Q2 2024 Molina Healthcare Inc Earnings Call
Operator: Good day and welcome to the Molina Healthcare second quarter 2024 earnings conference call. All participants will be on this call. If you do need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad.
Unknown Executive: Good day and welcome to the Molina Healthcare 2nd quarter of 2024 earnings conference call. All participants will be in the Sonoma mode. Should you need assistance, please signal. Conference specialists are pressing the star key followed by zero.
Good day and walks to the Molina healthcare second quarter 'twenty 'twenty four earnings conference call.
Speaker Change: All participants will be in listen only mode.
Speaker Change: Should you need assistance. Please signal conference specialist by pressing the star K followed by zero.
Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then want on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded.
After todays presentation, there will be an opportunity to ask questions.
Speaker Change: A question you May Press Star then one on your telephone keypad to withdraw.
Operator: To try our question, please press star then two. Please note, this event is being recorded. We're now turning the comments over to Jeffrey Geyer, Head of Investment Relations. Please go ahead.
Your question. Please press Star then two.
Please note. This event is being recorded I would now.
Jeffrey Geyer: But now a telecom is over, Jeffrey Geyer, head of investor relations. Please go ahead, sir.
Speaker Change: I'll turn the conference over to Jeffrey Guy our head of Investor Relations. Please go ahead Sir.
Jeffrey Geyer: Good morning and welcome to Molina Healthcare's 2nd quarter of 2024 earnings call. Joining me today are Molina's president and CEO, Joseph Raskin, and our interview after the market closed yesterday is available on our investor relations website. 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.
Jeffrey Geyer: Good morning, and welcome to Molina Healthcare's second quarter 2024 earnings call. Joining me today are Molina President and CEO, Joe Zubretsky, and our CFO, Mark Keim. A press release announcing our second quarter 2024 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.
Jeffrey Geyer: Good morning, and welcome to Molina Healthcare's second quarter 2024 earnings call. Joining me today are Molina, as president and CEO, Jos Nebraska, and our CFO Marc Cai.
Jeffrey Geyer: The numbers to access the replay are in the earnings report. For those of you who listened to the rebroadcast of this presentation, we remind you that all of the remarks are made as of today, Thursday, July 25, 2024, and have not been updated subsequent to the initial earnings. On this call, we will refer to certain non-GAAP measures. A reconciliation of these measures with the most directly comparable GAAP measures can be found in the second quarter 2024 earnings report.
Speaker Change: A press release announcing our second quarter 2024 earnings was distributed after the market closed yesterday and is available on our Investor Relations website.
Speaker Change: Shortly after the conclusion of this call a replay will be available for 30 days.
Speaker Change: The numbers to access the replay are in the earnings release.
Jeffrey Geyer: For those of you who listen to the rebroadcast of this presentation, we remind you that all of the remarks are made as of today, Thursday, July 25th, 2024, and have not been updated subsequent to the initial earnings call. On this call, we will refer to certain non-GAAP measures. A reconciliation of these measures with the most directly comparable gap measures can be found in the 2nd quarter 2024 earnings release.
Speaker Change: For those of you who listen to the rebroadcast of this presentation. We remind you that all of the remarks are made as of today Thursday July 25th 2024.
Speaker Change: I've been updated subsequent to the initial earnings call.
Speaker Change: On this call we will refer to certain non-GAAP measures.
Speaker Change: A reconciliation of these measures with the most directly comparable GAAP measures can be found in the second quarter 2024 earnings release.
Jeffrey Geyer: During the call, we will be making certain forward-looking statements, including, but not limited to, statements regarding our 2024 guidance, Medicaid redeterminations, expected Medicaid rate adjustments, medical costs initiatives, and our projected MCR, our recent RFP awards, and related revenue growth, our acquisitions and M&A activity. Our long-term 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. 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.
Jeffrey Geyer: During the call, we will be making certain forward-looking statements, including, but not limited to, statements regarding our 2024 guidance, Medicaid redetermination, the expected Medicaid rate adjustment, Medical Costs Initiatives, and our Projected MCR, our recent RFP awards and Related Revenue Growth, our Acquisitions and M&A Activity, our Long-Term Growth Strategy, and our Embedded Earnings Power and Future Earnings Realization. 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. We advise listeners to review the risk factors discussed in our Form 10-K Annual Report filed with the SBA, as well as the risk factors listed in our Form 10-Q and Form 8-K filings with the SEC.
Speaker Change: During the call, we will be making certain forward looking statements, including but not limited to statements regarding our 2024 guidance Medicaid redetermination.
Speaker Change: Expected Medicaid rate adjustments medical cost initiatives and our projected MCR, our recent RFP awards and related revenue growth or acquisitions, and M&A activity, our long term growth strategy and our embedded earnings power and future earnings realization.
Speaker Change: 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 Change: 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.
Jeffrey Geyer: After the completion of our prepared remarks, we will open the call to take your questions.
Jeffrey Geyer: After the completion of our prepared remarks, we will open the call to take your questions. I will now turn the call over to our Chief Executive Officer, Joe Zubretsky.
Speaker Change: After the completion of our prepared remarks, we will open the call to take your questions.
Joseph Raskin: I will now turn the call over to our Chief Executive Officer, Joseph Bresti. Joe?
Joseph Michael Zubretsky: I will now turn the call over to our Chief Executive Officer Joseph <unk>.
Speaker Change: Joe.
Joseph Raskin: Thank you, Jeff, and good morning. Today, we will provide you with updates on our reported financial results to the 2nd quarter, highlighted by $5.86 of earnings per share, which was in line with our expectations. In update on our full year 2024 guidance, which we reaffirm at $38 billion of premium revenue, and at least $23.50 in our case per share. and our growth initiatives and strategy for sustaining profitable growth.
Joseph Michael Zubretsky: Thank you, Jeff, and good morning. Today, we will provide you with updates on our reported financial results for the second quarter. Highlighted by $5.86 of earnings per share, which was in line with our expectations, an update on our full year 2024 guidance, which we reaffirm at $38 billion of premium revenue and at least $23.50 in earnings per share, and Our Growth Initiatives and Strategy for Sustaining Profitable Growth. Last night, we reported adjusted earnings per share of $5.86, a $9.4 billion of premium revenue.
Joseph: Thank you, Jeff and good morning.
Speaker Change: Today, we will provide you with updates on our reported financial results for the second quarter highlighted by $5.86 of earnings per share, which was in line with our expectations.
Speaker Change: An update on our full year 2024 guidance, which we reaffirmed at $38 billion with premium revenue and at least $23 50.
Earnings per share and our growth initiatives and strategy for sustaining profitable growth.
Joseph Raskin: Let me start with our second quarter performance. Last night, we reported adjusted earnings per share of $5.86 on $9.4 billion of premium revenue. Our 88.6% consolidated MCR reflects discipline to medical cost management, despite experiencing some modest medical cost pressure. We produced a 4.6% adjusted pre-tax margin or 3.5% aftertax, a very strong result that is in the middle of our long-term target range. Year-to-date, our consolidated MCR is also 88.6%, and our adjusted pre-tax margin is 4.5%, both within our long-term target ranges. Our well-balanced portfolio of businesses and focusing on managing medical costs continue to produce results in line with our expectations.
Speaker Change: Let me start with our second quarter performance.
Speaker Change: Last night, we reported adjusted earnings per share of $5 86.
Speaker Change: A $9 $4 billion with premium revenue.
Joseph Michael Zubretsky: Our 88.6% consolidated MCR reflects disciplined medical cost management. We produced a 4.6% adjusted pre-tax margin or 3.5% after tax, a very strong result that is in the middle of our long-term target range. Year-to-date, our consolidated MCR is also 88.6%, and our adjusted pre-tax margin is 4.5%, both within our long-term target range, are a well balanced portfolio of businesses and focus on managing medical costs, continue to produce results in line with our expectations. In Medicaid, the business produced a second quarter MCR of 90.8%, above our long-term target. This order included a one-time prior year retroactive premium item in our California business.
Speaker Change: Our 88, 6% consolidated MCR reflects disciplined medical cost management, despite experiencing some modest medical cost pressure.
Speaker Change: We produced a four 6% adjusted pre tax margin were three 5% after tax a very strong result that is in the middle of our long term target range.
Speaker Change: Year to date, our consolidated MCR is also 88, 6% and our adjusted pre tax margin is four 5% both within our long term target ranges.
Speaker Change: Our well balanced portfolio of businesses and focusing on managing medical cost.
Speaker Change: <unk> to produce results in line with our expectations.
Joseph Raskin: In Medicaid, the business produced a second quarter MCR of 90.8% above our long-term target range. This quarter included a one-time prior year retroactive premium item in our California business. Excluding this one-time item, the second quarter MCR was 90.1%, elevated by higher MCRs from our new store additions, a dynamic consistent with the first quarter. It also reflects slightly higher than expected medical costs in the legacy Medicaid portfolio. Attributable to the ongoing acuity shift of redeterminations. We continue to have risk-core or protection in many geographies and expect that this medical cost pressure will be adequately captured by no rate adjustments in the second half of 2024.
Speaker Change: In Medicaid the business produced a second quarter MCR of 98% above our long term target range.
Speaker Change: This quarter included a one time prior year retroactive premium items, and our California business.
Joseph Michael Zubretsky: Excluding this one-time item, the second quarter MCR was 90.1 percent, elevated by higher MCRs from our new store additions, a dynamic consistent with the first quarter. It also reflects slightly higher than expected medical costs in the legacy Medicaid portfolio. We continue to have risk corridor protection in many geographies and expect that this medical cost pressure will be adequately captured by known rate adjustments in the second half of 2024. We expect our Medicaid results to improve in the second half of the year. Several data points indicate we are well on track in this regard. First, the California retrograde item will not repeat.
Speaker Change: Excluding this one time item the second quarter MCR was 91%.
Speaker Change: Elevated by higher Ncr's from our new store additions are dynamic consistent with the first quarter.
Speaker Change: It also reflects slightly higher than expected medical costs in the legacy Medicaid portfolio.
Speaker Change: Attributable to the ongoing acuity shift of Redetermination.
Speaker Change: We continue to have risk corridor protection in many geographies and expect that this medical cost pressure will be adequately captured by no rate adjustments in the second half of 2024.
Joseph Raskin: We expect our Medicaid results to improve in the second half of the year. Several data points indicate we are well-entracked in this regard. First, the California retrovate item will not repeat. Second, our new store addition results will continue to improve as they did in the second quarter. Third, we received rates in many states for the second half of 2024 that were in line with first half developing cross-trend. Approximately 35% of our Medicaid premium revenue renews in the second half. Combined with several off-cycle adjustments, these account for the expected legacy Medicaid MCR improvement through the remainder of the year.
Speaker Change: We expect our Medicaid results to improve in the second half of the year.
Speaker Change: Several data points indicate we are well on track in this regard.
Speaker Change: First the California retro rate items will not repeat.
Joseph Michael Zubretsky: Second, our new store edition results will continue to improve as they did in the second quarter. Third, we received rates in many states for the second half of 2024 that were in line with first half developing clusters. Approximately 35% of our Medicaid premium revenue renews in the second half, combined with several off-cycle adjustments.
Speaker Change: Second our new store addition results will continue to improve as they did in the second quarter.
Speaker Change: Yeah.
Speaker Change: Third we received rates in many states in the second half of 2024 that were in line with first half developing cost trends.
Speaker Change: Approximately 35% of our Medicaid premium revenue renews in the second half.
Speaker Change: Combined with several off cycle adjustments. These account for the expected legacy Medicaid MCR improvement through the remainder of the year.
Joseph Michael Zubretsky: These account for the expected legacy Medicaid NCR improvement through the remainder of the year, and then with approximately 55% of our Medicaid premium revenue scheduled to renew on January 1st, our rate cycle cadence is well-timed for early 2025. Providing upside to our outlook for the balance of the year would be continued success with rate advocacy initiatives that could provide positive off-cycle rate adjustment. Turning to Medicare, our second-quarter reported MCR was 84.9%, representing better than expected performance across all our Medicare products, primarily due to favorable risk adjustment results, as well as benefit adjustments implemented for 2024.
Joseph Raskin: Then, with approximately 55% of our Medicaid premium revenue scheduled to renew on January 1, our rate cycle cadence is well-timed for early 2025. Providing off-site to our outlet for the balance of the year would be continued success with rate advocacy initiatives that could provide positive off-cycle rate adjustments.
Then with approximately 55% of our Medicaid premium revenue scheduled to renew on January one.
Speaker Change: Our rate cycle cadence is well timed for early 2025.
Providing upside to our outlook for the balance of the year would be continued success with rate advocacy initiatives that could provide positive off cycle rate adjustments.
Joseph Raskin: Turning to Medicare, our second quarter reported MCR with 84.9%. Representing better than expected performance across all our Medicare costs. Alex, primarily due to favorable risk adjustment results, as well as benefit adjustments implemented for 2024. Our newly acquired bright business in California is performing in line with expectations, and we remain confident in ultimately delivering the full one rate accretion of $1 per share. Our strategy of leveraging our existing Medicaid footprint to serve high acuity low income Medicare beneficiaries is working well. In marketplace, the second quarter NCR was 71.6%. This business performed better than our expectations, even as we saw a higher special enrollment period membership gains from redeterminations.
Speaker Change: Turning to Medicare our second quarter reported MCR was 84, 9% representing better than expected performance across all our Medicare products.
Speaker Change: Primarily due to favorable risk adjustment results as well as benefit adjustments implemented for 2024.
Joseph Michael Zubretsky: Our newly acquired Bright Business in California is performing in line with expectations, and we remain confident in ultimately delivering the full one rate accretion of $1 per share. Additionally, our strategy of leveraging our existing Medicaid footprint to serve high-acuity, low-income Medicare beneficiaries is working well.
Speaker Change: Our newly acquired bright business in California is performing in line with expectations and we remain confident and ultimately delivering the full run rate accretion of $1 per share.
Speaker Change: Our strategy of leveraging our existing Medicaid footprint to serve high acuity low income Medicare beneficiaries is working well.
Joseph Michael Zubretsky: In Marketplace, the second quarter MCR was 71.6%. This business performed better than we expected, even as we saw higher special enrollment period membership gains from redetermination. Our mix of renewing members, prior year pricing actions, and improved risk adjustment results position us well to continue to profitably grow this book of business. Turning now to our guidance for the full year. We remain confident in delivering our full-year adjusted earnings per share guidance of at least $23.50, or 13% year-over-year growth.
Speaker Change: In marketplace, the second quarter MCR was 71, 6%.
Speaker Change: This business performed better than our expectations, even as we saw higher special enrollment period membership gains from re determinations.
Joseph Raskin: Our mix of renewing members prior near pricing actions and improved risk adjustment results position us to continue to profitably grow this book of business.
Speaker Change: Our mix of renewing members prior year pricing actions and improved risk adjusted results position us well to continue to profitably grow this book of business.
Joseph Raskin: Turning now to our guidance for the full year, we remain confident in delivering our full year adjusted earnings per share guidance of at least $23.50 or 13% year-over-year growth. Drawing that investment income and known rates will offset the one-time retro premium item and the second quarter pressure experienced in Medicaid. Performance in our poor business remains strong, and we expect second half improvements to be driven by known on and off cycle rate increases and new store MCRs reverting to target. Our guidance also includes our Florida and Virginia contracts extending through year-end. Our full year premium revenue remains unchanged at approximately $38 billion or 17% year-over-year growth.
Speaker Change: Turning now to our guidance for the full year.
We remain confident in delivering our full year adjusted earnings per share guidance of at least $23 50.
Speaker Change: Or 13% year over year growth.
Joseph Michael Zubretsky: Draw Net Investment Income and Known Rates will offset the one-time retro premium item and the second quarter pressure experienced in Medicaid. Performance in our core business remains strong, and we expect second half improvements to be driven by known on and off cycle rate increases and new store MCRs reverting to target. Our guidance also includes our Florida and Virginia contracts extending through year-end. Our full-year premium revenue remains unchanged at approximately $38 billion, or 17% year-over-year growth.
Speaker Change: Strong net investment income and known rates will offset the onetime retro premium items and the second quarter pressure experienced in Medicaid.
Speaker Change: Performance in our core business remains strong and we expect second half improvement could be driven by known on an off cycle rate increases and new store mcr's reverting to target.
Speaker Change: Our guidance also includes our Florida, and Virginia contracts extending through year end.
Speaker Change: Our full year premium revenue remains unchanged at approximately $38 billion or 17% year over year growth.
Joseph Raskin: Our 2024 revenue and earnings per share guidance provided a strong foundation for profitable growth in 2025 and beyond, and the building blocks to get there remain intact.
Joseph Michael Zubretsky: Our 2024 revenue and Earnings Per Share guidance provide a strong foundation for profitable growth in 2025 and beyond, and the building blocks to get there remain intact. Now some comments on our growth. Our business is well positioned to capitalize on unique long-term growth opportunities in all three segments. First, a few comments on our recently announced acquisition of Connecticare from Emblem Health. Connecticut currently serves approximately 140,000 members with $1.4 billion in annual premium revenue.
Speaker Change: Our 2020 for revenue and earnings per share guidance provide a strong foundation for profitable growth in 2025 and beyond and the building blocks to get there remain intact.
Joseph Raskin: Now some comments on our growth initiatives, our business is well positioned to capitalize on unique long-term growth opportunities in all three segments. First, a few comments on our recently announced acquisition of Connecticut from Animal Health. Connecticut currently serves approximately 140,000 members with $1.4 billion in annual premium revenue. This is a well diversified government sponsored healthcare play, which serves primarily marketplace and Medicare membership in Connecticut. Historically, our strategy has been to establish these core product lines only in our preexisting Medicaid footprint to leverage our Medicaid infrastructure. While that option is not available to us in Connecticut, a Medicaid fee-for-service state, we believe this is a great opportunity to execute the time-tested Melina M&A playbook.
Speaker Change: Now some comments on our growth initiatives, our business is well positioned to capitalize on unique long term growth opportunities in all three segments.
Joseph Michael Zubretsky: This is a well-diversified, government-sponsored healthcare company that serves primarily marketplace and Medicare membership in Connecticut. Historically, our strategy has been to establish these core product lines only in our pre-existing Medicaid footprint to leverage our Medicaid infrastructure. While that option is not available to us in Connecticut, a Medicaid fee-for-service date, we believe this is a great opportunity to execute the time-tested Molina M&A playbook, deploy capital efficiently, and improve the asset performance in the proven and reliable Molina way. We expect this acquisition to provide earnings accretion of $1 in earnings per share, which is now added to our embedded earnings.
Speaker Change: First a few comments on our recently announced acquisition of Connecticut from emblem health.
Speaker Change: Connecticut are currently serves approximately 140000 members with one $4 billion in annual premium revenue.
Speaker Change: This is a well diversified government sponsored health care play, which serves primarily marketplace and Medicare membership in Connecticut.
Speaker Change: Historically, our strategy has been to establish these core product lines only in our pre existing Medicaid footprint to leverage our Medicaid infrastructure.
While that option is not available to us in Connecticut, a Medicaid fee for service State. We believe this is a great opportunity to execute the time-tested Molina M&A playbook.
Joseph Raskin: Require a stable revenue stream in our core products, deploy capital efficiently, and improve the assets performance and the proven and reliable Melina way. We expect this acquisition to provide earnings accretion of $1.00 in earnings per share, which is now added to our embedded earnings. Our M&A pipeline remains full of many actionable opportunities. of the United States. In Medicaid, we remain confident in winning new and renewal business contracts.
Speaker Change: Acquire a stable revenue stream and our core products deploy capital efficiently and improve the asset performance and a proven and reliable Molina way.
Speaker Change: We expect this acquisition to provide earnings accretion of $1 earnings per share, which is now added to our embedded earnings.
Joseph Michael Zubretsky: Our M&A pipeline remains full of many actionable opportunities. In Medicaid, we remain confident in winning new and renewal business contracts. Some comments on recent developments. In Florida, we were recently awarded a contract that successfully retains our foothold in the state. We will retain our 52,000 Medicaid members in the Miami-Dade region.
Speaker Change: Our M&A pipeline remains full of many actionable opportunities.
Speaker Change: In Medicaid, we remain confident in winning new and renewal business contracts.
Joseph Raskin: Some comments on recent developments. In Florida, we will recently award it a contract that successfully retains our foothold in the state. We will retain our 52,000 Medicaid members in the Miami-Dade region. In addition, by agreement, we will grow to approximately 90,000 members to preferential auto assignment. We estimate the annual premium revenue of $500 million. In Wisconsin, we successfully defended our LTSS position as the state announced its intent to award Molina a contract to provide services in Region 5, the first of a series of regional reperterminates. Additionally, we were just re-awarded our sole contract position in the IRIS Self-Directed Personal Care Program.
Speaker Change: Some comments on recent developments in.
Speaker Change: In Florida, we were recently awarded a contract that successfully retained our foothold in the state.
Speaker Change: We will retain our 52000 Medicaid members in the Miami Dade region.
Joseph Michael Zubretsky: In addition, by agreement, we will grow to approximately 90,000 members through preferential auto-assignment. We estimate annual premium revenue of $500 million. In Wisconsin, we successfully defended our LTSS position as the state announced its intent to award Molina a contract to provide services in Region 5, the first of a series of regional re-procurements. Additionally, we were just re-awarded our sole contract position in the IRIS Self-Directed Personal Care Program.
Speaker Change: In addition by agreement, we will grow to approximately 90000 members through preferential auto assignment.
Speaker Change: We estimate the annual premium revenue of $500 million.
Speaker Change: Yeah.
Speaker Change: In Wisconsin, we successfully defended our Lts S position as the state announced its intent to award Molina contract to provide services in region five the first in a series of regional re procurement.
Speaker Change: Additionally, we were just awarded our show contract position in the I R. I S self directed personal care program.
Joseph Raskin: In Georgia, while we await the award announcement, we remain confident as to our prospects and believe that we are well positioned to serve that state's Medicaid population. And finally, there is significant market opportunity out for bid over the next three years. This includes the Texas Star Kids RFT, which represents a meaningful opportunity in a state where we have demonstrated recent success.
Joseph Michael Zubretsky: In Georgia, while we await the award announcement, we remain confident as to our prospects and believe that we are well positioned to serve that state's Medicaid population. And finally, there is a significant market opportunity out for bid over the next three years. This includes the Texas Star Kids RFP, which represents a meaningful opportunity in a state where we have demonstrated recent success. In Medicare, we remain sharply focused on further penetration of low-income, high-acuity dual-eligible populations and on our high-acuity MAPD population in California.
Speaker Change: In Georgia, while we await the award announcement, we remain confident as to our prospects and believe that we are well positioned to serve that states Medicaid population.
Speaker Change: And finally, there is significant market opportunity up for bid over the next three years.
Speaker Change: This includes the Texas Star Kids, RFP, which represents a meaningful opportunity in a state where we have demonstrated recent success.
Joseph Raskin: In Medicare, we remain sharply focused on further penetration of low-income, high-acuity dual eligible populations and on our high-acuity MAPD population in California. The new CMS rules on Medicare and Medicaid integration position us well to attract dual eligible members over the coming years. As our footprint combines both products in most of our states, enabling a fully integrated member experience. We are in the process of further developing our suite of integrated dual products, and we will soon be establishing a new dedicated organization to lead this effort. In marketplace, we are positioned to grow organically in under penetrating markets given the stabilized risk profile in margins we've achieved.
Speaker Change: In Medicare we remain sharply focused on further penetration of low income high acuity dual eligible populations and on our high acuity.
Speaker Change: Population in California.
Joseph Michael Zubretsky: The new CMS rules on Medicare and Medicaid integration position us well to attract dual eligible members over the coming year, as our footprint combines both products in most of our states, enabling a fully integrated member experience. We are in the process of further developing our suite of integrated duals products, and we will soon be establishing a new, dedicated organization to lead this effort. In Marketplace, we are positioned to grow organically in underpenetrated markets, given the stabilized risk profile and margins we've achieved.
Speaker Change: The new CMS rules on Medicare and Medicaid integration position us well to attract dual eligible members over the coming years.
As our footprint combines both products and most of our states.
Speaker Change: Enabling a fully integrated member experience.
Speaker Change: We are in the process of further developing our suite of integrated tools products and we will soon be establishing a new dedicated organization to lead this effort.
Speaker Change: And marketplace, we are positioned to grow organically and underpenetrated markets, given the stabilized risk profile and margins we've achieved.
Joseph Raskin: We believe our rate filing for 2025 makes us very competitive in under-penetrated geographies and positions us well to grow. As a reminder, our growth outlook in this business can be simply stated as grow at a rate that allows us to sustain mid-single-digit pretax margins. We are confident in our ability to grow organically when new state contracts and execute our M&A strategy.
Joseph Michael Zubretsky: We believe our rate filings for 2025 make us very competitive in underpenetrated geographies and position us well to grow. As a reminder, our growth outlook in this business can be simply stated as growing at a rate that allows us to sustain mid-single-digit pre-tax margins. We are confident in our ability to grow organically, win new state contracts, and execute our M&A strategy.
Speaker Change: We believe our rate filings for 2025 make us very competitive in underpenetrated geographies and <unk>.
Speaker Change: Position us well to grow.
Speaker Change: As a reminder, our growth outlook in this business can be simply stated as grow at a rate that allows us to sustain mid single digit pre tax margins.
Speaker Change: We are confident in our ability to grow organically when new state contracts and execute our M&A strategy.
Joseph Raskin: These remain consistent pillars of our growth strategy, and we expect to meet our target of $46 billion of premium revenue in 2026. With our 2024 earnings per share guidance of at least $23.50 reaffirmed and with our embedded earnings outlook of $5. We remain committed to delivering on our long-term earnings per share growth targets. As Mark will describe shortly, the building blocks to get there are in-Hatt.
Joseph Michael Zubretsky: These remain consistent pillars of our growth strategy, and we expect to meet our target of $46 billion of premium revenue in 2026. With our 2024 earnings per share guidance of at least $23.50 reaffirmed, and with our embedded earnings outlook of $5, we remain committed to delivering on our long-term earnings-per-share growth target. As Mark will describe shortly, the building blocks to get there are in...
Speaker Change: These remain consistent pillars of our growth strategy and we expect to beat our target of $46 billion of premium revenue in 2026.
Speaker Change: With our 2024 earnings per share guidance of at least $23.50 reaffirmed and with our embedded earnings outlook of $5.
Speaker Change: We remain committed to delivering on our long term earnings per share growth targets.
Speaker Change: As Mark will describe shortly the building blocks to get there are intact.
Joseph Raskin: In summary, we are pleased with our second quarter 2024 financial performance. The Medicare and marketplace businesses significantly outperformed, while Medicaid is on track to improve the second half of the year through known rate increases in continuing new store MCR improvements. In the meantime, we continue to focus on executing on the fundamentals, which has been the hallmark of our financial performance. The unprecedented re-determination process, which will be a 24-month journey from beginning to end, has presented some challenges that we have successfully navigated. But nothing has occurred during this period that changes our view that these are attracted businesses for the near and long term, and profitable growth can and will be sustained.
Joseph Michael Zubretsky: In summary, we are pleased with our second quarter 2024 financial performance. The Medicare and Marketplace Businesses significantly outperformed. While Medicaid is on track to improve in the second half of the year through known rate increases and continuing new store MCR improvements, in the meantime, we continue to focus on executing on the fundamentals, which has been the hallmark of our financial performance. The unprecedented Redetermination Process, which will be a 24 month journey from beginning to end, has presented some challenges that we have successfully navigated. But nothing has occurred during this period that has changed our view that these are attractive businesses for the near and long term, and profitable growth can and will be sustained.
Mark: In summary, we are pleased with our second quarter 2024 financial performance.
Mark: Medicare and marketplace businesses significantly outperformed while Medicaid is on track to improve in the second half of the year through known rate increases and continuing new store MCR improvements.
Mark: In the meantime, we continue to focus on executing on the fundamentals, which has been the hallmark of our financial performance.
Mark: The unprecedented redetermination process, which will be a 24 month journey from beginning to end has presented some challenges that we have successfully navigated.
Mark: But nothing has occurred during this period that changes our view that these are attractive businesses for the near and long term.
Mark: Profitable growth can and will be sustained.
Joseph Raskin: In fact, our results demonstrate that the principle of rate sound works in that Molina's unique rate corridor position protects against transient court-to-quarter fluctuations of rates and medical costs.
Joseph Michael Zubretsky: In fact, our results demonstrate that the principle of rate soundness works and that Molina's unique rate corridor position protects against transient quarterly-to-quarter fluctuations in rates and medical costs. Finally, we look forward to updating you on our outlook for sustaining profitable growth at an Investor Day event on Friday, November 8, in New York City. As in previous years, we will provide you with our detailed playbook for achieving our growth targets and maintaining industry-leading margins.
Mark: In fact, our results demonstrate that the principle of rate found this works and that Molina has unique rate corridor position protects against transient quarter to quarter fluctuations of rates and medical costs.
Joseph Raskin: Finally, we look forward to updating you on our output for sustaining profitable growth at an investor-day event on flighting November 8 in New York City. As in past years, we will provide you with our detailed playbook for achieving our growth targets and maintaining industry-leading margins. We will outline our long-term goals and how we will achieve them with the transparency and specificity that you have come to expect from us.
Mark: Finally, we look forward to updating you on our outlook for sustaining profitable growth at an Investor day event on Friday November eight in New York City.
Mark: As in past years, we will provide you with our detailed playbook for achieving our growth targets and maintaining industry leading margins.
Joseph Michael Zubretsky: We will outline our long-term goals and how we will achieve them with the transparency and specificity that you have come to expect. With that, I will turn the call over to Mark for some additional color on the finances. Thanks, Joe. And good morning, everyone.
Mark: We will outline our long term goals and how we will achieve that with the transparency and specificity that you have come to expect from us.
Mark Keim: With that, I will turn the call over to Mark for some additional color on the financials.
Mark: With that I will turn the call over to Mark for some additional color on the financials.
Mark Lowell Keim: Thanks, Joe, and good morning, everyone. Today, I'll discuss some additional details on our second quarter performance.
Mark: Thanks, Joe and good morning, everyone.
Mark Lowell Keim: Today, I'll discuss some additional details on our second quarter performance, the balance sheet, our 2024 guidance, and the building blocks of our 2025 EPS Outlook. Beginning with our second quarter results. For the quarter, we reported approximately $10 billion in total revenue and $9.4 billion of premium revenue, with adjusted EPS of 586.
Mark: Today I'll discuss some additional details on our second quarter performance the balance sheet, our 2020 for guidance and the building blocks of our 2025 EPS outlook.
Mark Keim: The balance sheet are 2024 guidance and the building blocks of our 2025 EPS outlook. Beginning with our second quarter results. For the quarter, we reported approximately 10 billion in total revenue and 9.4 billion of premium revenue with adjusted EPS of 586. Our second quarter consolidated MCR of 88.6 is slightly above our expectations. But still, on track to support a four-year guidance. In Medicaid, our reported MCR with 90.8. As Joe mentioned, this result includes a 70 basis point increase from a one-time retroactive premium adjustment in California related to the prior year. It is highly unusual for a state to retroactively reduce rates.
Mark: Beginning with our second quarter results.
Mark: For the quarter, we reported approximately $10 billion in total revenue and $9 4 billion of premium revenue with adjusted EPS of $5 86.
Mark Lowell Keim: Our second quarter consolidated MCR of 88.6 was slightly above our expectations, but still on track to support a four-year guidance, and Medicaid, a reported MCR of 90.8. As Joe mentioned, this result includes a 70 basis point increase from a one-time retroactive premium adjustment in California related to the prior year. It is highly unusual for a state to retroactively reduce rates, and all of our known and expected future rate actions are positive as states address recent trends.
Mark: Our second quarter consolidated MCR of $88 six was slightly above our expectations, but still on track to support our full year guidance.
Mark Lowell Keim: Adjusting for this one-time prior year item, our reported MCR of 90.8 falls to 90.1. Within that result... New store additions continue to run at a higher MCR, but lower than the first quarter and in line with our expectations. Recall, new store additions comprise almost 20% of our Medicaid segment this year. Adjusting for New Store Impact.
Mark: And Medicaid are reported MCR was <unk> 98.
Mark: As Joe mentioned. This result includes a 70 basis point increase from a one time retroactive premium adjustment in California related to the prior year.
It is highly unusual for a state to retroactively at reduced rates.
Mark Keim: And all of our known and expected future rate actions are positive as states address recent trends. Adjusting for this one-time prior year item, our reported MCR of 90.8 falls to 90.1. Within that result, new store additions continue to run at a higher MCR, but lower than the first quarter and in line with our expectations. We call new store additions comprised almost 20% of our Medicaid segments this year. Adjusting for new store impact. , our reported MCR falls another 80 basis points. We expect the MCR of this component to continue to decline over the coming quarters as these plans progress towards portfolio target margins.
Joe: And all of our known and expected future rate actions are positive as states address recent trends.
Joe: Adjusting for this one time prior year item.
Speaker Change: Our reported MCR up 98 false to 91.
Speaker Change: Within that result, new store additions continued to run at a higher MCR, but lower than the first quarter and in line with our expectations.
Speaker Change: Record new store additions comprised almost 20% of our Medicaid segment this year.
Adjusting for new store impact.
Mark Lowell Keim: Our reported MCR fell another 80 basis points. We expect the MCR of this component to continue to decline over the coming quarters as these plans progress towards portfolio target margins, excluding the one-time prior year item and the new store edition. Our legacy Medicaid MCR was 89.3, approximately 30 basis points above the top end of our long-term target range. We continue to experience the impact of redetermination-related acuity shifts, although a little more pronounced in the second quarter.
Speaker Change: Our reported MTR falls, another 80 basis points.
Speaker Change: We expect the MTR and this component to continue to decline over the coming quarters as these plans progress towards portfolio target margins.
Mark Lowell Keim: Excluding the one-time prior year item and the new store additions, our legacy Medicaid MCR was 89.3. Approximately 30 basis points above the top end of our long-term target range. We continue to experience the impact of redetermination-related acuity shifts, a little more pronounced in the second quarter. Of course, Molina's strong performance in medical cost management means that in many states, in recent years, we have typically been paying into minimum LORs and corridors, and expense averaging 200 basis points within our reported MCR. As medical cost trend has modestly outpaced rates in the first and second quarters of the year, corridor expenses declined, largely shielding us from the temporary difference between rates and observed trend.
Speaker Change: Excluding the one time prior year item and the new store additions are legacy Medicaid MCR was $89 three.
Speaker Change: Approximately 30 basis points above the top end of our long term target range.
Speaker Change: We continued to experience the impact of Redetermination related acuity shifts are.
Speaker Change: A little more pronounced in the second quarter.
Mark Lowell Keim: Of course, Molina's strong performance in medical cost management means that in many states in recent years, we have typically been paying into minimum MORs and corridors, and expenses averaging 200 basis points within our reported MCR, as medical cost trends modestly outpaced rates in the first and second quarters of the year. However, corridor expenses declined, largely shielding us from the temporary difference between rates and observed trends. We expect these corridor positions to be restored in coming quarters with our continuing medical cost discipline and the known and expected rate cycle. Looking ahead to the remainder of the year, as Joe mentioned, we expect a number of items to drive the second half Medicaid MCR lower. For the first half of 2024, the reported Medicaid MCR was 90.2.
Speaker Change: Of course, well be in a strong performance in medical cost management means that in many states in recent years, we have typically been paying in the minimum MLR and corridor.
Speaker Change: And expense, averaging 200 basis points within our reported MCR.
Speaker Change: As medical cost trend has modestly outpaced rates in the first and second quarters of the year.
Speaker Change: [noise] corridor expenses declined largely shielding us from the temporary difference between rates and observed trend.
Mark Keim: We expect these corridor positions to be restored in coming quarters with our continuing medical cost discipline and the known and expected rate cycles. Looking ahead to the remainder of the year, as Joe mentioned, we expect a number of items to drive the second half Medicaid MCR lower. For the first half of 2024, our reported Medicaid MCR was 90.2. Our guidance includes the second half Medicaid MCR of 88.4, a 180 basis point improvement driven by a few items. First, we reduce the second half expected MCR for the impact of this quarter's retro rate item, a benefit of 30 basis points to the second half Medicaid MCR compared to the first half.
Speaker Change: We expect these corridor positions to be restored in coming quarters, with a continuing medical cost discipline, and the known and expected rate cycles.
Speaker Change: Yeah.
Speaker Change: Looking ahead to the remainder of the year as Joe mentioned, we expect the number of items to drive the second half Medicaid MCR lower.
Joe: For the first half of 2024, our reported Medicaid MCR was 92.
Mark Lowell Keim: Our guidance includes the second half Medicaid MCR of 88.4. A 180 Basis Point Improvement Driven by a Few Items.
Joe: Our guidance includes a second half Medicaid MCR of 88 four.
Joe: A 180 basis point improvement driven.
Joe: Driven by a few items.
Mark Lowell Keim: First, we reduced the second half expected MCR for the impact of this quarter's retro rate items, a benefit of 30 basis points to the second half Medicaid MCR compared to the first half. Second, new store additions, initially running higher than the legacy book, benefit from the execution of the Molina playbook quarter over quarter, and we expect 80 basis points of improvement in the second half Medicaid MCR compared to the first half. The rate cycle of our state mix is well-timed to return rates in line with the trend for the remainder of 2024 and into 2025. States are required to fund Medicaid managed care organizations with actuarially sound rates.
Joe: First we reduced the second half expected MCR for the impact of this quarter's retro rate item.
Joe: A benefit of 30 basis points to the second half Medicaid MCR compared to the first half.
Mark Keim: Second, new store additions, initially running higher than the legacy book, will continue to improve as they did in the second quarter, as they approach portfolio target margins. New stores, a combination of new RFP wins and acquisitions, benefit from the execution of the Molina Playbook quarter over quarter, and we expect 80 basis points of improvement to the second half Medicaid MCR compared to the first half. Third, the rate cycle of our state mix is well time to return rates in line with the trend for the remainder of 2024 and into 2025. DATES are required to fund Medicaid MCOs with actually rarely sound rates.
Joe: Second new store additions initially running at higher than the legacy book will continue to improve as they did in the second quarter.
Joe: They approached portfolio target margins.
Joe: New stores, a combination of new RFP wins and acquisitions.
Joe: From the execution of the Molina playbook quarter over quarter, and we expect 80 basis points of improvement to the second half Medicaid MCR compared to the first half.
Joe: Third.
Joe: The rate cycle of our state mix is well time to return rates in line with the trend for the remainder of 'twenty four and into 2025.
Joe: Data required to fund Medicaid M C o's with Actuarially sound rates.
Mark Lowell Keim: Most states determine those rates based on demonstrated market trends and completed data rather than working hypotheses or speculation. As such, the higher trends most plans are seeing in the first and second quarters provides hard data for the rate-setting process in coming months. We now have full visibility on higher final rates that offset observed trend representing approximately 35% of our revenue renewing in the second half of the year. In addition to the normal rate cycle, our rate advocacy efforts have already yielded positive off-cycle adjustments in four states that benefit the second half of the year. We are encouraged that several other states will follow this approach, although we do not include those in our guidance.
Mark Lowell Keim: Most states determine those rates based on demonstrated market trends and completed data rather than working hypotheses or speculation. As such, the higher trends most plans are seeing in the first and second quarters provide hard data for the rate-setting process in the coming months. We now have full visibility on higher final rates that offset the observed trend representing approximately 35% of our revenue renewing in the second half of the year. In addition to the normal rate cycle, our rate advocacy efforts have already yielded positive off-cycle adjustments in four states that benefit the second half of the year. We are encouraged that several other states will follow this approach, although we do not include those in our guidance.
Joe: Most states determined those rates based on demonstrated market trends and completed data.
Speaker Change: Rather than working hypotheses are speculation.
Speaker Change: As such the <unk>.
Joe: Higher trends most players are seeing in the first and second quarters provides hard data for the rate setting process in coming months.
Speaker Change: We now have full visibility on higher final rates that offset observed trend representing approximately 35% of our revenue renewing in the second half of the year.
Joe: Yeah.
Joe: In addition to the normal rate cycle, our rate advocacy efforts have already yielded positive off cycle adjustments in four states that benefit the second half of the year.
Joe: We are encouraged that several other states will follow this approach, although we do not include those in our guidance.
Mark Keim: Together, these known rate adjustments drive an expected benefit of 70 basis points to the second half Medicaid MCR when compared to the first half. Combining the first half reported MCR in our expectations for 180 basis point improvement in the second half as detailed results in four year Medicaid guidance of 89.3. Up from our previous guidance of 89, this small increase in four year Medicaid MCR guidance is almost entirely explained by this quarter's retro rate item.
Mark Lowell Keim: Together, these known rate adjustments drive an expected benefit of 70 basis points to the second half Medicaid MCR when compared to the first half. Combining the first half reported MCR and our expectations for a 180 basis point improvement in the second half, as detailed, results in four-year Medicaid guidance of 89.3, up from our previous guidance of 89. This small increase in full year Medicaid MCR guidance is almost entirely explained by this quarter's retro rate item. Also in Medicaid, a few comments on membership. While two of our states are continuing with redetermination in the third quarter, we are largely through the process.
Joe: Together these known rate adjustments driving expected benefit of 70 basis points to the second half Medicaid MCR when compared to the first half.
Joe: Combining the first half reported MCR and our expectations for 180 basis point improvement in the second half as detailed.
Joe: Resulting full year Medicaid guidance of $89 three.
Joe: Up from our previous guidance of 89.
Joe: This small increase in full year Medicaid MCR guidance is almost entirely explained by this quarter's retro rate item.
Mark Keim: Also in Medicaid, a few comments on membership. While two of our states are continuing with re-determination in the third quarter, we are largely through the process. In the second quarter, we estimate a net loss of 100,000 Medicaid members through re-determination, taking the cumulative total to 650,000. Due to the timing of reconnects that will continue into the third and fourth quarters, our outlook for the ultimate total net loss of approximately 600,000 or 40% of the members' gain is unchanged. Our full year membership guidance remains at 5.1 million members. Convergence to marketplace remains strong as Medicaid members losing eligibility moved to Molina Marketplace products.
Joe: Also in Medicaid.
Speaker Change: You comment on membership.
Speaker Change: While two of our states are continuing with Redetermination in the third quarter, we are largely through the process.
Mark Lowell Keim: In the second quarter, we estimate a net loss of 100,000 Medicaid members through redetermination, taking the cumulative total to 650,000. Due to the timing of ReConnects, that will continue into the third and fourth quarters. Our outlook for the ultimate total net loss of approximately $600,000, or 40% of the members gained, is unchanged. Our full year membership guidance remains at 5.1 million members.
In the second quarter, we estimate a net loss of 100000 Medicaid members through Redetermination, taking the cumulative total to 650000.
Joe: Due to the timing of reconnects that will continue into the third and fourth quarters.
Joe: Our outlook for the ultimate total net loss of approximately 600000 or 40% of the members gained is unchanged.
Joe: Our full year membership guidance remains at $5 1 million members.
Mark Lowell Keim: Conversions to the Marketplace remain strong as Medicaid members losing eligibility move to Molina Marketplace products. In Medicare, our second quarter reported MCR was 84.9. All Medicare products performed better than expected, driven by favorable risk adjustments and the benefit adjustments we implemented for 2024. Utilization in the quarter reflected consistent pressure from LTSS costs and pharmacy utilization. As Joe mentioned, the integration of the Bright business is on track to provide the projected ultimate $1 of earnings accretion.
Joe: Conversions to marketplace remains strong.
Joe: As Medicaid members, losing eligibility moved to Molina marketplace products.
Joe: Yeah.
Mark Keim: In Medicare, our second quarter reported MCR with 84.9. All Medicare products performed better than expected, driven by favorable risk adjustments and the benefit adjustments we implemented for 2024. Utilization in the quarter reflected consistent pressure from LTSS costs and pharmacy utilization. As Joe mentioned, the integration of the break business is on track to provide the projected ultimate $1 of earnings accretion. In marketplace, our second quarter reported MCR with 71.6, better than expected, despite higher Special Enrollment Period membership year-to-date. We remain focused on growing this business while producing mid-single-digit pre-tax margins. Our adjusted G&A ratio for the quarter was 6.9, as expected, and reflects operating discipline and the continued benefit of fixed cost leverage as we grow our business.
Speaker Change: In Medicare our second quarter reported MCR was $84 nine.
Speaker Change: All Medicare products performed better than expected driven by favorable risk adjustment and the benefit adjustments we implemented for 2024.
Speaker Change: Utilization in the quarter reflect a consistent pressure from L TSS costs and pharmacy utilization.
Speaker Change: As Joe mentioned the integration of the brake business is on track to provide the projected ultimate one dollar of earnings accretion.
Mark Lowell Keim: In Marketplace, our second-quarter reported MCR was 71.6, better than expected, despite higher special enrollment period membership year to date. We remain focused on growing this business while producing mid-single-digit pre-tax margins. Our adjusted G&A ratio for the quarter was 6.9, as expected, and reflects operating discipline and the continued benefit of fixed cost leverage as we grow our business. Turning to the balance sheet, our Capital Foundation remains strong.
Joe: In marketplace, our second quarter reported MCR was 71 six <unk>.
Joe: Better than expected despite higher special enrollment period membership year to date.
Speaker Change: We remain focused on growing this business, while producing mid single digit pre tax margins.
Speaker Change: Our adjusted G&A ratio for the quarter was $6 nine as expected and reflects the operating discipline and the continued benefit of fixed cost leverage as we grow our business.
Mark Keim: Turning to the balance sheet, our capital foundation remains strong. In the quarter, we harvested approximately 175 million of subsidiary dividends, and our parent company cash balance was approximately 235 million at the end of the quarter. Debt at the end of the quarter was unchanged and 1.4 times trailing 12-month-even DAW, with our debt-to-cap ratio at about 33%. These ratios reflect our low leverage position and ample cash and capital capacity for additional growth and investment. Days and claims payable at the end of the quarter was 50 and consistent with prior quarters. We remain confident in the strength of our reserves.
Mark Lowell Keim: In the quarter, we harvested approximately $175 million of subsidiary dividends, and our parent company cash balance was approximately $235 million at the end of the quarter. Debt at the end of the quarter was unchanged, and 1.4 times trailing 12-month EBITDA, with our debt-to-cap ratio at about 33%. These ratios reflect our low leverage position and ample cash and capital capacity for additional growth and investment. Days and claims payable at the end of the quarter were 50 and consistent with prior quarters. We remain confident in the strength of our reserves.
Speaker Change: Turning to the balance sheet.
Speaker Change: Our capital Foundation remains strong.
Speaker Change: In the quarter, we harvested approximately $175 million of subsidiary dividends and our parent company cash balance was approximately $235 million at the end of the quarter.
Speaker Change: Yeah.
Speaker Change: Debt at the end of the quarter was unchanged and one four times trailing 12 months EBITDA with our debt to cap ratio at about 33%.
These ratios reflect our low leverage position and ample cash and capital capacity for additional growth and investment.
Speaker Change: Days and claims payable at the end of the quarter was 50 and consistent with prior quarters, we remain confident in the strength of our reserves.
Mark Keim: Our operating cash flow for the first six months of 2024 was lower than prior year due to the timing of corridor payments, CMS receipts, as well as taxes. This year, we made several large corridor settlement payments within its prior periods.
Mark Lowell Keim: Our operating cash flow for the first six months of 2024 was lower than the prior year due to the timing of corridor payments, CMS receipts, as well as taxes. This year we made several large corridor settlement payments related to prior periods. Next, a few comments on our 2024 guidance. As Joe mentioned, we reaffirm our full-year guidance with premium revenue of approximately $38 billion. We continue to expect full-year EPS of at least $2350.
Speaker Change: Our operating cash flow for the first six months of 2024 was lower than prior year due to the timing of corridor payments CMS receipts as well as taxes.
Speaker Change: This year, we made several large corridor settlement payments related to prior periods.
Mark Keim: Next, a few comments on our 2024 guidance. As Joe mentioned, we reaffirmed our full-year guidance with premium revenue of approximately $38 billion. We continue to expect full-year EPS of at least 2,350. Our EPS guidance now includes 65 cents of higher expected investment income as short-term rates are expected to hold up through the year, higher for longer, and 30 cents from the extension of the current Florida and Virginia contracts through 2024 year end. These items are offset by approximately 65 cents from the one-time retro premium adjustment and 30 cents due to Medicaid performance in the second quarter.
Speaker Change: Net a few comments on our 2020 for guidance.
Speaker Change: As Joe mentioned, we reaffirmed our full year guidance with premium revenue of approximately 38 billion.
Joe: We continue to expect full year EPS of at least $23 50.
Mark Lowell Keim: Our EPS guidance now includes 65 cents of higher expected investment income as short-term rates are expected to hold up through the year, higher for longer, and $0.30 from the extension of the current Florida and Virginia contracts through 2024 year end. These items are offset by approximately $0.65 from the one-time retro premium adjustment and $0.30 due to Medicaid performance in the second quarter. Within our guidance, the full year consolidated MCR increases slightly to 88.4 per cent, driven by the second quarter performance in Medicaid.
Joe: Our EPS guidance now includes 65 cents of higher expected investment income as short term rates are expected to hold up through the year higher for longer.
Speaker Change: <unk> 30 from the extension of the current Florida, and Virginia contracts through 2020 for year end.
Speaker Change: These items are offset by approximately 65 cents from the onetime retro premium adjustments.
Speaker Change: And 30.
Speaker Change: Due to Medicaid performance in the second quarter.
Mark Lowell Keim: Within our guidance, the full-year consolidated MCR increases slightly to 88.4, driven by the second quarter performance in Medicaid. As details, the full-year Medicaid MCR is now expected to be approximately 89.3, up 30 basis points, primarily due to the second quarter of one-time item. Our NCR guidance on Medicare remains unchanged at 88, with strong, consistent year-to-date performance in our dual membership and the bright acquisition. In marketplace, we continue to expect the full-year MCR to be 78% and at the low end of its long-term target range, while producing mid-single-digit pre-tax margins. Conversion to the marketplace due to Medicaid redeterminations are expected to continue into the second half of the year.
Speaker Change: Within our guidance the full year consolidated MCR increases slightly to $88 four driven by the second quarter performance in Medicaid.
Mark Lowell Keim: As detailed, the full year of Medicaid MCR is now expected to be approximately 89.3, up 30 basis points, primarily due to the second quarter one-time items. Our MCR guidance on Medicare remains unchanged at 88, with strong, consistent year-to-date performance in our DUALS membership and the Bright Acquisition.
Speaker Change: As detailed the full year Medicaid MCR is now expected to be approximately 89 three.
Speaker Change: Up 30 basis points, primarily due to the second quarter, one time items.
Speaker Change: Our MTR guidance on Medicare remains unchanged at 88 with strong consistent year to date performance and our duals membership and the bright acquisition.
Mark Lowell Keim: In the Marketplace, we continue to expect the full-year MCR to be 78% and at the low end of its long-term target range while producing mid-single-digit pre-tax margins. Conversion to the marketplace due to Medicaid redetermination is expected to continue into the second half of the year. While SEP growth typically comes with a higher MCR, we considered this in our 2024 guidance and the pricing of our 2025 bid. Now, turning to Embedded Earnings and the building blocks of our 2025 EPS Outlook. Our guidance on new store-embedded earnings is now $5 per share, an increase from our prior outlook of $4. This increase reflects a dollar from the Connecticut acquisition.
Speaker Change: In marketplace, we continue to expect the full year MCR to be 78% and at the low end of its long term target range, while producing mid single digit pre tax margins.
Conversions to marketplace due to Medicaid redetermination.
Speaker Change: I expect it to continue into the second half of the year, while SCP growth typically comes with a higher MCR. We considered this in our 2020 for guidance and the pricing of our 2025 bps.
Mark Keim: While SEP growth typically comes with a higher MCR, we consider this in our 2024 guidance and the pricing of our 2025 business.
Mark Lowell Keim: Turning to embedded earnings and the building blocks of our 2025 EPS outlook. Our guidance on new store embedded earnings is now $5 per share, an increase from our prior outlook of $4. This increase reflects a dollar from the Connecticut acquisition. We expect a little more than half of the new store embedded earnings to emerge in 2025, with the remainder in 2026. Finally, we see a clear path to achieve our EPS growth target heading into 2025. The building blocks include the embedded earnings we expect in 2025. The Continuing Organic Growth and Margin in our current footprint, and our Inflight Organic and Inorganic Strategic Initiatives.
Speaker Change: Turning to embedded earnings and the building blocks of our 2025 EPS outlook.
Speaker Change: Our guidance on new store embedded earnings is now $5 per share and an increase from our prior outlook of $4.
Speaker Change: This increase reflects a dollar from the Connecticut acquisition.
Mark Lowell Keim: We expect a little more than half of the new store embedded earnings to emerge in 2025, with the remainder in 2026. Finally, we see a clear path to achieve our EPS growth target heading into 2025. The building blocks include the embedded earnings we expect in 2025, the continuing organic growth and margin in our current footprint, and our Inflate Organic and Inorganic Strategic Initiatives. With 55% of our revenue renewing on January 1st of next year, our rate cycle is well-timed for 2025. Even allowing for some headwinds from likely declining interest rates next year, the path is clear and compelling.
We expect a little more than half of the new store embedded earnings to emerge in 2025 with the remainder in 2026.
Speaker Change: Finally, we see a clear path to achieve our EPS growth target heading into 2025.
Speaker Change: The building blocks include the embedded earnings we expect in 2025 and the.
Speaker Change: The continuing organic growth and margin in our current footprint.
Speaker Change: And our in flight organic and inorganic strategic initiatives.
Mark Keim: With 55% of our revenue renewing on January 1st of next year, our rate cycle is well timed for 2025. Even allowing for some headwinds from likely declining interest rates next year, the path is clear and compelling.
Speaker Change: With 55% of our revenue renewing on January 1st of next year, our recycle is well time for 2025.
Speaker Change: Even allowing for some headwinds from a likely declining interest rates next year, the path is clear and compelling.
Unknown Executive: This concludes our prepared remarks. Operator, we are now ready to take questions.
Operator: This concludes our prepared remarks. Operator, we are now ready to take questions. Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the button.
Speaker Change: This concludes our prepared remarks.
Operator: If at any time your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble, and the first question comes from A.J. Rice with UBS.
Speaker Change: Operator, we are now ready to take questions.
Unknown Executive: Yes, thank you.
Speaker Change: Yes, yes. Thank you we will now begin the question answer session.
Unknown Executive: We will now begin the question and answer session. Do I ask a question you may impress a star than one on your telephone keypad. If you're using any speaker phone, please pick up your hands up before pressing the keys. If any time your question has been addressed and would like to withdraw out, please press star, then two.
Speaker Change: Ask a question you May press Star then one on your telephone keypad.
Speaker Change: And your speaker phone please pick up your handset before pressing the keys.
Speaker Change: My question has been addressed and would like to withdraw it. Please press Star then two.
Unknown Executive: At this time, we will pause momentarily to assemble the roster.
Speaker Change: At this time, we will pause momentarily to assemble the roster.
Speaker Change: Okay.
Andrew Mok: And the first question comes from AJ Rice with UBS. Hi, everybody. Thanks for the question. Just maybe, if a point of clarification, you're calling out risk adjustment true up that's helped you both in public exchanges and in Medicare Advantage.
Speaker Change: And the first question comes from a J rice with UBS.
Speaker Change: Okay.
Albert J. William Rice: Hi, everybody. Thanks for the question. Just maybe, as a point of clarification, you're calling out risk adjustment true-up that's helped you both in public exchanges and in Medicare Advantage. Is there any way to size that and talk about how much of a positive variance it was relative to guidance?
Albert J. William Rice: Hi, everybody. Thanks for the question.
Speaker Change: Just maybe.
Speaker Change: If a point of clarification are you calling out risk adjustment true up.
Speaker Change: That's helped you both in public exchanges and Medicare advantage anyway.
Andrew Mok: Anyway, to size that and talk about how much of a positive variance it was relative to guidance.
Mark Lowell Keim: And then my other follow-up would be on the Medicaid side; some of your peers, not all of them, but some are calling out that the legacy population they're left with seems to be having a little bit higher utilization than they had previously seen. It's not just a deterioration in the risk pool related to redeterminations. Have you seen any of that, or is this what you're seeing in Medicaid 100% related to just what's happening as a result of redeterminations? Hey, good morning, AJ. I'll take the first one, and Joe will pick up the second one.
Speaker Change: Besides that and talk about how much of a positive variance.
Speaker Change: Was relative to the guidance and then my other follow up would be on the Medicaid side.
Andrew Mok: And then my other follow-up would be on the Medicaid side. Some of your peers are not all of them, but some are calling out that the legacy population they're left with seems to be having a little bit higher utilization than they had previously seen. It's not just deterioration on the risk pool related to re-determination. Have you seen any of that? Or is this what you're seeing in Medicaid 100% related to just what's happening as a result of re-determination? Great.
Speaker Change: Some of the some of your peers are not all of them, but some are calling out the legacy popular.
Speaker Change: Population their livelihoods seems to be having a little bit higher utilization than they had previously seen.
Speaker Change: Not just a deterioration on the risk pool related to Redetermination. So have you seen any of that or is this what youre seeing in Medicaid 100% related to just what's happening as a result of redetermination.
A J: Great Hey, good morning, a J I'll take the first one and Joe will pick up the second one on risk adjustment, let's touch on the marketplace and Medicare.
Mark Lowell Keim: Hey, good morning, AJ. I'll take the first one, and Joe will pick up the second one. On risk adjustment, let's touch on Marketplace and Medicare. On marketplace, some of you have seen from the CMS files. We recognize about 20 million of additional risk adjustment benefit from the prior year between first and second quarter. Remember, we have insights on the development of that through the Wacley service and other things, but across the first half, about 20 million from the prior year. So, first half revenues, about 1.2 billion, you do the math a little bit less than 20 basis points in our first half, first and second quarter MLRs for marketplace.
Mark Lowell Keim: On risk adjustment, let's touch on Marketplace and Medicare. On Marketplace, some of you have seen from the CMS files, we've recognized about 20 million additional risk adjustment benefits from the prior year between first and second quarter. Remember, we have insights on the development of that through the weekly service and other things, but across the first half, about 20 million from the prior year. So, first half revenues were about $1.2 billion.
Speaker Change: On marketplace. Some of you have seen from the CMS files, we recognized about $20 million of additional risk adjustment benefit from the prior year between first and second quarter remember we have insights on the development of that through the Wakely service and other things, but across the first half about 'twenty.
From the prior year, so first half revenues about.
A J: About $1 2 billion you do the math, a little bit less than 20 basis points in our first half first and second quarter MLR for marketplace.
Mark Lowell Keim: You do the math, a little bit less than 20 basis points in our first half, first, and second quarter MORs for Marketplace. Just for reference, it was about the same a year ago. So the year over year comparisons are about the same, about 20 basis points of benefit. A.J. I'm here, A.J.
Mark Keim: Just for reference, it was about the same a year ago, so the year over a year as compares about the same, about 20 basis points of benefit.
A J: Just for reference it was about the same a year ago. So the year over year as compares about the same about 20 basis points of a benefit.
Andrew Mok: AJ, I'm going to give you a second question.
Joseph Michael Zubretsky: I'll second that. And your second question related to, I'm sorry, please go ahead. Unknown Speaker Just on the, Say it again, AJ.
Speaker Change: A J.
A J: Okay.
Speaker Change: And your second question related to.
Andrew Mok: I'm sorry, please go ahead. Just on the map. Say it again, AJ.
Speaker Change: I'm sorry. Please go ahead.
Speaker Change: Just on the back.
Speaker Change: Say it again.
Joseph Raskin: Let me take the second question related to medical cost trends in the business. Business, in Medicaid, as always, you see pockets of utilization increases and various geographies and various healthcare categories. You know, we see some pockets of skilled nursing facility cost increases, hours, and home-based care. The age is spiking in a couple of geographies, but nothing we've never seen before. Pharmacy trend to high-cost drugs and the GLP ones, certainly putting some cost pressure on the system. But again, nothing out of the ordinary, and nothing that can't be dealt with, particularly as our corridor position absorbs these trends, and then rates kick in to pick up the slide.
Speaker Change: Let me.
Operator: [inaudible] AJ, I think we lost you. But let me take your second question related to medical cost trends in the business. In Medicaid, as always, you see pockets of utilization increases in various geographies and in various healthcare categories. You know, we see some pockets of skilled nursing facility cost increases, hours, and home based care. BH is spiking in a couple of geographies, but nothing we've never seen before.
Speaker Change: Hey, Jay I think we lost you, but let me take the second question related to medical cost trends in the business.
Speaker Change: In Medicaid.
Speaker Change: As always you'll see pockets of utilization increases in various geographies and the various health care categories, we see some pockets of a.
Skilled nursing facility cost increases.
Speaker Change: Hours and Homebase.
Speaker Change: Homebase care DH is spiking in a couple of geographies, but nothing we've never seen before pharmacy trend to high cost drugs in the <unk> ones, certainly putting some cost pressure on the system, but again nothing out of the ordinary.
Joseph Michael Zubretsky: The pharmacy trend to high-cost drugs and the GLP-1s, certainly putting some cost pressure on the system. But again, nothing out of the ordinary and nothing that can't be dealt with, particularly as our corridor position absorbs these trends and then rates kick in to pick up. Okay, thanks a lot. Thank you, and the next question comes from Andrew Malk with Barclays. Hi, good morning.
Speaker Change: Nothing that can't be dealt with particularly as our corridor position absorbs these trends and then rates kick in to pick up the slack.
Unknown Executive: Okay, thanks a lot. Thank you.
Speaker Change: Okay. Thanks, a lot.
Speaker Change: Thank you and the next question comes from Andrew Mok with Barclays.
Andrew Mok: And the next question, consumer Andrew Mok with Barclays. Hi, good morning. Just a question on the underlying Medicaid pressure in the same store portfolio. I don't remember you calling out pressure in Q1, but sounds like that may have developed slightly worse. Is that correct? And can you clarify when core Medicaid pressure started to deteriorate this year? Thanks.
Andrew Malk: Just a question on the underlying Medicaid pressure in the same store portfolio. I don't remember you calling out pressure in Q1, but it sounds like that may have developed slightly worse. Is that correct?
Andrew Mok: Hi, Good morning, just a question on the underlying Medicaid crusher in the same store portfolio I don't remember you calling out pressure in Q1, but it sounds like that may have developed slightly worse is that correct and can you clarify when core Medicaid pressures starting to materialize this year.
Speaker Change: Thanks.
Mark Lowell Keim: And can you clarify when core Medicaid pressure started to materialize this year? Sure, you are right. We saw a little bit more pressure in the legacy book in the second quarter versus the first quarter. And one of the drivers is just simply membership.
Mark Keim: Sure. You are right. We saw a little bit more pressure in the legacy book in the second quarter versus the first quarter. And one of the drivers is just simply membership. You might recall in the first quarter, we noticed that we lost about 50,000 members due to re-determination. We were a little more than that in the second quarter, out about 100,000. Just around that out, we're currently at 650,000 total cumulative. And we expect to get back about 50,000 in the rest of the year through re-connect. So the volume, the membership up a little bit in the second quarter.
Speaker Change: Sure you are right, we saw a little bit more pressure in the legacy book in the second quarter versus the first quarter and one of the drivers it's just simply membership.
Mark Lowell Keim: You might recall that in the first quarter, we noticed that we lost about 50,000 members due to redetermination. We were a little more than that in the second quarter, at about 100,000. Just to round that out, we're currently at 650,000 total cumulative, and we expect to get back about 50,000 in the rest of the year through ReConnect. So the volume, the membership up a little bit in the second quarter, I don't doubt that drove a lot of the higher legacy impact we saw. I got it.
Speaker Change: You might recall in the first quarter, we noticed that we lost about 50000 members due to Redetermination, we were a little more than that in the second quarter at about 100000, just to round that out. We're currently at 650000 total cumulative and we expect to get back about 50000 in the rest of the year through reconnects. So.
Speaker Change: The volume the membership up a little bit second in the second quarter.
Mark Keim: I don't doubt that drove a lot of the higher legacy impact we saw. Got it.
Speaker Change: I don't doubt that drove a lot of the higher legacy impact we saw.
Mark Lowell Keim: But did Q1 also come in worse than you had expected when you actually saw the claims? It was a little bit higher than normal, but not worse than we expected in the first place. Okay, and then secondly, it sounds like you're describing a more modest pressure relative to peers. So I just want to better understand that experience: how much pressure was offset by the risk corridor buffer? And do you see modest pressure across most states or concentrated pressure in a few states? Thanks. The pressure is isolated.
Mark Keim: But to the Q1 also come in worse than kind of what you expected when you actually saw the claims. It was a little bit higher than normal, with not worth than we expected in the first quarter. Okay. And then secondly, it sounds like you're describing a more modest pressure relative to peer. So just want to better understand that experience. How much pressure was offset by the risk corridor buffer? And do you see modest pressure across most states or concentrated pressure in these states? The pressure is isolated. It's various health care and cost categories in various of our individual health plans.
Speaker Change: Got it but the Q1 also come in worse than kind of what you. What you had expected when you actually saw the claims.
Speaker Change: Was a little bit higher than normal, but not worse than we expected in the first quarter.
Speaker Change: And then secondly, it sounds like you're describing a more modest pressure relative to peers. So just wanted to better understand that experience how much pressure was offset by the risk corridor buffer and do you see modest pressure across most states or concentrated pressure in a few states.
Joseph Michael Zubretsky: It's various healthcare cost categories in various of our individual healthcare, and Mark covered this in his prepared remarks, sometimes it's overlooked. We've been routinely, over the past four years, paying into the risk corridors and minimum MORs to the extent of about 200 basis points inside our MCR, which basically means if you're reporting an 88, you're performing at an 86, which gives you 200 basis points of cushion. Medical costs should reflect for any reason, whether it's an acuity shift or whether it's normal.
Speaker Change: The pressure is isolated its various health care cost categories in various of our of our individual health plans and Mark covered this in his prepared remarks it is sometimes overlooked.
Joseph Raskin: And in what color this is prepared remarks, it is sometimes overlooked. We've been routinely over the past four years, paying in to the risk corridors and minimum hours to the extent of about 200 basis points inside our MCR, which basically means if you're reporting an 88, you're performing at an 86, which gives you 200 basis points of question. If a medical cost should reflect for any reason, whether it's in a QD shift or whether it's a normal trend. So we see pockets of utilization increases as I describe in various categories in various plans. But largely picked up by the corridors and mid cycle rate increases and on cycle rate increases, particularly in the second half of the year, with 35% of our revenue we use.
Mark: We've been routinely over the past four years.
Speaker Change: Into the risk corridor is at minimum MLR is to the extent of about 200 basis points inside our MCR.
Speaker Change: Which basically means if you are reporting an 88, you're performing at an 86, which gives you 200 basis points of cushion if a.
Speaker Change: Medical costs Shouldnt flex for any reason, whether it's an acuity shift or whether its normal trend.
Joseph Michael Zubretsky: So we see pockets of utilization increases, as I described in various categories, but largely picked up by the corridors and mid-cycle rate increases and on-cycle rate increases, particularly in the second half of the year, when 35% of our revenue is used. Great, thanks for the call, everybody. Thank you. And that's Councilman Ryan Langston with the City Council. Hey, good morning.
Speaker Change: So we see pockets of utilization increases as I described in various categories in various plans, but largely picked up by the corridors and <unk>.
Speaker Change: Mid cycle rate increases and on cycle rate increases, particularly in the second half of the year with 35% of our revenue renews in the second half.
Speaker Change: Great. Thanks for the color.
Speaker Change: Thank you and last question comes from Ryan Levenson with the C D Cowen.
Ryan Langston: I'm following up on Medicaid. We've heard some commentary just from some peers that there's this pull-through effect when folks are, you know, receiving their enrollment loss information, and then they might be utilizing more services before they. I guess, are you seeing that same kind of experience?
Ryan Levenson: Hey, good morning.
Ryan Levenson: Just following up on Medicaid, we heard some commentary from some peers that.
Ryan Levenson: This pull through effect when folks are receiving their enrollment loss information and then they might be utilizing more services before they actually use. It I guess are you seeing that same kind of experience and then maybe further do you have any sense of what the utilization profile actually it looks like for folks who actually are able to re enroll once being re determined.
Joseph Michael Zubretsky: And then maybe further, do you have any sense of what the utilization profile actually looks like for folks who are actually able to re-enroll once being re-determined off? Is that any different than sort of the normal population? Thanks. We've heard the discussion about over-utilizing in advance of losing coverage, but we have not experienced that.
Speaker Change: Is that any different than sort of the normal population. Thanks.
Speaker Change: We've heard the discussion about over utilizing an advance of losing coverage we have not experienced that.
Joseph Michael Zubretsky: Our leavers are leaving at the same MCR from the beginning of the redetermination process to the end. No change, and no indication that they're using services in advance because of the termination process. Many of them don't know that they've been redetermined, so they don't have any advance notice.
Speaker Change: Our leavers are leaving are at the at the same MCR.
Speaker Change: From the beginning of the Redetermination process to the end no change and no indication that they are using services against particularly.
Speaker Change: Because in the termination process.
Speaker Change: Many of them don't know that they are they've been re determined so they don't have any advance notice theyre just off the Medicaid roles, they weren't using services and now the rock through the through the Redetermination process. So we haven't seen that.
Joseph Michael Zubretsky: They're just off the Medicaid rolls. They weren't using services, and now they're off, through the redetermination process. So we haven't seen them. Ryan, I just build on that.
Mark Lowell Keim: What we've been citing and what many others are seeing is that of the folks that get redetermined, they lose their eligibility; 70% are for procedural reasons. That means they just didn't fill out the paperwork or weren't aware. So that certainly argues against any kind of last minute usage when, in fact, they weren't aware they were losing coverage. I think you also asked about reconnecting when they come back in. Yes, very often, for the first month, we'll see a little bit of higher utilization. But think about it. Somebody has lost their eligibility. They might not know they lost it until two or three months later when they go to the drugstore to fill out a script.
Ryan Levenson: Ryan I'd just build on that what we've been citing in what many others are seeing is that of the folks that get re determined they lose their eligibility 70% are for procedural reasons that means they just didn't fill out the paperwork or weren't aware. So that's certainly argues against any kind of last minute usage when in fact, they werent aware they were losing.
Speaker Change: <unk> I think you also asked about the reconnect when they come back in yes, very often for the first month, we will see a little bit of higher utilization and think about it somebody who lost their eligibility they might not know they lost it until two or three months later when they go to the drugstore to fill out a script at that point there.
Mark Lowell Keim: At that point, they're utilizing, and that first month might be a little bit higher, but typically, they're going to quickly resolve to the portfolio average. So we're not seeing any meaningful impact there. Thank you. And the next question comes from Josh Raskin with NetFont Research.
Speaker Change: Utilizing in that first month might be a little bit higher, but typically theyre going to quickly resolve to the portfolio average so we're not seeing any meaningful impact there.
Speaker Change: Thank you.
Speaker Change: Thank you <unk>.
Speaker Change: Question comes from Josh Raskin with Nephron research.
Joshua Richard Raskin: Hi, thanks. Just a clarification on the margin side of the Medicaid book. So could you just tell us what your Medicaid margins were in 1Q versus 2Q and what's embedded in guidance for the second half? And then my bigger question is just, you know, the commercial MLR exchanges were 75% last year. I think you said 78% MLR, and this year, it looks like you're tracking probably favorable to that. So how are you thinking about the potential for rebates next year?
Joshua Richard Raskin: Hi, Thanks, just a clarification on the margin side and some Medicaid book. So could you just tell us what your Medicaid margins were in <unk> versus <unk> and what what's embedded in guidance for the second half and then my bigger question is just you know.
Speaker Change: The commercial MLR last your exchanges, where 75% I think you said, 78% MLR next year it looks like you're tracking probably favorable to that so how are you thinking about the potential for rebates next year and should we be thinking about our strategy.
Joshua Richard Raskin: And should we be thinking about a strategy of, you know, reducing prices to get higher membership for 2025? I'll take the last part of that first, Josh, on Marketplace, clearly running at 72 for the first half and predicting 78 for the back half seems to be a push, but be mindful of the fact that SEP membership is quite high, and those members are coming in at higher utilization rates than the existing membership. And then, of course, you have the natural seasonality that this has. Now, you're absolutely right.
Speaker Change: Reducing price to get higher membership for 2025.
Speaker Change: I'll take the <unk>.
Speaker Change: Last part of it first Josh in the marketplace.
Speaker Change: Yeah, clearly running at 72 for the first half and predicting 78 for the back half seems to be a push but be mindful of the fact that S. EEP membership is quite high and those members are coming in at higher utilization rates than the existing membership and then of course, you have the natural seasonality of the business now.
Speaker Change: Now you're absolutely right last year.
Joseph Michael Zubretsky: Last year, we actually invested in margin for growth, and we grew at, you know, one to $1.2 billion in revenue. Where we're running this year, we think we're at par. We think we're right in mid-single-digit land, but you could see us be a little more aggressive on growth next year and try to grow this business as we did in 2024 over 23. So the margin position is solid, and again, our growth rate is going to be determined by our ability to produce mid-single-digit margins, just given the inherent volatility that exists in the business. Great, and I'll go ahead and take the second one.
Speaker Change: We actually invested.
Speaker Change: Margin and growth and we grew at one to $1 $2 billion of revenue this year.
Speaker Change: Where we're running this year, we think we're at par we think we're right in mid single digit land, but we.
Speaker Change: We could you could see us be a little more aggressive on growth next year and try to grow this business as we did in 2020 for over 23. So the margin position is solid and again our growth rate is going to be determined by our ability to produce mid single digit margins just given the inherent volatility that exists in the business itself.
Speaker Change: Yeah.
Speaker Change: Great and I'll go ahead and take the second one Josh per our reported results as you know the MCR.
Mark Lowell Keim: Josh, per our reported results, as you know, the MCR in the first quarter on Medicaid was 89.7. We reported a 90.8. Across the first half of the year, that's an average of 90.2. We're tracking to an 89.3 for the full year, and I gave you the walk in my prepared remarks about how the second half supports that. We have great confidence in those three building blocks that support that. Now, the 89.3 for the full year guidance is up from 89 the last time we were together, so we've raised the full year guidance by 30.
Speaker Change: MCR in the first quarter of Medicaid was it 80 97, we reported a 98.
Speaker Change: Across the first half of the year, that's an average of 192.
Speaker Change: We're tracking to an 89 three for the full year and I gave you the walk in my prepared remarks of how the second half supports that.
Speaker Change: We have great confidence in those three building blocks that support that.
Speaker Change: Now the 89 three for the full year guidance.
Speaker Change: Up from 89, the last time, we were together so we've raised our full year guidance by 30 bps to.
Mark Lowell Keim: Two-thirds of that was just recognizing that one-time California item we had to jump over in the second quarter. So the rest is just a little bit of pressure from the second quarter legacy business. Otherwise, very much on track for an 89.3 full year. Okay, so target market, but this year, not terribly off on target margins, right? Sort of towards the lower end, maybe.
Speaker Change: Two thirds of that was just recognizing that onetime, California item, we had to jump over in the second quarter. So the rest is just a little bit of pressure from the second quarter legacy business, otherwise very much on track for an 89, 3% full year.
Speaker Change: Okay. So a target market, but you know this year not terribly off from target margins right sort of towards the lower end, maybe overtime, okay, perfect correct and I think there's enough strength that we pointed out otherwise in the business to more than overcome that 30 bps increase so I think we're in good shape.
Mark Lowell Keim: Okay, perfect. Correct. And I think there's enough strength that we've pointed out otherwise in the business to more than overcome that 30 BIP increase. So I think we're in good shape. Thank you, and the next question comes from Kevin Fischbeck with Bank of America. Great, thanks.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you and the next question comes from Kevin Fischbeck with Bank of America.
Kevin Mark Fischbeck: I guess we're having a hard time kind of reconciling your view about where you know MOR is in Medicaid versus what a lot of your peers are doing. So, I guess. Your comment seems to be that your risk corridors are allowing you to kind of offset a lot of this pressure. Can you give us a sense of on a gross basis what the MLR pressure is, are you saying you had 200 basis points of risk corridor and now it's only a hundred? And then there's another, you know, 10 or 20 in the core net because Fable's not completely matching everything. Like, just kind of size it for us.
Kevin Mark Fischbeck: Great. Thanks.
Kevin Mark Fischbeck: I guess.
Kevin Mark Fischbeck: We're having a hard time kind of reconciling.
Kevin Mark Fischbeck: Your view about where MLR in the Medicaid versus a lot of your peers are doing.
Speaker Change: So I guess.
Speaker Change: Your your comment seems to be that your risk corridors are allowing you to kind of.
Speaker Change: Offset a lot of this pressure can you give us a sense of on a gross basis than what the MLR pressure or are you, saying you had 200 basis points of risk corridor and now it's only 100.
Speaker Change: And then there's another.
Speaker Change: 10 or 20.
Speaker Change: The core net because of payables not completely matching everything like this.
Speaker Change: Just kind of size up for us because it seems like everybody else seems to be saying somewhere between 150 basis points of MLR pressure.
Joseph Michael Zubretsky: It seems like everybody else is saying somewhere between a hundred and 150 basis points of MLR pressure, and just to hear 10 or 20 in the core is hard to reconcile. And then, I guess you mentioned you expect people to be coming back as the year goes on. But shouldn't that be pressure on MLR in the back half of the year? It didn't seem like you were building anything in for rejoiners putting upward pressure on MLR in your bridge from one half to two half.
Speaker Change: And just to hear 10 or 20 in the core is it's hard to reconcile them and then I guess you mentioned you expect people to be coming back as the year goes on.
Speaker Change: Shouldn't that be a pressure on MLR in the back half of the year I didn't.
Speaker Change: And it seemed like you were building anything in for joiners, putting upward pressure on MLR in your bridge from one asset to have.
Mark Lowell Keim: Well, Mark gave you the numbers of the prepared remarks that are actual for the last four years. We have been paying into the corridors to the extent of 200 bases. Contributing to the Medicaid MCR 200-based. We said at the beginning of the redetermination process, and we said this repeatedly, that the corridors were going to act as a financial buffer until such time as rates picked up the slack, which is exactly what's happening. So yes, suffice it to say, this year.
Speaker Change: Well.
Speaker Change: Mark gave you the numbers in the prepared remarks that are active in the last four years we.
Speaker Change: We have been paying in two quarters to the extent of 200 basis points contributing to the Medicaid MCR 200 basis points, we said at the beginning of the Redetermination process. We said repeatedly that the corridor, we're going to act as a financial buffer until such times rate pick up the slack which is.
Speaker Change: What's happening.
Speaker Change: So yes, suffice it to say this year.
Joseph Michael Zubretsky: Our corridor of liability isn't 200 basis points. We've used some of it to cushion the results, but some of it does remain in various geographies in a meaningful way. Now, the other point to make on the corridors is they don't just disappear forever; they replenish at the next rate cycle, whatever the state fiscal year is. And so if you get actually sound rates at the next rate..., and you continue to relatively outperform that benchmark. You're back in the corridors, and you're recreating those 200 basis points. And Kevin, just a couple more thoughts.
Speaker Change: Our quarter of liability is a 200 basis points, we've used some of it to Christian the results, but some of it does remain in various geographies in a meaningful way.
Speaker Change: Now the other point to make on the corridor is they don't just disappear.
Speaker Change: They replenish fnf's recycle whatever the state's fiscal years.
Speaker Change: So if you get Actuarially sound rates at the next rate cycle.
Speaker Change: And you continue to relatively outperform that benchmark you're back into the corridor and you're you're recreating that 200 basis points of cushion.
Mark Lowell Keim: Since our last guidance in the first quarter, we probably see trend across our business for the year up 150 basis points, one and a half percent higher than we thought before. That's capturing what we saw in the second quarter and what we're expecting for the third and fourth. And of course, to your point, that includes the dynamic for the rejoiners and, just as importantly, what we're actually jumping off in the second quarter.
Speaker Change: And Kevin just a couple more thoughts since our last guidance in the first.
Speaker Change: <unk>.
Kevin Mark Fischbeck: We probably see trend across our business for the year up 150 basis points, one 5% higher trend than we thought before that's capturing what we saw in the second quarter and what we're expecting for the third and fourth and of course to your point that includes a dynamic for the rejoin us and just as importantly, what we're actually jumping off in.
Mark Lowell Keim: So we're seeing a higher trend than we previously thought of one and a half percent. Now, as we detailed, we've got known rate adjustments in the second half, both on-cycle and off-cycle, which defray about 1% across the full year of that trend. The other 50 bibs are picked up by Corridor.
Kevin Mark Fischbeck: The second quarter, so we're seeing a higher trend than we previously thought of one 5%.
Kevin Mark Fischbeck: Now as we detailed we've got known rate adjustments in the second half both on cycle and off cycle, which defray about 1% across the full year of that trend.
Speaker Change: The other 50 bps is picked up by corridor.
Mark Lowell Keim: So we feel pretty insulated from a higher trend here, both on known rates and, as Joe mentioned, this very important corridor dynamic we bring to the table. So yeah, we've been carrying 200 BIFs over the last couple of years within our reported MCR. It'll be lower this year, but that'll be a function of actual rates and the ultimate trend. Okay, thanks. Thank you, and the next question comes from Justin Lake with Wolf Rising. Good morning.
Joe: So we feel pretty insulated from a higher trend here, both on known rates and as Joe had mentioned this very important corridor dynamic we bring to the table. So yeah, we'd be carrying 200 bps over the last couple of years within our reported MCR it'll be lower this year, but that'll be a function of actual rates.
Joe: And the ultimate trend.
Speaker Change: Okay. Thanks.
Speaker Change: Thank you and the next question comes from Justin Lake with Wolfe Research.
Justin Lake: First, it looked like your PYD benefit to MLR was almost 200 basis points in the quarter. Curious if you could share with us whether that was evenly spread among the three segments or, you know, was balanced in one or two specifically. And then Joe, can you talk to us a little bit about exchanges? A lot of focus going into the elections.
Justin Lake: Thanks, Good morning, first it looked like your P Y D M.
Justin Lake: The MLR was almost 200 basis points in the quarter curious if you could share with us whether that was evenly split spread among the three segments.
Speaker Change: Yeah, and it worked out and.
Speaker Change: One or two specifically.
Speaker Change: And then Joe could you talk to us a little bit about the trade, there's a lot of focus going into the elections.
Joe: If the what's your view early view on if the subsidies are extended.
Joseph Michael Zubretsky: What's your view, early view on if the subsidies aren't extended? Uh, the enhanced subsidies, I should say if they aren't extended uh at the end of 2025, what do you think happens to the exchange population in general? On the PYD point, I'll kick it to Mark, but the first point to make before that, which lines of business did it affect? Most of it, if not nearly all of it, was picked up by prior-year court orders. Mark, do you want to take this?
Speaker Change:
Joe: And subsidies I should say, but they aren't extended a b at the end of 2025, what do you think happens to the extreme population in general.
Mark: On the P Y E I'll kick it to mark, but the first point to make before which lines of business did it affect most of it if not nearly all of it was picked up by prior year corridor marketing right. So adjusting your question is yes, it's a little bit bigger than we've seen in the past, we're a bigger business than we've been in the past.
Mark Lowell Keim: Right. So, Justin, your question is, yes, it's a little bit bigger than we've seen in the past. We're a bigger business than we were in the past. A lot of this stems from our payment integrity business, which reaches back into prior years to make sure that fraud, waste, and abuse, things like that, are addressed. So it's a little bit bigger.
Speaker Change: A lot of this stems from our payment integrity.
Speaker Change: <unk> business, which you know reaches back into prior years to make sure that fraud waste and abuse things like that are addressed so it's a little bit bigger.
Joseph Michael Zubretsky: Of course, Medicaid and Medicare are where you expect to see it mostly, and that's what you'll see in the queue when it comes out, a little bit in Marketplace, but most of it was in Medicaid and Medicare. As Joe mentioned, it really isn't a good guy this year, because we were big-time corridor payers last year, and of course, the prior-year development goes to last year's corridors. So most of that got caught up in prior-year corridors. And your question related to the exchanges, but everybody's got models. We see models in the industry. We have our own models in terms of what would happen if the enhanced subsidies did, in fact, expire.
Speaker Change: Of course, Medicaid and Medicare is where you expect to see it mostly and Thats what youll see in the Q when it comes out a little bit in marketplace, but most of it was in Medicaid.
Speaker Change: And Medicare.
Speaker Change: As Joe mentioned, it really isn't a good guide this year, because we were big time corridor payers last year and of course, the prior year development goes to last year's corridors. So most of that got caught up in prior year corridors.
Speaker Change: On your question related to the exchanges, but everybody's got models, we see models in the industry, we ever own models in terms of what would happen if the enhanced.
Speaker Change: Enhanced subsidies are in fact do expire and you know this industry estimates we have our own you look at the level of subsidies you look at your FPL cohorts and you can argue that 10, 20% of membership could be affected and priced out of your silver product, but then again you have.
Joseph Michael Zubretsky: And there's, you know, industry estimates; we have our own. You look at the level of subsidies, you look at your FPL cohorts, and you can argue that, you know, 10, 20% of membership could be affected by the price of your silver product. But then again, you have a lower priced bronze product, perhaps sitting right next to it.
Speaker Change: A lower priced brands product, perhaps sitting right next to it so how many of those are going to recapture into one of your brands products at a lower price hard to say, but we've seen industry estimates of 10% to 20% and then the wildcard is if you have a bronze product sitting alongside yourself a product in a certain geography will you recapture some of that in the Bronx.
Stephen C. Baxter: So how many of those are going to recapture into one of your bronzes? At a lower price, hard to say. But we've seen industry estimates of 10 to 20%. And then the wild card is, if you have a bronze product sitting alongside your silver product in a certain geography, will you recapture some of that? Thank you, and the next question comes from Stephen Baxter with Wells Fargo. Hi, thanks. Just a couple of follow-ups on the Medicaid discussion, I guess.
Speaker Change: Yeah.
Speaker Change: Thank you and the next question comes from Stephen Baxter with Wells Fargo.
Stephen C. Baxter: Can you provide us specifically the first half number that's comparable to the 200 basis points of the typical corridor expense that you cite? And then can you also update us on what percentage of your premiums have some level of protection here versus are more directly exposed to whatever the underlying performance in the Medicaid book is? And then just trying to understand, you know, the rate update process. I think you suggested obviously states want to operate on hard data and not theories, but it does seem like a lot of this deterioration is happening in the second quarter, which is not fully developed at this point.
Stephen C. Baxter: Hi, Thanks, just a couple of follow ups on the Medicaid discussion I guess.
Stephen C. Baxter: Can you provide us specifically in the first half number that's comparable to the 200 basis points of the typical corridor.
Speaker Change: Yes.
Speaker Change #108: And then can you also update us on what percentage of your premiums at some level of protection here versus there are more directly exposed or whatever the underlying performance in the Medicaid book as and then I'm just trying to understand the rate of deposits. I think you suggested obviously stays with the operator hard data about theories, but it does seem like a lot of this deterioration was happening.
Speaker Change #114: In the second quarter, which is not fully developed at this point. So it's just largely because maybe the acuity adjustments contemplated the lower level of interest in Walmart.
Stephen C. Baxter: So is this largely because maybe the acuity adjustment compensated for a lower level of disenrollment, and that's an easier conversation? I'm just trying to understand why states would be compelled to act, you know, kind of on a more recently developing trend.
Speaker Change #104: Conversation I'm trying to understand the white space, we can tell backed carnival.
Speaker Change #100: More recently developed thanks.
Speaker Change: Thanks.
Operator: Thanks. Hey Stephen, it's Mark. There's a lot to unpack here. Can you start with the first one? I want to make sure I understand it.
Speaker Change: Hey, Stephen it's Mark there's a lot to unpack there can you start with the first one I want to make sure I understand it.
Stephen C. Baxter: Yes, it's 200 basis points of typical corridor expenses. I would like to know specifically, in the first half of the year, if you could give us a comparable metric there. And then when we think about the percentage of your Medicaid premiums that have some level of protection for most corridors versus are more directly exposed to the underlying performance of the business, like is it 50? Is it 75%?
Speaker Change #101: Yes, the 200 basis points of typical corridor expense that you cite I would just like to note specifically in the first half of the year. If you could give us a comparable metric there and then when we think about the percentage of your Medicaid premiums that have some level of protection from nice core doors versus our more directly exposed to the underlying performance of the business.
Speaker Change #102: 50% to 75% how should we think about it.
Mark Lowell Keim: How should we think about corridors? Sure. Now, the way to think about corridors, in prior years, roughly 200 were usually embedded in our reported MCR. Corridors track to an ultimate destination across the full year, so you don't really know until the year is over where you come out.
Speaker Change: Sure no the way to think about corridor in prior years roughly 200.
Speaker Change #106: Was usually embedded in our reported MCR core doors track to an ultimate across the full year. So you don't really know till the year is over where you come out and again, that's going to be a function of rate and trend, but what I can tell you is in the first half I think about half of that normal rate was within our number.
Mark Lowell Keim: And again, that's going to be a function of rate and trend. But what I can tell you is that in the first half, I think about half of that normal rate was within our number, if we look at what's happened and our expected ultimates. So we're definitely using some of it this year to date, and as we mentioned in our remarks here, we're expecting to use some of it for the rest of the year. So think across the full year, roughly half of that normal run rate number. Stephen, we have very detailed models.
Speaker Change: If we look at what's happened in our expected ultimate so we're definitely using some of it year to date and as we mentioned in our remarks here, we're expecting to use some of it in the rest of the year. So think across the full year roughly half of that normal run rate number.
Joseph Michael Zubretsky: We have an entire accounting system on minimum MLR and quarterly or tracking. And one of the reasons we don't give specific numbers generally is that if 50 or 75% of your premium has a corridor, you say, well, it's protected. Well, it's only protected if that's where the medical cost deterioration happens. And so looking at the gross number can just be very, very misleading. We have our arms around it. We know where we're protected.
Joseph Michael Zubretsky: We know when we have upside opportunity. And in some geographies, there's upside opportunity, depending on where you are in the corridor. So we generally don't like to give specific numbers on how much premium is protected, because I think it gives a false positive.
Sarah Elizabeth James: The next question comes from Sarah James with Cantor Fitzgerald. Thank you. I appreciate you reiterating the 2026 premium guidance. I was hoping that you could refresh the bridge a little bit. When you laid it out at I-Day off of the 23 base, you were talking about $4.5 billion of M&A and $2.5 billion of strategic initiatives. Is that still the mix that you see?
Speaker Change #105: So when you laid it out at I day off of the twenty-three base you were talking about four and a half billion of M&A in two and a half billion of strategic initiatives is that still the mix that you see and then when you think about M&A. How do you think about the mix between Medicaid and exchange that.
Joseph Michael Zubretsky: And then when you think about M&A, how do you think about the mix between Medicaid and the exchange that could play out through 2026 or that exists in your pipeline? It is possible that if we're redoing that projection right now, it would have to be a little more influenced by M&A, just given where we are in the restructuring cycle, but we're very active in the M&A space, as we just demonstrated. Yeah, comments have been made that the last two transactions that we executed were Medicare and Marketplace, which some people are calling non-core. They're core; they're as core as Medicaid.
Speaker Change: Could play out through 2026 are that exist in your pipeline.
Speaker Change #117: It is possible that if we were redoing our projection right now it would have to be able to be more influenced by M&A, just given where we are in the re procurement cycle.
Speaker Change #115: But we're very active in the M&A space as we just as we just demonstrated.
Speaker Change: Your comments have been made in the last two transactions that we executed were Medicare and marketplace, which some people are calling on core their core or the risk score is mitigated.
Joseph Michael Zubretsky: And our pipeline is still very active with Medicaid opportunities. And you'll hopefully see Medicaid transactions here over the next 12 to 18 months. We're still very active in that space.
Speaker Change: Our pipeline is still very active with Medicaid opportunities and you'll hopefully see Medicaid transactions here over the next 12 to 18 months, we're still very active in that space. The last two we did were non Medicaid, but that doesn't mean, we're not actively pursuing them and working them.
Joseph Michael Zubretsky: The last two we did were non-Medicaid, but that doesn't mean we're not actively pursuing them and working with them. Thank you. Thank you, and the next question comes from Michael Hall with FAIR. All right, thank you.
Speaker Change #109: Thank you.
Speaker Change #109: Thank you and our next question comes from Michael Hall with Baird.
Michael Hall: So, quick clarification and then my real question. I was surprised to see no cash flow from Operations so far in the first half of the year. I know you called out some special timing, corridor payments, CMS receipts, etc. I was wondering if you could break out some of the amounts of the larger pieces to help bridge this back to what, maybe, a normalized cash flow from Operations would look like. And then the real question on the MA risk adjustment benefit. Wondering if you could just, you know, how much specifically did you benefit from it for your 2Q MA MLR?
Michael Hall: Alright. Thank you. So a quick clarification and then my real question I was surprised it didn't know cash flow from ops. So far first half of the year I know you called out special.
Michael Hall: Special timing corridor payments may mattress creep et cetera, I'm wondering if you could break out some of the amounts of the larger pieces to help British Bath, what maybe normalized cash from ops.
Michael Hall: And generally, isn't it true that Yes, the risk adjustment fleets tend to result in some slight favorability, but also, from my understanding, plans generally don't see a huge benefit because they simply accrue to whatever the risk adjustment was in their early 1Q payments?
Mark Lowell Keim: So my question is, how did you recognize such a large benefit? Was there something unique going on with BrightHealth's MA assets where maybe you took a more conservative approach on the risk adjustment accrual? So more color on that would be great.
Mark Lowell Keim: Thank you. Hey Michael. Good morning. It's Mark.
Mark Lowell Keim: Let me take OCF. As we mentioned, and for everybody's benefit, Michael's asking about a large difference in this year's first six months operating cash flow versus prior years. Just a note on that; I think some people forget that government services MCOs have a lot more lumpier cash flow than maybe some of our diversified competitors. Commercial businesses tend to have much more stable quarter-to-quarter OCF as do services businesses. Government businesses, because of the timing of large payments, risk adjustment, and corridors, will be a little bit lumpier.
Mark Lowell Keim: The only other comment I'll make, and I'll get into the details, Michael, is that we are a growing business, and a growing business should always have OCF ahead of net investment income because, for a growing business, that's the way the working capital cycle works, and we do. If you look at any broader time frame, you will see that. So the first half is really about a couple of unique items, unique items that benefited us last year and are now just sort of catching up. So there are three that we'll talk about.
Speaker Change #103: We are a growing business and a growing business should always have ocs ahead of net investment income because of growing business. That's the way the working capital cycle works and we do if you look at any broader timeframe you will see that so the first half is really about a couple of unique items unique items that benefited us last.
Mark Lowell Keim: And you'll see these on my operating cash flow in the earnings release. The largest one is the timing of risk corridor payments. Here's how to think about this. We're accruing less this year on risk corridors than we were last year, for all the reasons Joe and I just discussed. But separately, I'm paying down last year's balances.
Speaker Change #103: At year end or now the sort of catching up so theres three that we'll talk about.
Speaker Change #103: And Youll see these on my operating cash flow in the earnings release.
Speaker Change #127: The largest one is the timing of risk corridor payments, here's how to think about this we're accruing less this year on risk corridors than we were last year for all the reasons, Joe and I, just discussed but separately on paying down last year's balances.
Mark Lowell Keim: So that's a big swing in OCF called a little more than half a billion. Next one is CMS payments. You know, it's funny, CMS payments usually come in a couple of days before the end of the quarter or a couple of days after the end of the quarter. And that makes a big difference in the reported cash flow. About 400 of our OCF swing is exactly that, and you'll see that on the operating cash flow statement. And the last one's a little bit unique.
Speaker Change #103: So that's a big swing in <unk> call it a little more than a half of $1 billion.
Speaker Change #103: Next one is CMS payments, it's funny CMS payments, usually come in a couple of days before the end of the quarter or a couple of days. After the end of the quarter and that makes a big difference on our reported cash flow about 400 of our Ocs swing is exactly that and youll see that on the operating cash flow statement.
Speaker Change #103: And the last one is a little bit unique.
Mark Lowell Keim: We had about $200 million of cash flow benefit year over year from California taxes. You might recall that California federal taxpayers got a little bit of a delay on their tax due dates back in 2023. So both the 2022 final tax payments, as well as the estimated 2023 tax payments, were delayed into the second half of the year.
Speaker Change #103: About $200 million of cash flow benefit year over year.
Speaker Change #103: From California taxes, you might recall that California, federal taxpayers got a little bit of a delay on their tax due dates back in 2023. So both the 2022 final tax payments as well as the estimated 2023 tax payments were delayed into the second half of the year.
Mark Lowell Keim: This year, we're right back on target. So year over year, that's a bad guy this year, was a good guy last year, that's 200 million right there. So I probably just walked you through the vast majority of that operating cash flow deficit you're talking about. We're very comfortable with the cash flow characteristics of the business.
Mark Lowell Keim: And again, look over any broader period of time, you'll see a great normalization in that relationship between OCS and net income. On the Medicare risk adjustment, a couple of comments there. Unlike the marketplace, most of that Medicare was a benefit from this year's operations. And gosh, we're just getting a little bit better at it.
Mark Lowell Keim: We've got a bigger business, we've got the bright business. And sure, there's always some prior year benefit. But a lot of this is we're just getting better at the risk adjustment equation across each of our individual Medicare businesses. Thank you. The next question comes from Scott Fidel with Stephen. Hi, thanks.
Scott J. Fidel: Actually, just to follow up, I guess, to sort of complete the operating cash flow discussion, Mark, can you give us what you're expecting for the back half of 24 or for the full year in terms of CFFO? And then second, I guess, main question would be: definitely thought it would be helpful maybe if you just wanted to segment or bucket the dollar of embedded earnings that you're expecting from Connecticare in terms of what, you know, sort of the key drivers of that accretion to get to the dollar bill. Thanks.
Mark Lowell Keim: Sure. On the second half of OCF, a normal relationship is a little bit ahead of net income. So think of a relationship of 1.1, 1.2, 1.3, something like that.
Mark Lowell Keim: I would expect a more normalized relationship in the second half of the year. Again, looking over the two years in total, so much of that year-over-year comparison was about things unique to last year or unique to this year. Looking at 23-24 combined, you'll get a very normal relationship between OCF and net income that'll certainly normalize in the second half of this year.
Speaker Change #103: Over the two years in total so much of that year over year comparison was about things unique to last year or unique to this year looking at 'twenty three 'twenty four combined youll get a very normal relationship between <unk> and net income that will certainly normalize in the second half of this year.
Joseph Michael Zubretsky: And Scott, on the Connecticut acquisition, the business performs okay. It does not perform to Molina's target market. As typical in these situations, we intend to improve the MCRs in both the marketplace business and the Medicare business and rationalize the DNA. It is not a huge undertaking.
Scott: And Scott on the.
Scott: The Connecticut acquisition.
Scott: The business performs okay. It does not perform two moving to target margins.
Speaker Change #118: And as typical in these situations, we intend to improve the MCR is in both the marketplace business and the Medicare business and rationalize the G&A spend.
Speaker Change #112: It is not a huge undertaking.
Joseph Michael Zubretsky: As I said, they're underperforming our targets, but not woefully underperforming. We will improve the performance by moving these simply from where they are to Molina, Fable membership, and good brand recognition. We bought it at 25. Okay, thank you.
Speaker Change #112: They said they are underperforming our targets, but not woefully underperforming we will improve the performance by moving these simply from where they are to moving to targets.
Speaker Change #121: Stable membership good brand recognition, we bought it at 25.
Speaker Change #116: The percent of revenue half of which is hard capital and then we have Mr. Molina playbook to get it to our targeted margins the dollar of accretion.
Speaker Change #112: Great deal for us.
Speaker Change #113: Okay. Thank you.
Speaker Change #125: Thank you and our last question. This morning comes from George Hill with Deutsche Bank.
Operator: And the last question this morning comes from George Hill. Hey, good morning, guys, and thanks for sneaking me in.
George Robert Hill: I hope I have two quick ones here. I guess you talked about the example where you have acuity getting worse in states or cutting rates. So, I guess talk to us about how confident you'll be that you'll kind of get right in that percentage of the book going forward. Just increasingly, as we're hearing, like, we hear about actuarial soundness, but when we talk to some state regulators, we hear actual soundness kind of with the phrase, you know, subject to budget. So, I'm kind of worried about the timing and the mismatch there.
George Robert Hill: Hey, good morning, guys and thanks for sneaking me in I Hope I have two quick ones here I guess you talked about the example, where you have acuity getting worse in states or cutting rates, but I guess talk to us about how confident that you'll you'll be you'll kind of get right in that percentage of the book going forward just.
Speaker Change #124: Just to increasingly as we're hearing like we'd hear about actuarial soundness, but when we talk to some state regulators, we hear actual soundness is kind of what the phrase.
George Robert Hill: And then on the 200 basis points in the risk quarter that we discussed, I guess, can you talk about your confidence in the risk quarter, like the contributions, like it'll suck up some utilization in the back half of this year? But, I guess, can you talk about, like, how much was sucked up in Q2 and, like, how should we think about, like, the risk quarter, the decrease in risk quarter contributions in Q2 and kind of how that varies through the back half of the year? Thank you. Sure.
Mark Lowell Keim: A couple of things there. So you're mentioning the California negative retro rate adjustment. Look, I haven't personally seen one.
Mark Lowell Keim: That's the only one. I don't expect another one. But for the rest of the year, there's not any speculation. Those rate increases that Joe and I talked about in the second half of the year, both the normal rate cycle and the off-cycle rates, all of those are known and committed. So not a lot of speculation there. On the 200 basis points that you're talking about of historical data, you can't really think about corridors on a quarterly basis because they're an annual fiscal year concept. So you're always accruing to an ultimate amount, which means you're spreading out any impact across all four quarters, not just the quarter specific.
Mark Lowell Keim: So when I think about the full year and our fiscal year accounting, we said somewhere around half of the historical 200 is about what we think we're using. That's, again, a guess, and it will ultimately come down to the full-year development of rates, trends, and our medical management. George, maybe it's best to give a couple of examples.
Joseph Michael Zubretsky: So we have, Texas is a September 1 renewal. Things were running a little hot in Texas. We got a high, the market got a high single-digit rating. That'll have impact the second year. It's known. We have it in draft form. Draft rates never decline. They can go up, but we're very confident.
Joseph Michael Zubretsky: Another example of a really interesting... It actually explains some of the trend inflection we talked about that's very localized and the rate actions that were taken in Kentucky. Due to the pandemic, the regulators asked the market to suspend UM on outpatient behavioral health. We did.
Joseph Raskin: Justin, one. It actually explains some of the trended selection we talked about that's very localized and the rate actions that are taken in Kentucky. Due to the pandemic, the regulators asked the market to suspend UM on outpatient behavioral. We did, as did the market. What happens? Cross goes up. The market then approaches the state presents the actual data, mid cycle rate increase because the behavioral program was underfunded. So the conversations with our state regulators are customer are very productive. They're database and they're taking very reasonable positions whether something is program related or whether it's an acuity shift that can be actually supported.
Speaker Change #126: The regulators ask the market to suspend U M. An outpatient behavioral we did as did the market what happens cost goes up.
Joseph Michael Zubretsky: As did the market. What happens? Cost goes up. The market then approaches the state, presents the actuarial data, and a mid-cycle rate increase because the behavioral program is underfunded. So the conversations with our state regulators, our customers, are very productive. Their data base, and they're taking very reasonable positions, whether something is program related or whether it's an acuity shift that can be actually supported.
Speaker Change #113: The market then approaches the state presents the actuarial data mid cycle rate increase because of the behavioral program was underfunded.
Speaker Change #113: So the conversations with our state regulators, our customer are very productive.
Speaker Change #113: Their database.
Speaker Change #113: And they're taking very reasonable positions, whether something is program related or whether it's an acuity shift that can be actuarially supported.
Andrew Mok: It's helpful. Thank you.
Joseph Michael Zubretsky: Helpful, thank you. Thank you. This concludes both the question session as well as the event itself. Thank you so much for attending today's presentation, and you may now disconnect your line.
Speaker Change #119: Helpful. Thank you.
Speaker Change #113: Yeah.
Unknown Executive: And this concludes about the questions session, as well as the event itself. Thank you so much for attending today's presentation, and you may not listen to lines. Thank you.
Speaker Change #123: Thank you.
Speaker Change #122: Inclusive about the questions session as well as the event itself. Thank you. So much for attending today's presentation. You may now disconnect your lines.
Speaker Change #122: [music].
Operator: S.O.S. S.O.S. S.O.S.