Q3 2024 Molina Healthcare Inc Earnings Call

October 24, 2024

Only conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one under telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.

Specialists by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one under telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.

Speaker Change: I'd now like to turn the conference over to Jeffrey Guyer, Vice President Investor Relations at Molina Healthcare. Please go ahead.

Speaker Change: I would now like to turn the conference over to Jeffrey Guyer, Vice President Investor Relations at Molina Healthcare. Please go ahead.

Joe Dobrowski: Given the confluence of the many MCR dynamics concentrated in the quarter. We are very pleased to be operating at a 90% Medicaid MCR for the full year nearly 100 basis points above the top end of our long term range.

Jeffrey Guyer: Good morning, and welcome to Molina Healthcare's third quarter 2024 earnings call Joy.

Jeffrey Guyer: Good morning, and welcome to Molina Healthcare's third quarter 2024 earnings call.

Jeffrey Guyer: Joining me today are Molina, President and CEO, Jos Dobrowski, and our CFO Mark <unk>.

Jeffrey Guyer: Joining me today are Molina, President and CEO, Joseph <unk>, and our CFO Mark <unk>.

Joe Dobrowski: With the assumption that rates may continue to improve and appropriately capture cost trend in this upcoming rate cycle. There is line of sight to be operating within our long term MCR target range for 2025.

Jeffrey Guyer: A press release announcing our third quarter 2024 earnings was distributed after the market closed yesterday and it's available on our Investor Relations website.

Jeffrey Guyer: A press release announcing our third quarter 2024 earnings was distributed after the market closed yesterday and is available on our Investor Relations website.

Jeffrey Guyer: Shortly after the conclusion of this call a replay will be available for 30 days.

Jeffrey Guyer: The numbers to access the replay are in the earnings release.

The numbers to access the replay are in the earnings release.

Jeffrey Guyer: Yeah.

Jeffrey Guyer: 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 October 24, 2024 and have not been updated subsequent to the initial earnings call.

Joe Dobrowski: Turning to Medicare are third quarter, MCR was $89, 6% above our long term target range.

Jeffrey Guyer: 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 third quarter 2024 earnings release.

Joe Dobrowski: The medical cost pressure in the quarter, which consistent with the elevated L. P. S S and pharmacy costs, we experienced through the first half of the year, while we also experienced higher outpatient utilization in the third quarter.

Jeffrey Guyer: During the call, we will be making certain forward looking statements, including but not limited to statements regarding our 2024 guidance Medicaid redetermination.

Jeffrey Guyer: <unk> Medicaid rate adjustments and update met.

Jeffrey Guyer: Expected Medicaid rate adjustments and update <unk>.

Joe Dobrowski: Our bright business in California performed in line with expectations.

Jeffrey Guyer: Medical cost initiatives and our projected MCR, our recent RFP award and depending RFP submissions are acquisitions and M&A activity.

Jeffrey Guyer: Medical cost initiatives and our projected MCR, our recent RFP award and depending RFP submission.

Joe Dobrowski: And marketplace, the third quarter MCR was 73% the business continued to perform better than our expectations, even with the higher special enrollment period membership gained from Redetermination. This year.

Jeffrey Guyer: Our acquisitions and M&A activity.

Jeffrey Guyer: Revenue growth related to Rfps and M&A activity, our long term growth strategy, our 2025 marketplace pricing and our embedded earnings power in future earnings realization.

Jeffrey Guyer: 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.

Joe Dobrowski: Our third quarter adjusted G&A ratio of six 4% with a very strong result, and reflects effective operating disciplines, including labor cost management, one time credits related to vendor contracts and leveraging our fixed cost base as we grow.

Jeffrey Guyer: 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 Guyer: After completion of our prepared remarks, we will open the call to take your questions I.

Joe Dobrowski: Turning now to our guidance for the full year.

Speaker Change: I will now turn the call over to our Chief Executive Officer, Joseph Bruski Joe.

Speaker Change: I will now turn the call over to our Chief Executive Officer, Jos Dobrowski Joe.

Joe Dobrowski: Our full year premium revenue remains unchanged at approximately $38 billion.

Joseph Bruski: Thank you, Jeff and good morning.

Thank you, Jeff and good morning.

Joe Dobrowski: Or 17% year over year growth.

Joseph Bruski: Today, we will provide you with updates on our reported financial results for the third quarter highlighted by $6 one of earnings per share, which was in line with our expectations.

Jos Dobrowski: Today, we will provide you with updates on our reported financial results for the third quarter highlighted by $6 one of earnings per share, which was in line with our expectations.

Joe Dobrowski: We maintain our full year adjusted EPS guidance of at least $23 50.

Joseph Bruski: 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 sustained profitable growth.

Jos Dobrowski: An update on our full year 2020 for guidance.

Joe Dobrowski: Representing 13% year over year growth.

Jos Dobrowski: Which we reaffirm at $38 billion of premium revenue and at least $23 50 in earnings per share.

Joe Dobrowski: We expect continued strong performance in our marketplace segment, G&A efficiencies and higher net investment income to offset the higher MCR, we are experiencing in Medicaid and Medicare.

Jos Dobrowski: And our growth initiatives and strategy for sustained profitable growth.

Joseph Bruski: Let me start with our third quarter performance.

Jos Dobrowski: Let me start with our third quarter performance.

Joseph Bruski: Last night, we reported adjusted earnings per share of $6 one.

Last night, we reported adjusted earnings per share of $6 and one on.

Joseph Bruski: A $9 $7 billion of premium revenue.

Jos Dobrowski: A $9 $7 billion of premium revenue.

Joe Dobrowski: Our 2020 for revenue and earnings per share guidance provide a strong foundation for profitable growth in 2025 and beyond.

Joseph Bruski: Our 89, 2% consolidated MCR with higher than expected as we experienced medical cost pressure in our Medicaid and Medicare segments.

Jos Dobrowski: Our 89, 2% consolidated MCR with higher than expected as we experienced medical cost pressure in our Medicaid and Medicare segments.

Joseph Bruski: However, we still produced a four 5% adjusted pre tax margin or three 4% after tax are very strong results.

Jos Dobrowski: However, we still produced a four 5% adjusted pre tax margin or three 4% after tax are very strong results.

Joseph Bruski: Year to date, our consolidated MCR was 88, 8% slightly above our long term target range and our adjusted pre tax margin is four 5%, which is within our long term target range.

Joe Dobrowski: The building blocks to achieve our long term growth targets remain intact.

Jos Dobrowski: Year to date, our consolidated MCR was 88, 8% slightly above our long term target range and our adjusted pre tax margin is four 5%, which is within our long term target range.

Joe Dobrowski: Now some comments on our growth initiatives, our business is well positioned to capitalize on long term growth opportunities in all three segments.

Joseph Bruski: Together these results reflect a well balanced and well performing portfolio of businesses.

Jos Dobrowski: Together these results reflect a well balanced and well performing portfolio of businesses.

Joe Dobrowski: In traditional Medicaid as previously reported we retained our presence in Florida with a contract to serve approximately 90000 members in Miami Dade County.

Joseph Bruski: In Medicaid the business produced a third quarter MCR of 95% above our long term target range.

Jos Dobrowski: In Medicaid the business produced a third quarter MCR of 95% above our long term target range.

Joseph Bruski: This result included a premium rate reduction in our California business.

Jos Dobrowski: This result included a premium rate reduction in our California business that was retroactive to the beginning of the year.

Joseph Bruski: It was retroactive to the beginning of the year.

Joseph Bruski: We are working with the state to understand its methodology and actuarial support for this adjustment both of which remain unclear.

Joe Dobrowski: This contract recovery as an important component of our portfolio given the state of Florida is significant Medicare and marketplace profile.

Jos Dobrowski: We are working with the state to understand its methodology and actuarial support for this adjustment both of which remain unclear.

Joseph Bruski: Excluding this retroactive item to third quarter, Medicaid MCR was 90%.

Jos Dobrowski: Excluding this retroactive item to third quarter, Medicaid MCR was 90%.

Joe Dobrowski: In Georgia, we await the announcement of statewide contract awards.

Joseph Bruski: <unk> reflect higher than expected medical cost elevated by the impact of Redetermination related to acuity shifts.

Jos Dobrowski: The quarter reflects higher than expected medical cost elevated by the impact of redetermination related to acuity shifts.

Joseph Bruski: And higher utilization among our continuing population.

Jos Dobrowski: And higher utilization among our continuing population.

Joseph Bruski: Particularly for <unk> pharmacy, and behavioral health services.

Jos Dobrowski: Particularly for <unk> pharmacy, and behavioral health services.

Joe Dobrowski: We remain confident in the strength of our proposal and our ability to serve a strong state partners for these populations.

Joseph Bruski: However, this higher trend continued to be partially offset by three dynamics.

Jos Dobrowski: However, this higher trend continued to be partially offset by three dynamics.

Joseph Bruski: First our new store additions continued to improve toward target margins.

Jos Dobrowski: First our new store additions continued to improve towards target margins.

Joe Dobrowski: We had significant wins in the quarter and our dual eligible integrated product businesses, which are a major strategic focus for us.

Joseph Bruski: Second on cycle and off cycle rate adjustments went into effect during the quarter.

Jos Dobrowski: Second on cycle and off cycle rate adjustments went into effect during the quarter.

Joseph Bruski: And finally, our risk corridor continued to act as a financial buffer against elevated medical cost trend.

Jos Dobrowski: And finally, our risk corridor continued to act as a financial buffer against elevated medical cost trend.

Joe Dobrowski: In Michigan, we were awarded a contract to provide benefits to the state's highly integrated dual eligible special needs population in fixed service regions, including Detroit.

Joseph Bruski: The short term disparity between rates and medical cost trend may have reached its widest point in the third quarter.

Jos Dobrowski: The short term disparity between rates and medical cost trend may have reached its widest point in the third quarter.

Joseph Bruski: We expect this short term disparity to narrow starting with known rate updates.

We expect this short term disparity to narrow starting with known rate updates.

Joseph Bruski: In the third quarter, we received five on cycle rate updates that averaged four 5%.

Jos Dobrowski: In the third quarter, we received five on cycle rate updates that averaged four 5%.

Joseph Bruski: We also received several positive off cycle rate adjustments, which is an important indication that many of our states have recognized that certain aspects of their program are underfunded.

Jos Dobrowski: We also received several positive off cycle rate adjustments, which is an important indication that many of our states have recognized that certain aspects of their program are underfunded.

Joe Dobrowski: This is an increase from our current MMP footprint of two service regions.

Joseph Bruski: For the fourth quarter, we received three on cycle rate updates that averaged 9%.

Jos Dobrowski: For the fourth quarter, we received three on cycle rate updates that averaged 9%.

Joe Dobrowski: This win facilitates the transition of our existing MMP members to a highly product and ensures a new dual eligible growth opportunity.

Joseph Bruski: In total the second half of 2024 now reflects these known rate increases that amount to a benefit of approximately $350 million or 230 basis points on the Medicaid MCR.

Jos Dobrowski: In total the second half of 2024 now reflects these known rate increases that amount to a benefit of approximately $350 million or 230 basis points on the Medicaid MCR.

Joe Dobrowski: We project $1 billion of incremental premium revenue by 2027 and have added 50 per share to our embedded earnings.

Joseph Bruski: This 230 basis point benefit along with risk corridor protection is expected to substantially offset the elevated cost trend in the second half of 2024.

Jos Dobrowski: This 230 basis point benefit along with risk corridor protection is expected to substantially offset the elevated cost trend in the second half of 2024.

Joseph Bruski: Looking forward to 2025, the progression of rates and cost trend is not entirely clear.

Jos Dobrowski: Looking forward to 2025, the progression of rates and cost trend is not entirely clear.

Joe Dobrowski: The contract, which is effective January one 2026, and select regions will be implemented statewide in 2027 and continue for seven years.

Joseph Bruski: 55% of our Medicaid premium renews on January one and.

Jos Dobrowski: 55% of our Medicaid premium renews on January one.

Joseph Bruski: And we are encouraged by the draft rates, we have seen from several of these states.

Jos Dobrowski: And we are encouraged by the draft rates, we have seen from several of these states.

Joseph Bruski: These draft rates are an important starting point for 2025, and we remain cautiously optimistic while we wait to see how medical cost trend progresses in the fourth quarter and early 2025.

Jos Dobrowski: These draft rates are an important starting point for 2025, and we remain cautiously optimistic while we wait to see how medical cost trend progresses in the fourth quarter and early 2025.

Joseph Bruski: Given the confluence of the many MCR dynamics concentrated in the quarter. We are very pleased to be operating at a 90% Medicaid MCR for the full year nearly 100 basis points above the top end of our long term range.

Jos Dobrowski: Given the confluence of the many MCR dynamics concentrated in the quarter. We are very pleased to be operating at a 90% Medicaid MCR for the full year nearly 100 basis points above the top end of our long term range.

Joe Dobrowski: Given our success in this Michigan MMP transition, we are confident about our prospects in both Ohio and Illinois.

Joseph Bruski: With the assumption that rates may continue to improve and appropriately capture cost trend in this upcoming rate cycle. There is line of sight to be operating within our long term MCR target range for 2025.

Jos Dobrowski: With the assumption that rates may continue to improve and appropriately capture cost trend in this upcoming rate cycle. There is line of sight to be operating within our long term MCR target range for 2025.

Joe Dobrowski: In Massachusetts, the Commonwealth awarded Us a new contract to operate the one care under 65 program and retain our position in the senior care options program for 2026.

Joseph Bruski: Turning to Medicare are third quarter, MCR was $89, 6% above our long term target range.

Jos Dobrowski: Turning to Medicare are third quarter, MCR was $89, 6% above our long term target range.

Joseph Bruski: The medical cost pressure in the quarter was consistent with the elevated lpns and pharmacy costs, we experienced through the first half of the year, while we also experienced higher outpatient utilization in the third quarter.

Jos Dobrowski: The medical cost pressure in the quarter was consistent with the elevated LTE access and pharmacy costs, we experienced through the first half of the year, while we also experienced higher outpatient utilization in the third quarter.

Joe Dobrowski: Incremental revenue is expected to reach nearly $400 million in three years' time. After this we have added 25 cents per share to our embedded earnings.

Joseph Bruski: Our bright business in California performed in line with expectations.

Jos Dobrowski: Our bright business in California performed in line with expectations.

Joseph Bruski: In marketplace, the third quarter MCR was 73% the business continued to perform better than our expectations, even with the higher special enrollment period membership gained from Redetermination. This year.

Jos Dobrowski: In marketplace for third quarter, MCR was 73% the business continued to perform better than our expectations, even with the higher special enrollment period membership gained from Redetermination. This year.

Joe Dobrowski: Also in Medicare beginning in 2025, we will no longer offer MAA PD products in 13 states totaling approximately $200 million in annual premium.

Joseph Bruski: Our third quarter adjusted G&A ratio of six 4% was a very strong result, and reflects effective operating discipline, including labor cost management, one time credits related to vendor contracts and leveraging our fixed cost base as we grow.

Jos Dobrowski: Our third quarter adjusted G&A ratio of six 4% was a very strong result, and reflects effective operating discipline, including labor cost management, one time credits related to vendor contracts and leveraging our fixed cost base as we grow.

Joe Dobrowski: This adjustment allows us to strategically focus on our dual eligible populations, where we increased our accounting footprint by 23% and on a low income MAA PD population in California.

Joseph Bruski: Turning now to our guidance for the full year.

Turning now to our guidance for the full year.

Joseph Bruski: Our full year premium revenue remains unchanged at approximately $38 billion.

Jos Dobrowski: Our full year premium revenue remains unchanged at approximately 38 billion or.

Joseph Bruski: Or 17% year over year growth.

Jos Dobrowski: Our 17% year over year growth.

Joseph Bruski: We maintain our full year adjusted EPS guidance of at least $23 50 reps.

Jos Dobrowski: We maintain our full year adjusted EPS guidance of at least $23 50 rep.

Joe Dobrowski: Recall, the new CMS final rule on integration positions us well as a major Medicaid player.

Joseph Bruski: Representing 13% year over year growth.

Jos Dobrowski: Representing 13% year over year growth.

Joseph Bruski: We expect continued strong performance in our marketplace segment, G&A efficiencies and higher net investment income to offset the higher MCR is we are experiencing in Medicaid and Medicare.

Jos Dobrowski: We expect continued strong performance in our marketplace segment, G&A efficiencies and higher net investment income to offset the higher NCR as we are experiencing in Medicaid and Medicare.

Joe Dobrowski: And marketplace, we are positioned to grow organically and underpenetrated markets, given the stabilized risk profile and margins we've achieved.

Joseph Bruski: Our 2020 for revenue and earnings per share guidance provide a strong foundation for profitable growth in 2025 and beyond.

Jos Dobrowski: Our 2020 for revenue and earnings per share guidance provide a strong foundation for profitable growth in 2025 and beyond.

Joseph Bruski: And the building blocks to achieve our long term growth targets remain intact.

Jos Dobrowski: And the building blocks to achieve our long term growth targets remain intact.

Joe Dobrowski: Our rate filings for 2025 are very competitive and position us to grow and Underpenetrated markets.

Joseph Bruski: Now some comments on our growth initiatives, our business is well positioned to capitalize on long term growth opportunities in all three segments.

Jos Dobrowski: Now some comments on our growth initiatives, our business is well positioned to capitalize on long term growth opportunities in all three segments.

Joseph Bruski: And traditional Medicaid as previously reported we retained our presence in Florida with a contract to serve approximately 90000 members in Miami Dade County.

Jos Dobrowski: And traditional Medicaid as previously reported we retained our presence in Florida with a contract to serve approximately 90000 members in Miami Dade County.

Joe Dobrowski: We are confident in our strategy to grow this segment at a rate that allows us to achieve mid single digit pre tax margins.

Joseph Bruski: This contract recovery as an important component of our portfolio given the state of Florida significant Medicare and marketplace profile.

Jos Dobrowski: This contract recovery as an important component of our portfolio given the state of Florida significant Medicare and marketplace profile.

Joseph Bruski: In Georgia, we await the announcement of statewide contract awards.

Jos Dobrowski: In Georgia, we await the announcement of statewide contract awards.

Joe Dobrowski: Finally, we continue to expect that our announced acquisition of Connecticut will close in the first quarter of 2025.

Joseph Bruski: We remain confident in the strength of our proposal and our ability to serve as strong state partners for these populations.

Jos Dobrowski: We remain confident in the strength of our proposal and our ability to serve as strong state partners for these populations.

Joseph Bruski: We had significant wins in the quarter and our dual eligible integrated product businesses, which are a major strategic focus for us.

Jos Dobrowski: We had significant wins in the quarter and our dual eligible integrated product businesses, which are a major strategic focus for us.

Joseph Bruski: In Michigan, we were awarded a contract to provide benefits to the state's highly integrated dual eligible special needs population and six service regions, including Detroit.

Jos Dobrowski: In Michigan, we were awarded a contract to provide benefits to the state's highly integrated dual eligible special needs population and six service regions, including Detroit.

Joe Dobrowski: Our ability to grow organically when new state contracts and execute M&A are the pillars of our growth strategy and we fully expect to meet our target of $46 billion of premium revenue in 2026.

Joseph Bruski: This is an increase from our current MMP footprint of two service regions.

Jos Dobrowski: This is an increase from our current MMP footprint of two service regions.

Joseph Bruski: This will facilitate the transition of our existing MMP members to our heightened product and ensures a new dual eligible growth opportunity.

Jos Dobrowski: This win facilitates the transition of our existing MMP members to our heightened product and insurers are new eligible growth opportunity.

Joseph Bruski: We project $1 billion of incremental premium revenue by 2027 and have added 50 per share to our embedded earnings.

Jos Dobrowski: We project $1 billion of incremental premium revenue by 2027 and have added 50 per share to our embedded earnings.

Joe Dobrowski: With our 2024 earnings per share guidance of at least $23 50 reaffirmed with our embedded earnings raised to $5 75 per share we remain on track to deliver long term profitable growth Mark will discuss the building blocks of our 2025 outlook in his remarks.

Joseph Bruski: The contract, which is effective January one 2026, and select regions will be implemented statewide in 2027 and continue for seven years.

Jos Dobrowski: The contract, which is effective January one 2026, and select regions will be implemented statewide in 2027 and continue for seven years.

Joseph Bruski: Given our success in this Michigan MMP transition, we are confident about our prospects in both Ohio and Illinois.

Jos Dobrowski: Given our success in this Michigan MMP transition, we are confident about our prospects in both Ohio and Illinois.

Joseph Bruski: In Massachusetts, the Commonwealth awarded Us a new contract to operate the one care under 65 program and retain our position in the senior care options program for 2026.

Jos Dobrowski: In Massachusetts, the Commonwealth awarded Us a new contract to operate the one care under 65 program and retain our position in the senior care options program for 2026.

Joe Dobrowski: In summary, we are pleased with the quarter's results as we continued to power through unprecedented short term dynamics and just keep executing on the fundamentals.

Joseph Bruski: Incremental revenue is expected to reach nearly $400 million in three years' time.

Incremental revenue is expected to reach nearly $400 million in three years' time.

Joseph Bruski: For this we have added <unk> 25 per share to our embedded earnings.

Jos Dobrowski: After this we have added <unk> 25 per share to our embedded earnings.

Joe Dobrowski: Our businesses remain on solid operational and financial foundations and are positioned well for long term profitable growth.

Joseph Bruski: Also in Medicare beginning in 2025, we will no longer offer MAA PD products in 13 states totaling approximately $200 million in annual premium.

Jos Dobrowski: Also in Medicare beginning in 2025, we will no longer offer MAA PD products in 13 states totaling approximately $200 million in annual premium.

Joseph Bruski: This adjustment allows us to strategically focus on our dual eligible populations.

Joe Dobrowski: We look forward to updating you on the next wave of long term value creation at our Investor Day event on Friday November eight in New York City.

Jos Dobrowski: This adjustment allows us to strategically focus on our dual eligible populations.

Joseph Bruski: We increased our county footprint by 23% and on a low income MAA PD population in California.

Jos Dobrowski: Where we increased our accounting footprint by 23%.

Jos Dobrowski: And on our low income.

With that I will turn the call over to Mark for some additional color on the financials Mark.

Jos Dobrowski: Population in California.

Joseph Bruski: Recall, the new CMS final rule on integration positions us well as a major Medicaid player.

Jos Dobrowski: Recall, the new CMS final rule on integration positions us well as a major Medicaid player.

Mark: Thanks, Joe and good morning, everyone.

Joseph Bruski: And marketplace, we are positioned to grow organically and underpenetrated markets, given the stabilized risk profile and margins we've achieved.

Jos Dobrowski: And marketplace, we are positioned to grow organically and underpenetrated markets, given the stabilized risk profile and margins we've achieved.

Mark: Today I'll discuss some additional details on our third quarter performance the balance sheet, our 2020 for guidance and the building blocks of our 2025 EPS outlook.

Joseph Bruski: Our rate filings for 2025 are very competitive and position us to grow and Underpenetrated markets.

Jos Dobrowski: Our rate filings for 2025 are very competitive and position us to grow and Underpenetrated markets.

Joseph Bruski: We are confident in our strategy to grow this segment at a rate that allows us to achieve mid single digit pre tax margins.

Jos Dobrowski: We are confident in our strategy to grow this segment at a rate that allows us to achieve mid single digit pre tax margins.

Joseph Bruski: Finally, we continue to expect that our announced acquisition of Connecticut will close in the first quarter of 2025.

Jos Dobrowski: Finally, we continue to expect that our announced acquisition of Connecticut will close in the first quarter of 2025.

Mark: Beginning with our third quarter results.

Joseph Bruski: Our ability to grow organically when new state contracts and execute M&A are the pillars of our growth strategy and we fully expect to meet our target of $46 billion of premium revenue in 2026.

Mark: For the quarter, we reported approximately $10 billion in total revenue and $9 7 billion of premium revenue with adjusted EPS of $6 <unk>.

Jos Dobrowski: Our ability to grow organically when new state contracts and execute M&A are the pillars of our growth strategy and we fully expect to meet our target of $46 billion of premium revenue in 2026.

Joseph Bruski: With our 2024 earnings per share guidance of at least $23 50 reaffirmed and with our embedded earnings raised to $5 75 per share we remain on track to deliver long term profitable growth Mark will discuss the building blocks of our 2025 outlook in his remarks.

Jos Dobrowski: With our 2024 earnings per share guidance of at least $23 50 reaffirmed and with our embedded earnings raised to $5 75 per share we remain on track to deliver long term profitable growth.

Mark: Our third quarter consolidated MCR of $89 two was above our expectations, reflecting some pressure we experienced in Medicaid and Medicare during the quarter.

Speaker Change: Mark will discuss the building blocks of our 2025 outlook in his remarks.

Joseph Bruski: In summary, we are pleased with the quarter's results as we continued to power through unprecedented short term dynamics and just keep executing on the fundamentals are.

Speaker Change: In summary, we are pleased with the quarter's results as we continue to power through unprecedented short term dynamics and just keep executing on the fundamentals.

Mark: And Medicaid are reported MCR was 95.

Joseph Bruski: Our businesses remain on solid operational and financial foundations and are positioned well for long term profitable growth.

Speaker Change: Our businesses remain on solid operational and financial foundations and are positioned well for long term profitable growth.

Speaker Change: As Joe mentioned. This result includes a 50 basis point increase due to a premium rate reduction in our California business that was retroactive to the beginning of the year.

Joseph Bruski: We look forward to updating you on the next wave of long term value creation at our Investor Day event on Friday November eight in New York City.

Speaker Change: We look forward to updating you on the next wave of long term value creation at our Investor Day event on Friday November 8th in New York City.

Speaker Change: With that I will turn the call over to Mark for some additional color on the financials.

Speaker Change: With much of our California revenue in the new store first year of operation stage corridors, we're not quite at the target margin levels. So much of the impact of this rate action fell through to our bottom line.

Speaker Change: With that I will turn the call over to Mark for some additional color on the financials.

Joseph Bruski: <unk>.

Speaker Change: Mark.

Mark: Thanks, Joe and good morning, everyone.

Mark: Today I will discuss some additional details on our third quarter performance the balance sheet, our 2020 for guidance and the building blocks of our 2025 EPS outlook.

Mark: Beginning with our third quarter results.

Mark: For the quarter, we reported approximately $10 billion in total revenue and $9 7 billion of premium revenue with adjusted EPS of $6 <unk>.

Speaker Change: We are still working with the state to understand the rationale for this rate adjustment.

Speaker Change: It is highly unusual for a state to retroactively reduce rates and all of our other known and expected future rate actions are positive as states address recent medical cost trends.

Mark: Our third quarter consolidated MCR of $89 two was above our expectations, reflecting some pressure we experienced in Medicaid and Medicare during the quarter.

Mark: And Medicaid are reported MCR was <unk> 95.

Speaker Change: As Joe mentioned. This result includes a 50 basis point increase due to a premium rate reduction in our California business that was retroactive to the beginning of the year.

As Joe mentioned. This result includes a 50 basis point increase due to a premium rate reduction in our California business that was retroactive to the beginning of the year.

Speaker Change: Adjusting for this retroactive item or.

Speaker Change: Our reported MCR of 95 to 90.

Mark: With much of our California revenue in the new store first year of operation stage corridors, we're not quite at the target margin levels. So much of the impact of this rate action fell through to our bottom line.

Speaker Change: This was in line with the second quarter and remained elevated versus our expectations.

Speaker Change: We are still working with the state to understand the rationale for this rate adjustment.

Mark: We are still working with the state to understand the rationale for this rate adjustment.

Mark: It is highly unusual for a state to retroactively reduce rates and all of our other known and expected future rate actions are positive as states address recent medical cost trends.

Speaker Change: Driven primarily by higher than expected medical costs in our legacy Medicaid portfolio.

Speaker Change: Recall, the dynamics of Redetermination involve joiners leavers and status.

Speaker Change: <unk> for this retroactive item our reported MCR of 95, 4% to 90.

Mark: <unk> for this retroactive item our reported MCR of 95 to 90.

Speaker Change: [noise] Redetermination related acuity shifts continued into the third quarter, even as the imbalance of joiners and leavers began to stabilize.

Speaker Change: This was in line with the second quarter and remained elevated versus our expectations.

Mark: This was in line with the second quarter and remained elevated versus our expectations.

Speaker Change: Driven primarily by higher than expected medical costs in our legacy Medicaid portfolio.

Mark: Driven primarily by higher than expected medical costs in our legacy Medicaid portfolio.

Speaker Change: Recall, the dynamics of Redetermination involve joiners leavers and status.

Mark: Recall, the dynamics of Redetermination involve joiners leavers and status.

We saw higher utilization among our stairs population, particularly for <unk> pharmacy, and behavioral health services.

Speaker Change: Redetermination related acuity shifts continued into the third quarter, even as the imbalance of joiners and leavers began to stabilize.

Mark: Redetermination related acuity shifts continued into the third quarter, even as the imbalance of joiners and leavers began to stabilize.

Speaker Change: We saw higher utilization among our stairs population, particularly for <unk> pharmacy, and behavioral health services.

Mark: We saw higher utilization among our stairs population, particularly for <unk> pharmacy, and behavioral health services.

Speaker Change: Several dynamics served to offset these higher trends in the third quarter and you did the overall impact.

Speaker Change: Several dynamics served to offset these higher trends in the third quarter and muted the overall impact.

Mark: Several dynamics served to offset these higher trends in the third quarter and unit the overall impact.

Speaker Change: First our new store additions, which represent approximately 20% of Medicaid premium and have a higher than average MCR in their first year improved during the quarter and remain on track to achieving target margins.

Mark: First our new store additions, which represent approximately 20% of Medicaid premium and have a higher than average MCR in their first year improved during the quarter and remain on track to achieving target margins.

Speaker Change: Second we had on cycle and off cycle rate adjustments in 11 states.

Mark: Second we had on cycle and off cycle rate adjustments in 11 states.

Speaker Change: And finally due to our strong medical cost management, we started the year deep into risk corridors, which acted as a buffer and created a more muted impact of this acuity shift.

Mark: And finally due to our strong medical cost management, we started the year deep into risk corridors, which acted as a buffer and created a more muted impact of this acuity shift.

Speaker Change: Second we had on cycle and off cycle rate adjustments in 11 states.

Speaker Change: Medicaid membership at the end of the third quarter was $4 9 million and.

Mark: Medicaid membership at the end of the third quarter was $4 9 million and.

And in line with the second quarter.

Mark: And in line with the second quarter.

Speaker Change: Some continuing redetermination in a few states in July and August were largely offset by the implementation of our new Mexico contract in the quarter.

Mark: Some continuing redetermination in a few states in July and August were largely offset by the implementation of our new Mexico contract in the quarter.

Speaker Change: And finally due to our strong medical cost management, we started the year deepened the risk corridors, which acted as a buffer and created a more muted impact of the security shift.

We continue to see reconnects from prior period terminations and expect continuing upside to membership from reconnects in the quarters ahead.

Mark: We continue to see reconnects from prior period terminations and expect continuing upside to membership from reconnects in the quarters ahead.

Speaker Change: Medicaid membership at the end of the third quarter was $4 9 million and.

Speaker Change: In Medicare our third quarter reported MCR was $89 six.

Mark: In Medicare our third quarter reported MCR was $89 six.

Speaker Change: And in line with the second quarter.

Speaker Change: Higher medical costs in the quarter reflect a continued iron utilization of El TSS and pharmacy.

Speaker Change: Some continuing redetermination in a few states in July and August were largely offset by the implementation of our new Mexico contract in the quarter.

Higher medical costs in the quarter reflect the continued higher utilization of El TSS and pharmacy.

Speaker Change: We also experienced higher outpatient utilization in the third quarter concentrated in our D. SNP population.

Mark: We also experienced higher outpatient utilization in the third quarter concentrated in our D. SNP population.

Speaker Change: We continue to see reconnects from prior period terminations and expect continuing upside to membership from reconnects in the quarters ahead.

Speaker Change: Separately I will note that the prior year risk adjustment true up in the second quarter drove a portion of the sequential increase in the MCR.

Mark: Separately I will note that the prior year risk adjustment true up in the second quarter drove a portion of the sequential increase in the MCR.

Speaker Change: In Medicare our third quarter reported MCR was $89 six.

Speaker Change: Our bright business in California performed in line with expectations.

Mark: Our brake business in California performed in line with expectations.

Speaker Change: Higher medical costs in the quarter reflect the continued higher utilization of L TSS and pharmacy.

Speaker Change: In marketplace, our third quarter reported MCR was 73 and better than expected.

Mark: In marketplace, our third quarter reported MCR was 73 and better than expected.

Speaker Change: We also experienced higher outpatient utilization in the third quarter concentrated in our D. SNP population.

Special enrollment periods membership increased during the quarter, but at a slower rate than the first half of the year.

Mark: Special enrollment periods membership increased during the quarter, but at a slower rate than the first half of the year.

Speaker Change: Separately I will note that the prior year risk adjustment true up in the second quarter drove a portion of the sequential increase in the MCR.

Speaker Change: Our adjusted G&A ratio for the quarter was $6 four.

Mark: Our adjusted G&A ratio for the quarter was $6 four.

Speaker Change: And reflects effective operating discipline, including labor cost management onetime credits related to vendor contracts and leveraging our fixed cost base as we grow.

Mark: And reflects effective operating discipline, including labor cost management onetime credits related to vendor contracts and leveraging our fixed cost base as we grow.

Speaker Change: Our bright business in California performed in line with expectations.

Speaker Change: Okay.

Speaker Change: In marketplace, our third quarter reported MCR was 73 and better than expected.

Speaker Change: Turning to the balance sheet.

Mark: Turning to the balance sheet.

Speaker Change: Our capital Foundation remains strong.

Mark: Our capital Foundation remains strong.

Speaker Change: Special enrollment periods membership increased during the quarter, but at a slower rate than the first half of the year.

Speaker Change: In the quarter, we harvested approximately $385 million of subsidiary dividends.

Mark: In the quarter, we harvested approximately $385 million of subsidiary dividends.

Speaker Change: Our adjusted G&A ratio for the quarter was $6 four.

Speaker Change: And our parent company cash balance was approximately $195 million at the end of the quarter.

Mark: And our parent company cash balance was approximately $195 million at the end of the quarter.

Speaker Change: And reflects effective operating discipline, including labor cost management.

Speaker Change: Yeah.

Mark: Yes.

Speaker Change: In the quarter, we repurchased approximately one 5 million shares our full year guidance now assumes 57 9 million shares outstanding.

Mark: In the quarter, we repurchased approximately one 5 million shares.

Speaker Change: One time credits related to vendor contracts and leveraging our fixed cost base as we grow.

Mark: Our full year guidance now assumes 57 9 million shares outstanding.

Speaker Change: Turning to the balance sheet.

Speaker Change: Yeah.

Mark: Yeah.

Speaker Change: Debt balances and the debt to capital ratio increased slightly in the quarter due to our share repurchases.

Mark: Debt balances and the debt to capital ratio increased slightly in the quarter due to our share repurchases.

Speaker Change: Our capital Foundation remains strong.

Speaker Change: In the quarter, we harvested approximately $385 million of subsidiary dividends.

Speaker Change: Debt at the end of the quarter was one four times trailing 12 months EBITDA with our debt to cap ratio at about 35%.

Mark: Debt at the end of the quarter was one four times trailing 12 month EBITDA with our debt to cap ratio at about 35%.

Speaker Change: And our parent company cash balance was approximately $195 million at the end of the quarter.

Speaker Change: In the quarter, we repurchased approximately one 5 million shares our full year guidance now assumes 57 9 million shares outstanding.

Speaker Change: We continue to have ample cash and capital to fuel our growth initiatives.

Mark: We continue to have ample cash and capital to fuel our growth initiatives.

Speaker Change: During the quarter, we also renewed our revolving credit facility for another five years and increase its capacity to 125 billion.

Mark: During the quarter, we also renewed our revolving credit facility for another five years and increase its capacity to $1 25 billion.

Speaker Change: Debt balances and the debt to capital ratio increased slightly in the quarter due to our share repurchases.

Speaker Change: Days and claims payable at the end of the quarter was 48.

Mark: Days and claims payable at the end of the quarter was 48.

Debt at the end of the quarter was one four times trailing 12 month EBITDA with our debt to cap ratio at about 35%.

Speaker Change: We remain confident in the strength of our reserves.

Mark: We remain confident in the strength of our reserves.

Our operating cash flow in the first nine months of 2024 was $868 million.

Speaker Change: We continue to have ample cash and capital to fuel our growth initiatives.

Speaker Change: This was lower than the prior year, but consistent with our comments last quarter reflects the timing of risk corridor payments CMS receipts and taxes.

Mark: This was lower than the prior year, but consistent with our comments last quarter reflects the timing of risk corridor payments CMS receipts and taxes.

Speaker Change: During the quarter, we also renewed our revolving credit facility for another five years and increased its capacity to $1 25 billion.

Speaker Change: Recall that earlier this year, we made several large corridor settlements related to prior years.

Mark: Call that earlier this year, we made several large corridor settlements related to prior years.

Speaker Change: Days and claims payable at the end of the quarter was <unk> 48.

Speaker Change: Next a few comments on our fourth quarter and 2020 for guidance.

Speaker Change: We remain confident in the strength of our reserves.

Next a few comments on our fourth quarter and 2020 for guidance.

Speaker Change: Our operating cash flow in the first nine months of 2024 was $868 million.

Speaker Change: As Joe mentioned, we reaffirm our full year premium revenue guidance of approximately 38 billion and our full year EPS guidance of at least $23 50.

Speaker Change: As Joe mentioned, we reaffirm our full year premium revenue guidance of approximately $38 billion and our full year EPS guidance of at least $23 50.

Speaker Change: This was lower than the prior year, but consistent with our comments last quarter reflects the timing of risk corridor payments CMS receipts and taxes.

Speaker Change: While full year EPS guidance is unchanged.

Speaker Change: Call that earlier this year, we made several large corridor settlements related to prior years.

Speaker Change: The performance in the second half of the year changes to components as compared to our previous guidance.

Speaker Change: Yeah.

Speaker Change: EPS guidance has increased by $2 70 from.

Speaker Change: EPS guidance has increased by $2 70.

Speaker Change: From the combined tailwind of strong performance in marketplace.

Speaker Change: Next a few comments on our fourth quarter and 2020 for guidance.

Speaker Change: G&A efficiencies and higher net investment income.

Speaker Change: As Joe mentioned, we reaffirm our full year premium revenue guidance of approximately 38 billion and our full year EPS guidance of at least $23 50.

Speaker Change: G&A efficiencies and higher net investment income.

Speaker Change: But will be offset by the higher MCR in Medicaid and Medicare for a net unchanged view of full year guidance.

Speaker Change: While full year EPS guidance is unchanged.

Speaker Change: Yeah.

Speaker Change: We now expect full year 2024, MCR of $88, seven and G&A ratio of six eight.

Speaker Change: The performance in the second half of the year changes to components as compared to our previous guidance.

Speaker Change: EPS guidance has increased by $2.70 from the combined tailwind of strong performance in marketplace.

Speaker Change: Within Medicaid, we expect fourth quarter MCR of 89% a decrease from 95 in the third quarter.

Within Medicaid, we expect fourth quarter MCR of 89% a decrease from 95 in the third quarter.

Speaker Change: G&A efficiencies and higher net investment income.

Speaker Change: The 150 basis point improvement is driven by three items.

Speaker Change: But will be offset by the higher MCR in Medicaid and Medicare for a net unchanged view of full year guidance.

Speaker Change: The 150 basis point improvement is driven by three items.

Speaker Change: First 50 basis points from the third quarter retroactive premium adjustment in California that will not recur.

Speaker Change: We now expect full year 2024, MCR of $88, seven and G&A ratio of six eight.

Speaker Change: Net 80 basis points from known on cycle and off cycle rate increases and some benefit of our corridor position will offset trend.

Speaker Change: Within Medicaid, we expect fourth quarter MCR of 89.

Speaker Change: Finally continued improvement in new store additions will contribute 20 basis points.

Speaker Change: A decrease from 95 in the third quarter.

The 150 basis point improvement is driven by three items.

Speaker Change: We expect full year Medicaid MCR of approximately 90 million up.

Speaker Change: We expect full year Medicaid MCR of approximately <unk> 90 up.

Speaker Change: First 50 basis points from the third quarter retroactive premium adjustment in California that will not recur.

Speaker Change: Up 70 basis points from our prior guidance, reflecting higher cost trend and approximately 10 basis points for the full year impact of the third quarter retroactive premium adjustments in California.

Speaker Change: Neck, 80 basis points from known on cycle and off cycle rate increases and some benefit of our corridor position will offset trend.

Speaker Change: In Medicare, we expect fourth quarter MCR of 90, an increase from $89 six in the third quarter.

Speaker Change: In Medicare, we expect fourth quarter MCR of 90 million and.

Speaker Change: Finally continued improvement in new store additions will contribute 20 basis points.

Speaker Change: An increase from $89 six in the third quarter.

Speaker Change: This guidance assumes the third quarter utilization persists for the remainder of the year and increases the full year MCR to 88 three.

Speaker Change: We expect full year Medicaid MCR of approximately 90 up.

Speaker Change: A 30 basis point increase from our prior guidance.

Speaker Change: And marketplace, we expect fourth quarter MCR of $78 one <unk>.

Speaker Change: In marketplace, we expect fourth quarter MCR of $78 one.

Speaker Change: In Medicare, we expect fourth quarter MCR up 90, an increase from $89 six in the third quarter.

Speaker Change: Compared to <unk> 73 in the third quarter.

Speaker Change: This increase reflects the normal marketplace seasonality during the year and the significant growth we experienced year to date.

Speaker Change: This guidance assumes the third quarter utilization persists for the remainder of the year and increases the full year MCR to $88 three or.

Speaker Change: We expect full year marketplace MCR of 74 down 400 basis points from our prior guidance, reflecting strong year to date performance.

Speaker Change: A 30 basis point increase from our prior guidance.

Speaker Change: In marketplace, we expect fourth quarter MCR of $78 one.

Speaker Change: Turning to embedded earnings and the building blocks of our 2025 EPS outlook.

Speaker Change: Compared to 73 in the third quarter.

Speaker Change: New store embedded earnings are now $5 75, with the addition of contract wins in Michigan in Massachusetts.

Speaker Change: This increase reflects the normal marketplace seasonality during the year and the significant growth we experienced year to date.

Speaker Change: Both contracts are expected to begin in 2026 and achieve target margins in 2027.

Speaker Change: We expect to harvest a little less than half of our embedded earnings in 2025.

Speaker Change: We expect full year marketplace MCR of 74 down 400 basis points from our prior guidance, reflecting strong year to date performance.

We expect to harvest a little less than half of our embedded earnings in 2025.

Speaker Change: The building blocks includes those embedded earnings we expected 2025.

Speaker Change: The organic growth and margin in our current footprint are inflate organic and strategic initiatives.

Speaker Change: The organic growth and margin in our current footprint.

Speaker Change: Our inflate organic and strategic initiatives and.

Speaker Change: And the year over year benefit of share repurchases executed in the third quarter of 2024.

Speaker Change: And a year over year benefit of share repurchases executed in the third quarter of 2024.

We expect some headwinds from declining interest rates next year.

Speaker Change: We expect some headwinds from declining interest rates next year.

Speaker Change: Yeah.

Speaker Change: Turning to embedded earnings and the building blocks of our 2025 EPS outlook.

Speaker Change: We caution that rates have not yet caught up with trend and our corridor predictions are now lower until replenished by the new cycle of Actuarially sound rates.

Speaker Change: While it is not yet clear how the short term disparity between rates and trends will progress.

Speaker Change: These known building blocks are an important foundation to our sustaining long term profitable growth.

Speaker Change: New store embedded earnings are now $5 75, with the addition of contract wins in Michigan in Massachusetts.

Speaker Change: These known building blocks are an important foundation to our sustaining long term profitable growth.

Speaker Change: This concludes our prepared remarks, operator, we're now ready to take questions.

Speaker Change: We will now begin the question and answer session.

Speaker Change: I'll ask a question you May press Star then one on your telephone keypad.

Speaker Change: Ask any question you May Press Star then one on your telephone keypad.

Speaker Change: Both contracts are expected to begin in 2026 and achieve target margins in 2027.

Speaker Change: If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please.

Speaker Change: Please press Star then two.

Speaker Change: At this time, we will pause momentarily.

Speaker Change: Assemble our roster.

Speaker Change: We expect to harvest a little less than half of our embedded earnings in 2025.

Speaker Change: The first question comes from Josh Raskin with Nephron Research. Please go ahead.

Josh Raskin: Hi, Thanks, I'll actually ask my second question first so the strength in market place does that change your view on the impact of potential rebate positions.

Hi, Thanks, I'll actually ask my second question first so the strength in market place does that change your view on the impact of potential rebate positions.

Speaker Change: The building blocks include those embedded earnings we expected 2025.

Josh Raskin: In 2025, just based on what you've seen in the last two years here could you just remind us your views I think you mentioned sort of that mid single digit margins just sort of how your tight trading additional growth in 2025 versus offsetting rebates versus sort of maintaining that mid single digit margin.

Speaker Change: 2025, just based on what you've seen in the last two years here and could you just remind us your views I think you mentioned sort of that mid single digit margin just sort of how your tight trading additional growth in 2025 person is offsetting rebates versus sort of maintaining that mid single digit margin.

Speaker Change: The organic growth and margin in our current footprint are inflate organic and strategic initiatives and a year over year benefit of share repurchases executed in the third quarter of 2024.

Speaker Change: Sure Josh this will be the second straight year of outperformance in marketplace.

Speaker Change: We expect some headwinds from declining interest rates next year.

Speaker Change: And in 'twenty four into 'twenty, five we did invest that excess margin in our bids.

Speaker Change: And in 'twenty four into 'twenty, five we did invest that excess margin and our bids.

Speaker Change: We caution that rates have not yet caught up with trend and our corridor predictions are now lower until replenished by the new cycle of Actuarially sound rates.

Speaker Change: Spec to grow the business and yet here, we are again with another year of outperformance and will continue to do the same.

Speaker Change: Expect to grow the business and yet here, we are again with another year of outperformance and we will continue to do the same.

Speaker Change: So yes.

Speaker Change: We're targeting mid single digit pre tax margins, but the business is positioned to grow really well next year and the year after now with.

Speaker Change: We're targeting mid single digit pre tax margins, but the business is positioned to grow really well next year and the year. After now with respect to the rebate question.

Speaker Change: While it is not yet clear how the short term disparity between rates and trends will progress.

Speaker Change: Respect to rebate question.

Speaker Change: These known building blocks are an important foundation to our sustaining long term profitable growth.

Speaker Change: Recall to three year test.

Recall to three year test.

Speaker Change: And also recall that an 80% minimum.

Speaker Change: Is equivalent mark to 175% GAAP equivalent correct right around there Josh.

Is equivalent to 175% GAAP equivalent correct right around there Josh.

Speaker Change: Tracking to a 74 and our guidance this year as Joe mentioned, the nominal that everybody thinks of a minimum MLR is more like a 76 ish.

Speaker Change: This concludes our prepared remarks, operator, we're now ready to take questions.

Speaker Change: Tracking to a 74 and our guidance this year as Joe mentioned, the AED nominal that everybody thinks of a minimum MLR is more like a 76 ish.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Speaker Change: And as Joe mentioned, you can either pay it in a rebate or make it up on volume through pricing and that's the direction we will take.

Speaker Change: And as Joe mentioned, you can either pay it in a rebate or make it up on volume through pricing and that's the direction we'll take.

Speaker Change: Okay. So you guys are now in a revitalization and your point is you can get that 200 basis point Delta for next year and then just a quick follow up on the Medicaid MLR I think it's running full year. It looks like 70 basis points higher than your previous so maybe if you could just drill down a little bit more on lgs adds behavioral health in our accident and whats running specifically.

Speaker Change: Okay. So you guys are now re registration and your point is you can get that 200 basis point Delta for next year and then just a quick follow up on the Medicaid MLR I think it's running full year. It looks like 70 basis points higher than your previous so maybe if you could just drill down a little bit more on lgs adds behavioral health in our accident and whats running specifically.

Speaker Change: If you are using a speakerphone. Please pick up your handset before pressing the change if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: Worse, what are those incremental pressures coming from.

Worse, what are those incremental pressures coming from.

Speaker Change: Okay.

Speaker Change: We expected in our initial guidance a trend in Medicaid of about 3% and it's landing at about shifts.

Speaker Change: At this time, we will pause momentarily.

Speaker Change: It's split sort of equally between redetermination impact and impact of higher utilization of what I call our continuing membership.

Speaker Change: Assemble our roster.

Speaker Change: The first question comes from Josh Raskin with Nephron Research. Please go ahead.

Speaker Change: No one phenomenon is really driving it.

Josh Raskin: Hi, Thanks, I'll actually ask my second question first so the strength in market place does that change your view on the impact of potential rebate position.

Speaker Change: A blend of <unk> and Rx <unk> skilled nursing facility inpatient stays and hours and home service benefits.

A blend of <unk> ones in Rx <unk> skilled nursing facility inpatient stays and hours and home service benefits.

Speaker Change: And then of course.

Speaker Change: The national phenomenon of behavioral services.

Speaker Change: Trending upwards as well really no one thing and it's different in every geography, but those are the trends we are observing mark anything to add no I think thats right.

Speaker Change: Trending upwards as well really no one thing and it's different in every geography, but those are the trends, we're observing mark anything to add no I think thats right.

Josh Raskin: 2025, just based on what you've seen in the last two years here and could you just remind us your views I think you mentioned sort of that mid single digit margins just sort of how your tight trading additional growth in 2025 versus offsetting rebates versus sort of maintaining that mid single digit margin.

Speaker Change: Versus the initial guidance or expectations for the year were up about 300 basis points on trend Joe mentioned, it's split between re that acuity and it's split between stairs running it a little bit hotter BH LTE assess.

Speaker Change: Pharmacy, we're seeing them in pockets here pockets, there, but those are national trends.

Speaker Change: Thank you.

Speaker Change: The next question comes from J J Rice with UBS. Please go ahead.

The next question comes from J J Rice with UBS. Please go ahead.

Speaker Change: Yes.

Speaker Change: Hi, everybody I think it's a J, but anyway.

Sure Josh So this will be the second straight year of outperformance in marketplace.

Speaker Change: If your trend is running at about 6%.

Speaker Change: So that would imply the rate update you'd need to normalize or probably in that range, maybe a little bit higher over the next year.

Speaker Change: That would imply the rate update as you need to normalize or probably in that range, maybe a little bit higher over the next year.

Josh Raskin: And in 'twenty four into 'twenty, five we did invest that excess margin and our bids.

Josh Raskin: Expect to grow the business and yet here, we are again with another year of outperformance and we will continue to do the same.

Speaker Change: That's quite a bit different as you may know from what at least one of your <unk>.

Speaker Change: That's quite a bit different as you may know from what at least one of your.

Speaker Change: Large peers is saying they need they are talking about low to mid double digit rate increases.

Speaker Change: And they've also raised the question about whether state budgets cannot afford to update in one year.

Speaker Change: Whats necessary or whether we might need multiple cycles I guess I don't know if you can comment on why there might be a difference between what youre seeing and what they're seeing but I'll throw that out and see if I can get you to confirm the order of magnitude of the rate update you need to normalize that whether you think thats achievable over the next.

Josh Raskin: So yes.

Speaker Change: Whats necessary or whether we might need multiple cycles I guess I don't know if you can comment on why there might be a difference.

Josh Raskin: We're targeting mid single digit pre tax margins, but the business is positioned to grow really well next year and the year. After now with respect to the rebate question.

Speaker Change: What youre seeing and what they're seeing but I'll throw that out.

Speaker Change: See if I can get you to confirm the order of magnitude.

Josh Raskin: Recall to three year test.

Speaker Change: The rate update to normalize or whether you think thats achievable over the next year.

Josh Raskin: And also recall that an 80% minimum.

<unk> is equivalent mark to what on a 75% GAAP equivalent correct right right around there Josh we're tracking to a 74 and our guidance. This year as Joe mentioned, the AED nominal that everybody thinks of a minimum MLR is more like a 76 ish and as Joe mentioned.

Speaker Change: Year.

Speaker Change: Let me first AJ comment on the model.

Of how we've been describing this redetermination started.

How we've been describing this redetermination started.

Speaker Change: We knew it would be an acuity shift without question.

Speaker Change: It takes.

Speaker Change: Time for a state's actuary to observe the acuity shift and allow rates to.

Speaker Change: Time for a state actuary to observe the acuity shift and allow rates.

Speaker Change: Right for it.

Josh Raskin: You can either pay it in a rebate or make it up on volume through pricing and that's the direction we'll take.

Speaker Change: There is a gap there.

Speaker Change: There is a gap here.

Speaker Change: Being 200 basis points deep into the risk corridors would act as a buffer until rates caught up and that's exactly what's happening here, obviously, we're a bit short.

Speaker Change: Being 200 basis points deep into the risk corridors would act as a buffer until rates caught up and that's exactly what's happening here, obviously, we're a bit short but.

Speaker Change: But we're operating comfortably at 90% no matter, how you cut it where operating comfortably at 90% now with respect to rates or gives us encouragement and great comfort are the rate updates we saw in the second half of the year $345 million of pre tax benefit to the second half.

Speaker Change: But we're operating comfortably at 90% no matter, how you cut it or operating comfortably at 90% now with respect to rates what gives us encouragement and great comfort are the rate updates we saw in the second half of the year $345 million of pre tax benefit to the second half.

Speaker Change: Okay. So you guys are in a position and your point is you can get about 200 basis point Delta for next year and then just a quick follow up on the Medicaid MLR I think it's running full year. It looks like 70 basis points higher than your previous so maybe if you could just drill down a little bit more on lgs adds behavioral health or accident and whats running specifically.

Speaker Change: 230 basis points in the MCR.

230 basis points in the MCR.

Some of those rate updates were off cycle meeting that stake truly have recognized that compose.

Speaker Change: Some of those rate updates were off cycle meeting that stake truly have recognized that compose.

Speaker Change: Components of their program are underfunded.

Speaker Change: The on cycle rate adjustments in the third quarter averaged four 5%.

Speaker Change: The on cycle rate adjustments in the third quarter average.

Speaker Change: 5%.

The on cycle of rate adjustments in the fourth quarter averaged nearly 9%.

Speaker Change: The on cycle rate adjustments in the fourth quarter averaged nearly 9%.

Speaker Change: Now, we've only seen a handful of draft rates for one one when 55% of our revenue renews.

Josh Raskin: Worse, what are those incremental pressures coming from.

Speaker Change: But we've been encouraged by what we've seen at this early stage.

Speaker Change: So how it all mapped out depends on what cost trend.

Speaker Change: Oh.

Speaker Change: So how it all mapped out depends on what cost trend.

Speaker Change: We expected in our initial guidance a trend in Medicaid of about 3% and it's landing at about shifts.

Emerging from the fourth quarter as to whether the strength those one when rates will truly get us back to our target MCR Mark anything to add Joe I think that's really will summarize theres no doubt that there is a little bit of a lag between trend and when states recognize it but as Joe mentioned five one cycle seven off in the third quarter three more in the.

Speaker Change: Emerging from the fourth quarter as to whether the strength of those one win rates will truly get us back to our target MCR Mark anything to add Joe I think that's really will summarize theres no doubt that there is a little bit of a lag between trend and when states recognize it but as Joe mentioned five one cycle seven off in the third quarter three more in the.

Speaker Change: It's split sort of equally between redetermination impact and impact of higher utilization of what I call our continuing membership.

Speaker Change: Fourth quarter.

Speaker Change: Fourth quarter the.

Speaker Change: The timing will never be perfect, but part of our equation here is those corridors make up that difference until we get to the new year and the new rate cycle. So I think a combination of the states being fairly responsive in the corridor position, we're confident in our outlook.

Speaker Change: No one phenomenon is really driving it.

Speaker Change: It's a blend of <unk> ones in Rx.

Speaker Change: ASP of skilled nursing facility inpatient stays and hours and home service benefits and.

Speaker Change: Okay.

Speaker Change: Helpful.

Speaker Change: On your utilization trends that youre seeing.

Speaker Change: Just on your utilization trends that youre seeing.

Speaker Change: And you called out the areas of Medicaid, So what youre seeing a little bit of that better care.

Speaker Change: And you called out the areas of Medicaid is that what youre seeing a little bit of that better care.

Speaker Change: And then of course, the national phenomenon of behavioral services.

Speaker Change: Just trying to parse out are these just the way the market is at this point or do you need to get that and you're right updates both for Medicaid or Medicare or is there a medical management opportunities for you to.

Speaker Change: Trending upwards as well really no one thing and it's different in every geography, but those are the trends were observing mark anything to add no I think that's right.

Speaker Change: Pushback on some of what Youre seeing.

Pushback on some of what Youre seeing.

Speaker Change: Well I think its all relative right because we all get the same rates. We're all observing the same growth trends supply driven demand driven.

Speaker Change: We have.

Speaker Change: Proven on a sustainable basis that we are managing medical cost effectively otherwise we would not have historically been 200 basis points deep into the core horse on average for the past three years or four years.

Speaker Change: Proven on a sustainable basis that we are managing medical cost effectively otherwise we would not have historically been 200 basis points deep into the quarters on average for the past three years or four years.

Speaker Change: H L. TSS pharmacy, we're seeing them in pockets here pockets, there, but those are national trends.

Speaker Change: So as rates renew.

Those.

Speaker Change: Those.

Core doors, replenish and given our expertise in medical management care management.

Speaker Change: Corridors replenish and given our expertise in medical management care management.

Speaker Change: Driving great quality scores risk adjustment et cetera, we plan to and it is our intention to always be operating below whatever state benchmark exists and a minimum MLR or a corridor to always have that financial buffer available to us. The only thing I would add Joe is when we talk about trend we talked.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: The next question comes from J J Rice with UBS. Please go ahead.

Speaker Change: Hi, everybody I think it's a J, but anyway.

Speaker Change: About net trend so the benefit of the medical cost management that we do <unk> all of that is already in the numbers that we report I think maybe when you hear a higher trend numbers from other folks they may have different views on how they do medical management, but again, we talk about net trends net of all of the things we do to manage costs.

Speaker Change: About net trend so the benefit of the medical cost management that we do <unk> all of that is already in the numbers that we report I think maybe when you hear higher trend numbers from other folks they may have different views on how they do medical management, but again, we talk about net trends net of all of the things we do to manage costs.

Speaker Change: You know if your trend is running at about 6%.

Speaker Change: That would imply the rate update you need to normalize or probably in that range, maybe a little bit higher over the next year.

Speaker Change: Okay. Thanks, a lot.

Speaker Change: Hey, Jay.

Speaker Change: Hey, Joe.

Speaker Change: Okay.

Speaker Change: Apologies to you Mr. Rice for Misspeaking. Your name. The next question comes from Sarah James with Cantor Fitzgerald. Please go ahead.

Speaker Change: That's quite a bit different as you may know from what at least one of your.

Speaker Change: Large peers is saying they need they're talking about low to mid double digit rate increases.

Sarah James: Thank you.

Sarah James: Help us think about what a clean jumping off point for Q.

Speaker Change: And they've also raised the question about whether state budgets or update in one year.

Sarah James: No.

Sarah James: You guys mentioned, a one time vendor credit how big was that I think also unusual tax item and with any of the 80 basis point pressure on the core Medicaid MLR out of period.

You guys mentioned, a one time from the credit topic with Bard I think also unusual tax item and with any of the 80 basis point pressure on the core Medicaid MLR out of period.

Sarah James: And then just a clarification.

Speaker Change: Whats necessary or whether we might need multiple cycles I guess I don't know if you can comment on why there might be a difference.

Sarah James: And then just a clarification.

Should we think about 80, plus the 200 basis points risk corridor, so really to 80 year over year.

Sarah James: Should we think about 80, plus the 200 basis points risk corridor, so really to 80 year over year.

Speaker Change: Okay. Thanks.

Speaker Change: You are seeing and what they're seeing but I'll throw that out and see if I can get you to confirm but order of magnitude of the rate update to normalize or whether you think thats achievable over the next year.

Sarah James: Okay. Thanks.

Speaker Change: We'd have to parse your question into various pieces, but as I said.

Speaker Change: We would have to parse your question into various pieces, but as I said.

We are no matter, whether you pro forma the second quarter to the third third quarter to the fourth of the full year, we are comfortably operating Medicaid at 90% MCR in fact.

Speaker Change: We are no matter, whether you pro forma the second quarter into the third third quarter to the fourth of the full year, we are comfortably operating Medicaid at 90% MCR in fact.

Speaker Change: For the full year embedded in our guidance is an 89, 3% MSR MCR on the legacy book, that's only 30 basis points above the top end of the range.

Speaker Change: For the full year embedded in our guidance is an 89, 3% MSR MCR on the legacy book, It's only 30 basis points above the top end of the range.

Speaker Change: Let me first AJ comment on the model of.

Speaker Change: How we've been describing this redetermination started.

Speaker Change: We have a bridge and Mark will give it to you here in a second how we get from 95 in the third to 89 in the fourth which we can support our guidance Mark Yeah, absolutely. So the jumping off point on the third quarter, we reported a 95.

Speaker Change: We knew there would be an acuity shift without question.

Speaker Change: It takes.

Speaker Change: But as you know 50 basis points was that one time item in California. So we're jumping off of 90% from a clean basis on a third quarter.

Mark: But as you know 50 basis points was that one time item in California. So we're jumping off of 90 from a clean basis on a third quarter.

Speaker Change: Time for a state's actuary to observe the acuity shift and allow rates.

Speaker Change: When we look at our rates.

Mark: When we look at our rates.

Speaker Change: Right for it.

Speaker Change: And our trend and our corridors.

Mark: And our trend and our corridors.

Speaker Change: There is a gap here.

Speaker Change: Seeing a pretty significant improvement I'm trying to give you an 89 for the fourth quarter the way I get there off over 90.

Mark: Seeing a pretty significant improvement target given the 89 for the fourth quarter the way I get there off of a 90.

Speaker Change: Is rates, we have three states with known on cycle rates, which give me 80 bps of good guide for the fourth quarter.

Mark: Is rates, we have three states with known on cycle rates, which give me 80 bps of good guide for the fourth quarter.

Speaker Change: Being 200 basis points deep into the risk corridors would act as a buffer until rates caught up and that's exactly what's happening here, obviously, we're a bit short, but we're operating comfortably at 90% no matter, how you cut it where operating comfortably at 90% now with respect to rates, what gives us encouragement and Greg.

Speaker Change: I'm going to assume trends another 50 bps in the fourth quarter and I know I have corridors roughly to offset that.

Mark: I'm going to assume trends another 50 bps in the fourth quarter and I know I have corridors roughly to offset that.

Speaker Change: You add a little bit of benefit from our new stores, which continued to give US 2030 bps every quarter as they progress through their targets. That's your trajectory to get from a 90 adjusted $2 89.

Mark: You add a little bit of benefit from our new stores, which continued to give US 2030 bps every quarter as they progress through their targets. That's your trajectory to get from a 90 adjusted $2 89.

Speaker Change: Now on G&A you asked also about the jumping off point, we reported a six four in the third quarter.

Speaker Change: That benefited some from some vendor credits a little bit it was a retro, but a little bit of sustaining.

Speaker Change: That benefited some from some vendor credits a little bit was a retro, but a little bit of sustaining.

Speaker Change: Just to cut to the chase on that my full year guidance will be a six to eight on G&A.

Speaker Change: Are the rate updates we saw in the second half of the year $345 million of pre tax benefit to the second half.

Speaker Change: Just to cut to the chase on that my full year guidance will be a six to eight on G&A.

Speaker Change: I think that gives you the building blocks to model out the rest of the year.

Speaker Change: Great. Thank you.

Speaker Change: 230 basis points in the MCR.

Speaker Change: The next question comes from Stephen Baxter with Wells Fargo. Please go ahead.

Speaker Change: Some of those rate updates were off cycle, meaning that stake truly have recognized that components.

Stephen Baxter: Yes, hi, thanks for the question I appreciate it.

Stephen Baxter: Yes, hi, Thanks for the question I appreciate the color on the bridge to the fourth quarter's wanted to follow up a bit on that you mentioned some of the <unk>.

Stephen Baxter: Color on the bridge for the fourth quarter is one of the follow up little bit on that you mentioned some of it you're factoring in potential for some incremental trend I guess when you think about the negative impact from acuity shifts that have been driving up MLR sequentially rejoined our dynamic presumably contributing to that as well as your expectation now given where we are in the <unk>.

Speaker Change: Components of their program are underfunded.

Speaker Change: The on cycle rate adjustments in the third quarter average.

Stephen Baxter: You're factoring in potential for some incremental trend I guess, when you think about the negative impact from acuity shifts that have been driving up MLR sequentially rejoined our dynamic presumably contributing to that as well as our expectation now given where we are in the cycle that this negative incremental pressure has largely stopped as we enter the.

Speaker Change: 5%.

Speaker Change: The on cycle of rate adjustments in the fourth quarter averaged nearly 9%.

Michael that this negative incremental pressure has largely stopped as we enter the third and fourth quarter or is that factored into your thought process is continuing at least for another quarter or two thank you.

Speaker Change: Now, we've only seen a handful of draft rates for one one when 55% of our revenue renews.

Speaker Change: I know the fourth quarter or is that factored into your thought process is continuing at least for another quarter or two thank you.

Speaker Change: So in the third quarter, we had pretty meaningful trend as did everybody right and I think there were two dynamics in the third quarter. One there was a little more carryover from Redetermination.

Speaker Change: But we've been encouraged by what we've seen at this early stage.

Speaker Change: So how it all mapped out depends on what cost trend.

Speaker Change: One is just the weighted average math redetermination, mostly stopped in the second quarter, but the weighted average math carrying into the third quarter put a little pressure in the third quarter. The other thing is I had a couple of states that continued to do determinations in the third quarter had.

Speaker Change: Emerging from the fourth quarter as to whether the strength those one when rates will truly get us back to our target MCR Mark anything to add Joe I think that's really well summarize theres no doubt that there is a little bit of a lag between trend and when states recognize it but as Joe mentioned five one cycle seven off in the third quarter three more in the.

Speaker Change: Two states in particular that extended into the third quarter. So we saw a little bit more of the joiners leavers dynamic into the third quarter that I would've otherwise expected and of course, the leavers, having a little bit higher utilization I don't think either of those are sustaining which is why I'm, suggesting more like a 50 basis point trend in the fourth quarter.

Speaker Change: Two states in particular that extended into the third quarter. So we saw a little bit more of the joiners leavers dynamic into the third quarter than I would've otherwise expected and of course, the leavers, having a little bit higher utilization I don't think either of those are sustaining which is why I'm, suggesting more like a 50 basis point trend in the fourth quarter.

Speaker Change: Over the third kind of coming back to a new normal.

Speaker Change: The fourth quarter.

Speaker Change: Was there a follow up Mr. Baxter.

Speaker Change: It is our intention to always be operating below whatever state benchmark exist in a minimum MLR or a corridor to always have that financial buffer available to us. The only thing I would add Joe is when we talk about trend we talked about net trend. So the benefit of the medical cost management that we do UMC them all of that.

Stephen Baxter: Yes, yes.

Stephen Baxter: Youre going to be a follow up there I appreciate.

Stephen Baxter: If youre going to be a follow up there I appreciate it.

Stephen Baxter: Yes.

Speaker Change: Just a little bit of like what the states in terms of the rate update process are really seeing here I mean like to follow up on a previous question. We've kind of heard from peer companies that there is often a multi year lagged the claims base needed to reset rates. So in terms of the rate update and so large today as it truing up acuity factors largely because we've seen enrollment dropoff more than would have been.

Stephen Baxter: It's a little bit of like what the states in terms of the rate update process are really seeing here I mean like to follow up on a previous question. We've kind of heard from peer companies that there is often a multi year lagged the claims base needed to reset rates. So in terms of the rate update and so large today as it truing up acuity factors largely because we've seen enrollment dropoff more than would've been previous.

Speaker Change: Previously projected trying to understand what is making its way into the rates and why given that the claims experience obviously is still very dynamic.

Speaker Change: Protective is trying to understand.

Speaker Change: What is making its way into the rates and why given the claims experience obviously is still very dynamic.

Speaker Change: Thanks.

Speaker Change: Great process has not changed the rate setting process starts with a credible baseline every state has a view of what that where that baseline should lie whether it's a year prior two years prior pre pandemic.

Speaker Change: It's already in the numbers that we report I think maybe when you hear a higher trend numbers from other folks.

Speaker Change: Trend off the baseline and acuity shifts for any reason are always part of the <unk> process. The only thing that's different now is that the acuity shift is far more dramatic given the 92 million enrollees down $2 million to $72 million in a short period of time. So nothing has really changed in the rating model process. It works exactly the way it is.

Speaker Change: It may have different views on how they do medical management, but again, we talk about net trends net of all the things we do to manage costs.

Speaker Change: Worked historically the only thing that's different is the acuity shift as more prominent and by the way it's not a secret.

Speaker Change: The way it's worked historically the only thing that's different is the acuity shift as more prominent and by the way.

Speaker Change: Okay. Thanks, a lot.

Speaker Change: It's not a secret.

Speaker Change: Hey, Joe.

Speaker Change: Its high profile every state knows it Andrew is laser focused on this with the fact that we're getting updates that seem to be capturing it should be no surprise.

Speaker Change: Its high profile every state knows it Andrew is laser focused on the fact that we're getting updates that seem to be capturing it should be no surprise.

Speaker Change: Okay.

Speaker Change: Apologies team Mr. Rice for MS. Speaking your name. The next question comes from Sarah James with Cantor Fitzgerald. Please go ahead.

Speaker Change: Okay.

The next question comes from Justin Lake with Wolfe Research. Please go ahead.

Speaker Change: The next question comes from Justin Lake with Wolfe Research. Please go ahead.

Sarah James: Thank you.

Speaker Change: Okay.

Speaker Change: Thanks, Good morning wanted to focus on your 2020 filed comments.

Sarah James: Help us think about what a clean jumping off point for Q.

Speaker Change: Thanks, Good morning wanted to focus on your 2020 filed comments.

Speaker Change: First.

First.

Speaker Change: Are you confirming that you believe you can do 13% to 15% next year and specifically.

Justin Lake: Are you confirming that you believe you can do 13% to 15% next year and specifically.

Sarah James: You guys mentioned, a one time vendor credit how big was that I think also unusual tax item and with any of the 80 basis point pressure on the core Medicaid MLR out of period.

Speaker Change: Mark you gave the just about $3 a got embedded earnings kind of comes in next year, which is a great tailwind on the other hand, you talked about a bunch of help from investment income in G&A and marketplace that might not reoccur.

Speaker Change: Mark you gave the just about $3 of embedded earnings kind of comes in next year, which is a great tailwind on the other hand, you talked about a bunch of help from investment income in G&A and marketplace that might not reoccur.

Speaker Change: There is almost a similar number I think you said it was like $2 70. So just trying to think about those moving parts and whether you still see that when combined with our core growth getting you to that 13% to 15% target or where you expect to be in there.

Speaker Change: There's almost a similar number I think you said it was like $2 70. So just trying to think about those moving parts and whether you still see that when combined with our core growth getting you to that 13% to 15 target or where you expect to be in there.

Sarah James: And then just a clarification is it should we think about it is 80, plus the 200 basis points risk corridor, so really to 80 year over year that'd.

Speaker Change: Well I think just it's Joe I think the items that are easy to get your arms around the better earnings because we have visibility into them.

Speaker Change: Well I think.

Speaker Change: Justin It's Joe I think the items that are easy to get your arms around the better earnings because we have visibility into them.

Sarah James: That'd be great. Thanks.

Speaker Change: We'd have to parse your question into various pieces, but as I said.

Speaker Change: As Mark said, there will be a headwind from net investment income that's pretty obvious.

Speaker Change: We are no matter, whether you pro forma the second quarter to the third third quarter to the fourth of the full year.

Speaker Change:

Speaker Change: More.

Speaker Change: Yes.

Speaker Change: The unknown is when we talk about growth off the footprint, that's usually pretty easy to predict but we need to see how medical cost trend emerges in the fourth quarter into the first two then conclude that the one one rates 55% of our revenue are appropriately capture yet so.

Speaker Change: We are comfortably operating Medicaid at 90% MCR in fact for.

Speaker Change: For the full year embedded in our guidance is an 89, 3% MSR and NCR and the legacy book.

Speaker Change: It's only 30 basis points above the top end of the range.

Speaker Change: Normally we'd be able to give you a really good point estimate in a normal environment that our footprint should produce a backup by 52 Bucks a share right now where hesitated to do that until we see more in the fourth quarter Mark anything gas Yeah, a couple of things Justin just to set the table you mentioned and $2 70.

Speaker Change: <unk>, we'd be able to give you a really good point estimate in a normal environment that our footprint should produce a backup by 52 Bucks a share.

Speaker Change: Right now we're hesitated to do that until we see more in the fourth quarter Mark anything gas Yeah, a couple things Justin just to set the table you mentioned and $2 70.

Speaker Change: We have a bridge and Mark will give it to you here in a second how do we get from 95 in the third to 89 in the fourth which we can support our guidance Mark Yeah, absolutely. So the jumping off point on the third quarter, we reported a 95.

Speaker Change: That was part of my bridging on 2024 guidance held versus prior guidance now $2 70 on a bunch of good guys and down $2 70 on the trend in Medicaid and Medicare. So thats current year, let's put that aside for 2025 guidance Joe hit it exactly right with some of the vagaries, we have right now on trend and <unk>.

Speaker Change: That was part of my bridging on 2024 guidance held versus prior guidance ill now $2 70 on a bunch of good guys and down $2 70 on the trend in Medicaid and Medicare. So thats current year, let's put that aside for 2025 guidance Joe hit it exactly right with some of the vagaries, we have right now on trend and.

Speaker Change: Right, we're optimistic, but we're not ready to lay out specific numbers on that now the biggest component of next year is the embedded earnings.

Mark: But as you know 50 basis points was that one time item in California. So we're jumping off of 90 from a clean basis on a third quarter.

Speaker Change: As you know, we're now up to $5 75 on embedded earnings and I said in my prepared remarks, we expect a little less than half of that to.

As you know, we're now up to $5 75 on embedded earnings and I said in my prepared remarks, we expect a little less than half of that too.

Mark: When we look at our rates and.

Speaker Change: To emerge next year.

Speaker Change: Pressures on net investment income you got that one absolutely and Youre aware, we did a small stock repurchase in the third quarter, which you would want to factor into your numbers as well.

Mark: Process is continuing at least for another quarter or two thank you.

Speaker Change: Okay, Great and then just a follow up on the on the rates right. It sounded like you got some pretty good.

Mark: So in the third quarter, we had pretty meaningful trend as did everybody right and I think there were two dynamics in the third quarter. One there was a little more carryover from Redetermination.

Speaker Change: Okay, Great and then just a follow up on the on the rates right. It sounded like you got some pretty good.

Speaker Change: Retro rates in the quarter, you mentioned the headwind from California.

Speaker Change: Retro cod.

Speaker Change: Retro caught.

Is there any tailwind.

Speaker Change: Is there any tailwind.

Speaker Change: Some of these some of these rates in the third quarter, especially the off cycle rates being also retroactive.

Speaker Change: From some of these some of these rates in the third quarter, especially the off cycle rates being also retroactive.

Mark: One is just the weighted average math redetermination, mostly stopped in the second quarter, but the weighted average math carrying into the third quarter put a little pressure in the third quarter. The other thing is I had a couple of states that continued.

Speaker Change: We need to consider in that jump off point over where noted those retro.

Speaker Change: The rates that we got in the third quarter are obviously, a good jumping off point going forward. The retro rates are not only retro, but also imply a new go forward basis. So you can jump off third quarter with confidence and then Joe mentioned, we had three new rates in the fourth quarter, which are factored into my fourth.

Speaker Change: The rates that we got in the third quarter are obviously, a good jumping off point going forward. The retro rates are not only retro but also in play a new go forward basis. So you can jump off third quarter with confidence and then Joe mentioned, we had three new rates in the fourth quarter, which are factored into my fourth.

Mark: The terminations in the third quarter had.

Speaker Change: Quarter outlook.

Speaker Change: Right, Mark but to the extent they are retro you would have $1 in the quarter that don't belong in the quarter, just like California doesn't belong in the crop right was there any of that like any offset to that 50 bps.

Speaker Change: Right, Mark but to the extent they are retro you would have $1 in the quarter that don't belong in the quarter, just like California doesn't belong in my product right was there any of that like any offset to that 50 bps.

Mark: Two states in particular that extended into the third quarter. So we saw a little bit more of the joiners leavers dynamic into the third quarter that I would've otherwise expected and of course, the leavers, having a little bit higher utilization I don't think either of those or sustaining which is why I'm, suggesting more like a 50 basis point trend in the fourth quarter.

Speaker Change: That's a little of both.

Jeffrey Guyer: So Jeff just for a little blip in the quarter.

Speaker Change: For the quarter.

Speaker Change: Just a little bit, but when I give you my bridge from third quarter to fourth quarter that didn't my net rate increase.

Jeffrey Guyer: A little bit, but when I give you my bridge from third quarter to fourth quarter that didn't my net rate increase.

Speaker Change: Okay. Thanks, guys.

Speaker Change: You bet.

Speaker Change: The next question comes from Andrew Mok with Barclays. Please go ahead.

Andrew Mok: Hi, Good morning wanted to follow up on the exchanges can you help us understand the drivers of the outperformance in the quarter and how would you compare this years SVP memberships to performance of prior years. Thanks.

Speaker Change: Hi, Good morning wanted to follow up on the exchanges can you help us understand the drivers of the outperformance in the quarter and how would you compare this year as SVP memberships to performance of prior years.

Mark: Over the third kind of coming back to a new normal.

Speaker Change: The FEP membership this year, a marketplace's band extraordinary I think in the second quarter was 90000, plus a level dropped to 60.

Speaker Change: The FEP membership this year and marketplaces band extraordinary I think in the second quarter was 90000, plus a leveled off to 60000.

Speaker Change: What's sort of a follow up Mr. Baxter.

Speaker Change: And then 50000 in each of the last three quarters.

Speaker Change: Yes, yes.

Speaker Change: Our normal SVP membership gain in that business is 20 to $25. So you can see that it benefited by the Medicaid redetermination process without question.

Speaker Change: Our normal SVP membership gain in that business is 20 to 25000. So you can see that it benefited by.

Speaker Change: If youre going to be.

Speaker Change: Follow ups I appreciate it.

Speaker Change: Yes, a little bit of like what the states in terms of the rate update process are really seeing here I mean like to follow up on a previous question. We've kind of heard from peer companies that there is often a multi year lagged the claims base needed to reset rates. So in terms of the rate update being so large today as it truing up acuity factors largely because we've seen enrollment dropoff more than would've been.

Speaker Change: The Medicaid Redetermination process without question.

Speaker Change: Normally that FEP membership comes in with higher acuity and runs higher NCR. This year. The S&P membership came in running higher than the traditional book, but not as high.

Speaker Change: Normally that FEP membership comes in with higher acuity and runs higher NCR. This year. The FCP membership came in running higher than the traditional book, but not as high.

Speaker Change: It's due to a younger demographic a more healthy demographic and it didn't put as much pressure on the MCR as it had done historically likely due to the fact that many of those members came in from Medicaid.

Speaker Change: It's skewed to a younger demographic a more healthy demographic and it didn't put as much pressure on the MCR as it had done historically slightly due to the fact that many of those members came in for Medicaid.

Speaker Change: So.

Speaker Change: If the business is performing well.

Speaker Change: And I'd, rather have I'd, rather have excess margin and not because I can always invest excess margin and growth, which is exactly what we plan to do.

Speaker Change: And I'd, rather have the I'd, rather have excess margin and not because I can always invest excess margin and growth, which is exactly what we plan to do.

Speaker Change: Obviously projected is trying to understand what is making its way into the reason why given that the claims experience obviously is still very dynamic.

Speaker Change: Got it and if I could just follow up can you help us understand how the revenue recognition works for off cycle rate adjustments do you wait for those payments to be received or you're able to recognize though is when you have a certain level of assurance and visibility into those payments.

Speaker Change: Got it and then if I could just follow up can you help us understand how the revenue recognition works for off cycle rate adjustments do you wait for those payments.

Speaker Change: We received are you able to recognize though is when you have a certain level of assurance and visibility into those payments. Thanks.

Speaker Change: Yes, we have a really tight accounting standard on that we need documented evidence.

Speaker Change: Not not just suggestion or conversation we book on documented evidence.

Speaker Change: Great. Thank you.

Speaker Change: The next question comes from Andrew Adam Ron with Bank of America.

Speaker Change: The next question comes from Adam Adam Ron with Bank of America.

Speaker Change: Please go ahead.

Speaker Change: Hey, thanks, so much.

Speaker Change: I have a question about core trend.

Adam Ron: I have a question about core trend.

Speaker Change: What youre seeing on that versus the rate in acuity mismatch first has that core trend accelerated throughout the year such that <unk>.

Adam Ron: And what youre seeing on that versus the rate in acuity mismatch first has that core trend accelerated throughout the year such that <unk>.

Mark: Mark anything to add yeah, a couple of things Justin just to set the table you mentioned $2.70 that was part of my bridging on 'twenty 'twenty four guidance held versus prior guidance now at $2 70 on a bunch of good guys and down $2 70 on the trend in Medicaid and Medicare. So that's current year, let's put that aside.

Speaker Change: <unk> was higher than once you with <unk> retirement, and <unk>, we expect <unk> to be higher.

Adam Ron: <unk> was higher than once you get through to your retirement Uqm's, we expect <unk> to be higher.

Speaker Change: And if not what gives you confidence that it will slow and then second if you could.

Adam Ron: And if not what gives you confidence that it will slow and then second if you could just break out the magnitude of how youre seeing core trend versus the acuity rate mismatch.

Speaker Change: Just break out the magnitude of how youre seeing core trend versus the acuity rate mismatch.

Speaker Change: Overall, how that stacks up I think one of your competitors, but it was roughly a third core trend two thirds acuity birth rate.

Adam Ron: Overall, how that stacks up I think one of your competitors, but it was roughly a third core trend two thirds acuity birth rate. Thanks.

Speaker Change: As I said previously and ill kick it to Mark I'll, let you state Medicaid to keep the conversation is simple.

Speaker Change: As I said previously and ill kick it to Mark electric state Medicaid to keep the conversation simple.

Speaker Change: We had anticipated a net trend of 3% and our initial guidance that has increased to six and I guess you can say, yes. It add built during the year.

Speaker Change: We had anticipated a net trend of 3% and our initial guidance that has increased to six and I guess you could say, yes. It add built during the year we.

Mark: For 2025 guidance, Joe hit it exactly right with some of the vagaries, we have right now on trend and rate, we're optimistic, but we're not ready to lay out specific numbers on that now the biggest component of next year is the embedded earnings as.

We still have a trend increase going into the fourth even office incredibly high cost baseline, we still in our forecast at a slight trend increase into the fourth quarter.

Speaker Change: We still have a trend increase going into the fourth even office incredibly high cost baseline, we still in our forecast at a slight trend increase into the fourth quarter.

Speaker Change: Yeah.

Speaker Change: The combination of rates trend in corridors.

Speaker Change: Are the reason, we're operating at 90% not 89, so it worked exactly the way we had predicted.

Speaker Change: Are the reason, we're operating at 90% not 89, so it worked exactly the way we had.

Mark: As you know, we're now up to $5 75 on embedded earnings and I said in my prepared remarks, we expect a little less than half of that too.

Speaker Change: Predicted.

Speaker Change: With core wars acting as a buffer until rates caught up.

Speaker Change: And that is happening now we are still cautious on the <unk> rates as I said before but the model is working exactly as we had predicted the quarter of <unk> as a financial buffer.

Speaker Change: And that is happening now we are still cautious on the <unk> rates as I said before but the model is working exactly as we have predicted the quarter of <unk> as a financial buffer.

Mark: To emerge next year.

Mark: Pressures on net investment income you got that one absolutely and you are aware, we did a small stock repurchase in the third quarter, which you would want to factor into your numbers as well.

Speaker Change: Rates time to catch up with trend and yes trend did build over the year.

Speaker Change: <unk> rates time to catch up with trend and yes trend did build over the year.

Speaker Change: Yes, and I think Adam the easiest way for me to think about it because you get into timing issues quarter to quarter. What came in when it was something retro on a full year basis, as we said before <unk>.

Speaker Change: Trend is 3% higher.

Speaker Change: I initially thought in the outlook just for all the reasons, we all know.

Speaker Change: Okay, Great and then just a follow up on the on the rates right. It sounded like you got some pretty good.

Speaker Change: Rates are one 5% better than I initially thought.

Speaker Change: I'm using 1% of my core doors on a full year basis to offset some of that mismatch.

Speaker Change: I'm using 1% of my corridors on a full year basis to offset some of that mismatch.

Speaker Change: Retro rates in the quarter, you mentioned that headwind from California.

Speaker Change: Which is largely why full year guidance went from 89 to 90.

Speaker Change: The difference at all of that math is obviously, you've got a couple of California retro items in there, but those are the big items and on that trend. What we've been very clear about is part of it is the ongoing imbalance of joiners and leavers and part of it is those stairs running just a little bit hotter than most of us expected.

Speaker Change: Retro cod.

Speaker Change: Is there any tailwind.

Speaker Change: Some of these some of these rates in the third quarter, especially the off cycle rates being also retroactive.

Speaker Change: We need to consider in that jump off point over where noted those retro.

Speaker Change: Hey, Adam I keep coming back to the legacy book, because the California, retro and the new stores create.

Adam Ron: Adam I keep coming back to the legacy book because of the California retro on the new stores create.

Speaker Change: Little bit of uptick application.

Adam Ron: A little bit of uptick application.

Speaker Change: The fourth quarter legacy book is going to produce an $88 eight the second half is it 80 93 and the full year legacy book is 89 three.

Adam Ron: The fourth quarter legacy book is going to produce an $88 eight the second half is at 89, 3% in the full year legacy book of 89, three in this incredibly difficult time.

Speaker Change: This incredibly difficult time.

Speaker Change: Huge shifting the risk pool, we're operating on our legacy book only 30 basis points above the high end of our range combination of quarter protection rates catching up to an accelerated trend.

Adam Ron: Huge shifting the risk pool, we're operating on our legacy book only 30 basis points above the high end of our range combination of corridor protection rates catching up to an accelerated trend.

Speaker Change: Okay.

Adam Ron: Okay.

Speaker Change: I appreciate it.

Speaker Change: The next question comes from Ryan <unk> with TD Cowen. Please go ahead.

Speaker Change: Quarter outlook.

Right, Mark but to the extent their retro you would have $1 in the quarter that don't belong in the quarter, just like California doesn't belong in the crop right was there any of that like any offset to that 50 bps.

Speaker Change: Hi, Thank you.

Speaker Change: You called out higher utilization pharmacy behavioral LTC I'm curious if any other service lines might have come in maybe better than you had expected in the <unk> and then just on the behavioral side I called out Kentucky last quarter, specifically is that higher utilization still isolated to that state or are you not seeing that more maybe <unk>.

Speaker Change: Based on other geographies. Thanks.

Speaker Change: <unk> based in other geographies.

Speaker Change: I'll answer the second question first.

Speaker Change: The first question to Mark on behavioral the reasonably excited Kentucky. It was a program change that caused it there was a suspension of utilization management and Kentucky during the pandemic, which are part of course caused behavioral cost to go up.

Speaker Change: There's a little of both.

Speaker Change: For the quarter.

Speaker Change: Just a little bit, but when I give you my bridge from third quarter to fourth quarter that didn't my net rate increase.

Speaker Change: We are seeing pockets of of trend inflection on behavioral services broad based across the country.

We are seeing pockets of of trend inflection on behavioral services broad based across the country.

Speaker Change: Okay. Thanks, guys.

Speaker Change: How youre seeing core trend versus the acuity rate mismatch.

Speaker Change: It was more pronounced because of the program change.

Speaker Change: Kentucky was more pronounced because of the program change.

Speaker Change: Overall, how that stacks up I think one of your competitors said it was roughly a third core trend two thirds acuity versus rate. Thanks.

Speaker Change: But the stigma over receipt of behavioral services is removed providers are open for business they really suffered.

Speaker Change: In terms of service revenue during the pandemic and of course, it would be a debit created all kinds of.

In terms of service revenue during the pandemic and of course, it would be a debit created all kinds of.

Speaker Change: As I said previously and I'll kick it to Mark I'll, let you state Medicaid to keep the conversation simple.

Speaker Change: Behavioral issues in the population. So it is a national trend. The reason, we called out Kentucky. It was because of a program change and back on the utilization management side, we certainly called attention to some of the challenges I wouldn't call any specific good guys out.

Speaker Change: We had anticipated a net trend of 3% and our initial guidance that has increased to six and I guess you can say, yes. It add built during the year.

Speaker Change: Rates by state. We're in 21 States every state has its own story with some unique items going on here in here, but as a national trend I wouldn't cite any specific good guys with interest.

Speaker Change: Date by state. We're in 21 States every state has its own story with some unique items going on here in here, but as a national trend I wouldn't cite any specific good guys with interest.

Speaker Change: Okay. Thank you.

Speaker Change: You bet.

Speaker Change: The next question comes from Michael Hall with Baird. Please go ahead.

The next question comes from Michael Hall with Baird. Please go ahead.

Speaker Change: We still have a trend increase going into the fourth even office incredibly high cost baseline, we still in our forecast at a slight trend increase into the fourth quarter.

Michael Hall: Alright, thank you.

Speaker Change: Alright, thank you.

Michael Hall: Something I've been thinking about more question.

Michael Hall: I understand D. SNP lives I think to pick month Grace period in terms of the Redetermination.

Speaker Change: I understand D SNP lives.

Speaker Change: To pick month Grace period in terms of Redetermination.

Michael Hall: Granted I think most duly eligible lives aren't actually in the job market, but just given how high revenue <unk>, even just a few percent change to drive compression on MLR. So I'm curious to hear what you've seen on the redetermination.

Granted I think most duly eligible lives aren't actually in the job market, but just given how high revenue <unk>, even just a few percent change to drive compression on MLR. So I'm curious to hear what you've seen on the redetermination.

Speaker Change: The combination of rates trend in corridors.

Michael Hall: The Redetermination is there potential excuse.

Speaker Change: Redetermination is there potential excuse.

Michael Hall: Just any unexpected tail responded glides goodwill grace period, and just trying to figure out if there is another potential shoe to drop here.

Speaker Change: Just any unexpected tail responded glides goodwill grace period, and just trying to figure out if there is another potential shoe to drop here.

Speaker Change: Are the reason, we're operating at 90% not 89, so it worked exactly the way we had predicted.

Speaker Change: I'm only pausing, Michael because I'm, having difficulty understanding the question.

Speaker Change: With core wars acting as a buffer until rates caught up.

Speaker Change: D SNP lives in our Medicare book.

Speaker Change: And that is happening now we are still cautious on the <unk> rates as I said before but the model is working exactly as we have predicted the quarters <unk> as a financial buffer given rates time to catch up with trend and yes trended build over the year.

Speaker Change: And <unk>.

Speaker Change: Pressure on what aspect of these decent lives are you referring to.

Speaker Change: Yeah, I guess, if they're taking a month grace period.

Speaker Change: Yes, yes.

Speaker Change: Grace period.

Speaker Change: D SNP lives Redetermination.

Speaker Change: And could that impact your visibility now could you just do that come here later on or maybe I'm not thinking about it correctly.

Speaker Change: And could that impact your visibility now could you just do that come here later on or maybe im not thinking about it correctly.

Speaker Change: Yes.

Speaker Change: The easiest way for me to think about it because you get into timing issues quarter to quarter, what came in when something retro on a full year basis as we said before.

Speaker Change: It's kept visibility onto on clarity.

Speaker Change:

Speaker Change: I can only comment on our D. SNP business as you know our Medicare business is performing well.

Speaker Change: And pre tax margin.

Speaker Change: We target 655 to six.

Speaker Change: In this environment, we're pretty pleased with demonstrations of doing well decent book is doing well.

Speaker Change: The trend is 3% higher than I initially thought in the outlook just for all the reasons, we all know.

Speaker Change: As we said, we expanded our county footprint by 23% we're really.

Speaker Change: And as we said, we expanded our county footprint by 23%, we're really focusing on the dual eligible patient population and of course, the Michigan win was huge we have an MMP book, that's going to convert to a fully integrated product here in 2026. So I can only comment that we're very bullish on the D. SNP population we're.

Speaker Change: Focusing on the dual eligible patient population and of course, the Michigan win was huge we have an MMP book, that's going to convert to a fully integrated product here in 2026. So I can only comment that we're very bullish on the decent population, we're focusing intensely on it.

Speaker Change: Rates are one 5% better than I initially thought.

Speaker Change: I'm using 1% of my core doors on a full year basis to offset some of that mismatch.

Speaker Change: <unk> intensely on it.

Speaker Change: Final rule passed by CMS.

Speaker Change: Huge players with a substantial Medicaid footprint, a huge advantage to take advantage of this great growth opportunity.

Speaker Change: Which is largely why full year guidance went from 89 to 90.

Speaker Change: And it's a profitable book of business for US we have a proven track record of managing high acuity wives effectively.

Speaker Change: And it's a profitable book of business for US we have a proven track record of managing high acuity wise effectively.

Speaker Change: Got it. Thank you if I can follow up in terms of favorable PID.

Speaker Change: Seems like it's been pretty outside I think around 700 million. This year, if that goes back to normal next year.

Speaker Change: Like it's been pretty outside I think around Kevin 100 million this year.

Speaker Change: That goes back to normal next year.

Speaker Change: I think it's about close to 100 bps.

Speaker Change: MLR potential headwind into 25, I'm wondering if you have any color on how or where that could shake out next year at least directionally should we be thinking about this as returning to more normal levels in 'twenty five.

Speaker Change: A potential headwind into 25 I'm wondering if you have any color on how or where that could shake out next year at least directionally should we be thinking about this as returning to more normal levels in 'twenty five.

Speaker Change: Well, Michael Thanks for the question.

Speaker Change: Does that Redetermination is there potential.

Speaker Change: Well Michael.

Speaker Change: Michael Thanks for the question.

Speaker Change: I'd start with what is normal right.

Speaker Change: Unexpected tell respond these lives.

Speaker Change: A bigger business in 'twenty four than we were in 'twenty three.

Speaker Change: Grace period, and just trying to figure out if there's another potential shoe to drop here.

Speaker Change: And yet <unk> is bigger this year than it was last year.

Speaker Change: And yes, <unk> is bigger this year than it was last year.

Speaker Change: But we're a bigger business, we're getting better and better at things like payment integrity and as you know when we acquire businesses that also helps us.

Speaker Change: We're a bigger business, we're getting better and better at things like payment integrity and as you know when we acquire businesses that also helps us.

Speaker Change: I'm only pausing, Michael because I'm, having difficulty understanding the question.

Speaker Change: When we look at prior year end prior period development. So I wouldn't say, we're necessarily outsized this year, we're a growing business.

Speaker Change: When we look at prior year end prior period development. So I wouldn't say, we're necessarily outsized this year, we're growing business.

Speaker Change: D SNP lives in our Medicare book.

Speaker Change: And.

Speaker Change: Now on a go forward business.

Speaker Change: Pressure on what aspect of these D. SNP lives are you referring to.

Speaker Change: Now on a go go forward business.

Speaker Change: I am not expecting any headwind from that area. It's part of the way we run our business remember on medical cost management. There are many components to it <unk> U M network contracting payment integrity, and making sure that in retrospect things got settled appropriately avoiding fraud waste and abuse, that's a big.

I am not expecting any headwind from that area. It's part of the way we run our business remember on medical cost management. There are many components to it cm UN network contracting payment integrity, and making sure that in retrospect things got settled appropriately avoiding fraud waste and abuse, that's a big.

Speaker Change: Yeah, I guess, if there month grace period on.

Speaker Change: D SNP lives Redetermination.

Speaker Change: Of our business, so I see the PID item as a very continuing part of our business and I wouldn't factor in anything meaningfully different next year.

Speaker Change: And could that impact your visibility now could you see that come through later on or maybe am I not thinking about it correctly that'd be get skipped.

Speaker Change: The next question comes from Scott Fidel with Stephens. Please go ahead.

Speaker Change: Hi, Thanks. Good morning first question just thought it might be helpful. If you could maybe just startup sequences to walk us through on the corridor.

Scott Fidel: Hi, Thanks. Good morning first question just thought it might be helpful. If you could maybe just startup sequences to walk us through on the corridor.

Speaker Change: Kept visibility onto some clarity.

Speaker Change: Where you stood.

Speaker Change: At the beginning of the quarter.

Speaker Change: And then at the ended the quarter and then where you are expecting to be I guess in terms of remaining question.

Speaker Change: I can only comment on our D. SNP business as you know our Medicare business is performing well.

Speaker Change: At the ended the year, just trying to understand particularly how much potential I guess sort of question Youll still have room from corridor.

Speaker Change: 45% pretax margin.

Speaker Change: Adding into 2025.

Jeffrey Guyer: Sure Scott, it's Jeff Im going to make a framing comment and then kick it to mark for some color on the numbers, but the first thing one of the reasons we usually.

Speaker Change: We target 655 to six.

Speaker Change: In this environment, we're pretty pleased with the demonstrations are doing well decent book is doing well.

Jeffrey Guyer: We hesitate to talk about corridor is either in dollars or in basis points of cushion is you never know.

Speaker Change: And as we said, we expanded our county footprint by 23%, we're really focusing on the dual eligible patient population and of course, the Michigan win was huge we have and MMP book, that's going to convert to a fully integrated product here in 2026. So I can only comment that we're very bullish on the D. SNP population we're focused.

Jeffrey Guyer: Got you are going to be using it in a place where you have it.

Jeffrey Guyer: That you are going to be using it in a place where you have it.

If you have negative trend experience if it happens in a place where there is no quarter protection, there zero protection and if it happens everywhere. We do have protection, it's 100% protected so averages actually can be misleading, but I will tell you in each of the past four years, we've been operating with about 200 basis.

Jeffrey Guyer: If you have negative trend experience if it happens in a place where there is no quarter protection. There are zero protection and if it happens everywhere, we do have protection, it's 100% protected.

Jeffrey Guyer: Average is actually can be misleading, but I will tell you in each of the past four years, we've been operating with about 200 basis points of protection at every point in time Mark Yes.

Speaker Change: Points of protection at every point in time, Mark Yes, Let me just run through the usual example that we give just so everyone's level set if a business reports an 88 MLR.

Speaker Change: Ill run through the usual example that we give just so everyone's level set if a business reports an 88 MLR.

Speaker Change: In our case, an analogy might be we were really running at 86 and again. This is just an example.

Speaker Change: In our case, an analogy might be we were really running at 86 again. This is just an example.

Speaker Change: And we were booking 200 basis points of corridor expense.

Speaker Change: Intensely on it.

Speaker Change: And we were booking 200 basis points of corridor expense.

Speaker Change: Now if during that example year the true underlying medical costs went from an $86 287, you might still report. The 88, you just would've used more corridor expense.

Speaker Change: If during that example year the true underlying medical costs went from an 86%, 87% you might still report. The 88, you just would've used more corridor expense.

Speaker Change: Final rule passed by CMS.

Speaker Change: Gives players with a substantial Medicaid footprint, a huge advantage to take advantage of this great growth opportunity.

The book to less corridor expense.

Speaker Change: The book to less corridor expense.

Speaker Change: When the new rate cycle comes around if rates are actuarially sound.

Speaker Change: This will have to jump enough to essentially put that corridor position back to where it was all things being equal. So the 86 underlying medical cost goes to an 87% the new rate trend not just back to <unk> 86.

Speaker Change: <unk> will have to jump enough to essentially put that corridor position back to where it was all things being equal. So the 86 underlying medical cost goes to an 87% the new rate trend not just back to <unk> 86.

Speaker Change: And it's a profitable book of business for US we have a proven track record of managing high acuity wives effectively.

Speaker Change: Right now that is somewhat analogous to the overall enterprise.

Speaker Change: <unk> off the year thinking I had about 200 basis points of corridor expense in my MLR.

Speaker Change: Started off the year thinking I had about 200 basis points of corridor expense in my MLR.

Speaker Change: Got it. Thank you if I can follow up.

Speaker Change: As you know over the quarters, we've started to use that in our view.

Speaker Change: As you know over the quarters, we've started to use that in <unk>.

Speaker Change: In terms of favorable <unk>. It seems like it's been pretty outside I think around 700 million this year.

Speaker Change: Showing you that in my bridges.

Speaker Change: So new that in my bridges, such that I'm thinking full year ultimate that 200 that I normally have it down to more like 100 basis points within my MLR.

Speaker Change: Such that I'm thinking full year ultimate that 200 that I normally have it down to more like 100 basis points within my MLR now Joe talked about how 55% of our revenue re prices on January one we are optimistic on what that looks like as well as the rate increases we got in Q3 Q4, so I'm expecting some extent.

Speaker Change: That goes back to normal next year.

Speaker Change: I think it's about close to 100 bps of just MLR.

Speaker Change: Joe talked about how 55% of our revenue re prices on January one we are optimistic on what that looks like as well as the rate increases we got in Q3 Q4, So I am expecting some extent to replenish that corridor now thats all about the rate cycles, and we're not really ready to get into what on that.

Speaker Change: <unk> potential headwind into 25 I.

Speaker Change: To replenish that corridor now thats, all about the rate cycles, and we're not really ready to get into what on that and the last thing with Joe made the point Joe made is even with that 100 basis points of remaining corridor, it's an imperfect hedge because it depends on where the medical costs come up and where you have the.

Speaker Change: Part of our equation and again just to round. It out 200, originally in my guidance and I, probably used half of it during the course of the year.

Speaker Change: The last thing with Joe made the points you made is even with that 100 basis points of remaining corridor, it's an imperfect hedge because it depends on where the medical costs come up and where you have the remaining corridors. So there's only so much comfort you can take in that but it is a very big part of our equation and again just to round it out.

Speaker Change: Yes.

Our remaining corridors. So there's only so much comfort you can taken that but it is a very big part of our equation and again just to round. It out 200, originally in my guidance and I, probably used half of it during the course of the year.

Speaker Change: And the last questioner today will be George Hill with Deutsche Bank. Please go ahead.

Speaker Change: 200, originally in my guidance and I, probably used half of it during the course of the year.

George Hill: Yes. Thanks for squeezing me in guys and you might be Mark you might have just gotten there, but I guess so the expectation is you have a 100 basis points of the risk corridor to us in the back half of the year I guess can you talk about how much you expect to have by the end and can you talk about how much was used front half versus back half.

Speaker Change: Yes.

Speaker Change: And the last questioner today will be George Hill with Deutsche Bank. Please go ahead.

George Hill: Yes, Thanks for squeezing me in guys and Mark you might have just gotten there, but I guess so the expectation is you'll have a 100 basis points of the risk corridor to us in the back half of the year I guess can you talk about how much you expect to have by the end and can you talk about how much was used one half versus back half.

Speaker Change: Okay. So on a full year, it's best to think about these on a full year basis because quarter to quarter. It gets.

Speaker Change: It gets a little bit more complicated on a full year basis I started off the year expecting 200 across the year a little bit in Q2 more in Q3 and more in Q4 I expect to have we used half of it which means on a full year basis within my reported MLR I'm expecting about 100 basis points of corridor expense.

Speaker Change: It gets a little bit more complicated on a full year basis I started off the year expecting 200 across the year a little bit in Q2 more in Q3 more in Q4 I expect to have we used half of it which means on a full year basis within my reported MLR I'm expecting about 100 basis points of corridor.

George Hill: Okay. So on a full year, it's best to think about these on a full year basis because quarter to quarter. It gets.

<unk>.

Speaker Change: <unk> and.

Speaker Change: And again for the new year, it's all about the new rate cycle on what happens on resetting that.

Speaker Change: Okay. That's helpful and if I kind of a quick follow up could you just comment on how many states do you guys still have a quarter position in and what percent of lives are on a multiyear repricing basis like we've spoken to some states where they just say like we like our rate cycles, two years or more than two years. So I know, we talked about like the annual rate.

Basis like we've spoken to some states, where they just say like we like our rate cycles, two years or more than two years. So I know, we talked about like the annual rate cycle, but there is just some states who don't do this annually maybe on a percentage of lives can you talk about what's being thrown a multiyear cycle versus a single year cycle.

Speaker Change: Clinical but theres, just some states who don't do this annually maybe on a percentage of lives can you talk about what's being thrown a multiyear cycle versus a single year cycle.

Speaker Change: So sure just about every one of our states has some form of a corridor a minimum MLR. We're a profit sharing and that's not news. Many of these things have been around for quite some time.

Speaker Change: So sure just about every one of our states has some form of a corridor a minimum MLR, where our profit sharing and that's not news. Many of these things have been around for quite some time.

George Hill: <unk> and.

George Hill: And again for the new year, it's all about the new rate cycle, what happens on resetting that.

Speaker Change: Okay. That's helpful and if I could have a quick follow up could you just comment on how many states do you guys still have a quarter position in and what percent of lives are on a multiyear <unk>.

Speaker Change: What is important is what the what the numbers are.

Speaker Change: And how that acts, but you have some form of that in just about every state and if I understood. Your question right on the pricing cycle every state that we have re prices on an annual basis and some of them commit to on a twice a year basis to look at the rates most years thats not necessary, but obviously these days that's an important fact.

Speaker Change: <unk>.

Speaker Change: Okay. That's helpful. Thank you.

Speaker Change #100: Okay. That's helpful. Thank you.

Speaker Change: This concludes our question and answer session.

Speaker Change #101: This concludes our question and answer session and <unk>.

Speaker Change: Basis like we've spoken to some states, where they just say like we like our rate cycles, two years or more than two years. So I know, we talked about like the annual rate cycle, but there is just some states don't do this annually maybe on a percentage of lives can you talk about what's being thrown a multi year cycle versus a single year cycle.

Speaker Change: And <unk>.

Speaker Change #100: Molina Healthcare's third quarter 2024 earnings call.

Speaker Change #102: Molina Healthcare's third quarter 2024 earnings call.

Speaker Change #100: Thank you for attending today's presentation you may now disconnect.

Speaker Change #103: Thank you for attending today's presentation you may now disconnect.

What is important is what the what the numbers are.

Q3 2024 Molina Healthcare Inc Earnings Call

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