Q3 2023 Molina Healthcare Inc Earnings Call
Speaker 1: Good morning and welcome to the Molina HealthCare third quarter 2023 earnings call. All participants will be in listen only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Good morning, and welcome to the Molina healthcare third quarter 2023 earnings call.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions.
Speaker 1: Please note this event is being recorded. I would now like to turn the conference over to Joe Korshesky, Senior Vice President of Investor Relations. Please go ahead.
Please note. This event is being recorded I would now like to turn the conference over to Joe Kruszewski Senior Vice President of Investor Relations. Please go ahead.
Speaker 2: Good morning and welcome to Molina HealthCare's third quarter 2023 earnings call.
Good morning, and welcome to Molina Healthcare's third quarter 2023 earnings call.
Speaker 2: Joining me today are Molina's President and CEO , Joe Zdupresski, and our CFO , Mark Kime.
Joining me today are Molina, as president and CEO, Joseph Gretzky and our CFO archive.
Speaker 2: A press release announcing our third quarter earnings was distributed after the market closed yesterday and is available on our investor relations website.
A press release announcing our third quarter earnings was distributed after the market closed yesterday and is available on our Investor Relations website.
Speaker 2: Shortly after the conclusion of this call, a replay will be available for 30 days. The numbers to access the replay are in the earnings relief.
Shortly after the conclusion of this call a replay will be available for 30 days the numbers to access the replay are in the earnings release.
Speaker 2: For those of you who listened to the rebroadcast of this presentation, we remind you that all of the remarks made are as of today, Thursday, October 26, 2023, and have not been updated subsequent to the initial earnings call.
For those of you who listen to the rebroadcast of this presentation, we remind you that.
All of the remarks made are as of today Thursday October 26, 2023 and have not been updated subsequent to the initial earnings call.
Speaker 2: On this call, we refer to certain non- GAAP measures .
On this call we will refer to certain non-GAAP measures a reconciliation.
Speaker 2: A reconciliation of these measures with the most directly comparable GAAP measures can be found in our third quarter 2023 earnings release.
Filiation of these measures with the most directly comparable GAAP measures can be found in our third quarter 2023 earnings release.
Speaker 2: During the call, we will be making certain forward-looking statements, including, but not limited to. Statements regarding our 2023 guidance, Medicaid redeterminations, our recent RFP awards and related revenue growth, our 2024 outlook, our recent acquisitions and eminent activities, our long-term growth strategy and our embedded earnings power and margin.
During the call, we will be making certain forward looking statements, including but not limited to statements regarding our 2023 guidance Medicaid Redetermination. Our recent RFP awards and related revenue growth, our 'twenty 'twenty four outlook, our recent acquisitions and M&A activity, our long term growth.
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Speaker 2: The listeners are cautioned at all of our forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from our current expectation.
Listeners are cautioned that all of our forward looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from our current expectations.
Speaker 2: We'd invite listeners to review the risk factors discussed in our form 10K and in report, final of the SEC, as well as our risk factors listed in our form 10Q and form 8K filings with the SEC.
We advise listeners to review the risk factors discussed in our Form 10-K annual report filed with the SEC as well as our risk factors listed in our Form 10-Q, and form 8-K filings with the SEC.
Speaker 2: After the completion of our prepare 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 turn the call over to our Chief Executive Officer, Joseph Brezky. Joe.
I will now turn the call over to our Chief Executive Officer, Joseph Gretzky Joe.
Speaker 3: Thank you Joe and good morning. Today I will provide updates on several topics.
Thank you Joe and good morning.
Today, I will provide updates on several topics.
Speaker 3: Our financial results for the third quarter of 2023 are full year 2023 guidance.
Our financial results for the third quarter 2023.
Our full year 2023 guidance.
Medicaid Redetermination.
Speaker 3: our growth initiatives and our strategy for sustaining profitable growth and our 2024 premium outlook.
Our growth initiatives and our strategy for sustaining profitable growth.
Our 2024 premium outlook.
Let me start with our third quarter performance.
Speaker 3: Last night, we reported adjusted earnings for deluded share for the third quarter of $5.05.
Last night, we reported adjusted earnings per diluted share for the third quarter of $5.05.
Speaker 3: or 16% year-over-year growth on $8.2 billion of premium revenue.
Or 16% year over year growth, an $8 $2 billion of premium revenue.
Speaker 3: Our results reflect the continued execution of our strategy for sustaining profitable growth.
Our results reflect the continued execution of our strategy for sustaining profitable growth.
Speaker 3: Our third quarter 88.7% consolidated MCR, and 4.6% adjusted pre-tax margin demonstrate continued strong medical and operating cost management.
Our third quarter 88, 7% consolidated MCR and four 6% adjusted pre tax margin.
Demonstrate continued strong medical and operating cost management.
Speaker 3: Our year-to-date consolidated MCR of 87.8% is squarely aligned with our long-term target range, and our 5.1% pre-tax margin is above the high end of the range.
Our year to date consolidated MCR of 87, 8% is squarely in line with our long term target range and our 5.1% pre tax margin is above the high end of the range.
Speaker 3: We know that investment income continues to bolster our year-over-year earnings growth and already a strong margin profile.
We knew that investment income continues to bolster our year over year earnings growth and already strong margin profile.
Yeah.
Our Medicaid business performed as we expected.
Speaker 3: Our 88.8% MCR was within our long-term target range.
Our 88, 8% MCR.
Our long term target range.
Speaker 3: Medical cost rent, including the net effective re-determination acuity shifts in quarters in several states, was within our expectation.
Medical cost trends, including the net effect of Redetermination acuity shifts in corridors in several states was within our expectations.
Speaker 3: Medicare's results came in below our expectations with a reported MCR of 92.4%.
Medicare's results came in below our expectations with a reported MCR of 92, 4%.
Speaker 3: In the quarter, we continue to experience higher utilization of outpatient, professional, and in-home services, all of which we believe we appropriately addressed in our 2024 bid.
In the quarter, we continued to experience higher utilization of outpatient professional and in home services all of which we believe we appropriately addressed and our 2024 beds.
Speaker 3: And finally, marketplace with a reported MCR of 78.9% continues to perform well.
Yeah.
And finally marketplace with the reported MCR of 78, 9% continues to perform well.
Speaker 3: Medical cost trends are in line with our pricing assumptions and our improved risk adjustment performance is meaningful.
Medical cost trends are in line with our pricing assumptions in our improved risk adjustment performance is meaningful.
Speaker 3: Our small silver stable strategy is working.
Our small silver stable strategy is working.
Speaker 3: In summary, our third quarter results build on our strong first half performance.
In summary, our third quarter results build on our strong first half performance.
Turning now to our 2023 guidance.
Speaker 3: Based on our third quarter results, we are affirming our full year 2023 adjusted earnings per share guidance of at least $20.75, or 16% growth year over year.
Based on our third quarter results, we are affirming our full year 2023 adjusted earnings per share guidance of at least $20 75 or.
Our 16% growth year over year.
Speaker 3: consistent with our long-term earnings for shared growth target, a 15 to 18%.
Consistent with our long term earnings per share growth target of 15% to 18%.
Speaker 3: Our fourth quarter outlook takes full account of our year-to-date performance and consideration for seasonality and conservatism.
Our fourth quarter outlook take full account of our year to date performance and consideration for seasonality and conservatism.
Now a few words about Medicaid redetermination.
Speaker 3: As of July , all our Medicaid states had begun disenrolling them.
As of July all of our Medicaid States had begun dishes rolling members.
Speaker 3: Despite the redetermination activity, our third quarter Medicaid membership was nearly unchanged from the second.
Despite the Redetermination activity, our third quarter Medicaid membership was nearly unchanged from the second quarter.
Speaker 3: Growth driven by the initiation of the Iowa contract and the closing of the my choice Wisconsin acquisition.
Growth driven by the initiation of the Iowa contract and the closing of the my choice, Wisconsin acquisition.
Speaker 3: offset the 200,000 member decrease from the net impact of redeterminations and new enrollment.
The 200000 member decrease from the net impact of Redetermination and new enrollment.
Speaker 3: while many uncertainties remain on the ultimate impact of redetermination.
While many uncertainties remain on the ultimate impact of Redetermination.
Speaker 3: We now believe it proved to lower our retention assumption from 50% to 40%.
We now believe it prudent to lower our retention assumption from 50% to 40%.
Speaker 3: Mark will address implications for revenue and our unchanged outlook for $38 billion in premium revenue for next year in his remote.
Mark will address implications for revenue.
And our unchanged outlook for $38 billion in premium revenue for next year in his remarks.
Speaker 3: Although the medical cost profile of members who have left the Medicaid roles continues to be more favorable than the portfolio average.
Although the medical cost profile of members, who have left the Medicaid roles.
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Speaker 3: when combined with the impact of corridor offsets in several states.
When combined with the impact of corridor offsets in several states.
Speaker 3: Our overall Medicaid MCR was within our expectations.
Our overall Medicaid MCR was within our expectations.
Speaker 3: Mark will provide more color on redeterminations during his remarks.
Mark will provide more color on redetermination during his remarks.
Speaker 3: Turning now to an update on our growth initiatives and our strategy for sustaining profitable growth, beginning with our recent state wins.
Turning now to an update on our growth initiatives and our strategy for sustained profitable growth.
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Speaker 3: The implementation of our new California contract, which will nearly double the size of our current membership in the state and add approximately $2 billion in annual premium is proceeding as planned for a January 1st, 2024 start date.
The implementation of our new California contract, which will nearly double the size of our current membership in the state and add approximately $2 billion in annual premium is proceeding as planned for a January one 2024 start date.
Speaker 3: In July , we finalized our contract for the Texas Star Plus program, retaining our entire existing footprint.
In July we finalized our contract for the Texas Star plus program, retaining our entire existing footprint.
Speaker 3: With numerous new entrants likely attracting low shares, we expect our share of membership in the state to grow, driving incremental annual premium revenue of approximately $400 million.
With numerous new entrants likely attracting low share we expect our share of membership in the state to grow driving incremental annual premium revenue of approximately $400 million.
Yeah.
Speaker 3: Also in July , we successfully launched our Iowa Helpline, serving approximately 180,000 members, consistent with our expectations.
Also in July we successfully launched our Iowa Health plan, serving approximately 180000 members consistent with our expectations.
Yes.
Speaker 3: Our Nebraska implementation is tracking to a successful launch on January 1, 2024 and will contribute an estimated annual premium of $600 million.
Our Nebraska implementation is tracking to a successful launch on January one 2024, and will contribute an estimated annual premium of $600 million.
Speaker 3: In August , we announced that we will once again be serving Medicaid beneficiaries in the state of New Mexico.
In August we announced that we will once again be serving Medicaid beneficiaries in the state of New Mexico.
Speaker 3: We expect the new contract to begin mid-2024 and produce approximately $500 million in annual premium.
We expect a new contract to begin mid 2024 and produce approximately $500 million in annual premium revenue.
Speaker 3: In Indiana, the state deemed us not to have met the readiness requirements for a Medicaid contract due to our Medicare D-SNP product becoming available in the state on January 1st, 2025 and not by January 1st, 2024 as required.
In Indiana, the state deemed us not to have met the readiness requirements for a Medicaid contract due to our Medicare D. SNP products, becoming available mistake on January one 2025, and not by January one 2024 as required.
Speaker 3: We are proud to have won the initial award as testimony to our proposal skills, but disappointed we did not meet that one readiness requirement.
We are proud to have won the initial award as testimony to our proposal skills, but disappointed we did not meet that one readiness requirement.
Our growth agenda is in full gear.
Speaker 3: even with the development in Indiana and changing assumptions for redetermination retention.
Even with the development in Indiana, and changing assumptions for Redetermination retention.
Speaker 3: All of these new contract rents and reperturbance combined keep us on track for approximately $38 billion of premium revenue in 2024, as previously forecast.
All of these new contract wins and re procurements combined keep us on track for approximately $38 billion of premium revenue in 2024 as previously forecasted.
Speaker 3: Shifting to our M&A activity, in early September , we announced the closing of the MyChoice Wisconsin acquisition.
Shifting to our M&A activity in early September we announced the closing of the my choice, Wisconsin acquisition.
Speaker 3: Recall, this transaction adds approximately 40,000 mostly MLTSS members and approximately $1 billion in annual premium revenue.
Recall this transaction adds approximately 40000, mostly M. L. P. S. S members and approximately $1 billion in annual premium revenue.
Speaker 3: The regulatory approval process for the Bright Medicare acquisition is proceeding as planned.
The regulatory approval process for the bright Medicare acquisition is proceeding as planned.
Speaker 3: We continue to work with Bright Management on satisfying the remaining closing conditions and continue to expect to close by the first quarter of 2024.
We continue to work with bright management on satisfying the remaining closing conditions and continue to expect to close by the first quarter of 2024.
Now looking ahead to 2024.
Speaker 3: Assuming a timely close of the bright Medicare acquisition, we remain confident that all of the known building plans are in place.
Assuming a timely close the bright Medicare acquisition, we remain confident that all of the known building blocks provide line of sight to approximately $38 billion of premium revenue in 2024, which represents a 19% year over year growth, even before executing on additional strategic initiatives.
Speaker 3: Provide line-of-sight to approximately $38 billion of premium revenue in 2024, which represents 19% year-over-year growth, even before executing an additional strategic initiative.
Speaker 3: Well, there are many positive earnings catalysts going into next year, which Mark will speak to in a moment. There are also some factors which are not yet fully developed.
Well there are many positive earnings catalyst going into next year, which mark will speak to in a moment. There are also some factors which are not yet fully developed.
Speaker 3: As is customary, we will provide our specific earnings guidance with you in February .
As is customary we will provide our specific earnings guidance with you in February.
Speaker 3: Recall that at our Investor Day earlier this year, we announced our long-term financial targets, the centerpiece of which is a long-term earnings per share compound annual growth rate of 15% to 18%.
Recall that at our Investor Day earlier, this year, we announced our long term financial targets.
On a piece of which is our long term earnings per share compounded annual growth rate of 15% to 18%.
Speaker 3: With the visibility we have into our earnings trajectory, we are comfortable in reaffirming our commitment to that compound annual growth rate target over the next three years.
With the visibility we have into our earnings trajectory, we are comfortable and reaffirming our commitment to that compound annual growth rate target over the next three years.
Speaker 3: As always, I would like to thank our management team who work tirelessly every day to deliver these results.
As always I would like to thank our management team, who work tirelessly everyday to deliver these results are.
Speaker 3: Our team has evolved to keep pace with our growth and to execute each stage of our strategy.
Our team has evolved to keep pace with our growth and to execute each stage of our strategy.
Speaker 3: Recall that most recently, we promoted both Jim Loyce and Mark Heim to the position of Senior Executive Vice President, with Jim adding the title of Chief Operating Officer.
Call that most recently, we promoted both Jim boys and more time to the position of senior Executive Vice President with Jim, adding the title of Chief operating Officer.
Speaker 3: In further shaping our lineup under Jim and Mark, two Molina veterans, Executive Vice Presidents Deb Bacon and Dave Reynolds, will now lead our flagship Medicaid.
And further shaping our lineup under Jim and Mark to Molina Veterans Executive Vice President's debit Bacon and Dave Reynolds will now lead our flagship Medicaid business.
Speaker 3: We're also adding additional management talent in our Medicare and Marketplace businesses and scaling up our integration platform, all to support our substantial growth.
We are also adding additional management talent in our Medicare and marketplace businesses and scaling up our integration platform all to support our substantial growth.
Speaker 3: Mark Bruso will be leading the company with our thanks for his service.
Marc Russo will be leaving the company with our thanks for his service.
Speaker 3: Not only our executive team, but all of our colleagues throughout the enterprise and across the nation are vital to our...
Not only our executive team, but all of our colleagues throughout the enterprise and across the nation are vital to our success.
Unknown Executive: Good morning and welcome to the Molina Healthcare Third Quarter 2023 earnings call. All participants will be in listen only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero.
Speaker 3: I want to extend my special thanks to our nearly 18,000 associates who are dedicated to deliver access to high quality health care to our members.
I want to extend my special thanks to our nearly 18000 associates, who are dedicated to deliver access to high quality health care to our members.
Unknown Executive: After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.
Speaker 3: It is my privilege to serve with such a committed and capable group of profession.
It is my privilege to serve with such a committed and capable group of professionals.
Joe Krocheski: I would now like to turn the conference over to Joe Krocheski, Senior Vice President of Investor Relations. Please go ahead. Good morning and welcome to Molina Healthcare's third quarter 2023 earnings call. Joining me today are Molina's president and CEO, Joseph Rasky, and RCFO Mark Keim. A press release announcing our third 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 3: In summary, we are very pleased with our performances.
In summary, we are very pleased with our performance this quarter.
Speaker 3: We have maintained our attractive margin profile during this unprecedented, industry-wide re-determination process while continuing to generate double-digit growth.
We have maintained our attractive margin profile during this unprecedented industry wide redetermination process, while continuing to generate double digit growth.
Speaker 3: With that, I will turn the call over to Mark for some additional color on the financials. Mark. Mark.
With that I will turn the call over to Mark for some additional color on the financials.
Mark.
Thanks, Joe and good morning, everyone.
Speaker 4: Today I'll discuss some additional details of our third quarter performance to balance sheet and our 20-23 guidance and embedded earnings.
Today I'll discuss some additional details of our third quarter performance, the balance sheet, and our 2023 guidance and embedded earnings.
Joe Krocheski: The numbers to access the replay are in the earnings release. For those of you who listen to the rebroadcast of this presentation, we remind you that all of the remarks made are as of today, Thursday, October 26, 2023, and have not been updated subsequent to the initial earnings call. On this call, we will refer to certain non gap measures. A reconciliation of these measures with the most directly comparable gap measures can be found in our third quarter 2023 earnings release.
Speaker 4: I'll also provide an update on redeterminations, our 2024 premium revenue outlook, and similarly thoughts on the drivers of 2024 earnings. Thank you very much.
I'll also provide an update on redetermination, our 'twenty 'twenty four premium revenue outlook and some early thoughts on the drivers of 2020 for earnings.
Beginning with our third quarter results.
Speaker 4: For the corner, we reported a jet that earnings per share of $5.5 and a consolidated MCR of 88.7.
For the quarter, we reported adjusted earnings per share of $5.05 and a consolidated MCR of $88 seven.
Speaker 4: In Medicaid, our reported MCR with 8.8.
And Medicaid are reported MCR was $88 eight.
Speaker 4: The MCR included a moderate impact from the net effect of redetermination acuity shifts and corridors in several states.
The MTR included a moderate impact from the net effect of Redetermination acuity shifts and corridors in several states.
Joe Krocheski: During the call, we will be making certain forward looking statements, including but not limited to statements regarding our 2023 guidance, Medicaid redeterminations, our recent RFP awards and related revenue growth, our 2024 outlook, our recent acquisitions and M&A activity, our long term growth strategy, and our embedded earnings power and margins. Listeners are cautioned that all of our forward looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from our current expectations.
Speaker 4: Our third quarter MCR was also slightly elevated from a provisional retroactive rate adjustment in New York State.
Our third quarter MCR was also slightly elevated from a provisional retroactive rate adjustments in New York State.
Speaker 4: Across our Medicaid segment, the major medical cause categories were largely in line with our expectations and normal quarter-decornered trend fluctuations.
Across our Medicaid segment, the major medical cost categories were largely in line with our expectation and normal quarter to quarter trend fluctuations.
Speaker 4: In Medicare, our reported MCR with 92.4 above our long-term target range.
In Medicare our reported MCR was $92 four above our long term target range.
Speaker 4: During the quarter, we saw a continuation of increased utilization of outpatient, professional, and in-home service.
During the quarter, we saw a continuation of increased utilization of outpatient professional and in home services.
Joe Krocheski: We advise listeners to review the risk factors discussed in our form 10K and in report file with the SEC, as well as our risk factors listed in our form 10Q and form 8K filings with the SEC.
Speaker 4: Recall we observe these trends emerging in the first and second quarters in time to inform our 2024 BIDS and benefit design.
Recall, we observe these trends emerging in the first and second quarters in time to inform our 2024 bids and benefit design.
Unknown Executive: After the completion of our prepare remarks, we will open the call to take your questions.
Speaker 4: We are confident our 2024 bid will produce target margins next year.
We are confident our 'twenty 'twenty four bids will produce target margins next year.
Joseph Rasky: I will now turn the call over to our Chief Executive Officer, Joseph Bretsky. Thank you, Joe, and good morning. Today, I will provide updates on several topics. Our financial results for the third quarter 2023, our full year 2023 guidance, Medicaid redeterminations, our growth initiatives in our strategy for sustaining profitable growth, and our 2024 premium outlook. Let me start with our third quarter performance. Last night, we reported adjusted earnings for diluted share for the third quarter of $5.05, or 16% year over year growth, on $8.2 billion of premium revenue.
Speaker 4: In Marketplace, our reported MCR was 78.0.
In marketplace, our reported MCR was $78 nine.
Speaker 4: This strong result reflects our pricing strategy to return this business to target margin.
This strong result reflects our pricing strategy to return this business to target margins.
Speaker 4: Our enhanced focus on silver and renewal members helps us to drive strong performance and risk adjust.
Our enhanced focus on silver and renewal members helps us to drive strong performance and risk adjusted.
Speaker 4: Based on our year-to-date performance, we are well positioned to exceed our mid-single digit target margins for the year.
Based on our year to date performance, we are well positioned to exceed our mid single digit target margins for the year.
Speaker 4: Also in marketplace, we recorded a non-recurring charge in the quarter on our Texas Marketplace Risk Adjustment Receivable from 2022 due to the financial difficulties of one major program participant in that state.
Yeah.
Also in marketplace, we recorded a nonrecurring charge in the quarter on our Texas marketplace risk adjustment receivable from 'twenty to 'twenty two.
Due to the financial difficulties of one major program participant in that state.
Speaker 4: While we have made our best estimates of the shortfall in collections, we will continue to pursue regulatory paths to collecting the full receivable due to us.
While we have made our best estimate of the shortfall on collections, we will continue to pursue regulatory paths to collecting the full receivable due to us.
Joseph Rasky: Our results reflected continued execution of our strategy for sustaining profitable growth. Our third quarter 88.7% consolidated MCR, and 4.6% adjusted pre-tax margin demonstrate continued strong medical and operating cost management. Management. Our year-to-date consolidated MCR of 87.8% is squarely aligned with our long-term target range and our 5.1% pre-tax margin is above the high end of the range. We know that investment income continues to bolster our year-over-year earnings growth and already a strong margin profile.
Speaker 4: Given it's unusual and one-time nature, we have excluded it from our adjusted earnings.
Given the unusual and one time nature, we've excluded it from our adjusted earnings.
Speaker 4: or adjust the G and A ratio for the corner with 7.1. Consistent with our expectations.
Our adjusted G&A ratio for the quarter was 7.1 consistent with our expectations. This.
Speaker 4: This result includes a new business implementation spending for new contract wins in Iowa as well as several new contracts beginning in 2024. Turning.
This result includes a new business implementation spending for new contract wins in Iowa, as well as several new contracts beginning in 2024.
Turning now to our balance sheet.
Our capital Foundation remains strong.
Speaker 4: We harvested approximately 175 million of subsidiary dividends in the quarter and used a similar amount for our Wisconsin acquisition, leaving our parent company cash balance unchanged, quarter over quarter, at approximately half a billion.
We harvested approximately $175 million of subsidiary dividends in the quarter and used a similar amount for our Wisconsin acquisition, leaving our parent company cash balance unchanged quarter over quarter at approximately half a billion.
Joseph Rasky: Our Medicaid business performed as we expected. Our 88.8% MCR was within our long-term target range. Medical cost run, including the net effect of re-determination acuity shifts in quarters and several states, was within our expectations. Medicare's results came in below our expectations with a reported MCR of 92.4%. In the quarter, we continue to experience higher utilization of outpatient, professional, and in-home services, all of which we believe we appropriately addressed in our 2024 bids.
Speaker 4: Dead at the end of the quarter was unchanged at just 1.6 times trailing 12 months even though, with our distance.
Debt at the end of the quarter was unchanged at just one six times trailing 12 months EBITDA.
With our debt to cap ratio at $38 three.
Speaker 4: Net-a-parent company cash, these ratios fall to 1.3 and 33.2, reflecting our low leverage position and ample cash and capital capacity for additional growth and investment.
Net of parent company cash these ratios fall to 1.3, and $33, two reflecting our low leverage position and ample cash and capital capacity for additional growth and investment.
Turning to reserves.
Speaker 4: Our reserve approach remains consistent with prior quarters, and we continue to be confident in the strength of our reserve position. Days and clean is payable at the end.
Our reserve approach remains consistent with prior quarters, and we continue to be confident in the strength of our reserve position.
Joseph Rasky: And finally, marketplace with a reported MCR of 78.9% continues to perform well. Medical cost trends are in line with our pricing assumptions and our improved risk adjustment performance is meaningful. Our small, silver, stable strategy is working. In summary, our third quarter results build on our strong first half performance.
Days and claims payable at the end of the quarter was 51.
Speaker 4: elevated from normal levels due to the inclusion of light choice with constant and our new Iowa plan.
Elevated from normal levels due to the inclusion of my choice, Wisconsin, and our new Iowa plant.
Speaker 4: Adjusted for this temporary impact, our reported DCP would have been consistent with Q1 and Q2L.
Adjusted for this temporary impact our reported DCP would have been consistent with Q1 and Q2 levels.
Speaker 4: Now some additional color on our 2023 guidance and embedded earning.
Now some additional color on our 2023 guidance and embedded earnings.
Speaker 4: We are affirming our four year 2023 adjusted earnings for shared guidance about least $20.75.
We are affirming our full year 2023 adjusted earnings per share guidance of at least $20 75.
Joseph Rasky: Turning now to our 2023 guidance. Based on our third quarter results, we are forming our full year 2023 adjusted earnings per share guidance of at least $20.75 or 16% growth year-over-year, consistent with our long-term earnings per share growth target of 15 to 18%. Our fourth quarter outlook takes full account of our year-to-date performance and consideration for seasonality and conservatism. Now a few words about Medicaid re-determinations. As of July, all our Medicaid states had begun disenrolling numbers.
Speaker 4: Our full year guidance now effectively, the remaining fourth quarter, reflects our third quarter result, which we're largely consistent with our expectations, and includes considerations for seasonality.
Our full year guidance now effectively the remaining fourth quarter reflects our third quarter results, which were largely consistent with our expectations.
And includes considerations for seasonality in conservativism.
Speaker 4: New store embedded earnings remains unchanged at $5.50 per share. Comprised to $4 for our recent new contract wins and $1.50 for acquisition.
New store of embedded earnings remains unchanged at $5 50 per share comprised of $4 for our recent new contract wins and a $1 50 per acquisitions.
Speaker 4: The $4 per share for our new contract wins now includes approximately 50 cents for the combination of Texas Star Plus and New Mexico.
The $4 per share for our new contract wins now includes approximately 54.
Joseph Rasky: Despite the re-determination activity, our third quarter Medicaid membership was nearly unchanged from the second quarter. Growth driven by the initiation of the Iowa contract and the closing of the my choice Wisconsin acquisition offset the 200,000 member decrease from the net impact of re-determinations and new enrollment. While many uncertainties remain on the ultimate impact of re-determinations, we now believe it proved to lower our retention assumption from 50% to 40%. Mark will address implications for revenue and our unchanged outlook for $38 billion in premium revenue for next year in his remarks.
So with a combination of Texas Star plus and new Mexico.
Speaker 4: Replacing the same amount previously expected from the Indiana country.
Replacing the same amount previously expected from the Indiana contract.
Speaker 4: The $50 per share of acquisition earnings includes achieving full run rate accretion from age well, light choice, and bright health Medicare business.
The $1 50 per share of acquisition earnings includes achieving full run rate accretion from Hol, My choice and Brighthouse Medicare business.
Turning to Redetermination.
Speaker 4: As we discussed on prior calls, we have built robust tracking and monitoring systems to maximize retention of members who meet the eligibility criteria and to also promptly understand any financial impacts of re-determination.
As we discussed on prior calls we have built robust tracking and monitoring systems to maximize retention of members who meet the eligibility criteria and to also promptly understand any financial impacts of re determinations.
Speaker 4: Across our state, approximately one-third of our members' review had been turned.
Across our states approximately one third of our members reviewed had been turned.
Speaker 4: of which over 70% have been procedural disenrollments rather than due to verification of actual ineligibility.
Of which over 70% had been procedural disagreement rather than do the verification of actual in eligibility.
Speaker 4: As a result, we are seeing nearly 30% of those terms being reconnected and we expect these numbers to grow.
As a result, we are seeing nearly 30% of those trips being reconnected and we expect these numbers to grow.
Joseph Rasky: Although the medical cost profile of members who have left the Medicaid roles continues to be more favorable than the portfolio average, when combined with the impact of quarter offsets in several states. Fisch, our overall Medicaid MCR was within our expectations. Mark will provide more color on redeterminations during his remarks.
Speaker 4: In the quarter, we estimated we lost approximately 200,000 members due to the net impact of without any ret?ment of had greater discrimination.
In the quarter, we estimate that we lost approximately 200000 members due to the net impact of Redetermination, bringing.
Speaker 4: Bringing the year-to-date figure to approximately 300,000.
Bringing the year to date figure to approximately 300000.
Speaker 4: Given the high number of procedural terminations and increasing state and CMS intervention.
Given the high number of procedural terminations and increasing state and CMS interventions.
Speaker 4: We expect regional expo likely to continue decreasing currently reported membership laws.
We expect reconnects will likely to continue decreasing currently reported membership losses.
Joseph Rasky: Turning now to an update on our growth initiatives and our strategy for sustaining profitable growth, beginning with our recent state wins. The implementation of our new California contract, which will merely double the size of our current membership in the state and add approximately $2 billion in annual premium is proceeding as planned for a January 1st, 2024 start date. In July, we finalized our contract for the Texas Star Plus program, retaining our entire existing footprint.
Speaker 4: As we interact with members who lose eligibility, we seek to warm transfer them to our marketplace team for potential enrollment in that province.
As we interact with members who lose eligibility, we seek to warm transfer them to our marketplace team for potential enrollment in that product.
Speaker 4: Throughout the process, we are seeing an increasing rate of former Medicaid members, both ours and our competitors, enroll in our marketplace product.
Throughout the process, we are seeing an increasing rate of former Medicaid members, both ours and our competitors' enroll in our marketplace products.
Speaker 4: Turning to our observations on the margin impact of redeterminations.
Turning to our observations on the margin impact of Redetermination.
Speaker 4: We see that terminated members have lower medical costs than the portfolio average. However, combined with the impact of corridors in several states, the net effects for acuity shifts remain well within our expectations and our overall NCR outlook for the year.
We see that terminated members have lower medical costs than the portfolio average however, combined with the impact of corridor in several states. The net effects from acuity shifts remains well within our expectations and our overall MCR outlook for the year.
Joseph Rasky: With numerous new entrants likely attracting low share of, we expect our share of membership in the state to grow, driving incremental annual premium revenue of approximately $400 million. Also in July, we successfully launched our Iowa Health Land, serving approximately 180,000 members consistent with our expectations. Our Nebraska implementation is tracking to a successful launch on January 1st, 2024 and will contribute estimated annual premium of $600 million. In August, we announced that we would once again be serving Medicaid beneficiaries in the state of New Mexico.
Speaker 4: Of course, as trends have emerged, we are working with our state partners to ensure rates reflect the impact of redeterminations, either prospectively in the normal fiscal year rate cycle, off cycle, or retrospectively if necessary.
Of course as trends have emerged we are working with our state partners to ensure our rates reflect the impact of re determinations, either prospectively in the normal fiscal year rate cycle off cycle or retrospectively if necessary.
Speaker 4: In our states, through the end of September , 10 of 12 with draft or final rates have included an acute adjustment with several considering retroactive or mid-cycle adjustments.
In our states through the end of September 10, or 12 with draft or final rates have included an acuity adjustment with several considering retroactive we're mid cycle adjustments.
Speaker 4: Lastly, some additional color on 2024, starting with our premium revenue outlook.
Lastly, some additional color on 2024, starting with our premium revenue outlook.
Speaker 4: As Joe mentioned, we have line of sight to the building blocks that are expected to deliver approximately 38 billion in premium revenue for 2024, or approximately 19% growth of our 2023 premium guidance of 32 billion.
As Joe mentioned, we have line of sight to the building blocks that are expected to deliver approximately 38 billion in premium revenue for 2024 or approximately 19% growth off our 2023 premium guidance of 32 billion.
Joseph Rasky: We expect the new contract to begin mid-2024 and produce approximately $500 million in annual premium revenue. In India, the state deemed us not to have met the readiness requirements for a Medicaid contract due to our Medicare desnip product becoming available in the state on January 1st, 2025 and not by January 1st, 2024 as required. We are proud to have won the initial award as testimony to our proposal skills, but disappointed, we did not meet that one readiness requirement.
These building blocks include.
Speaker 4: 1.1 billion of organic growth in our current footprint. Plus, approximately 4 billion from our recent state contract wins with the expected premium from our Texas Star Plus and New Mexico contracts will largely replacing the approximately 500 million that we had previously projected from Indiana next year.
One 1 billion of organic growth in our current footprint plus approximately $4 billion from our recent state contract wins with the expected premium from our Texas Star plus and new Mexico contracts, largely replacing the approximately $500 million that we had previously projected from Indiana next year.
Speaker 4: This, we add approximately 2.4 billion of acquisition-related premium consisting of a four-year of my choice Wisconsin and the Bright California Medicare Act was...
To this we added approximately $2 4 billion of acquisition related premium consisting of a full year of my choice, Wisconsin, and the bright, California Medicare acquisition.
Joseph Rasky: Our growth agenda is in full gear, even with the development in Indiana and changing assumptions for re-determination retention. All of these new contract grants and re-presurments combined keep us on track for approximately $38 billion of premium revenue in 2024 as previously forecasted.
Speaker 4: Partially offsetting these growth drivers is 1.6 billion for the impact of redeterminations and known pharmacy carve-out.
Partially offsetting these growth drivers is $1 6 billion for the impact of Redetermination and known pharmacy carve outs.
Speaker 4: We have revised our original 50% retention assumption to 40% reflecting the earlier re-determination activity we have seen and a generally conservative approach to forecast.
We have revised our original 50% retention assumption to 40%, reflecting the early redetermination activity, we have seen and are generally conservative approach to forecasting.
Joseph Rasky: Shifting to our M&A activity, in early September, we announced the closing of the My Choice Wisconsin acquisition. We call this transaction adds approximately $40,000, mostly LMLTSS members, and approximately $1 billion in annual premium revenue. The regulatory approval process for the bright Medicare acquisition is proceeding as planned. We continue to work with bright management on satisfying the remaining closing conditions and continue to expect to close by the first quarter of 2024. Now, looking ahead to 2024, assuming a timely close of the bright Medicare acquisition, we remain confident that all of the known buildings.
Speaker 4: While this changing assumption will lower 2024 premium revenue by 300 million, we expect that gains in marketplace through increasing cross-down on SEP and an expected strong OEP will effectively offset this result.
While this changing assumption will lower 2024 premium revenue by $300 million we.
We expect that gains in marketplace through increasing cross sell and S&P and an expected strong OUP will effectively offset this result.
Speaker 4: We maintain our 38 billion premium revenue outlook for 2020.
We maintained our $38 billion in premium revenue outlook for 2024.
Speaker 4: Finally, the really thoughts on the drivers of 2024 earnings.
Finally, some early thoughts on the drivers of 2020 for earnings.
Speaker 4: We note the following elements that will positively influence our 2024 earnings project.
We note the following elements that will positively influence our 2024 earnings trajectory.
We have a solid 2023 earnings baseline off of which to grow.
Speaker 4: We have a solid 2023 earnings baseline off of which to grow.
Speaker 4: Our new store of better earnings remain unchanged at $5.50 and continue to provide meaningful visibility into our future earnings growth potential. 2007.
Our new store of embedded earnings remain unchanged at $5 50 sets and continued to provide meaningful visibility into our future earnings growth potential.
Joseph Rasky: Locks, provided line of sight to approximately $38 billion of premium revenue in 2024, which represents 19% year-over-year growth, even before executing on additional strategic initiatives. While there are many positive earnings catalysts going into next year, which Mark will speak to in a moment, there are also some factors which are not yet fully developed. As is customary, we will provide our specific earnings guidance with you in February. We call that at our investor day earlier this year, we announced our long-term financial targets, the centerpiece of which is a long-term earnings per share compound annual growth rate of 15 to 18%.
Investment income will likely continue to be strong.
Speaker 4: We believe our Medicare performance will improve as a result of our 2024 bid.
We believe our Medicare performance will improve as a result of our 2020 for bids.
Speaker 4: And the impact of new business implementation costs of 75 cents a share this year go away as we begin recording premium revenue on our new business win.
And the impact of new business implementation costs of 75 cents a share. This year go away as we begin recording premium revenue on our new business wins.
Speaker 4: However, there are some remaining variables as we close 2023 and move into 2024.
However, there are some remaining variables as we close 2023 and move into 2024.
Speaker 4: First, our 2024 outlook will be better informed with another quarter of redetermination activity of zero.
First our 2024 outlook will be better informed with another quarter of Redetermination activity observed.
Speaker 4: Second, rates impacting 60% of our 2024 Medicaid premium revenue are still unknown, but we are confident that the principle of actuarial soundness will prevail, including appropriate acuity adjustments for redetermination.
Second rates impacting 60% of our 2020 for Medicaid premium revenue are still unknown, but we are confident that the principle of actuarial soundness will prevail, including appropriate acuity adjustments for Redetermination we.
Joseph Rasky: With the visibility we have into our earnings trajectory, we are comfortable in reaffirming our commitment to that compound annual growth rate target over the next three years. As always, I would like to thank our management team who work tirelessly every day to deliver these results. Our team has evolved to keep pace with our growth and to execute each stage of our strategy. We call that most recently we promoted both Jim Lois and Mark Keim to the position of senior executive vice president with Jim adding the title of Chief Operating Officer.
Speaker 4: We do note that rates have been finalized today have generally been satisfactory.
We do note that rates have been finalized to date have generally been satisfactory.
Finally.
Speaker 4: The first year earnings contribution from the Bright acquisition is still under review.
The first year earnings contribution from the bright acquisition is still under review.
Speaker 4: In summary, we are very pleased with our third quarter performance and the momentum we have established toward achieving our growth target.
In summary, we are very pleased with our third quarter performance and the momentum we have established toward achieving our growth targets.
Speaker 4: This concludes our prepared remarks. Operator, we are now ready to take questions.
This concludes our prepared remarks.
Joseph Rasky: In further shaping our lineup under Jim and Mark, two Melina veterans, executive vice president Deb Bacon and Dave Reynolds, will now lead our flagship Medicaid business. We are also adding additional management talent in our Medicare and marketplace businesses and scaling up our integration platform all to support our substantial growth. Mark Bruso will be leading the company with our thanks for his service. Not only our executive team, but all of our colleagues throughout the enterprise and across the nation are vital to our success.
Operator, we are now ready to take questions.
Speaker 1: Thank you. We will now begin the question and answer session. To ask a question you may press star then one when you're touched on phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our Ross.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Speaker 1: Our first question comes from Josh Braskin from Neffron Research. Please go ahead.
Our first question comes from Josh Raskin from Nephron Research. Please go ahead.
Speaker 1: Thanks, good morning. I want to pick up on that last thread around the exchange growth from the redeterminations and what you're seeing early. I'm curious in terms of trends and members coming in. And then did they fair to assume that that would be better risk? They're coming into your product and they've probably been previously insured or coming out of Medicaid.
Thanks, Good morning, I wanted to pick up on that last thread around battery exchange growth from the Redetermination and what Youre seeing early I'm curious in terms of trends and members coming in and then is it fair to assume that that would be better risk. They are coming into your product and they've probably been previously insured Greg coming out of Medicaid and.
Joseph Rasky: I want to extend my special thanks to our nearly 18,000 associates who are dedicated to deliver access to high quality healthcare to our members. It is my privilege to serve with such a committed and capable group of professionals.
Speaker 5: And then I'm just curious if this early experience understand a little less retention. Does that change your view of the exchanges in 24? I think last quarter you said that they would be.
And then I'm just curious if this early experience I understand a little less retention does that change your view of the exchanges in 24, I think last quarter, you said that they would be.
Joseph Rasky: In summary, we are very pleased with our performance this quarter. We have maintained our attractive margin profile during this unprecedented industry-wide re-determination process while continuing to generate double-digit growth.
Speaker 5: relatively low growth in terms of premiums for 2024.
Relatively low growth for in terms of premiums for 2024.
Speaker 3: Josh, when it comes to the exchange business and the special enrollment period, we are seeing an increase in special enrollment, monthly special.
Josh when it comes to the exchange business and.
Mark Keim: With that, I will turn the call over to Mark for some additional color on the financials. Mark? Thanks, Joe, and good morning, everyone.
And the special enrollment period, we are seeing an increase in special enrollment monthly special enrollment it was averaging eight to 9000, a month until the Redetermination process happened and it's increased to 12000, a month and growing.
Speaker 3: It was averaging $8,000 to $9,000 a month until the redetermination process.
Mark Keim: Today, I'll discuss some additional details of our third quarter performance to balance sheet and our 2023 guidance and embedded earnings. I'll also provide an update on re-determinations, our 2024 premium revenue outlook, and some early thoughts on the drivers of 2024 earnings.
Speaker 3: and it's increased to 12,000 a month and growing. So we are getting membership flow into the marketplace are from Medicaid redeterminations, not only from our book of business, but from competitors.
So we are getting membership flow into the marketplace.
Medicaid Redetermination not only from our book of business, but from competitors' books of business.
Speaker 3: We do have a product in every place we have a Medicaid footprint, but in many cases that product isn't as competitive, competitively priced as our competitors. So where we're competitively priced, we're getting Medicaid membership from other competitors, and we're getting Medicaid marketplace membership from our own book.
We do have a product in every place we have a medicaid footprint, but in many cases that product isn't as competitive a competitively priced as our competitors. So we're we're competitively priced we're getting Medicaid membership from other competitors and we're getting Medicaid <unk>.
Mark Keim: Beginning with our third quarter results. For the quarter, we reported the adjusted earnings per share of $5.05 and a consolidated MCR of 88.7. In Medicaid, our reported MCR was 88.8. The MCR included a moderate impact from the net effect of re-determination and acuity shifts and corridors in several states. Our third quarter MCR was also slightly elevated from a provisional, retroactive rate adjustment in New York State. Across our Medicaid segment, the major medical cause categories were largely in line with our expectation and normal quarter-decorder trend fluctuations.
Marketplace membership from our own book of business.
Speaker 3: So we're pretty pleased that we did not forecast.
So we're pretty pleased that we did not forecast marketplace membership growth, we continue to upside to our membership case and we're seeing a nice result, there mark anything to add sure Josh I added about 40000 members through S&P in the quarter.
<unk> to the 200000 net we lost in Medicaid.
Mark Keim: In Medicare, our reported MCR was 92.4 above our long-term target range. During the quarter, we saw a continuation of increased utilization of outpatient, professional, and in-home services. Recall, we observed these trends emerging in the first and second quarters in time to inform our 2024 BIDS and benefit design. We are confident our 2024 BIDS will produce target margins next year.
So if you put some conversion rate on how many of the 40000 came from our Medicaid book or someone else's Medicaid book that conversion rate is pretty good call it 15 or 20%.
Speaker 4: On the rate that they're coming in at it looks like they're coming in pretty much at our portfolio run rate within marketplace We're not seeing pent-up demand or anything like that So we're liking the pickup and the implications for future volume and those margins so far are looking pretty good to us
On the rate that they're coming in and it looks like they're coming in pretty much at our portfolio run rate within marketplace, we're not seeing pent up demand or anything like that so we're liking the pickup and the implications for future volume and those margins so far looking pretty good to us.
Speaker 3: The second part of your question, Josh, you asked about the retention percentage. We just followed the data. And with 300,000 membership losses to date, the first thing we say is it's ill-advised to extrapolate any current results.
The second part of your question you asked you asked about the retention percentage.
Mark Keim: In marketplace, our reported MCR was 78.9. This strong result reflects our pricing strategy to return this business to target margins. Our enhanced focus on silver and renewal members helps us to drive strong performance and risk adjustment. Based on our year-to-date performance, we are well-positioned to exceed our mid-single-visit target margins for the year.
Just follow the data.
And with 300000 membership losses to date, the first thing, we face which ill advised to extrapolate any current result.
Speaker 3: Many of our states front-loaded the process. And by front-loading, we mean they specifically targeted members more likely to lose eligibility. And the fact that 70% of terminations were procedural means that the reconnect rate has been high, averaging 25% and now moving to 30% of those members who have lost eligibility.
Many of our states are front loaded the process by front loading we mean very specifically targeted members more likely to lose eligibility.
And the fact that 70% of the terminations were procedural means that the reconnect rate has been high averaging 25, and now moving to 30% of those members who have washed eligibility. So we just follow the data.
Mark Keim: Also in marketplace, we recorded a non-recurring charge in the quarter on our Texas marketplace risk adjustment receivable from 2022 due to the financial difficulties of one major program participant in that state. While we have made our best estimate of the shortfall on collections, we will continue to pursue regulatory paths to collecting the full receivable due to us. Given its unusual and one-time nature, we have excluded it from our adjusted earnings. Our adjusted G&A ratio for the quarter was 7.1, consistent with our expectations. This result includes new business implementation spending for new contract wins in Iowa as well as several new contracts beginning in 2024.
Speaker 3: So we just follow the data. And we originally said we would lose 400,000 of the 800,000 members we gained during the pandemic. And now that number has increased to 480,000. And I suppose that would mean that it is likely that whatever we're seeing.
And we originally said we would lose 400000 of the 800000 members. We gained during the pandemic and now that number has increased to 480000 and I suppose that would mean that it is likely that whatever we're seeing in.
Speaker 3: in terms of marketplace pick-up would like the increase as well.
In terms of marketplace pickup would likely increase as well.
Perfect. Thanks.
Speaker 1: The next question comes from Kevin Fishback from Bank of America. Please go ahead.
The next question comes from Kevin Fischbeck from Bank of America. Please go ahead.
Speaker 6: Thanks. I guess two questions. One, but then the Medicaid business, as you've talked about how MLR is coming in, line with expectations, so that can we do that? You also mentioned that, you know, met of risk corridors and things like that. Is there any way to quantify what the pressure would have been without the offset of risk corridors? And then as far as the MA commentary, it sounds like you're saying Q3 came in worse, but you still caught it in time.
Great. Thanks, I guess two questions one on within the Medicaid business as we've talked about how our MLR is coming in line with expectations.
Mark Keim: Turning now to our balance sheet, our capital foundation remains strong. We harvested approximately 175 million of subsidiary dividends in the quarter and used a similar amount for our Wisconsin acquisition, leaving our parent company cash balance unchanged quarter over quarter at approximately half a billion. Dead at the end of the quarter was unchanged at just 1.6 times trailing 12 months EBITDA, with our deficit cap ratio at 38.3. Net up parent company cash, these ratios fall to 1.3 and 33.2, reflecting our low leverage position and ample cash and capital capacity for additional growth and investment.
What can we do that you also mentioned that your net of risk core doors and things like that is there any way to quantify what the pressure would have been without the offset a risk corridor.
Then as far as the M. A.
All commentary it sounds like you're saying Q3 came in worse, but you still caught it in time for your bid so kind of figure out how.
Speaker 6: for your bid. So I'm trying to figure out how MLR and Q3 could be higher than expectations, but but not be a problem for 2024, if you submit a bid in June .
Al MLR in Q3, it could be higher than expectations, but would not be a problem for 2024, you submitted bids in June.
Speaker 3: On the Medicaid MLR, I'll kick it to Mark here from WorkColor. But as we've always said, and we made a big point of this adding yesterday, on the pre-COVID minimum MLRs and corridors that set sort of an industry benchmark of medical margin performance.
On the Medicaid MLR I'll kick it to mark here for more color.
But as we've always said and we made a big point of this at Investor Day.
On the pre Covid minimum MLR corridors are there sort of an industry benchmark of medical margin performance, we have routinely outperform those benchmarks, which gives rise to a payback to the state in the form of a liability and many of our states and some of those corridor, we're deep into.
Mark Keim: Turning to reserves. Our reserve approach remains consistent with prior quarters and we continue to be confident in the strength of our reserve position. Days and claims payable at the end of the quarter was 51, elevated from normal levels due to the inclusion of light choice with constant and our new Iowa plan. Adjusted for this temporary impact, our reported DCP would have been consistent with Q1 and Q2L.
Speaker 3: We have routinely outperform those benchmarks, which gives rise to a payback to the state and form of a liability in many of our states. In some of those corridors, we're deep into them, meaning that we're in the 100% tier. So...
To them, meaning that were in the 100% here.
So.
Speaker 3: With that having been said, if performance deteriorates.
With that having been said.
If performance deteriorates.
Speaker 3: during the year for any reason, whether it's an acuity shift for redetermination, whether it's a trend inflection, whether it's flu or COVID, for whatever reason, that liability acts as sort of the first financial cushion to absorb it before rates pick up.
During the year for any reason, whether it's an acuity shift redetermination, whether its a trend inflection whether its fluor COVID-19 for whatever reason.
Joseph Rasky: Joseph.
Mark Keim: Now some additional color on our 2023 guidance and embedded earnings. We are affirming our four year 2023 adjusted earnings per shared guidance, about $20.75. Our four year guidance now effectively the remaining fourth quarter reflects our third quarter result, which we're largely consistent with our expectations and includes considerations for seasonality and conservatism. New store embedded earnings remains unchanged at $5.50 per share, comprised of $4 for our recent new contract wins and $1.50 for acquisitions.
That liability actually sort of the first financial cushion to absorb it before.
Rates pick up.
Meaning the acuity adjustments.
Speaker 3: Trend assumptions, always being baked into rates fulfilling the concept of actual assessment.
Trend assumptions always being baked into rates fulfilling the concept of actuarial soundness.
Speaker 3: And we've said that from the beginning of this process that this is developing exactly as plain.
And we've said that from the beginning of this process that this is developing exactly as planned we knew there'd be an acuity shift manageable and modest as it is it would put pressure on the underlying NCR our quarter liabilities would act as the first point of financial cushion until the right process.
Speaker 3: We knew their beta-cutie shift, manageable and modest as it is. It would put pressure on the underlying NCR. Our course.
Mark Keim: The $4.00 per share for our new contract wins now includes approximately $0.50 for the combination of Texas Star Plus and New Mexico, replacing the same amount previously expected from the Indiana contract. The $1.50 per share of acquisition earnings includes achieving full run rate accretion from age well, might choice, and bright health Medicare business.
Speaker 3: point of financial cushion until the rate process.
Speaker 3: takes full credit of the Acuity, Shift and Trend. And that's exactly what happens.
<unk> takes full credit of the acuity shift and trend and Thats exactly whats happening today, right and just to put a little color around that if in normal times, you are booking corridor expense and underlying trend increases quarter to quarter.
Speaker 4: Right, and just to put a little color around that, if in normal times you're booking corridor expense.
Speaker 4: and underlying trends increases quarter to quarter. In our situation, I'll just book less corridor expense.
In our situation all just book less corridor expense, but it is important to note I still booked meaningful corridor expense in the third quarter. So it's not like the corridors have completely.
Speaker 4: But it's important to note, I still booked meaningful corridor expense in the third quarter, so it's not like the corridor has not completely been offset. We're still booking corridor expense.
Mark Keim: Turning to redeterminations. As we discussed on prior calls, we have built robust tracking and monitoring systems to maximize retention of members who meet the eligibility criteria and to also promptly understand any financial impacts of redeterminations. Across our states, approximately one-third of our members' review had been turned, of which over 70% have been procedural disappoints rather than due to verification of actual ineligibility. As a result, we are seeing nearly 30% of those turned being reconnected and we expect these numbers to grow.
<unk> been offset we're still booking corridor expense and.
Speaker 4: And we still have a significant ultimate on those liability.
And we still have a significant ultimate on those liabilities now as Joe mentioned that corridor works well in the current fiscal year and then it's about the new rate cycle, but remember we tend to be best in class margins, which means that new rate cycle always works for us and Replenishes, our corridor position it keeps us in the mode. We're currently <unk>.
Speaker 4: Now, as Joe mentioned, that corridor works well in the current fiscal year, and that it's about the new race cycle. But remember, we tend to be best in class margins, which means that new race cycle always works for us. And replenishes our corridor position and keeps us in the mode we're currently running.
<unk>.
Speaker 3: Kevin, the second part of your question was on the Medicare MCR, which admittedly ran hot in the quarter at 92.4% and was running in the high 80s earlier in the year. We're still on target to produce 2.5% to 3% pre-tax margins in that business. It should be twice that. Our target is 5% to 6% pre-tax.
Kevin and second part of your question was on the Medicare MCR.
NCR, which admittedly ran hot in the quarter at 92, 4% and was running in the high eighties earlier in the year.
Mark Keim: In the quarter, we estimated that we will also approximately 200,000 members due to the net impact of redeterminations, bringing the year-to-date figure to approximately 300,000. Given the high number of procedural terminations and increasing state and CMS interventions, we expect regional export likely to continue decreasing currently reported membership losses. As we interact with members who lose eligibility, we seek to warm transfer them to our marketplace team for potential enrollment in that product. Throughout the process, we are seeing an increasing rate of former Medicaid members, both ours and our competitors, enroll in our marketplace products.
We're still on target to produce two 5% to 3% pre tax margins in that business.
It should be twice that our target is 5% to 6% pretax.
Speaker 3: And yes, we saw some trend inflections in the third quarter that were higher than we observed in the first part of the year. But we're conservative frisers. We caught somebody's trends early in the year, whether outpatient.
And yes, we saw from trend inflections in the third quarter.
<unk> were higher than we observed in the first part of the year.
We're conservative prices.
We caught some of these trends early in the year whether outpatient.
Speaker 3: Professional services, screenings and PCP visits are back, both on the medical side and on the behavioral side, and LPSS hours. The hours assigned to the frail members were getting in on services, increased slightly in the corner. All in, we believe we captured a conservative view of medical cost trend, which right now is running at seven percent year over year.
Professional services screenings and PCP visits are back.
Both on the medical side and on the behavioral side and <unk>.
<unk> hours a week.
Hours assigned to the trail members.
Mark Keim: Turning to our observations on the margin impact of redeterminations. We see that terminated members have lower medical costs than the portfolio average. However, combined with the impact of corridors in several states, the net effect for acuity shifts remains well within our expectations and our overall MCR outlook for the year. Of course, as trends have emerged, we are working with our state partners to ensure rates reflect the impact of redeterminations, either prospectively in the normal fiscal year right cycle, off cycle, or retrospectively if necessary. In our states, through the end of September, 10 of 12 with draft or final rates have included an acuity adjustment with several considering retroactive or mid-cycle adjustments.
We're getting in home services increased slightly in the quarter.
All in we believe we've captured a conservative view of medical cost trend, which right now is running at 7% year over year.
Speaker 3: Higher than we expected, but we believe we've captured that in our 2024 biz and to leave spec, our Medicare business to be back to five to six percent pre-tax margins in 2024.
Than we had expected, but we believe we've captured that in our 2024 beds and fully expect our Medicare business to be back to 5% to 6% pretax margins in 2024.
Great. Thanks.
Speaker 1: The next question comes from Nathan Rich from Goldman Sachs. Please go ahead.
The next question comes from Nathan Rich from Goldman Sachs. Please go ahead.
Speaker 1: Good morning. Thanks for the questions and thanks for the detail on the earnings drivers for next year. Joe, I think you kind of framed the 15 to 18% EPS growth as the average over the next three years. I guess could you maybe just go into a little bit more detail on sort of the biggest unknowns and from your point of view on that could impact growth next year relative to that 15 to 18% range. And then just a quick clarification. On the retroactive rate adjustment in New York, is it possible to quantify what impact that had in the quarter? And do you see a potential for an adjustment to this going forward potentially to be more favorable?
Great. Good morning, Thanks for the questions and thanks for the detail on the earnings drivers for next year.
Joe I think you kind of frame the 15% to 18% EPS growth as the average over the next three years.
Mark Keim: Lastly, some additional color of 2024, starting with our premium revenue outlook. Park. As Joe mentioned, we have line of sight to the building blocks that are expected to deliver approximately 38 billion in premium revenue for 2024 or approximately 19% growth of our 2023 premium guidance of 32 billion. These building blocks include 1.1 billion of organic growth in our current footprint, plus approximately 4 billion from our recent state contract wins with the expected premium from our Texas star plus and New Mexico contracts, largely replacing the approximately 500 million that we have previously projected from Indiana next year.
I guess.
Could you maybe just go into a little bit more detail on sort of the biggest unknowns and from your point of view on that could impact growth next year relative to that that 15% to 18% range and then just a quick clarification.
Mark Keim: This, we add approximately 2.4 billion of acquisition-related premium consisting of a four year of my choice Wisconsin and the bright California Medicare acquisition. Partially offsetting these growth drivers is 1.6 billion for the impact of redeterminations and known pharmacy carve-outs. We have revised our original 50% retention assumption to 40%, reflecting the early redetermination activity we have seen, and a generally conservative approach to forecasting. While this changing assumption will lower 2024 premium revenue by 300 million, we expect that gains in marketplace through increasing cross sell and SEP and an expected strong OEP will effectively offset this result. We maintain our 38 billion in premium revenue outlook for 2024.
On the retroactive rate adjustments in New York and is it possible to quantify what impact that had in the quarter and do you see a potential for an adjustment to this.
Going forward potentially to be more favorable thank you.
Speaker 7: Thank you.
Speaker 3: Sure Nathan, I'll provide the framing in the kick of the market. I think Mark gave some of the building blocks. It is preparing marks. First and foremost, we're very confident in the $38 billion revenue outlook for next year. That's 19% year over year growth. And a year where we're still producing best in class marks.
Sure Nathan.
I'll provide the framing and then kick it to market and I think Mark gave from the building blocks.
It is in his prepared remarks first and foremost we're very confident in the 38 billion dollar revenue outlook for next year, that's 19% year over year growth.
In a year, where we're still producing best in class margins first I would say, we're starting with a very high quality solid 2023 earnings baseline.
Speaker 3: First, I would say we're starting with a very high quality solid 2023 earnings base.
Speaker 3: We generally grow organically in our footprint.
We generally grow organically in our footprint.
Speaker 3: Embedded earnings of $5.50 a share of both new store, both M&A and new contract wins is certainly a catalyst into next year.
Embedded earnings of $5 50, a share of both new store, both M&A and new contract wins is certainly a catalyst into next year.
Speaker 3: Those implementation costs of 75 cents we've already
Those implementation costs of 75 reverse.
Speaker 3: We believe interest rates will continue to be high. Bear in mind that half our investable base is in intermediate-term bonds, so they're locked in. And then the rates on the short-term portfolio are going to fluctuate with what the Fed does.
We believe interest rates will continue to be high bear in mind that half of our investable base as an intermediate term bond so they're locked in and then the rates on the short term portfolio, Oregon fluctuate with what the fed does but.
Speaker 3: all out what fair is that interest rates will remain high going into next year even to the end of next year.
You know all out warfare is that interest rates will remain high going into next year, even to the end of next year.
Mark Keim: Finally, the early thoughts on the drivers of 2024 earnings. We note the following elements that will positively influence our 2024 earnings trajectory. We have a solid 2023 earnings baseline off of which to grow. Our new store embedded earnings remain unchanged at $5.50 and continue to provide meaningful visibility into our future earnings growth potential. Investing income will likely continue to be strong. We believe our Medicare performance will improve as a result of our 2024 bids. And the impact of new business implementation costs of 75 cents a share this year go away as we begin recording premium revenue on our new business wins.
Speaker 3: The three variables that we need to see more of before giving a specific earnings per share forecast for 2024 is.
These three variables are.
We need to see more of them before giving a specific earnings per share forecast from 2024 is.
Speaker 3: How does redetermination experience emerge in the fourth quarter? To date, it has been completely in line with our expectation. We did increase our ultimate loss assumption as.
How does redetermination experience emerge in the fourth quarter to date has been completely in line with our expectation we did increase our ultimate loss assumption.
Spoken.
Speaker 3: And we'd like to see how the rates develop on our 60% of our Medicaid revenue for next year We know about rates on 40% of our Medicaid revenue next year. Those rates have been actually sound We've been satisfied with the acuity adjustments as Mark said those acuity adjustments were resident in 10 out of the 12 rates that we already know About but we want to see how the rates develop on 60% of the book
And we'd like to see how rates develop on our 60% of our Medicaid revenue for next year, we know about rates on 40% of our Medicaid revenue next year those rates are actuarially sound, we've been satisfied with the acuity adjustments as Mark said those acuity adjustments were resident in 10 out of the 12 rates that we already know about where we want to see how the rates to go.
On 50% of the book So those are the variables going into next year as you cited at the beginning of your question, we are confident and committed to the 15% to 80% long term earnings per share growth rate often through 'twenty, three baseline, which means that 2026 earnings per share will be.
Speaker 3: So those are the variables going into next year. As you cited at the beginning of your question.
Mark Keim: However, there are some remaining variables as we close 2023 and move into 2024. First, our 2024 outlook will be better informed with another quarter of redetermination activity observed. Second, rates impacting 60% of our 2024 Medicaid premium revenue are still unknown, but we are confident that the principle of actual value will prevail, including appropriate acuity adjustments for redeterminations. We do note that rates have been finalized today have generally been satisfactory.
Speaker 3: We are confident and committed to the 15% to 18% long-term earnings per share growth rate off of the 2023
Speaker 3: Which means that 2026 earnings per share will be 52% to 64% higher than 2023 of $20.75.
52% to 64% higher than 2023 of $20 75.
Anything to add yeah. The only other thing Nathan I think you asked about the rate adjustment in New York.
Speaker 4: The only other thing, Nathan, I think you asked about the rape adjustment in New York.
Speaker 4: We reported, as you know, an E-D-E-E-D in Medicaid for the quarter. I'd estimate someplace around 30 bits is related to that specific phenomena. And the reason it's a little uncertain is in several of our states, the retro rates constantly get revisited. I'm optimistic that this one gets a little bit better, but at the moment we book that adjustment.
We reported it as you know in the 88 eight.
In Medicaid for the quarter I'd estimate someplace around 30 bps is it related to that specific phenomena and the reason it's.
Mark Keim: Finally, the first year earnings contribution from the bright acquisition is still under review. In summary, we are very pleased with our third quarter performance and the momentum we have established toward achieving our growth targets.
A little uncertain is.
In several of our states the retro rates cut.
Constantly get revisited I'm optimistic that this one gets a little bit better but at the moment, we book that adjustment.
Unknown Executive: This concludes our prepared remarks.
Unknown Executive: Operator, we are now ready to take questions. Thank you.
Unknown Executive: We will now begin the question and answer session.
Thank you very much.
Unknown Executive: To ask a question, you may press star than one when you're touched on phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two.
Speaker 1: The next question comes from Justin Lake from Wolf Research. Please go in.
The next question comes from Justin Lake from Wolfe Research. Please go ahead.
Okay.
Speaker 8: Good morning. Sorry about that. Appreciate the question here.
Hi, good morning, sorry about that.
Unknown Executive: At this time, we'll pause momentarily to assemble a roster.
Unknown Executive: Professor.
Yeah your question here.
Speaker 8: Two things I wanted to touch on were, you know, you had a fair amount of prior year development in the third quarter, kind of abnormally high relative to previous. Just curious which segments of the business might have drove that and the potential, you know, impact to earnings there. And then secondly on, Joe, you mentioned investment income. I'm curious as you're having these conversations with the states on rates.
Joshua Raskin: Our first question comes from Josh Raskin from Neffron Research. Please go ahead. Thanks, good morning. I want to pick up on that last thread around the exchange growth from the redeterminations and what you're seeing early. I'm curious in terms of trends and members coming in. And then they've fair to assume that that would be better risk. They're coming into your product and they've probably been previously insured or coming out of Medicaid.
Two things I wanted to touch on where you had a bump you had a fair amount of prior year development in the third quarter kind of abnormally high relative to previous just curious which segments of the business might have drove that and the potential impact to earnings there and then secondly on Joe you met.
Joshua Raskin: And then I'm just curious to see if this early experience understand a little less retention. Does that change your view of the exchanges in 24? I think last quarter you said that they would be relatively low growth in terms of premiums for 2024. Josh, when it comes to the exchange business and the special enrollment period, we are seeing an increase in special enrollment, monthly special enrollment. It was averaging 8 to 9,000 a month until the re-determination process happened and it's increased to 12,000 a month and growing.
<unk> investment income I'm curious as you're having these conversations with the states on rates.
Speaker 8: I just want to confirm, like, historically, my understanding is states didn't really take when they set your margin, you know, your rates actually sound with a margin target behind it. That margin target was before investment income. Are they looking at investment income and saying, geez, maybe we could pay you a little bit less because your earnings are higher because of the investment income, or is that still left outside of the calculation? Thanks.
Just wanted to confirm what historically my understanding is states didn't really take where they set your margin rates actually sound with no margin target behind that that margin target was before investment income there are they looking at investment income and say Gee, maybe we can pay you a little bit less because your earnings are higher because of the investment income or is that still.
But outside of the calculation.
Speaker 3: I'll answer the second question first. Investment income is not only generally, but almost entirely outside the conversation of rates, which generally focus on what we call medical margin or trend.
I'll answer the second question first investment income.
Is not only generally but almost entirely outside the conversation of rates, which generally focus on what we call medical margin or trend assumptions.
Joshua Raskin: So we are getting membership flow into the marketplace from Medicaid re-determinations, not only from our book of business, but from competitors' book of business. We do have a product and every place we have a Medicaid footprint, but in many cases that product isn't as competitive, competitively priced as competitors. So where we're competitively priced, we're getting Medicaid membership from other competitors and we're getting Medicaid marketplace membership from our own book of business. So we're pretty pleased that we did not forecast marketplace membership growth. We continued it upside to our membership case and we're seeing a nice result there. Mark, anything to add? Sure.
Speaker 3: In some cases, they also focus on a GNA load, but that's rare and infrequent. On the PYD, I'll kick it to Mark because we're very confident in the strength of our balance sheet. Two points I'll make. From a business perspective, our payment integrity routines are both prepaid and postpaid.
In some cases, they also focus on a G&A load, but that's rare and infrequent on the <unk> I'll kick it to mark because we're very confident in the strength of our balance sheet.
Two points I'll make from a business perspective, our payment integrity routines are both prepaid and postpaid.
Speaker 3: and a post-pay routine where you identify things that you should not have paid for and recover it from providers.
And our postpaid routine where you identified things that you should not have paid for and recovered from providers by.
Speaker 3: by definition that is accounted for in prior period development because it relates to prior period.
By definition that is accounted for in prior period development because it relates to prior periods.
Speaker 3: That is a large share of any prior period development that we report. Second point to note is, don't forget, we have quarterly liabilities relating to some of these prior periods and to the extent that FIID went against a state in a period where a quarterly liability existed, that it was muted in terms of its financial.
That is a large share of any prior period development that we've reported second point to note is don't forget we have quarter liabilities relating to some of these prior periods and to the extent that <unk> D. A.
Mark Keim: Josh, I added about 40,000 members through SEP in the quarter compared to the 200,000 net we lost in Medicaid. So if you put some conversion rate on how many of the 40,000 came from our Medicaid book or someone else's Medicaid book, that conversion rate is pretty good. Call it, you know, 15 or 20%. On the rate that they're coming in at, it looks like they're coming in pretty much at our portfolio run rate within marketplace.
Went against a state in a period, where our core quarter liability existed then it was muted in terms of its financial impact.
Speaker 4: That's exactly right. Payment integrity has become such a fundamental part of our operations, and we do it fairly well.
That's exactly right payment integrity has become such a fundamental part of our operations and we do it fairly well.
Speaker 4: that prior year amount that you pulled from the earnings release was largely offset by corridors. Now more to the point, when we see strong prior period development, it's tempting to be concerned about current reserving.
That prior year amount that you've pulled from the earnings release.
Was largely offset by corridors now more to the point when we see strong prior period development, it's tempting to be concerned about current reserving.
Mark Keim: We're not seeing pent up demand or anything like that. So we're liking to pick up and the implications for future volume and those margins so far are looking pretty good to us. The second part of your question is you asked about the retention percentage. We just followed the data and with 300,000 membership losses today. The first thing we say is it's ill advised to extrapolate any current result. Many of our states front loaded the process and by front loading, we mean they specifically targeted members more likely to lose eligibility.
Speaker 4: Did they somehow offset to make earnings something like that? Look, I point to the strength of our current reserve position 51 days, DCP, the growth versus revenue. So I feel both good about our current reserve position, but the strength of this prior year exercise as well through our payment integrity fund.
Did they somehow offset to make earnings something like that look I'd point to the strength of our current reserve position 51 days DCP.
The growth versus revenue so I feel good about our current reserving position, but the strength of this prior year exercise as well through our payment integrity function.
Speaker 1: Our next question comes from Calvin Sternick from JP Morgan. Please go ahead.
Our next question comes from Calvin <unk> from J P. Morgan. Please go ahead.
Mark Keim: And the fact that 70% of determinations for procedural means that the reconnect rate has been high, averaging 25 and now moving to 30% of those members who have lost eligibility. So we just followed the data and we originally said we would lose 400,000 of the 800,000 members we gained during the pandemic and now that numbers increased to 480,000. And I suppose that would mean that it is likely that whatever we're seeing in terms of marketplace pickup would like the increase as well.
Speaker 6: Yeah, thanks. Maybe just switching gears here a little bit. I'm curious what you're seeing in the cohort of members who haven't reconnected with in that 90 to 120 day window, but you know, realize afterwards they're still eligible for Medicaid. What are the members of the division looking like there, relatives, what you expected? And I know you've talked about in the past, investing in quality initiatives to move up in the auto-sign algorithms. So just wondering if you're seeing those efforts bare fruit here, or if it's still too early to tell, or just too much noise going on with retirement.
Okay. Thanks.
Maybe just switching gears here a little bit.
Curious what you're seeing in the cohort of members haven't reconnected within that 90 to 120 day window, but realized afterwards, they are still eligible for Medicaid what are the members of different looking like there relative to what you expected and I know you've talked about in the past investing in quality initiatives to move up in the auto assign algorithms.
Unknown Executive: Paul.
I'm just wondering if you're seeing those efforts bear fruit here or if it's still too early to tell or just too much noise going on with Redetermination.
Kevin Fischbeck: Perfect, thanks.
Speaker 3: I think you answered the question in your last statement, because that gap is 90 to 120 days, we've seen very little of it, given that the redetermination was in full throes.
I think you answered the question in your last statement because of that gap is 90 to 120 days, we've seen very little of it given that the redetermination was in full throes.
Kevin Fischbeck: The next question comes from Kevin Fischbeck from Bank of America. Please go ahead. Great, thanks.
Speaker 3: You know, May and June . By your supposition, your theoretical supposition is correct. That member is going to go to the doctor or to the pharmacy for a service or a script, realize they don't have service and then reconnect, obviously with no retroactivity back to the data termination. So we suspect that member will come back in somewhere around the portfolio average because they'll be requiring service.
May and June.
By your supposition Youre theoretical supposition is correct that members are going to go to the doctor or to the pharmacy.
Kevin Fischbeck: I guess two questions. One, but then the Medicaid business, as you talked about how MLR is coming in line with expectations, so that can we do that? You also mentioned that met of risk corridors and things like that. Is there any way to quantify what the pressure would have been without the offset of risk corridors? And then as far as the MA commentary, it sounds like you're saying Q3 came in worse, but you still caught it in time for your bid. So I'm trying to figure out how MLR and Q3 could be higher than expectations but but not be a problem for 2024, if you submit a bid in June.
For a surface of a script realize they don't have service and then reconnect obviously with no retroactivity back to the data termination. So we suspect that member will come back in somewhere around the portfolio average because there'll be requiring services.
Speaker 4: Anything Dad Martin? Yeah, when we talk about reconnects, just to set the stage for everybody, we tend to think about two categories. Most of them are what we call seamless. That is within 90 to 120 days, they realize they lost coverage, contacted the agency and got back on. As though they never lost coverage and we pick up the retro premium.
Denmark, Yes, when we talk about reconnects just to set the stage for everybody. We tend to think about two categories.
Most of them are what we call seamless that is within 90 to 120 days they realize they loss coverage contacted the agency and got back on as though they nevertheless coverage and we pick up the retro premium.
Joseph Rasky: Thanks. On the Medicaid MLR, I'll kick it to Mark here from work color, but as we've always said, and we made a big point of this at investor day, on the pre-COVID minimum MLRs and corridors that set sort of an industry benchmark of medical margin performance, we have routinely outperformed those benchmarks, which gives rise to a payback to the state and the form of a liability in many of our states. And some of those corridors were deep into them, meaning that we're in the 100% tier.
Speaker 4: Now, as Joe mentioned, we're, you know, only three, four, five months into this dynamic, so the people that are outside the 90 to 120-day window are only starting to emerge now. We call those reconnects with a gap. They will come in through the typical auto-assign process, and through a number of algorithms, we're getting better and better on auto-assigns in states, so I feel good about our recapture of those reconnects with a gap.
Now as Joe mentioned, we're only three four or five months into this dynamic. So the people that are outside the 90 to 120 day window are only starting to emerge now we called those reconnects with a gap they will come in through the typical auto assign a process and through a number of algorithms, we're getting better and better.
On the auto assigns it states so I feel good about our recapture of those reconnects with the gap.
Speaker 9: Thanks, if I can just ask and follow up, and I apologize in advance, this is nitpicking a little bit, but he said the rates are generally satisfactory. Was that just a hedge against New York, maybe coming in a little bit lower? Just curious what you're seeing on the rest of the book, if things are generally better in line, or if you have something the other side that aren't as good as you expected. Thank you.
Thanks, if I can just ask a follow up and I apologize in advance nitpicking, a little bit, but you said the rates are generally satisfactory, but that just like a hedge against.
Joseph Rasky: So with that having been said, if performance deteriorates during the year for any reason, whether it's an acuity shift for re-determination, whether it's a trend in flexion, whether it's an acuity, acts as sort of the first financial cushion to absorb it before rates pick up, meaning the acuity adjustments, trend assumptions, always being baked into rates, fulfilling the concept of actual soundness. And we've said that from the beginning of this process that this is developing exactly as planned.
Maybe coming in a little bit lower.
Just curious what youre seeing on the rest of the book if some things are generally better in line or if you have something on the other side that arent as good as you expect.
Speaker 3: So I think we use it originally obviously because we were reporting a retroactive rate that not only us but the entire industry is advocating against. So that was the reason for the term. But for the most part, I'm a 40% of rates that we know about that impact 40% of our revenue for 2024 in the Medicaid.
We used the word generally obviously, because we report a retroactive rate that I'm not only us but the entire industry is advocating against so that was the reason for the term, but for the most part and a 40% of rates that we know about that impact 40% of our revenue.
For 2024, and the Medicaid business the rates had been Actuarially sound and have included what we consider to be actuarial reasonable adjustments for acuity.
Speaker 3: the rates have been actually really silent and have included what we consider to be actually reasonable, adjusted for acuity.
Joseph Rasky: We knew there'd be an acuity shift, manageable and modest as it is, it would put pressure on the underlying MCR. Our corridor liabilities would act as the first point of financial cushion until the rate process takes full credit of the acuity shift and trend. And that's exactly what's happening today. Right. And just to put a little color around that, if in normal times you're booking corridor expense and underlying trends increases quarter to quarter, in our situation, I'll just book less corridor expense.
Okay.
Great. Thanks.
Speaker 1: The next question comes from Stephen Baxter from Wells Fargo. Please go ahead.
The next question comes from Stephen Baxter from Wells Fargo. Please go ahead.
Speaker 10: Yeah, hi, thanks for the question. I'm sort of to come back to the acuity discussion. I think you mentioned it was running in line with your expectations at this point. I guess how do you think about the higher level of procedural disenrollments, having impacted that? I guess that how much does that make it challenging for you to feel like you have?
Yeah, Hi, Thanks for the question I just wanted to come back to the acuity discussion I think you mentioned it was running in line with your expectations. At this point I guess, how do you think about the higher level of procedural dis enrollments have been impacted that I guess like how much does that make it challenging for you to feel like you have good visibility there at this point and then I think you mentioned that the <unk>.
Speaker 10: good visibility there at this point. And then I think you mentioned that, you know, the reconnect population you expected.
Joseph Rasky: But as important to note, I still book meaningful corridor expense in the third quarter. So it's not like the corridor has completely been offset. We're still booking corridor expense, and we still have a significant ultimate on those liabilities. Now, as Joe mentioned, that corridor works well in the current fiscal year and that it's about the new race cycle. But remember, we tend to be best in class margins, which means that new race cycle always works for us. And replenishes our corridor position and keeps us in the mode we're currently running.
<unk> population you expected. The MLR is there will be in line with sort of like the rest of the stairs.
Speaker 10: The MLRs there will be in line with sort of like the rest of the stairs. I guess if you have data at this point to support that, or can you look back and see what the utilization looks like over the past couple of years for those people, so I'm just wondering if that's based on data at this point, or it's still kind of a working period. Thank you.
Do you have data at this point to support that or can you look back and see what the Utilizations look like over the past couple of years for those people. So I'm just wondering if that's based on data at this point or it's still kind of a working theory. Thank you.
Speaker 4: So on the reconnect themselves, we're seeing them come back in closer to the stares average, the portfolio average. Now I appreciate your question about historical benchmarks of data, but the problem is over the last two to three years we didn't really have such a phenomena. But I am feeling pretty good about the MLR of these reconnects, both seamless and with a gap.
So on the on the reconnect themselves, we're seeing them come back in closer to the stairs to average the portfolio average now I. Appreciate your question about historical benchmarks of data, but the problem is over the last two to three years, we didn't really have such a phenomena.
Mark Keim: Kevin, second part of your question was on the Medicare MCR, which admittedly ran hot in the quarter at 92.4% and was running in the high age earlier in the year. We're still on target to produce two and a half to three percent pretext margins in that business. It should be twice that. Our target is five to six percent. Jacks. And yes, we saw some trend inflections in the third quarter that were higher than we observed in the first part of the year.
But I am feeling pretty good about the MLR of these reconnects, both seamless and with the guests.
Speaker 3: The other, the, the, the last point to make on this point is really important. Durational acuity and lever stairs and joiners is not a new phenomenon of detracting a book of business. It's just that in this environment, it's more important to track it and to be able to fork it.
Maybe the last point to make at this point its really important one duration of acuity.
And lever stairs to join ours is not a new phenomenon to tracking our book of business. It's just that in this environment, it's more important to track it and to be able to forecast it.
Speaker 3: People come in to Medicaid because they need services. They come in higher than the portfolio average. And by the time they leave, they're using fewer services and leaving out lower than the portfolio average. That's the way the business works. And we have produced, through all
People come in to Medicaid because they need services that come in higher than our portfolio average and by the time, they leave they're using fewer services and leaving out lower than the portfolio average that's the way the business works and we have produced through all of that on an average of 88 between <unk> 88 and 89%.
Mark Keim: But we're conservative frisers. We caught somebody's trends early in the year, whether outpatient, professional services, screenings and PCP visits are back, both on the medical side and on the behavioral side, and LPSS hours. The hours assigned to the frail members were getting in on services, increased slightly in the quarter. All in, we believe we captured a conservative view of medical cost trend, which right now is running at 7% year over year, higher than we expected. But we believe we've captured that in our 2024 bids and fully expect our Medicare business to be back to 5% to 6% pre-tax margins in 2024.
Unknown Executive: Great, thanks.
Speaker 3: an on average in 88, you know, between 88 and 89%, 88.5% on average, on MCR. That's the way the business works. The issue here is because of the re-determination pause during the PHE, there's quite as many people leaving than joining.
Eight 5% on average our MCR, that's the way the business works. The issue here is because of the Redetermination pause during the phe, there's twice as many people leaving enjoying.
Speaker 3: So this has always been a phenomenon. We've had tracking mechanisms for durational acuity. We understand the levers, stairs, and joiners' analysis really well, but it is very early in the process.
So this has always been a phenomenon we've had tracking mechanisms for duration of acuity, we understand the lever of stairs and joiners analysis really well, but it is very early in the process and I come back to the point. We made earlier it is ill advised to mathematically extrapolate any of these data points certain state.
Speaker 3: And I come back to the point we made earlier. It is ill advised to mathematically extrapolate any of these data points, certain states front load of the process. And as you suggested with the procedural termination rate being so high, the reconnect rate is higher than anybody expected and likely to be.
Nathan Rich: The next question comes from Nathan Rich from Goldman Sachs. Please go ahead.
It's frontloaded the process and as you suggested with the procedural termination rate being so high the reconnect rate is higher than anybody expected and likely growing.
Nathan Rich: Great, good morning. Thanks for the questions and thanks for the detail on the earnings drivers for next year. Joe, I think you kind of framed the 15 to 18% EPS growth as the average over the next three years. Could you maybe just go into a little bit more detail on sort of the biggest unknowns from your point of view on that could impact growth next year relative to that 15 to 18% range.
Yeah.
Speaker 1: Next question comes from Scott Fidel from Stevens, please go ahead.
The next question comes from Scott Fidel from Stephens. Please go ahead.
Speaker 5: Thanks. Would appreciate it if you can just give us sort of, I guess your sense on your comfort levels right now with the current performance and then the bid positioning.
Hi, Thanks.
I appreciate it if you can just give us a sort of I guess your sense on your comfort levels right now with the current performance and then the positioning of the bright Medicare asset that youre going to be acquiring and maybe just sort of talk about how you're thinking about sort of factoring that into your 2024 outlook in.
Nathan Rich: And then just a quick clarification. On the retroactive rate adjustment in New York, is it possible to quantify what impact that had in the quarter? And do you see a potential for an adjustment to this going forward potentially to be more favorable? Thank you. Sure, Nathan. I'll provide the framing in the kick of the market. I think Mark gave some of the building blocks. It is, it is preparing marks. First and foremost, we're very confident in the $38 billion revenue outlook for next year.
Speaker 11: of the bright Medicare asset that you're going to be acquiring. And I may just sort of talk about how you're thinking about
Speaker 11: you know, sort of factoring that into your 2024 outlook and
Speaker 11: and maybe some of the downside protections that
And maybe some of the downside protections that.
Speaker 11: exist, you know, if that performance does come in, let's say, you know, a bit meaningfully below optimal levels. Thanks.
Yes.
That performance does come in let's say a bit meaningfully below.
Optimal levels. Thanks.
Yeah.
Well Scott Ware.
We're.
Speaker 3: very pleased with these strategic complement to our Medicare business, taking it from a $4 billion business to nearly a $6 billion business, and a very important state for us, obviously in California where we're doubling the size of our Medicare.
Very pleased with the strategic complement to our our Medicare business, taking it from $4 billion business to nearly $6 billion business and a very important state for Russia, obviously in California, where we're doubling the size of our Medicaid business.
Nathan Rich: That's 19% year over year growth. And a year where we're still producing best in class margins. First, I would say we're starting with a very high quality solid 2023 earnings baseline. We generally grow organically in our footprint. I'm betting earnings of $5.50 a year both new store, both M&A and new contract wins is certainly a catalyst into next year. Those implementation costs of 75 cents reverse. We believe interest rates will continue to be high.
Speaker 3: So from a strategic rationale perspective, we're very excited.
So from a strategic rationale perspective, we're very excited about it in our embedded earnings is a.
Speaker 3: In our embedded earnings is a run rate accretion level of $1 earnings per share.
Run rate accretion level of $1 earnings per share ultimately.
Speaker 3: Given the way the CMS pricing cycle works, it is going to take us a little longer than normal to get there, but we're confident in doing so.
Given the way the CMS pricing cycle works it is going to take us a little longer than normal to get there, but we're confident in doing so.
Speaker 3: I'll stop short on commenting about their financial performance. Their public company, this is a mature up to their operations. So I would allow them to report on how they're doing. But we do have visibility into how they're performing. And when we said that one of the variables going to next year is, how will it perform in the first year? We don't yet know because we don't know where it will be performing when we close on it.
I'll stop short on commenting about their financial performance. They are a public company. This is a mature into their operations. So I would want them to report on how they're doing but we do have visibility into how they are performing.
Nathan Rich: They're in mind that half our investible base is an intermediate term bond, so they're locked in. And then the rates on the short term portfolio are going to fluctuate with what the Fed does. But, you know, all out what fair is that interest rates will remain high going into next year, even to the end of next year. The three variables that we need to see more of before giving us specific earnings to share forecasts from 2024 is, how does re-determination experience emerge in the fourth quarter?
And when we said that one of the variables going to next year is how will it perform in the first year, we don't yet know because we don't know where it will be performing when we close on it I'll stop short of commenting on their performance because that would be inappropriate. Obviously that will report earnings soon and you can get a view as to how the Medicare business is doing.
Speaker 3: I'll stop short of commenting on their performance because that would be inappropriate. Obviously, they'll report everything soon, and you can get a view as to how the Medicare business is doing.
Nathan Rich: To date it has been completely in line with our expectation. We did increase our ultimate loss assumption as Joseph Spoken. And we'd like to see how the rates develop on our 60% of our Medicaid revenue for next year. We know about rates on 40% of our Medicaid revenue next year. Those rates have been asked where we sound. We've been satisfied with the acuity adjustments. As Mark said, those acuity adjustments will resonate in 10 out of the 12 rates that we already know about, but we want to see how the rates develop on 60% of the work.
Okay.
Our next question.
Speaker 1: Our next question comes from AJ Rice from UBS. Please go ahead.
Our next question comes from AJ Rice from UBS. Please go ahead.
Speaker 12: Thanks. Just maybe to ask about the exchanges a bit more. It sounds like you've got some conservatism, at least you believe you have, in that fourth quarter baked in. I know you've been running a pretty low MCR year-to-date in exchanges. Are you allowing for a
Thanks.
Just maybe to ask you about the exchange is a bit more it sounds like you've got some conservativism you unless you believe you have in the fourth quarter baked yet.
I know you've been running a pretty.
Low MCR year to date and exchanges are you, allowing for significant uptake.
Nathan Rich: So those are the variables going into next year. As you cited at the beginning of your question, we are confident and committed to the 15 to 18% long-term earnings for share growth rate, often for 2023 baseline, which means that 2026 earnings for share will be 52 to 64% higher than 2023 of $20.75. Mark, anything to add? Yeah, the only other thing, Nathan, I think you asked about the rate adjustment in New York.
Speaker 12: significant uptick, and sometimes we see that in utilization. Obviously, as people hit their deductible limits, et cetera, and the exchanges, can you give us any sense of what you've baked in? And I think the comment was made that as you look ahead to 2024, you're not expecting a lot of premium growth. It seems like, you know, you've repriced the business.
Sometimes we see that in utilization, obviously as people hit their deductible limits et cetera. In the exchanges can you give us any sense of what you baked in and I think the comment was made that as you look ahead to 'twenty four youre not expecting a lot of premium growth. It seems like you know you've repriced the business.
Speaker 12: pretty well, why not take a little more active approach to growing?
Pretty well.
Why why not take a little more active approach to growing that product line next year given it sounds like you are hitting your margin targets pretty easily.
Speaker 12: that product line next year, given it sounds like you're hitting your margin targets pretty easily this year in that product or maybe I'm missing something.
Nathan Rich: We reported, as you know, an 888 in Medicaid for the quarter. I'd estimate someplace around 30 bits is related to that specific phenomena. And the reason it's a little uncertain is in several of our states, the retro rates constantly get revisited. I'm optimistic that this one gets a little bit better, but at the moment we book that adjustment.
This year in that product or maybe I'm missing something.
Nathan Rich: Thank you very much.
Speaker 3: So you're not missing anything. Thanks for the question. Let me frame it in terms of you asked you questions. What about the MCR? What about membership?
So you're not missing anything thanks for the question.
Frame it in terms of you asked two questions one about the MCR camborne about membership growth.
Speaker 3: On the MCR, when we gave guidance at the end of the second quarter, we built in roughly an 85%.
On the MCR when we gave guidance at the end of the second quarter, we build in roughly an 85% back half NCR and obviously, we outperformed that in the third quarter, we continue to make it something in the mid <unk> for the fourth quarter, which would put us at 76% for the full year, which is 200 basis points below the low end of the range.
Speaker 3: back half MCR, and obviously we outperformed that in the third quarter, we continue to make in something in the mid-80s for the fourth quarter, which would put us at 76% for the full year, which is 200 basis points below the low end of the range. This business is going to produce 8.5% to 9% pre-tax margins for the year. Small, silver, and stable work, given the potential for inherent volatility and the risk.
Justin Lake: The next question comes from Justin Lake from Wolf Research. Please go ahead. Good morning. Sorry about that. I appreciate your question here. Two things I wanted to touch on were, you had a fair amount of prior year development in the third quarter kind of have normally higher roles than the previous. Just curious, what segments of the business might have drove that and the potential impact to earnings there. And then secondly on, you mentioned investment income.
This business is going to produce eight 5% to 9% pre tax margins for the year small silver and stable work given the potential for inherent volatility and the risk pool I think we have this right now to your point Mark mentioned in his prepared remarks in salt, but he mentioned it that we do.
Speaker 3: think we have this right. Now to your point, Mark mentioned it is for Perry Mark's who saw it, but he mentioned it that we do plan to grow the marketplace business next year. We plan to grow it measured.
Do plan to grow the marketplace business next year, we plan to grow it measuredly and modestly.
Speaker 3: The early read on our pricing competitiveness, I'll just give you one stat that's really important. In our silver product, which is our flagship product, we are now number one or number two priced in 30% of our counties versus 20% this year.
The early read on our pricing competitiveness I'll just give you one stat that is really important and our silver product, which is our flagship product. We are now number one or number two price and 30% of our counties versus 20% this year.
Justin Lake: I'm curious as you're having these conversations with the states on rates. Just want to confirm, like historically, my understanding is states didn't really take when they set your margin, you know, the rates actually sound with a margin target behind it. That margin target was before investment income. Are they looking at investment income and say, do we pay you a little bit less because your earnings are higher because of the investment income? Or is that still left outside of the calculation? Thanks.
Speaker 3: It will grow next year. We plan to do it measurably and modestly.
It will grow next year, we plan to do it measurably and modestly.
Speaker 3: all with the view of producing at least mid-single digit.
All with the view of producing at least mid single digit.
Speaker 3: pre-tax margins, which this year will be very high single-digit pre-tax.
Pre tax margins, which this year will be very high single digit pre tax margins anything to add mark a J. The only thing I'd add is Joe has been adamant about small stable in silver in this product and so when we set rates last June we set them on our discipline on our margin expectations.
Mark Keim: I'll answer the second question first. Investing income is not only generally, but almost entirely outside the conversation of rates, which generally focus on what we call medical margin or trend assumptions. In some cases, they also focus on a GNA load, but that's rare and infrequent.
Speaker 4: A.J., the only thing I'd add is Joe's been adamant about small, stable, and silver in this product. And so when we set rates last June , we set them on our discipline, on our margin expectation.
Speaker 4: It looks like the risk pool next year is stabilizing with some of the more strangely priced players dropping out.
It looks like the risk pool next year is stabilizing with some of the.
Joseph Rasky: On the PYG, I'll take it to mark because we're very confident in the strength of our balance sheet. Two points I'll make. From a business perspective, our payment integrity routines are both free pay and post pay. And a post pay routine where you identify things that you should not have paid for and recover it from providers. By definition, that is accounted for in prior period development because it relates to prior period, that is a large share of any prior period development that we report.
More strangely price players dropping out.
Speaker 4: which means the risk pool for the rest of us has stabilized. As a result, on pricing we committed to last June , we're seeing a much better competitive position. Joe mentioned 20% of our county is now growing to 30% where we're number one or number two.
Which means the risk pool for the rest of US has stabilized as a result.
On pricing, we committed to last June we're seeing a much better competitive position Joe mentioned, 20% of our Kennedy is now growing to 30%, where we're number one or number two which means I'm expecting to get more volume than I thought before at margins that conform with our discipline. So we're feeling good about that outlook.
Speaker 4: which means I'm expecting to get more volume than I thought before at margins that conform with our discipline. So we're feeling good about that outlook.
Okay. Thanks.
Speaker 1: The next question comes from George Hill from Deutsche Bank. Please go ahead.
The next question comes from George Hill from Deutsche Bank. Please go ahead.
Joseph Rasky: Second point to note is, don't forget, we have corridor wide billities relating to some of these prior periods and to the extent a few ID went against a state in a period where a corridor wide bill existed that it was muted in terms of its financial impact. That's exactly right. Payment integrity has become such a fundamental part of our operations and we do it fairly well. That prior year amount that you pulled from the earnings release was largely offset by corridors.
Speaker 3: Hey, good morning guys and thanks for taking the question. I guess with respect to the retrospective rate adjustments that you guys talked about, is there any way to quantify both how far you guys are through the process? And simplistically speaking, I guess, how much money you guys think you might be owed from from rate adjustments that kind of didn't need to be trued up historically?
Hey, good morning, guys and thanks for taking the question I guess.
With respect to the retrospective rate adjustments that you guys talked about is there any way to quantify both how far you guys are through the process and Simplistically speaking I guess, how much money you guys think you might be owed.
From rate adjustments to kind of do they need to be turned up historically.
Speaker 4: So I'll take that. Obviously, I'm in no position to comment on retro rates that haven't been contractually committed to by our state partners. But with our actual rail team and our data-driven process, we're in there working with them. And I'd say there's a handful right now where the data is compelling. The state is receptive to the discussion, and we'll let that play out. And of course, I'll book those benefits if and when they come. Okay, fine.
So I'll take that obviously I am in no position to comment on retro rates that havent been contractually committed to by our state partners.
Joseph Rasky: Now, more to the point, when we see strong prior period development, it's tempting to be concerned about current reserving. Did they somehow offset to make earnings something like that? Look, I point to the strength of our current reserve position 51 days DCP, the growth versus revenue. So I feel both good about our current reserving position, but the strength of this prior year exercise as well, through our payment integrity function.
But with our actuarial team and our data driven process. We're in there working with them and I'd say, there's you know a handful right now where the data is compelling the state is receptive to the discussion and we'll let that play out and of course, all booked those benefits if and when they come.
Okay. Thank you.
Speaker 1: The next question comes from Gary Kailer from Cowan. Please go ahead.
The next question comes from Gary Taylor from Cowen. Please go ahead.
Okay.
Speaker 10: Hi, good morning. I had two questions. One was just on the 550 of embedded earnings, which I think you reiterated. I think a portion of that historically was Indiana. That might have only been
Yeah.
Hi, good morning.
Calvin Sternick: Our next question comes from Calvin Sternick from JP Morgan, please go ahead. Yeah, thanks. Maybe just switching gears here a little bit. I'm curious what you're seeing the cohort of members who haven't reconnected within that 90 to 120 day window, but you have realized afterwards they're still eligible for Medicaid. What are the members of addition looking like there, relative to what you expected? And I know you've talked about in the past investing in quality initiative to move up in the auto assigned algorithms.
Two questions. One was just on the 550 of embedded earnings, which I think you reiterated.
A portion of that historically was Indiana that that might have only been.
Calvin Sternick: So just wondering if you're seeing those efforts there for a year or if it's still too early to tell or just too much noise going on with determinations. I think you answered the question in your last statement because that gap is 90 to 120 days we've seen during little of it given that the re determination was in full throws, you know, May and June. But in your supposition, your theoretical supposition is correct.
Speaker 13: sort of $0.15 or $0.20, so I just wanted to make sure, understanding what sort of backfilling that to keep the embedded earnings at.
Sort of 15 or <unk>.
<unk>. So just wanted to make sure understanding what sort of back filling.
That to keep the embedded earnings at.
Speaker 13: 550 and also if you would agree it sounds like maybe just the bright year one
550, and also if you would agree it sounds like maybe just the bright year one.
Speaker 13: Profitability is the biggest.
Profitability is is the biggest.
Speaker 13: I guess question mark right now in terms of how much that embedded earnings will get realized in 2024. Is that fair? Yes.
I guess a question Mark right now in terms of how much that embedded earnings will get realized in 2024 is that fair.
Speaker 3: First question, Gary, this is Joe. Yes, and embedded earnings, you're absolutely right. We removed Indiana from embedded earnings but replaced it with New Mexico and an expansion in Texas now that the contract is finalized.
First question.
Gary This is Joe yes of embedded earnings Youre actually right, we removed, Indiana from embedded earnings by replaced it.
Calvin Sternick: That member is going to go to the doctor or to the pharmacy for a service or script, realize they don't have service and then reconnect. Obviously, with no retroactivity back to the data termination. So we suspect that member will come back in somewhere around the portfolio average because they'll be requiring services. Anything, Dad?
New Mexico.
<unk> and expansion in Texas now with the contract is finalized and yes as I said.
Speaker 3: And yes, as I said, we're very confident that we can get bright to target margins after a two-year period and achieve the $1 earnings per share accretion number.
We're very confident that we can get bright to target margins. After the two year period and achieved a $1 earnings per share accretion number and again, we're just saying that we just don't know what we're going to inherit in terms of earnings picture at closing to forecasted first year.
Speaker 3: And again, we're just saying that we just don't know what we're going to inherit in terms of earnings picture and closing.
Joseph Rasky: Yeah, well, we talk about reconnects just to set the stage for everybody. We tend to think about two categories. Most of them are what we call seamless. That is within 90 to 120 days, they realize they lost coverage, contacted the agency and got back on as though they never lost coverage and we pick up the retro premium. Now, as Joe mentioned, we're only three, four, five months into this dynamic. So the people that are outside the 90 to 120 day window are only starting to emerge now.
Speaker 4: And given that company is going into OEP themselves, they're probably still working through what their outlook is for next year. So it's definitely too early given the situation for us to comment on that one.
And given that that company is going into OAP themselves, they're probably still working through what their outlook is for next year. So it's definitely too early given the situation for us to comment on that one.
Thank you.
Okay.
Speaker 1: The last question comes from Sarah James from Cantor Fitzgerald. Please go ahead.
The last question comes from Sarah James from Cantor Fitzgerald. Please go ahead.
Joseph Rasky: We call those reconnects with a gap. They will come in through the typical auto assign process and through a number of algorithms, we're getting better and better on auto assigns in states. So I feel good about our recapture of those reconnects with a gap. Thanks.
Speaker 14: Thank you. One clarification on the rejoiners, can you give us a split of what's coming back in exchanges versus coming back on Medicaid? And then.
Thank you.
One clarification on the re joiners can you give us a split of whats coming back and exchanges for instance, coming back on Medicaid.
Speaker 14: In the two of the 12 states that didn't put in the acuity adjustments, are you able
And then.
The two of the 12 states that didn't put in the acuity adjustments are you able to see any pattern there either and how the cost that is coming in maybe the timing that they started re determinations are how the radius Chuck shared.
Mark Keim: If I can just ask a follow up and I probably doesn't advance this is nitpicking a little bit, but he said the rates are generally satisfactory. It was that just a hedge against New York maybe coming in a little bit lower. Just curious what you're seeing on the rest of the book if some things are generally better in line or if you have something the other side that aren't as good as you expect.
Speaker 14: any pattern there either in how the cost data is coming in, maybe the timing that they started redeterminations or how the rate is structured with risk corridors that you're able to determine maybe why those two are.
But the risk corridor Scott.
That you are able to determine maybe why those two outliers.
Mark Keim: Thanks. So I think we use it originally because we were reporting a retroactive rate that not only us but the entire industry is advocating against, so that was a reason for the term. But for the most part, I'm a 40% of rates that we know about that impact 40% of our revenue for 2024 in the Medicaid business. The rates have been actually really silent and have included what we consider to be actually really reasonable, adjusted for a QD. Great, thanks.
Speaker 3: I'll kick it to Mark for the cover on these, but the first point I'll make is on your second question. I think we appropriately need to include the word yet in the two that haven't. Bear in mind, some of our rate cycle actually in set.
Okay due to mark to cover on these but the first point I'll make is on your second question I think we appropriately need to include the award yet and the two that haven't bear in mind some of our rates cycle actually in steps.
Speaker 3: only as the redetermination process was starting, or even before it started, which makes it not possible for any Medicaid department to project what the acuity shift would be. So I would introduce the word yet, and who knows, maybe we'll get a retro or a mid-cycle adjustment on those two states. Mark.
Only as the Redetermination process, we are starting to even before it started which makes it not possible for.
Any Medicaid department to project, what the acuity shift would be fine.
So I would introduce the word yet and who knows.
Maybe we'll get a retro or a or a mid cycle adjustment on those two states mark.
Stephen Baxter: The next question comes from Stephen Baxter from Wells Fargo. Please go ahead. Yeah, hi, thanks for the question. I'm sort of to come back to the QD discussion. I think you mentioned it was running, you know, in line with your expectations at this point. I guess, how do you think about the higher level of procedural disenrollments, you know, having impacted that? I guess that how much does that make it challenging for you to feel like you have good visibility there at this point?
Speaker 4: Hey Sarah, on the reconnects, when we use the term reconnects, both seamless and with a gap, that is purely a Medicaid concept.
Hey, Sara on the reconnect when we use the term reconnects, both seamless and with a gap that is purely a Medicaid concept.
Speaker 4: So that 25% go into 30% that we're seeing is strictly within Medicaid. Then separately, as I mentioned earlier, we're picking up members in Marketplace. I mentioned closer to 40,000 through FEP in the third quarter. So that would be a different concept. And obviously, as an enterprise, it only helps.
So that 25% go into 30% that we're seeing is strictly within Medicaid then separately as I mentioned earlier, we're picking up members in marketplace I mentioned closer to 40000 through S&P in the third quarter, so that would be a different concept and obviously as an enterprise.
Stephen Baxter: And then I think you mentioned that, you know, the reconnect population, you expect that the MLRs there will be in line with sort of like the rest of the stares. I guess if you have data at this point to support that, or, you know, can you look back and see what the utilization looks like over the past couple of years for those people. So I'm just wondering if that's based on data at this point or it's still kind of a working theory.
Only helps in.
Speaker 4: in the overall membership story. And then Joe's exactly right on the two of the 12 states where we haven't seen it yet. There's a few things driving that. The timing of when folks started.
In the overall membership story and then Joe is exactly right on the two of the 12 states, where we haven't seen it yet there is a few things driving that.
Timing of when folks started impacts how quickly data develops to have a data driven process. The timing of the fiscal year is definitely a component, but in all cases the concept of actuarial soundness just means it's a matter of getting the data into timing.
Speaker 4: impacts how quickly data develops to have a data-driven process. The timing of the fiscal year is definitely a component, but in all cases, the concept of actuarial soundness just means it's a matter of getting the data and the timing consistent with fiscal years and appropriate retro period.
Joseph Rasky: Thank you. So on the reconnects themselves, we're seeing them come back in closer to the stares average, the portfolio average. Now I appreciate your question about historical benchmarks of data, but the problem is over the last two to three years. We didn't really have such a phenomena, but I am feeling pretty good about the MLR of these reconnects, both seamless and with a gap. But the other, the, the last point to make on this point is really important one, duration of acuity and lever stares and joiners is not a new phenomenon to tracking a book of business.
Consistent with fiscal years and inappropriate retro periods.
Speaker 4: So, we feel good about that process, and again, the vast majority have already given us those concessions, so we feel good about how the process will unfold.
We feel good about that process and again the vast majority have already given us.
Those concessions so we feel good about how the process will unfold.
That's helpful. Thank you.
Joseph Rasky: It's just that in this environment, it's more important to track it and to be able to forecast it. People come in to Medicaid because they need services they can in higher than the portfolio average, and by the time they leave, they're using fewer services and leaving out lower than the portfolio average. That's the way the business works. And we have produced through all of that on average and 88, you know, between 88 and 89% 88.5% on average.
Speaker 1: This concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
This concludes our question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Joseph Rasky: That's the way the business works. The issue here is because of the re-determination pause during the PHE, there's twice as many people leaving than joining. So this has always been a phenomenon we've had tracking mechanisms for duration acuity. We understand the levers, stares, and joiners, analysis really well, but it is very early in the process and I come back to the point we made earlier. It is ill advised to mathematically extrapolate any of these data points, certain states front-loaded the process, and as you suggested with the procedural termination rate being so high, the reconnect rate is higher than anybody expected and likely growing.
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Scott Fidel: Next question comes from Scott Fidel from Stevens. Please go ahead. Hi, thanks. Would appreciate if you can just give us sort of, I guess, your sense on your comfort levels right now with the current performance and then the bid positioning of the bright Medicare asset that you're going to be acquiring. I may just sort of talk about how you're thinking about, you know, sort of factoring that into your 2024 outlook and maybe some of the downside protections that exist, you know, if that performance does come in, let's say, you know, a bit meaningfully below optimal levels.
Speaker 15: © BF-WATCH TV 2021
Scott Fidel: Well, Scott, we're very pleased with these strategic complement to our Medicare business, taking it from a four billion dollar business to nearly a six billion dollar business and a very important state for us, obviously in California where we're doubling the size of our Medicaid business. So, from a strategic rationale perspective, we're very excited about it. In our categories, is a one rate accretion level of $1 per share, ultimately. Given the way the CMS pricing cycle works, it is going to take us a little longer than normal to get there, but we're confident in doing so.
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Scott Fidel: I'll stop short on commenting about their financial performance, their public company. This is a mature up to their operation, so I would allow them to report on how they're doing, but we do have disability into how they're performing. And when we said that one of the variables going to next year is, how will it perform in the first year? We don't yet know because we don't know where it will be performing when we close on it. I'll stop short of commenting on their performance because that would be inappropriate. Obviously, they'll report very soon, and you can get a few as to how the Medicare business is doing.
Speaker 15: .
A.J. Rice: Our next question comes from A.J. Rice from UBS. Please go ahead. Thanks. Just maybe to ask about the exchange is a bit more. It sounds like you've got some conservatism. At least you believe you have in the fourth quarter baked in. I know you've been running a pretty low MCR year to date and exchanges. Are you allowing for significant uptake? Sometimes we see that in utilization. Obviously, people hit their deductible limits, etc.
A.J. Rice: And exchanges. Can you give us any sense of what you baked in? And I think the comment was made that when you looked ahead to 24, you're not expecting a lot of premium growth. It seems like you've reprised the business pretty well. Why not take a little more active approach to growing that product line next year, given it sounds like you're hitting your margin targets pretty easily this year in that product or maybe I'm missing something.
A.J. Rice: So you're not missing anything. Thanks for the question. Let me frame it in terms of you asked two questions about the MCR on what about membership growth. On the MCR, when we gave guidance at the end of the second quarter, we built in roughly an 85% back half MCR. And obviously we outperformed that in the third quarter. We continue to bake in something in the mid 80s for the fourth quarter, which would put us at 76% for the full year, which is 200 basis points below the low end of the range.
A.J. Rice: This business is going to produce 8 and a half to 9% pre-tax margins for the year. Small silver and stable work, given the potential for inherent volatility in the Riftful. I think we have this right. Now, to your point, Mark mentioned it is prepared to be Mark's who saw it, but he mentioned it that we do plan to grow the marketplace business next. We plan to grow it measurably and modestly. The early read on our pricing competitiveness, I'll just give you one staff that's really important.
A.J. Rice: In our silver product, which is our flagship product, we are now number one or number two price and 30% of our counties versus 20% this year. Mid-single digit pre-tax margins, which this year will be very high single digit pre-tax margins. Anything to add Mark? AJ, the only thing I'd add is Joe has been adamant about small, stable and silver in this product and so when we set rates last June, we set them on our discipline on our margin expectations.
A.J. Rice: It looks like the risk pool next year is stabilizing with some of the more strangely priced players dropping out, which means the risk pool for the rest of us has stabilized as a result on pricing we committed to last June. We're seeing a much better competitive position. Joe mentioned 20% of our counties now growing to 30% where we're number one or number two, which means I'm expecting to get more volume than I thought before.
A.J. Rice: We're at margins that conform with our discipline, so we're feeling good about that outlook. Okay, thanks. The next question comes from George Hill from Deutsche Bank. Please go ahead. Hey, good morning guys and thanks for taking the question. I guess with with respect to the retrospective rate adjustments that you guys talked about, is there anybody to quantify both how far you guys are through the process? And simplistically speaking, I guess how much money you guys think you might be owed from from rate adjustments that kind of didn't need to be screwed up historically?
A.J. Rice: So I'll take that. Obviously, I'm in no position to comment on retro rates that haven't been contractually committed to by our state partners. But with our actual real team and our data driven process, we're in there working with them. And I'd say there's, you know, a handful right now where the data is compelling. The state is receptive to the discussion and we'll let that play out. And of course, I'll book those benefits if and when they come.
A.J. Rice: Okay, thank you. The next question comes from Gary Taylor from Cowan. Please go ahead. Hi, good morning. I had two questions. One was just on the 550 of embedded earnings, which I think you reiterated. I think a portion of that historically was Indiana that that might have only been sort of 15 or 20 cents. So just wanted to make sure understanding what sort of backfilling that to keep the embedded earnings at 550.
A.J. Rice: And also, if you would agree, it sounds like maybe just the bright year one profitability is the biggest. I guess question mark right now in terms of how much that embedded earnings will get realized in 2024. Is that fair? First question, Gary, this is Joe. Yes, embedded earnings, you're absolutely right. We removed Indiana from the embedded earnings, but replaced it with New Mexico and an expansion in Texas. Now that the contract is finalized.
A.J. Rice: And yes, as I said, we're very confident that we can get bright to target margins after the two-year period and achieve the $1 earnings per share accretion number. And again, we're just saying that we just don't know what we're going to inherit in terms of earning a particular closing to forecast the first year. And given that company is going into OEP themselves, they're probably still working through what their outlook is for next year.
A.J. Rice: So it's definitely too early given the situation for us to comment on that one. Thank you. The last question comes from Sarah James from Cantor Fitzgerald, please go ahead. Thank you. One clarification on the rejoiners. Can you give us a split of what's coming back in exchanges versus coming back on Medicaid? And then in the two of the 12 states that didn't put in the acuity adjustments, are you able to see any pattern there, either in how the cost status coming in, maybe the timing that they started redeterminations or how the rate is structured with risk corridors that you're able to determine maybe why those two were outliers.
A.J. Rice: Okay, get to mark for the cover on these. But the first point I'll make is on your second question. I think we appropriately need to include the word yet in the two that haven't bear in mind some of our rate cycle actually in steps, only as the redetermination process was starting before it started, which makes it not possible for any Medicaid department to project what the acuity shift would be. So I would introduce the word yet and who knows maybe we'll get a retro or a or a mid cycle adjustment on those two states mark.
A.J. Rice: Hey Sarah, on the reconnect when we use the term reconnect both seamless and with a gap, that is purely a Medicaid concept. So that 25% go into 30% that we're seeing is strictly within Medicaid, then separately, as I mentioned earlier, we're picking up members in marketplace. I mentioned closer to 40,000 through FEP in the third quarter. So that would be a different concept. And obviously as an enterprise only helps in the overall membership story.
A.J. Rice: And then Joe is exactly right on the two of the 12 states where we haven't seen it yet. There's a few things driving that the timing of when folks started impacts, you know, how quickly data develops to have a data driven process. The timing of the fiscal year is definitely a component. But in all cases, the concept of actual rail sound is just means it's a matter of getting the data into timing consistent with fiscal years and an appropriate retro periods.
A.J. Rice: So we feel good about that process. And again, the vast majority have already given us those concessions. So we feel good about how the process wouldn't fold. That's helpful. Thank you. This concludes our question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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