before regulatory headwinds and the marketplace reset and strong earnings per shared growth of 26% with key up-
In summary, our 2022 guidance features premium revenue growth of 14% before regulatory headwinds in the marketplace reset.
And strong earnings per share growth of 26%.
With key operating and margin metrics.
Speaker 3: squarely in line with the long-term targets we shared at our September 2021 investment.
Squarely in line with our long term targets, we shared at our September 2021 Investor Conference.
Speaker 3: I will now provide a few concluding comments that frame our profitable growth strategy. We remain.
I will now provide a few concluding comments that frame our profitable growth strategy.
We remain committed to staying close to the core.
Speaker 3: We intend to remain a pure play government managed care business, which has very attractive growth characteristics.
We intend to remain a pure play government managed care business.
Which has very attractive growth characteristics demographically and politically.
Speaker 3: We aspire to provide high quality care to our members, while driving to the lowest cost of delivery to produce attractive margins.
We aspire to provide high quality care to our members, while driving to the lowest cost of delivery to produce attractive margins.
Speaker 3: We believe we have the right strategy and the right key.
We believe we have the right strategy and the right team to execute it are.
Speaker 3: Our strong finish to 2021 and our 2022 guidance, position as well and give us great confidence we can achieve our long-term target.
Our strong finish to 2021, and our 2022 guidance.
Position as well to give us great confidence, we can achieve our long term targets up 13% to 15% premium revenue growth and 15% to 18% earnings per share growth on.
Speaker 3: 13 to 15% premium revenue growth and 15 to 18% earnings for share growth on average over
On average over time.
Speaker 3: As I conclude my remarks, I want to express my gratitude to our management team and our nearly 14,000 Malena Cubs.
As I conclude my remarks, I want to express my gratitude to our management team and our nearly 14000 Molina colleagues.
Speaker 3: Their skill, dedication, and steadfast service continue to form the foundation for everything we have achieved and everything we will achieve in the years.
Their skill dedication and steadfast service continued to form the foundation for everything we have achieved and everything we will achieve in the years to come.
Speaker 3: With that, I will turn the call over to Mark for some additional color on the financials and 2022 guide. Mark?
With that I will turn the call over to Mark.
Some additional color on the financials and 2022 guidance.
Mark.
Thank you Joe good morning, everyone.
Speaker 4: This morning I will discuss some additional details of our fourth quarter and full year performance.
This morning, I will discuss some additional details of our fourth quarter and full year performance.
Speaker 4: I will then turn to the balance sheet and some thoughts on our 2022 guidance. Beginning.
I will then turn to the balance sheet and some thoughts on our 2022 guidance.
Beginning with our fourth quarter results by segment.
Speaker 4: In Medicaid, we reported an 88.3% MCR, a strong result that included continuation of costs from the net effect of COVID, offset by strong medical cost management.
In Medicaid we reported an 88, 3% MCR a strong result that included continuation of costs from the net effect of Covid offset by strong medical cost management.
Speaker 4: In Medicare, a reported MCR was 88.3%.
In Medicare our reported MCR was 88, 3%.
Speaker 4: During the quarter, the emergence of the Omnichran variant had a greater impact on our Medicare population than on our other segments.
During the quarter the emergence of the Omicron Varian had a greater impact on our Medicare population than our other segments.
Focused medical cost management and better than expected risk adjustment offset the net effect of COVID-19 in the quarter.
Speaker 4: Focus medical cost management and better than expected risk adjustment offset the net effect of COVID in the quarter.
In marketplace, our reported MCR was 92, 1%.
Speaker 4: In Marketplace, a reported MCR was 92.1%.
Speaker 4: While COVID infection rates in our marketplace population declined from the peak of the Delta variant in August , the net effect of COVID continued to press results in the fourth quarter.
While COVID-19 infection rates in our marketplace population declined from the peak of the Delta value in August the net effect of Covid continue to pressure results in the fourth quarter.
Speaker 4: The Special Enrollment Period Membership, which grew to almost 40% of our Marketplace book in the quarter, also contributed to the elevated Marketplace MCR.
The special enrollment period membership, which grew to almost 40% of our marketplace book in the quarter also contributed to the elevated marketplace MCR.
Turning to full year results.
Speaker 4: Our four-year consolidated MCR was 88.3%.
Our full year consolidated MCR was 88, 3%.
Speaker 4: This result is modestly above our long-term target as strong performance in our Medicaid and Medicare businesses was offset by the performance of our marketplace.
This result is modestly above our long term target as strong performance in our Medicaid and Medicare businesses was offset by the performance of our marketplace business.
Speaker 4: Specifically, our full year Medicaid MCR was 88.7% in line with our 88 to 89% long-term target.
Specifically, our full year Medicaid MCR was 88, 7% in.
In line with our 88% to 89% long term target.
Speaker 4: Our four-year Medicare MCR was 87.2% in line with our 87 to 88% long-term target.
Our full year Medicare MCR was 87, 2%.
In line with our 87% to 88% long term target.
Speaker 4: in both Medicaid and Medicare, strong medical cost management, offset the net effective COVID.
In both Medicaid and Medicare strong medical cost management.
Offset the net effect of Covid.
Our full year marketplace MCR of 86, 9% is well above our 78% to 80% long term target.
Speaker 4: Our four-year marketplace MCR of 86.9% is well above our 78 to 80% long-term target.
Speaker 4: and includes approximately 430 basis points of the net effect of COVID.
That includes approximately 430 basis points of the net effect of Covid.
Speaker 4: as well as approximately 360 basis points from the impact of the special enrollment period. Turning now.
As well as approximately 360 basis points from the impact of the special enrollment period.
Turning now to our balance sheet.
Our capital Foundation remains strong.
Speaker 4: We harvested $218 million of subsidiary dividends in the quarter, which brought our year-end 2021 parent company cash balance to $348 million.
We harvested $218 million of subsidiary dividends in the quarter, which brought our year end 2021 parent company cash balance to $348 million.
Debt at the end of the quarter is two one times trailing 12 month EBITDA.
Speaker 4: debt at the end of the quarter is 2.1 times trailing 12-month-eva da.
Speaker 4: Our death to total cap ratio is 47.8%.
Our debt to total cap ratio at 47, 8%.
Speaker 4: However, on a net debt basis, net apparent company cash.
However, on a net debt basis net of parent company cash.
Speaker 4: These ratios fall to 1.8 times and 43.9% respect.
These ratios fall to one eight times and 43, 9% respectively.
Speaker 4: These metrics reflect the conservative leverage position and ample cash capacity for additional growth and investments.
These metrics reflect our conservative leverage position and ample cash capacity for additional growth and investment.
Speaker 4: During the quarter, we redeemed our senior node stew 2022 using the proceeds of our November debt offering of node stew 2032.
During the quarter, we redeemed our senior notes due 2022, using the proceeds of our November debt offering of notes due 2032.
Speaker 4: This refinancing will lower our total interest expense by 50 basis points and extend our debt maturity towers to 2028 through 2032.
This refinancing will lower our total interest expense by 50 basis points and extend our debt maturity towers to 2028 to 2032.
Speaker 4: More importantly, the transaction marks the final step in our capital restructuring strategy.
More importantly, the transaction marks the final step in our capital restructuring strategy.
Speaker 4: We have eliminated the costly convertible bonds and addressed all near-term majorities at coupon rates well below similarly rated issuers.
We have eliminated the costly convertible bonds and.
And addressed all near term maturities at coupon rates well below similarly rated issuers.
Turning to reserves.
Our reserve approach remains consistent with prior quarters, and we continue to be confident in our reserve position.
Speaker 4: Our reserve approach remains consistent with prior quarters and we continue to be confident in our reserve position.
Days and claims payable at the end of the quarter Rep.
Speaker 4: Days inclaimed payable at the end of the quarter represented 51 days of medical cost expense, an increase of two-
Represented 51 days of medical cost expense.
An increase of two days sequentially.
Speaker 4: Now, turning to guidance, beginning with membership.
Now turning to guidance beginning with membership.
Speaker 4: We ended 2021 with approximately 4.3 million Medicaid members.
We ended 2021 with approximately $4 3 million Medicaid members.
Speaker 4: As discussed, our 2022 guidance reflects the resumption of redeterminations, which we expect will more than offset Medicaid growth drivers.
As discussed our 2022 guidance reflects the resumption of re determinations, which we expect will more than offset Medicaid growth drivers.
Speaker 4: and result in 2022 year end membership of approximately 4.1 million members.
And result in 2022 year end membership of approximately $4 1 million members.
Speaker 4: In Medicare, we ended 2021 with 142,000 members.
In Medicare we ended 2021 with a 142000 members.
We expect year end 2022 total Medicare membership of approximately 150000 members.
Speaker 4: We spec year end 2022 total Medicare membership of approximately 150,000 members.
Speaker 4: This reflects strong AEP growth in our MAPD and DSNIP products.
This reflects strong AEP growth in our MA PD in D SNP products.
Speaker 4: and the addition of members from our Signet Texas Medicaid acquisition.
And the addition of members from our Cigna, Texas Medicaid acquisition.
Speaker 4: In marketplace, we ended 2021 with 728,000 members.
And marketplace. We ended 2021 with 728000 members.
Speaker 4: Based on open enrollment, we expect to begin 2022 with approximately 320,000 members.
Based on open enrollment, we expect to begin 2022 with approximately 320000 members.
Speaker 4: reflecting our strategy to achieve target margins in this business for 2022.
Reflecting our strategy to achieve target margins in this business for 2022.
Speaker 4: accounting for a limited SEP and normal levels of attrition through the year.
Accounting for a limited SVP and.
And normal levels of attrition through the year.
Speaker 4: We expect to end 2022 with approximately 250,000 members.
We expect to end 2022 with approximately 250000 members.
Turning now to premium revenue guidance.
Speaker 4: We expect premium revenue of approximately $28.5 billion, or 6% growth.
We expect premium revenue of approximately $28 5 billion.
Our 6% growth.
Excluding regulatory headwinds and our marketplace reset this represents 14% growth over 2021.
Speaker 4: including regulatory headwinds and our marketplace reset, this represents 14% growth over 2021.
Speaker 4: Specifically, our premium revenue guidance includes the following growth driver.
Specifically, our premium revenue guidance includes the following growth drivers.
Speaker 4: a full year of the acquired affinity business, which closed October 25th.
A full year of the acquired affinity business, which closed October 25th.
Speaker 4: and the Signatecness Medicaid business which closed on January 1st, for a combined $2.2 billion.
And the Cigna, Texas, Medicaid business, which closed on January one.
For a combined $2 2 billion.
Speaker 4: Approximately 1.1 billion dollars of organic Medicaid and Medicare growth in our current footprint.
Approximately $1 1 billion of.
Organic Medicaid and Medicare growth in our current footprint.
And approximately $400 million.
Speaker 4: and approximately $400 million for the Nevada Medicaid contract, which began on January 1st.
For the Nevada, Medicaid contract, which began on January one.
Partially offsetting these growth drivers are several headwinds to 2022 revenue growth.
Speaker 4: Partially offsetting these growth drivers are several headwinds to 2022 revenue growth.
Speaker 4: 1.2 billion of lower marketplace premium revenue, reflecting our strategy to restore target margins in this business.
$1 2 billion of lower marketplace premium revenue, reflecting our strategy to restore target margins in this business.
Speaker 4: Approximately 400 million related to the resumption of redetermination.
Approximately $400 million related to the resumption of Redetermination.
And $500 million from the carve out of pharmacy benefits in our California, and Ohio Medicaid contracts.
Speaker 4: and 500 million from the Carvoud of Pharmacy Benefits in our California and Ohio Medicaid Contracts.
Speaker 4: Consistent with past practice, age well is excluded from our 2022 guide.
Consistent with past practice AGL is excluded from our 2022 guidance.
Speaker 4: We continue to expect this acquisition to close in the third quarter of this year.
We continue to expect this acquisition to close in the third quarter of this year.
Speaker 4: and will provide $200 million or more of additional premium revenue in 2022 when closed. Well done.
And we will provide $200 million or more of additional premium revenue in 2022 what closed.
Turning now to earnings guidance.
Speaker 4: We introduced our initial full year 2022 adjusted earnings guidance of no less than $17 per share, reflecting 26% growth over 2021.
We introduced our initial full year 2022, adjusted earnings guidance of no less than $17 per share.
Reflecting 26% growth over 2021.
Speaker 4: Our APS guidance reflects the realization of approximately $3.50 per share of 2021 embedded earnings.
Our EPS guidance reflects the realization of approximately $3 50 per share of 2021 embedded earnings.
Consisting of.
Speaker 4: approximately $1.50 per share of lower net effective COVID.
Approximately $1 50 per share of lower net effect of Covid.
Roughly <unk> 50 per share for improvement in Medicare risk adjustment.
Speaker 4: Roughly 50 cents per share for improvement in Medicare risk adjust.
Speaker 4: approximately a dollar per share as we attain target margins in Magellan complete care and passport.
Approximately $1 per share as we attained target margins and Magellan complete care and passport.
And approximately <unk> 50 per share for the recently closed affinity and Signet, Texas Medicaid acquisitions.
Speaker 4: and approximately 50 cents per share for the recently closed affinity and signet Texas Medicaid acquisition.
Speaker 4: Our 2022 guidance also includes approximately 80 cents per share of marketplace margin improvement, not captured in the lower net effective COVID.
Our 2022 guidance also includes approximately <unk> <unk> per share of marketplace margin improvement not captured in the lower net effect of Covid.
Speaker 4: This is offset by the net impact of organic earnings growth and the resumption of redeterminations and the previously discussed pharmacy benefit carve-out.
This is offset by the net impact of organic earnings growth and the resumption of re determinations and the previously discussed pharmacy benefit carve outs.
Speaker 4: The restoration of Marketplace margins to mid-single digits in 2022 will be accomplished through actions already taken.
The restoration of marketplace margins to mid single digits in 2022 will be accomplished through actions already taken.
Typically.
Speaker 4: We pray to a higher medical cost trend, anticipating a more moderate COVID and SEPM.
We price to a higher medical cost trend.
Anticipating a more moderate COVID-19 impact.
Speaker 4: We redesigned our product offerings, focusing on the silver tier in response to the increased member premium subsidy.
We redesigned our product offerings, focusing on the silver tier in response to the increased number of premium subsidies.
Speaker 4: Based on recently concluded open enrollment period, we expect to have a higher percentage of renewing members.
Based on recently concluded open enrollment period, we expect to have a higher percentage of renewing members.
Speaker 4: We also expect a lower mix of special enrollment membership in 2022 based on the revised eligibility rules and our revised product design and distribution strategy.
We also expect a lower mix of special enrollment membership in 2022 based on the revised eligibility rules and our revised product design and distribution strategies.
We expect many of these changes will also improve our risk adjustment results.
Speaker 4: We expect many of these changes will also improve our risk adjustment result.
Moving on to select P&L guidance metrics.
Speaker 4: We expect our medical care ratio to be approximately 88%.
We expect our medical care ratio to be approximately 88%.
Speaker 4: The MCR improvement over 2021 is primarily due to lower net effect of COVID. Our actions to improve marketplace performance in 2022.
The MCR improvement over 2021 is primarily due to lower net effect of Covid.
Our actions to improve marketplace performance in 2022.
Speaker 4: continued progress in medical cost management in our legacy in acquired businesses and improvement.
Continued progress in medical cost management, and our legacy and acquired businesses.
An improvement in Medicare risk scores.
Speaker 4: We expect our adjusted GNA ratio to improve to 6.8%. This reflects discipline cost management, fixed cost leverage from our revenue growth and mix.
We expect our adjusted G&A ratio to improve to six 8%.
This reflects disciplined cost management.
<unk> cost leverage from our revenue growth and mix.
Offset by continued investment in growth and capabilities.
The effective tax rate is expected to be 25, 4%.
Speaker 4: The effective tax rate is expected to be 25.4%.
Speaker 4: Adjusted after tax margin is expected to be 3.4% consistent with our long-term targeted range.
Adjusted after tax margin is expected to be three 4% consistent with our long term targeted range.
Speaker 4: We did average share count, it's expected to remain flat at 58.4 million shares.
Weighted average share count is expected to remain flat at 58 4 million shares.
And we expect that just over 50% of our full year earnings will be produced in the first half of the year.
Speaker 4: And we expect that just over 50% of our full year earnings will be produced in the first half of the year.
As mentioned our 2022 guidance includes the realization of $3 50, a share of 2021 embedded earnings, leaving approximately $2 50, a share of embedded earnings power in 2022, comprising.
Speaker 4: As mentioned, our 2022 guidance includes the realization of $3.50 a share of 2021 embedded earnings, leaving approximately $2.50 a share of a better earnings power in 2022. Comprising.
Speaker 4: the net effective COVID of approximately $2 per share, which shouldn't continue to dissipate.
The net effect of Covid of approximately $2 per share, which should continue to dissipate.
Speaker 4: and approximately $1 per share as we attain our target margins on closed deals, including affinity, thickness, Texas Medicaid business, and our pending acquisition of age.
And approximately $1 per share as we attain our target margins on closed deals, including affinity Cigna, Texas Medicaid business.
Our pending acquisition of AGL.
Partially offset by roughly <unk> 50 per share are projected Medicaid redetermination impact in 2023.
Speaker 4: partially offset by roughly 50 cents per share of projected Medicaid re-determination impact in 2023.
Speaker 4: As a reminder, this embedded earnings power does not represent 2023 guidance, but rather an accounting of drivers that are temporarily suppressing our earnings profile and our current projection of the impact of Medicaid re-determinations post 2020.
As a reminder, this embedded earnings power does not represent 2023 guidance, but rather an accounting of drivers that are temporarily depressing our earnings profile and our current projection of the impact of Medicaid Redetermination post 2022.
This concludes our prepared remarks.
Speaker 4: This concludes our prepared remarks. Operator, we are now ready to take questions.
Greater we are now ready to take questions.
Okay.
Speaker 1: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone sound. If you're using a speaker phone, please pick up your hands up before pressing the key. To withdraw from the question queue, please press star then two.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw from the question queue. Please press Star then two.
Speaker 1: The first question is from Kevin Fishback, a Bank of America. Please go ahead.
The first question is from Kevin Fischbeck of Bank of America. Please go ahead.
Okay, great. Thanks.
Speaker 8: Very great. Thanks. I just wanted to ask about the exchange.
I just wanted to ask about the.
The exchange.
Speaker 5: I think that was a surprise for me in this guidance. She talked a little bit about how you think about this business, particularly in a way. It was just looking back. I guess for the last eight years, you could either grew that business by over 50 percent, or you dropped that business by over 50 percent.
I guess that was a surprise for me.
Guidance.
Can you talk a little bit about how you think about this business sustainably just looking back in I guess.
Over the last eight years six of those years, either grew that business by over 50% or you drop that business by over 50%.
Speaker 5: to give in here. So very volatile from year to year. It's hard to see kind of what the strategy is long-term. How comfortable are you that this is actually a base that you can grow off of in that, you know, a little bit of high-final-digit picture, forecasting long-term. Thanks, sir.
Given year, so very volatile from year to year, it's hard to see kind of what the what the strategy is long term how comfortable are you that this is actually a base that you can grow off of.
And that.
Yes, low to mid singles.
Sorry, sorry mid to high single digit next year forecasting long term.
Speaker 3: Pure Kevin, Joe. The strategic positioning of the business really hasn't changed. This is an adjunct to Medicare.
Sure Kevin This is Joe.
The strategic positioning of the business really hasnt changed.
This is an adjunct to Medicaid.
Speaker 3: We serve the working poor, we leverage our Medicaid network, we leverage our Medicaid network pricing and our Medicaid footprint. So the strategy hasn't changed. 90% of our members are fully or partially subsidized. That is the market segment we are approaching.
We serve the working poor we leverage our Medicaid network, we leverage our Medicaid network pricing in our Medicaid footprint. So the strategy Hasnt changed 90% of our members are fully or partially subsidized that is the market segment, we are approaching.
Speaker 3: What you're observing this year is really a capital allocation.
What you are observing this year is really a capital allocation decision.
Speaker 3: We never intended to have 728,000 members. That was a function of the special enrollment period, which not only grew membership beyond what anybody expected, but added a significant element of adverse.
We never intended to have 728000 members that was a function of the special enrollment period, which not only grew membership beyond what anybody expected, but added a significant element of adverse selection.
Speaker 3: really what you're seeing this year is the repositioning of the product as Mark suggested in his comments. From a pricing perspective, from a structuring perspective, from a metallic tier perspective, and from a distribution perspective.
Really what Youre seeing this year is the repositioning of the product as Mark suggested in his comments.
From a pricing perspective from a structuring perspective from a metallic tier perspective and from a distribution perspective to continue to target the working poor.
Speaker 3: to continue to target the working poor and to more emphasize the silver tier that is much easier to price to and to financially manage.
And two more emphasize the silver tier that is much easier to price to into financially manage.
Speaker 3: This is a business where we're more focused on margins than we are a membership and we will let membership float up and down with our ability to obtain mid-single-digit margins.
So this is a business where we're more focused on margin and we are a membership and we will let membership float up and down with our ability to obtain mid single digit margin.
Mark anything to add.
Speaker 4: I think that's right, Joe. If you look back to 2020, we were about 318,000 members at the end of the year. 2021 probably would have looked a lot more like 2020 if it wasn't for the SEP that Joe talked about, which almost none of us in the space knew pretty much this time last year.
That's right Joe.
If you look back to 2020.
We were about 318000 members at the end of the year 2021, probably would have looked a lot more like 2020, if it wasn't for the S&P that Joe talked about which almost none of us in this space new pretty much. This time last year backing out that S&P <unk>.
Speaker 4: Backing out that SEP 2021 would have looked a lot like 2020. Here we are in 22 with an outlook that's a lot like 2020 and 2021 before the SEP. So I think this level in our portfolio is about the right level, but as Joe mentioned, we'll be entirely pricing for margin, not for volume.
'twenty one would have looked a lot like 2020 here. We are in 22 with an outlook that is a lot like 2020 and.
<unk> 2021 before the S&P.
So I think.
This level and our portfolio is about the right level, but as Joe mentioned will be will be entirely pricing for margin not for volume.
Speaker 5: You're not talking about increased competition or irrational pricing here. This is more of a company specific decision that just want to make sure I understand.
Kevin Youre not tough.
Youre not talking about increased competition or irrational pricing here. This is more of a company specific decision that I just want to make sure I understand.
Speaker 5: There's a market issue or there's just Melina's strategy.
Is this a market issue or is it just.
Strategy.
Speaker 3: Our strategy is to focus on our Medicaid footprint and to capture individuals who at times income out of Medicaid and have a marketplace product buy from us at zero premium. That's always been the strategy. And again, if you look back just a year ago, we're at 300,000 members. And then of course, the special enrollment period had 20 to 40,000 members a month that were coming on to the marketplace.
Our strategy is to focus on our Medicaid footprint and to capture individuals who at times income out of Medicaid and have a marketplace product to buy from us at zero premium that's always been the strategy and again, if you look back just a year ago, we were at 300000 members and.
And then of course, the special enrollment period.
20% to 40000 members a month, we're coming on to the.
To the marketplace.
Speaker 3: at a higher acuity. So this is a capital allocation decision. It's a function of the SEP, it's a function of the pandemic. And we are comfortable with this business at roughly seven to eight percent of revenue leveraging our Medicaid footprint. And we think our capital allocation is appropriate as we've now repositioned the risk profile of this business.
At a higher acuity. So this is a capital allocation decision.
A function of the S&P, it's a function of the pandemic.
And we are comfortable with this business at roughly 7% to 8% of revenue leveraging our Medicaid footprint.
And we think our capital allocation is appropriate as we have now repositioned the risk profile of this business.
Okay. That's helpful. Thank you.
The next question is from Matt Borsch of BMO capital markets. Please go ahead.
Speaker 1: The next question is from Matt Borscht of the MO Capital Market. Please go ahead.
Speaker 1: Good morning, this is Ariana Brady on Fromat Borscht. I was wondering if you could give more detail on the expected timing of the Medicaid redeterminations and how much certainty and visibility you have around the process. Thanks.
Good morning. This is oriented Brady on for Matt Borsch I was wondering if you could give more detail on the expected timing of the Medicaid redetermination.
How much certainty and visibility you have around the process. Thanks.
Sure.
Speaker 3: Sure, with the public health emergency now having been extended to April .
With the.
Public health emergency now having been extended to April .
Speaker 3: given the notification periods that are required. The first members will not be re-determining, re-establishing eligibility until July 1st.
Given the notification periods that are required.
First members will not be re determining reestablishing eligibility until July one.
Speaker 3: We estimate that given that we grew organically approximately 750,000 members.
We estimate that given that we grew organically approximately 750000 members on our <unk>.
Speaker 3: that equates to approximately $2.9 billion of revenue.
Since the beginning of the pandemic that equates to approximately $2 $9 billion of revenue.
Speaker 3: We believe that $2.9 billion of revenue will
We believe that $2 $9 billion of revenue.
<unk> decreased.
Speaker 3: by 1.3 billion to a 1.6 billion dollar residual tariff.
By $1 3 billion to a $1 6 billion dollar residual target and that will happen partially over 2022, and then partially over 2023, Mark do you want to go through the numbers, yes, just to build on that so thats, a $1 3 billion decline over time.
Speaker 4: And that will happen partially over 2022 and then partially over 2023. Mark, do you want to go through the numbers? Yeah, just to build on that. So that's a 1.3 billion decline over time. But that's going to happen over a couple of years. So in my prepared remarks, I mentioned 400 million impacting our 2022 outlook and the additional 900 million in 23.
But thats going to happen over a couple of years. So in my prepared remarks, I mentioned $400 million impacting our 2022 outlook and the additional $900 million in 'twenty three.
Speaker 4: So our target was expectation that we would keep half of these members gains since the start of the pandemic. They'll come off over time for the public healthy emergency and the revenue impacts across the two years are as I mentioned.
So our target was an expectation that we would keep half of these members gain since the start of the pandemic they'll come off over time part of the public health emergency.
And the revenue impacts across the two years are as I mentioned.
Great. Thank you.
Yeah.
Speaker 1: The next question is from Nathan Rich of Golden and Sack. Please go ahead.
The next question is from Nathan Rich of Goldman Sachs. Please go ahead.
Speaker 6: Hi, good morning. Thanks for the questions. I wanted to follow up on the member attrition and market place. I guess I'm just trying to think about the 475,000 member decline for 2022, and how that's balanced between member attrition potentially due to SAP and maybe the adverse selection that you mentioned. I think that 300,000 that you saw sign up during that period. And any competitive factors that you may have seen in the market. And, you know, could you, Mark maybe, could you help us think about how much marketplace margins were impacted by that adverse selection dynamic in 2021 as we think about where kind of marketplace margins ended the year and the improvements that's contemplated to get the mid single digit margins for 2022?
Hi, good morning, Thanks for the questions.
I wanted to follow up on the member attrition in marketplace.
I guess I'm, just trying to think about the 475000 member decline.
For 2022, and how that is balanced between.
Member attrition potentially due to the S&P and you know maybe the adverse selection that you mentioned I think the 300000 that you saw sign up during that period.
And any competitive factors that you may have seen in the in the market and.
Mark maybe you could.
Help us think about how much marketplace and margins were impacted by that adverse selection dynamic in 2021.
As we think about where kind of marketplace margins ended the year and the improvement that contemplated to get to mid single digit margins for 2022.
Speaker 3: Well, first on the membership and revenue question, what's interesting and should be noted that although membership is down by over 60%, revenue is down by less than 40%, because we shifted the book to the silver tier, the silver tier has a much richer product design and therefore revenue.
Well first on the <unk>.
Membership and revenue question.
What's interesting and it should be noted that although membership is down by over 60% revenue is down by less than 40% because we shifted the book to the silver tier the silver tier has a much richer product design and therefore revenue flow so the <unk> revenue.
Speaker 3: So the PM PM revenue on silver is much higher. So the operating leverage is very positive. With respect to the margin, we are very confident in a return to mid-single digit. This produced, this business due to the SEP and the pandemic, this business produced a low single digit margin loss on $3 billion of revenue in 2021.
On silver is much higher.
So the operating leverage is very positive.
With respect to the margin.
We are very confident and returned to mid single digit.
This produced this business due to the SVP and the pandemic. This business produced a low single digit margin loss on $3 billion of revenue in 2021, we.
Speaker 3: We expect now to return that to a mid-single-digit margin gained on $2 billion of revenue in 2022. So sort of a 7 to 8 point increase in margins. A lot of it due to the...
We expect now to return that to a mid single digit margin gain on $2 billion of revenue in 2022.
Sort.
A 7% to eight point.
Increase in margins a lot of it due to the.
Speaker 4: elimination of the COVID pandemic and Much of it also do do the adverse selection that the SDP produced mark the numbers Yeah, absolutely So if you look at our membership as you point out we're down some 60% End of 21 versus 22, but as Joe mentioned our revenues in marketplace are down 38%
Elimination of the Covid pandemic and much of it also due to the adverse selection that the SVP produce mark the numbers, yes, absolutely. So if you look at our membership as you point out we're down some 60%.
End of 'twenty, one versus 'twenty, two but as Joe mentioned.
Our revenues in marketplace are down 38%.
Speaker 4: Why the disconnect within our new membership is a very different mix of bronze versus silver.
Why the disconnect.
Within our new membership is a very different mix of brands versus silver.
Speaker 4: Last year, 2021, we had about 41% of our portfolio in bronze. That'll be down to 15% in 2022. As I'm sure you know, the PMPMs, the revenue PMPMs, are quite different between bronze and silver. They're about 300 in bronze.
Last year 2021, we had about 41% of our portfolio and brands that will be down to 15% in 2022 as I'm sure you know the <unk>. The revenue <unk> are quite different between bronze and silver there are about 300 and brands and about $5 50 and silver.
Speaker 4: and about 550 in silver on an average across the portfolio. So that kind of offsets a lot of the volume decline just on higher PM PMs on those members.
On average across the portfolio, so that kind of offsets a lot of the volume decline just on higher PMT Amazon those members.
Speaker 4: Now on the margins, Joe mentioned last year 86.9 MCR. We're tracking this year to a 79, which is back in the middle of our long-term guidance for marketplace MLR.
Now on the margins.
Joe mentioned.
Last year's $86 nine MCR.
Tracking this year two of 79, which is smack in the middle of our long term guidance for market marketplace MLR Cup.
Speaker 4: A couple of things that Bridges from last year to this year. Obviously, we took significant pricing as we looked into the new year. Your specific question around what did SEP and COVID cost us? I think we mentioned at a high level in our prepared remarks. We carried across marketplace 430 basis points of COVID last year.
Couple of things that bridge us from last year to this year, obviously, we took significant pricing.
As we looked into the new year.
Your specific question around what did SVP and Covid cost US I think we mentioned at a high level on our prepared remarks.
We carried across marketplace of 430 basis points of Covid last year.
Speaker 4: and 360 basis points from the SEP. So you put those two together, that's 8% of headwind that I'm not expecting in the new year. COVID, we all have a more optimistic outlook for COVID in the new year. And SEP, the market will behave differently this year. The regulations are different. Fewer people can sign up and our distribution strategy puts us in a different place. I just don't think we'll have that exposure.
And 360 basis points from the S&P. So you put those two together that's 8% of headwind that I'm not expecting in the new year Covid. We all have in a more optimistic outlook for COVID-19 in the new year and SVP.
The market will behave differently. This year. The regulations are different fewer people can sign up and our distribution strategy puts us in a different place I. Just don't think we will have that exposure.
Speaker 4: So you get the 8% pricing coming into the new year. You remove that headwind of COVID and SEP. Throw a trend assumption on there for what a normalized trend assumption could be. And you have a very clear path to that high 70s, 79% MLR I'm talking about.
So you get the 8% pricing coming into the new year.
Move that headwind of Covid and SVP throw as trend assumption on there for what a normalized trend assumption could be and you have a very clear path to that high $70, 79% MLR I am talking about.
Thanks, I appreciate the detail.
The next question is from Stephen Baxter Wells Fargo. Please go ahead.
Speaker 1: The next question is from Stephen Baxter, Wells Fargo. Please go ahead.
Speaker 7: Hi, thanks for the updated view on earnings power. I guess just first, you know, appreciate actions were required on the exchange business. I guess how should we think about the foregone membership there is impacting the earnings power dynamics you talked about through 2021? It seems like in aggregate, you're kind of at the same ballpark as you were before just trying to make sure I can follow that.
Hi, Thanks for the updated view on earnings power I guess just first.
<unk> actions are required on the exchange business I guess, how should we think about the foregone membership there is impacting the earnings power dynamics, you've talked about through 2021 it.
It seems like in aggregate Youre kind of at the same ballpark as you work or just trying to make sure I can follow that.
Speaker 7: And then second, just to appreciate, you know, if you could provide a little more detail on what's still in the $2 of COVID pressure at this point, it sounds like maybe you're getting back to these sounds with the dollar of risk scores, maybe that's half, or excuse me, a quarter of it. But when we think about the balance, you know, it sounds like you're saying that all three businesses, you know, I think will be roughly a target margin. So just try not to understand where you feel like the opportunity still is. Next.
Then second just would.
I appreciate if you could provide a little more detail on what's still in the $2 of Covid pressure at this point it sounds like maybe youre getting back with you.
The dollar per scores, maybe that half or excuse me a quarter of it but when you think about the balance it sounds like youre, saying that all three businesses I think will be roughly at target margins I'm, just trying to understand where you feel like the opportunity to sell it.
Speaker 3: Sure, Steven, you mentioned the embedded earnings power, which is not a theoretical construct. We didn't construct it in the abstract, it's real. And as we previously disclosed,
Sure Steve.
Stephen you mentioned the embedded earnings power.
Which is.
Is not a theoretical construct we didnt constructed in the abstract its real.
And as we previously disclosed.
Speaker 3: Sitting on top of our $13.50 actual result for 2021. Oh, it's $6.50.
Sitting on top of our $13 50 actual results for 2021.
It was $6 50 of embedded earnings power.
Speaker 3: clearly with the significant impact of the pandemic was something reasonable to account for and because we've been so inquisitive, we thought it was also helpful to account for the growing accretion of our closed acquisition.
Clearly with the significant impact of the pandemic with something.
Reasonable to account for it because we've been so acquisitive. We thought it was also helpful to account for the growing accretion of our closed the acquisition.
Speaker 3: So, sitting on top of our $13.50 result for $21 was an additional $6.50 to a better journey. We have harvested $3.50.
So <unk>.
Sitting on top of our $13 50, <unk> results through 'twenty, one was an additional $6 50 and embedded earnings.
We have harvested $3 50.
Speaker 3: of that embedded earnings inside our $17, at least $17 plan for 2022.
Of that embedded earnings inside or $17.
At least $17 plan for 2022.
Speaker 3: Also, as you suggested, sitting on top of the $17 is an additional $2.50 of continued and better earnings.
Also as you suggested.
Sitting on top of the $17 is an additional $2 50, a continued embedded earnings power due to the net effect of Covid.
Speaker 3: Due to the net effective COVID, due to the affinity and synatexis acquisitions, which are new to the portfolio, and age well will add a little bit of...
Due to the affinity and Cigna, Texas acquisitions, which are new to the portfolio and as well, we'll add a little bit as well.
Speaker 3: So it's a real construct. The embedded earnings have been harvested inside the 2022 plan and some still exist to add to future earnings both here.
No.
It's a it's a real construct the embedded earnings have been harvested inside the 2022 plan and some still exist to add.
Add to future earnings growth year over time.
Speaker 3: And the net effective code that we account for three things. We account for the direct cost of COVID related care. We attempt to estimate the effect of utilization curtailment due to the pandemic. And then we account for the effects of the portal.
And the net effect of Covid, we account for three things we account for the direct cost of Covid related care, we attempt to estimate the effect of utilization curtailment due to the pandemic.
And then we.
We account for the effects of the corridor.
Speaker 3: As we previously suggested, the corridors were significant in 2021.
As we previously suggested.
Corridors were significant in 2021.
Speaker 3: We had nine of them that were financially significant. That has been reduced to three for 2022. So they linger on into 22 in the state of Washington, Ohio, and Mississippi. We have every confidence when the PhD ends, they too will be eliminated. So that's really what's in the $2 net effective COVID for 2020.
We had nine of them that we're financially significant that has been reduced to three for 2022.
So they linger on into 'twenty, two and the state of Washington, Ohio in Mississippi, We have every confidence when the Phd and they too will be eliminated.
Really what's in the $2 net effect of Covid.
For 2012.
Speaker 3: 22 are the lingering effects of three quarter.
<unk> 22, or the lingering effects of three corridor.
Thanks for the color.
Speaker 1: The next question is from Michael Hall of Morgan Stanley . Leave go ahead.
The next question is from Michael Hall of Morgan Stanley . Please go ahead.
Hey, Thank you guys.
Speaker 8: Hey, thank you guys. I appreciate the color on the exchanges. I understand you're pretty confident on this single digit margin this year, but just wanted to clarify, so a large percent of these lives that were lost, basically were very low to no margin, maybe the negative margin, so earnings impact was basically negligible. And looking forward, are you now at a place where the portfolio is fully right-side?
I appreciate the color on the exchanges I understand you are pretty confident on mid single digit margins.
Just wanted to clarify it largely kind of these lives that were lost.
Anywhere.
Low to no margin and maybe even negative margin so.
Earnings impact was basically negligible and looking forward are you now at a place where the portfolio of Chipotle right side.
Speaker 8: You're ready to charge ahead at 5% long-term growth of the year.
You are ready to charge ahead at 5% to 8% long term growth a year.
Speaker 3: Yes, just against an additional color, the answer is yes, that special enrollment membership ran at a very high loss ratio in fact.
Yes.
Just again some additional color. The answer is yes that special enrollment membership ran at a very high loss ratio in fact.
Speaker 3: The volume, it represented about 40% of the member month volume in the fourth quarter alone.
The volume it represented about 40% of the.
Member month volume in the fourth quarter alone.
Speaker 3: and 25% of the year. RANN had 105% MCR in the fourth quarter, and just about 100% for the full year.
And 25% for the year ran at 105% MCR in the fourth quarter and just about a 100% for the full year.
Speaker 3: So that was a significant contribution to our issues this year. As Mark suggested, blended over the entire year, it was 260 basis points of MCR.
So that was a significant contribution to our issue this year as Mark suggested when it over the entire year. It was 260 basis points of MTR pressure.
Speaker 3: So we expect that to completely reverse into next year. The business is positioned where it should have been, pre-SEP. As I said, we follow our Medicaid footprint. We sell to highly subsidized members. Now that we've repositioned the mix to more silver than bronze, we have every confidence that this is the solid baseline, mid single digit margins, and probably mid to low single digit growth here over the first year.
So we expect that to completely reverse into next year.
The business is positioned where it should've been pre SVP.
As I said, we follow our Medicaid footprint, we sell to highly subsidized members now that we've repositioned the mix to more silver than brands. We have every confidence that this is a solid baseline mid single digit margins and probably mid to low single digit growth here over the foreseeable future.
The next question is from Josh Raskin of Nephron Research. Please go ahead.
Speaker 1: The next question is from Josh Raffkin of Neffron Research. Please go ahead.
Speaker 9: Thanks, good morning. I've been a bigger picture question around where Malena is in their sort of corporate life cycle. And obviously, to turn around, Joseph got there about four years ago. It's been much more successful than I think anyone expected and feels mainly driven by this big margin improvement and some opportunistic M&A. But teams is over getting to a point where there are some top line headwinds and it's sort of edging and flowing. And as you look over the next few years, I'm curious about the plan to extract.
Thanks, Good morning, I have been a bigger picture question around where molina as in their corporate lifecycle of them. Obviously the turnaround Joe since you got there about four years ago has been much more successful than I think anyone expected in sales, mainly driven by this big margin improvement and some opportunistic M&A, but it seems as though we're getting to a point where there are some topline.
Headwinds and it sort of ebb and flowing and as you look over the next few years I'm curious about the plan to extract more value from that membership not just the embedded earnings that you talked about but real value over the long term and are we at a point where scale and maybe.
Speaker 9: more value from that membership, not just the embedded earnings that you talk about, but real value over the long term. And are we at a point where scale and maybe...
Speaker 9: you know, other non-insurance-based capabilities become more important.
Other non insurance based capabilities become more important.
Speaker 3: You know, it certainly is part of our strategic planning process to look at all opportunities for allocation of capital. And yes, we're well aware of the capability builds that happen in other companies. We're well aware of vertical integration with providers.
It certainly is.
Part of our strategic planning process to look at all opportunities for allocation of capital.
And yes, we're well aware of the capability builds that happen in other companies, we are well aware of vertical integration with providers.
Speaker 3: We believe for the foreseeable future, there is so much growth both in the demographic and the actual membership growth, particularly in the high-acuity segment that we don't have to look far beyond our ability to take capitated risks.
We believe for the foreseeable future there is so much growth.
Both in the demographics demographics actual membership growth, particularly in the high acuity segment that we don't have to look far beyond.
Our ability to take capital risk, particularly.
Speaker 3: particularly with high-acuity members, manage it really well, be a rate taker and Medicaid, grow Medicare, and use this ballast of marketplace as this residual mechanism that we don't need to do much beyond that to sustain the growth around. We never would have suggested a 13 to 15% revenue growth and 15 to 18% EPS growth.
Particularly with high acuity members manage it really well.
B a rate taker in Medicaid.
<unk> Medicare.
And use this ballast of marketplace as this residual mechanism that we don't need to do much beyond that to sustain the growth around we never would have suggested a 13% to 15% revenue growth and 15% to 18% EPS growth.
Speaker 3: by 2025 if we didn't see enough runway to continue growing the business.
By 2025, if we didn't see enough runway.
To continue growing the business.
Speaker 3: and the swim lanes we're in. So certainly in our strategic planning process, we always look at capability builds. We are not going to allocate capital to vertically integrate with providers. For us, we do not think that's a good deployment of capital, but there's so much runway with the wide, the number of lives that will go managed, and particularly the high-acuity lives, that we don't need to do a bunch of things on that.
And the swim lanes we're in.
So certainly in our strategic planning process, we always look at capability build.
We are not going to allocate capital to vertically integrate with providers for us we do not think thats a good.
Deployment of capital.
But there is so much.
Runway with the wide the number of lives that will go managed and particularly the high acuity lives.
We don't need to do much beyond that.
Very helpful. Thanks.
Speaker 1: The next question is from Justin Lake of Wolf Research. Please go ahead.
The next question is from Justin Lake of Wolfe Research. Please go ahead.
Speaker 13: Thanks good morning. A couple questions here on the exchanges. First, Joe, you know, go back, go back to the third quarter.
Thanks, Good morning couple of questions here on the exchanges first Joe go back going back to the third quarter.
Speaker 13: You had talked about exchange membership being flat to down. So you certainly indicated that there could be some pressure here. But the fact that flat was in the ballpark, potentially by 60% decline is certainly more than, I think, any of us expected. So I was hoping you could tell us a little bit more about what happened between the third quarter and today.
You had talked about exchange membership being flat to down. So you certainly indicated that there could be some pressure here.
The fact that flat was in the ballpark.
Actually right, 60% decline is certainly more than I think any of US expected. So I was hoping you could tell us a little bit more about what happened between the third quarter and today.
Speaker 13: that you know, so significantly change the outlook for the exchanges. Like did you, did you cut commissions or something? Is there, is there just something structural that you did? Or is it just higher turn? What can you tell us?
That significantly change the outlook for the stages like did you did you cut commissions or something is there is there something structural that you did.
Or is it just higher churn.
Adult.
Speaker 3: Well, certainly all the strategies that we were executing for 2022 were in place during the third quarter they had to be as we're going into open enrollment. Yes, membership is down, but we withdrew in just about all of our markets, the Bronx.
Well certainly all the strategies that we were executing for 2022 were in place during the third quarter they had to be.
As we're going into open enrollment.
Yes membership is down, but we withdrew and just about all of our markets the bronze product.
Speaker 3: Now, how many of those members were going to then take up a Molina-based silver product? Was a matter of destination. Would I have hoped to end up with more membership if it was silver? Sure. But 320,000 out of the gate is just...
Now how many of those members were going to then take up a Marina Bay silver product was a matter of estimation.
Would I have hoped to end up with more membership if it was silver short.
But 320000 out of the gate is just fine.
Speaker 3: So as you take a complete product set off the shelf, except in free states where the circumstances are quite different. Basically pull it off the shelf. It was hard to know how much of that membership would have stayed in a Malina product with silver. But the good news is the members we do have, most of them are renewal members, and 85% of them are silver. So...
So as you take a complete product set off the shelf, except in three states, where the circumstances are quite different but basically pull off the shelf. It was hard to know how much of that membership would have stayed in a molina product with silver.
But the good news is the members that we do have most of them are renewal members and 85% of them are silver.
No.
Speaker 3: Irrespective of where we started and where we ended up, we're ending up in a really, really good place. That foretens well for the production of the mid-single.
Irrespective of where we started and where we ended up we're ending up in a really really good place that portends well for the production of the mid single digit margin.
Speaker 13: And then, you know, I'd love to get your opinion on a couple things. You talked about the impact.
Great and then I'd love to get your opinion on a couple of things you talked about the impact.
Speaker 13: of the Special Enrollment Periods, both the margins and membership.
The special enrollment period, both the margins and membership.
Speaker 13: You know, I'd love to hear your view on like how sticky do you think that membership is in terms of?
I'd love to hear your view on like how sticky do you think that membership is in.
In terms of.
Speaker 13: In terms of 2022, right, if we don't have those personal Roman periods, like what do you think happens with those numbers? Also, there's a lot of talk about the fact that, you know, with Medicaid determinations, we could see a lot of those numbers move.
In terms of 2022 right. If we don't have those personal enrollment periods like what do you think happens with those members.
So theres a lot of talk about the fact that with Medicaid Redetermination, we could see a lot of those members move.
Speaker 13: from Medicaid over to the exchanges.
Rob.
Medicaid over to the exchanges.
Speaker 13: So what do you think happens with those two things specifically and then you know maybe you can give us your kind of view of what you think the Marketplace is going to do in terms of enrollment overall Given all those different swing factors in 2022 versus 2021. Do you think it for those are shrinks?
So what do you think happens with those two things specifically and then maybe you could give us your kind of view.
The marketplace is going to do in terms of enrollment overall.
All of those different swing factors.
In 2022 versus 2021, do you think it grows or shrinks.
Speaker 3: Well, certainly, when insurance is available to you anytime you need it, you buy it, and it should be no surprise that the effects of the adverse selection were significant.
Sure well certainly.
When insurance is available to you any time you need it.
By it and it should be no surprise that the effects of the adverse selection where significant.
Speaker 3: So the question then becomes, what happens to that cohort? A lot of the uptake during the special enrollment period was brought.
The question, then becomes what happens to that cohort a lot of the uptake during the special enrollment period was Brian .
Speaker 3: So to the extent that that product was the one that was affordable and no Malina bronze product was available They either renewed with us into silver or didn't renew with us
So to the extent that that product was one that was affordable and no Molina bronze product was available days are renewed with us into silver it didn't renew with us at all.
Speaker 3: The other fact that's really important is if the acuity of the member didn't change, there's still high acuity, but now we still have.
The other fact, that's really important is if the acuity of the member Didnt change Theres still high acuity, but now we still have them.
Speaker 3: The fact that we've now had them for over a year means that we'll be able to capture risk scoring more.
Fact that we've now had them for over a year means that we'll be able to capture risk scoring more.
Speaker 3: appropriately and the fact that the Ren Silver means the risk score will count for more revenue. So the fact that some of these members renewed into the renewal book into 2022 is fine. The numbers not very high, but now we have visibility into their acuity. We'll be able to capture the risk score and at least they're in a silver product.
Appropriately.
And the fact that they are in silver it means the risk score will account for more revenue.
So the fact that some of these members renewed into the renewable book into 2022 is fine. The number is not very high but now we have visibility into their acuity will be able to capture the risk score and at least they are in a silver product.
Long term.
My comments are going to really extend to our strategy, which is this is a.
Speaker 3: My comments are going to really extend to our strategy, which is this is a high subsidy strategy to follow or Medicaid foot.
Hi, subsidy strategy to follow our Medicaid footprint. My view of this has always been and Im looking I was always looking for the right word it's a residual market for Medicaid.
Speaker 3: My view of this has always been, and I was always looking for the right words. It's a residual market for medicine.
Speaker 3: As members get part-time jobs and have an income level just above Medicaid, they're probably eligible for highly subsidized market.
As members get part time jobs and have an income level just above Medicaid probably eligible for highly subsidized marketplace product our strategy has always been to.
Speaker 3: Our strategy has always been to target that market. Now our execution has been less than perfect on that. But that's always been the...
To target that market.
Our execution.
It's been less than perfect on that.
But thats always been the strategy so.
Speaker 3: This is going to grow with the working poor, with the Medicaid population as people flexed up and down. So we think there, as we said in a yesterday, most single digit growth rate mid to, I think it's 5 to 8%, I think it's the right number. And we're confident that that's the way the business will grow with a yield that's probably half of that and membership growth that's another half.
This is going to grow with the working poor with the Medicaid population as people flex up and down so.
We think there as we said in Investor day, low single digit growth rate mid to I think it's 5% to 8% I think is the right number.
And were confident that thats the way the business will grow with a yield thats, probably half of that and membership growth thats growth thats another half of that.
Speaker 3: But it's a product that should flex up and down with Medicaid as the Medicaid role. We will up.
But it's a product that should flex up and down with Medicaid as the Medicaid roles.
Move up and down.
Speaker 4: And Justin, it's Mark, the only thing I'd add to that is I think you asked about redetermination as well. As you know, we have the projections for some revenue coming off and some members through redetermination. What we don't have is those members picked up in our marketplace product. At the margins we expect to drive here, that is all upside to our projections.
Justin It's mark the only thing I'd add to that is I think you asked about redetermination as well.
As you know we have the projections for some revenue coming off into members through Redetermination. What we don't have is those members picked up in our marketplace product.
The margins, we expect to drive here that is all upside to our projections, but.
Speaker 4: but we have a meaningful effort out there to pick up the re-determination members in our marketplace and Medicare in some case products through CrossDal, which is meaningful upside to the numbers we've talked about today.
But we have a meaningful effort out there to pick up the redetermination members in our marketplace and Medicare in some case products through cross sell which is meaningful upside to the numbers we've talked about today.
Great. Thanks.
Speaker 1: The next question is from AJ Rice of Credit Squeez. Please go ahead.
The next question is from a J rice of credit Suisse. Please go ahead.
Hi, everybody.
Speaker 10: Let me just ask you about the Medicaid business. So can you comment on what the RFP pipeline looks like where the opportunities are, where the defending requirements might be, and just in the way maybe comment on California that's been in the press lately with discussion about participation and side deal with kinds of permanency. Do you think that's gonna be a normal RFP process from your perspective or their nuances of difference? And I don't think you've commented on...
Let me just ask you about the Medicaid business. So can you comment on.
What's the RFP pipeline it looks like where the opportunities are where the defending re procurements might be and specifically may be comment on.
California.
Lately with the discussion about is this ideal with Kaiser Permanente do you think thats going to be a normal RFP process from your perspective are there.
Losses are different and I don't think you've commented on your expectations for the 22 average composite rate increase across your states.
Speaker 10: your expectations for the 22 average composite rate increase across your state.
Speaker 10: that you're seeing in Medicaid. And I wanted it if I missed that or if you would give that.
You are seeing in Medicaid and I wanted to.
I missed that or.
If you would give that.
Well a J.
Speaker 3: So IJ, first thanks for asking about Medicaid. It's obviously 80% of the revenue base. And we couldn't be more pleased with the result that the Medicaid team produced in 2021 and the plan for 22. I mean, it's now a total of nearly a $24 billion of revenue, $23 billion of premium revenue. And it's gonna operate north of a 3% affi-tech margin.
Thanks for asking about Medicaid, it's obviously, 80% of the revenue base and.
And we couldnt be more pleased with the result that the Medicaid <unk> produced in 2021 and the plan for 'twenty. Two I mean, it's now a total of nearly $24 billion of revenue of $23 billion of premium revenue and it is going to operate north of a 3% after tax margin.
Speaker 3: We continue to win new business. And yes, we do have to retain and defend our existing contractors. You suggest
We continue to win new business and yes, we do have to retain and defend our existing contract as you suggested.
Speaker 3: The California RFC was distributed just yesterday.
The California RFP.
With.
Distributed just yesterday.
We believe the Texas RFP will be distributed late in the first quarter.
Speaker 3: believe the Texas RFP will be distributed late in the first quarter.
Speaker 3: and Mississippi is in the middle of a proposal writing effort as we sit here today. Most of the other repercurements are longer dated. But those are the three. We have a high confidence in all three of them.
In Mississippi is in the middle of a proposal writing effort as we sit here today most of the other re procurements are longer dated but those are the three we have a high confidence in all three of them.
Speaker 3: We run a really well-run business in California. We have a great team. As you know, it's a pretty complex state with respect to how the regions work. And yes, I think Austin, the rest of the managed care industry, were disappointed that Kaiser was awarded a no-bid contract.
Run a really well run business in California, we have a great team as you know, it's a pretty complex state with respect to how the regions work and yes, I think us and the rest of the managed care industry. We're disappointed that Kaiser was awarded.
No bid contract, but it's not a it's not as though it's some transformational.
Speaker 3: But it's not a, it's not as though it's some transformational event that's going to reshape the entire Medi-Cal landscape. It's
Event, that's going to reshape the entire medical landscape, it's incremental in fact, most of the impact will be.
Speaker 3: In fact, most of the impact will be in the two plan regions where the
And the two planned regions.
The.
Speaker 3: the local out plans have major share. So high confidence in California, high confidence in Texas, in fact we say that the fact that the regulatory process for the SIGNAC position went so well that it is testimony to the high regard the state holds us in with respect to the Star Plus.
The local health plans have major share.
So high confidence in California high confidence in Texas in fact, we say that the fact that the regulatory process for the Sigma acquisition went so well that it is testimony to the high regard the state holds us in with respect to the starplex.
Population.
Speaker 3: With respect to new states, as you know, there's a $108 billion pipeline over four to five years.
With respect to new states as you know theres $108 billion pipeline over four to five years.
Speaker 3: We certainly won't chase every opportunity in every state. We are very selective as to where we think we can win, evaluating a series of criteria. But our proposal writing team, our business development team, are extremely active and today have demonstrated a great deal of success with a Kentucky win and Nevada win and defending the Ohio.
We certainly won't chase every opportunity and every state.
We are very selective as to where we think we can win evaluating a series of criteria.
But our proposal writing team our business development team.
Our extremely active and to date have demonstrated a great deal of success with the Kentucky win in Nevada win.
And defending the Ohio contract.
Speaker 3: So the business is performing extremely well and at 80% of revenue it needs to and has. And the outlook for growth both organically and inorganically is pretty robust.
So the business is performing extremely well and at 80% of revenue it needs to and has.
And the outlook for growth, both organically and Inorganically is pretty robust.
Speaker 10: Okay, any thoughts on the rating price for 22 on average?
Okay any thoughts on the rate increase for 'twenty two on average.
Speaker 3: I don't think we've given a specific percentage, but the rate increase was low single digit in Medicaid across the book. We are comfortable with its actuarial soundness. It is generally kept paced with our view of normalized medical cost trend, which also was low single digit.
Yes, I don't think we've given a specific percentage, but the rate increase was low single digit.
In Medicaid across the book.
We are comfortable with its actuarial soundness. It has generally kept pace with our view of normalized medical cost trend, which also was low single digit.
Speaker 3: So the rate environment is stable, is rational, the principle of actual real soundness and the return to a prospective setting of rates based on a sound medical baseline and the removal of these corridors seems to be happening as quickly as we originally estimated.
So the rate environment is stable, it's rational the principle of actuarial soundness and they returned to a prospective setting of rates based on our sound medical baseline and the removal of these corridors seems to be happening as quickly as we originally estimated.
Okay, great. Thanks, a lot.
Speaker 1: The next question is from Stephen Zallis-Kett of Barclays. Please go ahead.
The next question is from Steven Valiquette of Barclays. Please go ahead.
Speaker 5: Great, thanks, good morning. I guess two more interrelated questions on marketplace. First, just with the drop-off in membership by 65%.
Great. Thanks, good morning.
I guess two are interrelated questions on marketplace.
First just with the.
Drop off in membership by 65% from 728 to $2 50, as we think about the quarterly cadence around that.
Speaker 5: 728-250. As we think about the quarterly cadence around that.
Speaker 5: The M&E sensor will shake out at the end of the first quarter in particular. And then is it possible that the 250 year-end number is just conservative, you know, around the progression around all.
Do you have any sense of where that will shake out at the end of the first quarter in particular, and then is it possible that the $2 50 year end number maybe it's just conservative.
Around the progression around all of this.
Speaker 5: And then the second question, maybe just ask it now too, because it's kind of interrelated with the 65% decline and membership, but revenues expected to decline 38%. As we think about the delta between those two numbers, how much of that is just driven by that shift from bronze to silver versus just premium increases, just trying to get a proxie for what drive the delta between that two a little more color?
And then the second question, maybe just ask it now so you can just kind of interrelated with the 65% decline in membership.
Revenue is expected to decline 38, 38%.
As we think about the delta between those two numbers how much of that is just driven by that shift from brands to silver.
Versus just premium increases just trying to get a proxy for what drives the delta between that to you a little more color on that thanks.
Speaker 3: Most of it is the shift from Bronze to Silver, which is a very significant differential in the PMPM revenues that those products generate. But we did go for in a tame a highest single digit rate increase in that business.
Most of it is the shift from Brian to silver.
Which is a very significant.
Differential in the <unk> <unk>.
Revenues that those products generate but we did go for it and attain a high single digit rate increase in that business.
Speaker 3: In terms of where we start and where we end, I think we said we started with 323 and 30,000 members after the whole annual enrollment period.
In terms of where we start and where we end.
I think we said we started with 323% to 30000 members after the whole annual enrollment period.
Speaker 3: We are projecting pre-pandemic levels of attrition, which average 1.5 to 2% a month. Now, if that doesn't happen, we'll end up with more than 250,000 members by year end. We're also expecting not to pick up many members during special enrollment. As you know, the special enrollment period still exists.
We are projecting pre pandemic levels of attrition, which average one 5% to 2% a month now if that doesn't happen. We will end up with more than 250000 members by year end. We're also expecting not to pick up many members during special enrollment as you know the special enrollment period.
Still exist, but the eligibility requirements have been significantly reduced.
Speaker 3: But the eligibility requirements have been significantly reduced to where only people at less than 150% of federal poverty level income are eligible.
To wear only people at less than 150% of federal poverty level income are eligible. So if we we won't pick up.
Speaker 3: So if we won't pick up SAP members, we're confident in that. And if a tradition is at 1.5 to 2% a year, the 250,000 number by year end is about where we went.
Members, we're confident in that and if attrition is at one 5% to 2% a year to 250000 number by year end is about where we win.
Okay, Alright got it thanks.
Speaker 1: The next question is from Scott Siddell of Steven. Please go ahead.
The next question is from Scott Fidel of Stephens. Please go ahead.
Hi, Thanks, good morning.
Speaker 9: Hi, thanks. Good morning. I'm just interested if you can give us your initial thoughts on the 2023 MA Advanced Notice and then just walk us through your capital priorities and how you think about capital in terms of, you know, M&A opportunity, five acts, et cetera. Thanks.
Interested if you can give us your initial thoughts on the 2023 and advance notice.
And then just walk us through your capital.
<unk>, how are you thinking about capital appointment that jarrod charges.
M&A opportunity buybacks et cetera. Thanks.
Speaker 3: So obviously, like the rest of the industry, we were pleased.
Sure obviously like the rest of the industry we were pleased.
Speaker 3: with the advanced notice. Second year in a row that it looked very attractive on its surface.
With the advanced notice.
Second year in a row that it looked very attractive on its surface.
Speaker 3: You know, we've grown our Medicare business, even though half of it is demonstrations which likely won't grow, the other half is marketed business in the DeSnet product that will grow.
We've grown our Medicare business, even though half of it is demonstrations, which likely won't grow. The other half is is marketed business and the D. SNP product that will grow and the fact that we are growing from 142 to 152000 members.
Speaker 3: In the fact that we are growing from 142 to 152,000 members.
Speaker 3: is significant. So we're really happy with the growth characteristics of the business. We think two years straight of rate increases give us a lot of room to put the right benefits in the product.
A significant.
So we're really happy with the growth characteristics of the business, we think two years right.
Rate increases give us a lot of room to put the right benefit and the product too.
Speaker 3: to rate it appropriately and to win new business and have margins in the mid-stingled digit after tax territory where we're positioned today. So we're really bullish on our Medicare business and we have a great team that will grow that business here over the foreseeable future, as we said in our investment.
To rate it appropriately and to win new business and have margins in the mid single digit after tax territory, where we're positioned today. So we're really bullish on our Medicare business and we have a great team that we'll grow that business here over the foreseeable future as we said at our Investor day.
Speaker 4: So on the capital side, I feel really good about our dry powder. We're starting off the year with a good cash balance at the parent. Our projected cash flow for the year is strong. And you can see the leverage metrics gives me a lot of room to raise more if I need it.
Capital deployment, Mark so on the capital side I feel really good about our dry powder, we're starting off the year with.
A good cash balance at the parent.
Our projected cash flow for the year is strong and you can see the leverage metrics that gives me a lot of room to raise more if I need it.
Speaker 4: On the M&A side, I'm encouraged by what we're seeing for the year. A number of things in the hopper right now. Of course, they all move at their own speed. We never make commitments about when they might happen. But good align a site on a number of targets, which I'm hoping to deploy the capital again.
On the M&A side.
Encouraged by what we're seeing for the year.
Number of things in the Hopper right now of course, they all move at their own speed, we never make commitments about when they might happen, but good line of sight on a number of targets.
I am hoping to deploy the capital against.
Speaker 4: What Joe and I have always been adamant about though is share repurchases when and where appropriate. There's some small amount that is just not part of our normal hygiene that we would probably do during the course of the year. Not a big commitment by any means, but just on an annual basis, there is some small amount we like to do. Part of that, though, a function of what the M&A pipeline turns out on. We'll have to see how that plays out on the year.
What Joe and I have always been adamant about though is.
Share repurchases.
When and where appropriate there is some small amount that is just not part of our normal hygiene that we would probably do during the course of the year not a big commitment by any means but just on an annual basis. There is some small amount we'd like to do part of Thats, though a function of what the M&A pipeline turns out on we'll have to see how that plays out on the year.
The next question is from George Hill of Deutsche Bank. Please go ahead.
Speaker 1: The next question is from Dorch Hill of Dorchabank. Please go ahead.
Speaker 2: Hey, good morning guys and thanks for taking the question. I know a lot's been covered here, so I just was gonna ask one about the PBM Carvins. And I guess, could you talk about, is the impact that meaningful at all? I didn't hear you guys called out in the prepared commentary and I didn't have anything on it in my notes. So maybe just kind of, maybe walk through the mechanics, how does it impact the income statement? Is there any meaningful impact as the financials from the PBM Carvins?
Hey, good morning, guys and thanks for taking the question I know a lot's been covered here. So I just was going to ask one about the TBM carve ins and I guess could you talk about is the impact of that meaningful at all I Didnt hear you guys called out.
In the prepared commentary and I don't have anything on at my notes.
Maybe just kind of maybe walk through the mechanics, how does it impact. The income statement is the is there any meaningful impact to the financials from the ppm carbon.
Okay.
Speaker 3: I think you're George referring to the PBM carve outs. Yes. In California. I think you guys carve into the safe.
I think Georgia for him to the.
TBM carve outs, yes.
How about you guys carve into the same okay. Okay. Thank you.
Speaker 3: Okay, thank you. You want to make sure we're talking about the same thing. Sure, we have a $500 million of revenue decrement in our forecast of the year due to the car box, which is a full year of California and a half a year of Ohio.
Just wanted to make sure we're talking about the same thing.
Sure we have a $500 million revenue decrement in our forecast for the year due to the carve out which is a full year of California, and the half a year of Ohio.
Speaker 3: And obviously, there's margin implications to that. These revenues that are taken out into a fee-for-service environment generally carry with them the average Medicaid margin. So think of it as the loss of the average Medicaid margins on $500 million.
And obviously there's.
<unk> margin implications of that.
These revenues that are taken out into a fee for service environment generally carry with them. The average Medicaid margin. So think of it as the loss of the average Medicaid margins on $500 million of revenue.
Helpful. Thank you.
Speaker 1: And the last question comes from Gary Taylor of Collin. Please go ahead.
And the last question comes from Gary Taylor of Cowen. Please go ahead.
Okay.
Speaker 11: Hi, good morning. Most of my questions sort of touched on one way or the other, but just refining a little bit. You have any on the non at...
Hey, good morning, most of my question sort of touched on one way or the other such as refining a little bit.
Do you have any on the on the non FTE.
Speaker 11: population. Do you have any retention figures on that piece for what it historically looks like?
Okay.
Population do you have any.
<unk> figures.
Figures on on that versus what it's historically looked like.
That's too early.
Speaker 3: Gary, I want to make sure we answer any questions. When you say retention, you're talking about throughout the year, our lapse rate, or you're talking about how many members review from the prior year.
Gary you want to make sure we answered your question when you say retention you're talking about throughout the year, our lapse rate or you're talking about how many members we knew from the prior year.
The latter.
Speaker 4: Yeah, we do have pretty good insight at this point. A much better proportion of our starting membership this year is renewal, meaningfully better than say even last year.
Yes.
We do have pretty good insight at this at this point.
A much better proportion of our starting membership this year is renewal meaningfully better.
Then say even last year.
Speaker 4: Part of that is with the smaller book, a number of our members rolled over with us.
Part of that is with the smaller book a number of our members rolled over with us.
Speaker 4: So we kept a much higher percentage of renewal members this year. And that's a really good thing because we know those members better. We have the history on them and that converts right into risk adjustment and starting the year with a much better risk adjustment position and obviously being able to code those members right out of the gate.
So we kept a much higher percentage of renewal members. This year and that's a really good thing because we know those members better we have the history on them and that converts right into risk adjustment and starting the year with a much better risk adjustment position and obviously being able to code those members right out of the gate. So we feel good.
Speaker 4: So we feel good about that higher level of renewals and it does translate into risk-just.
About that higher level of renewals and it does translate into risk adjustment.
Speaker 11: And then my second one was on the Medicare risk adjustment, you know, headwind related to...
Great and then my second one was on the Medicare risk adjustment.
Headwinds related to.
Speaker 11: pandemic. I thought I thought at one point you had tried that.
And then Mike I.
Hi, Scott.
I thought at one point you had cited.
Ed.
Speaker 11: dollar it sounds like you're saying you're you're gonna recoup 50 cents of that in
A dollar it sounds like Youre, saying youre going to recoup.
<unk> of that.
And then.
Speaker 11: 22 does it still mean there's another 50 cents for that and that's maybe kind of embedded in your
'twenty two does it still mean, there's another 50% for that and that may be kind of embedded in your.
Speaker 11: You're remaining COVID recapture, or my has the dollar chains are my-
Your remaining COVID-19 recapture rmi as the dollar change.
Paul.
Speaker 4: No, it's Mark. Your memory is quite good. We used to talk about a dollar of Medicare risk or in our embedded earnings. That is, we just weren't able to get out there and do the in-home assessments and the risk-goring during the pandemic the way we had historically.
No.
It's Mark your memory is quite good.
We used to talk about a dollar of Medicare risk score in our embedded earnings that is we just werent able to get out there and do the in home assessment and the risk scoring during the pandemic. The way we had historically so we were carrying a dollar now the good news is late in the third quarter, especially in the fourth quarter.
Speaker 4: So we were carrying a dollar. Now the good news is late in the third quarter, especially in the fourth quarter, we were actually able to realize part of that. CMS extended the window for submissions from 20...
We were actually able to realize part of that.
CMS extended the window for submissions from 2020, which meant we were able to get a little bit more of that into the back half of 'twenty. One as a result that dollar fell to 50 at the end of the year and we will realize that 50 in our guidance. So the dollar.
Speaker 4: which meant we were able to get a little bit more of that into the back half of 21. As a result, that dollar fell to 50 cents at the end of the year and we'll realize that 50 cents in our guidance.
Speaker 4: So the dollar we used to talk about, 50 cents you got in third and fourth quarters, the other 50 cents you're getting in guidance.
We used to talk about 50 cents you got in third and fourth quarters. The other 50 youre getting in guidance.
Got it okay. Thank you.
This concludes our question and answer session and today's conference. Thank you for attending today's presentation. You may now disconnect.
Speaker 1: This concludes our question and answer session and today's conference. Thank you for attending today's presentation. You may now disconnect.