Q1 2025 Elevance Health Inc Earnings Call
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the Elevance Health First Quarter earnings conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session where participants are encouraged to present a single question.
Speaker Change: If you wish to ask a question, please press star then one on your telephone keypad. You will hear a prompt that you have been cued. You may withdraw your question at any time by pressing star then two. These instructions will be repeated prior to the question and the proportion of this call. As a reminder, today's conference is being recorded. I would now like to turn the conference over to the company's management. Please go ahead. Thank you.
Speaker Change: Good morning and welcome to Elevance Health's first quarter 2025 earnings call. My name is Nathan Rich, Vice President of Investor Relations.
Speaker Change: With us this morning, on the earnings call, our Gail Boudreaux, President and CEO , Mark Kaye, our CFO , Pete Haytaian, President of Carolyn, Morgan Kendrick, President of our Commercial Health Benefits Business, and Felicia Norwood, President of our Government Health Benefits Business.
Gail Boudreaux: Gail will begin the call with the review of the progress we've made against our strategic initiatives and a discussion of our first quarter performance. Mark will then discuss our financial results and outlook in greater detail. After our prepared remarks, the team will be available for Q&A.
Gail Boudreaux: During the call, we will reference certain non-GAAP measures , reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available on our website, elevancehealth.com
Speaker Change: We will also be making forward-looking statements on this call. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Elevance Health.
Speaker Change: These risks and uncertainties can cause actual results to different materially from our current expectations. We advise listeners to carefully review the risk factors discussed in today's press release and in our quarterly filings with the SEC. I will now turn the call over to Gail.
Gail Boudreaux: Good morning, and thank you for joining today's call. At Elevance Health, we began 2025 with focus, momentum, and a deep commitment to advancing our purpose to improve the health of humanity.
Gail Boudreaux: Across our enterprise, this purpose is not an abstract mission. It's what drives how we serve our members, support care providers, and partner with communities. In the first quarter, we've seen that commitment come to life in powerful ways.
Gail Boudreaux: Let me begin by highlighting just a few examples of the difference we're making.
Gail Boudreaux: We believe the healthcare experience should be simpler, more affordable, and more human. That's why we've made sustained investments to fundamentally transform how people experience their care.
Gail Boudreaux: In Q1, our patient advocacy solution supported over 6 million members delivering personalized guidance to navigate benefits, manage chronic conditions, and access behavioral health services.
Gail Boudreaux: With a 95% satisfaction rate, it's become a valuable differentiator, especially among employers seeking holistic proactive care for their employees.
Gail Boudreaux: We also continue to scale health OS, our digital platform that integrates clinical data and insights into provider workflows.
Gail Boudreaux: It now supports more than 88,000 care providers and over 1200 provider organizations enabling real-time decision making and seamless prior authorizations when documentation is accurate and complete.
Gail Boudreaux: and for high-performing providers, we've gone a step further, eliminating prior authorization requirements on more than 400 outpatient procedures to reduce administrative friction and speed up access to care.
Gail Boudreaux: These efforts are helping us reduce complexity, rebuild trust, and create a more connected care experience for both members and care providers.
Gail Boudreaux: Across every line of business, we're addressing the full spectrum of physical, behavioral and social health to drive better outcomes and lower total cost of care.
Gail Boudreaux: We're expanding our value based on college care model to Medicare Advantage this year, following success in commercial last year.
with reduced inpatient admissions and higher adherence to treatment protocols.
Gail Boudreaux: These are the kind of outcomes that matter most to members and careteens alike.
Gail Boudreaux: Through Carolyn Services, we continued to expand our external reach. In Q1, we launched new post-acute and behavioral health contracts with health plant clients.
Gail Boudreaux: Validating our ability to deliver risk-based outcomes for complex populations and reinforcing Carol Ann's role as a scalable platform for whole-person care.
Gail Boudreaux: We also completed the acquisition of Carebridge at the end of last year, further strengthening our capabilities in home and community-based services.
Gail Boudreaux: By integrating these offerings into our Medicaid and Duals platforms, we're delivering high touch in-home support to individuals with complex needs, helping to avoid ER visits and institutional stays.
Gail Boudreaux: and, as we scale our risk-based care model, we're leveraging Carolin's advanced data-driven capabilities to deepen collaboration with providers and close gaps in care.
Gail Boudreaux: These value-based arrangements are not only improving quality but have also driven nearly $100 in per-member per-month savings across medical and pharmacy.
highlighting the impact of our whole health approach.
Now turning to our first quarter results.
Gail Boudreaux: We delivered performance in line with our expectations, reflecting consistent execution and disciplined operations despite an elevated trend environment.
Gail Boudreaux: Across our businesses, we're staying focused on what we can control.
Gail Boudreaux: Delivering operational results, engaging proactively with partners, and advancing our long-term strategy.
Gail Boudreaux: In Medicaid, we continue to make progress on RAID alignment with April adjustments coming in as expected and early discussions for the July cohort underway.
Gail Boudreaux: These conversations reflect a shared understanding of the need to align reimbursement with the current level of acuity of our membership.
Gail Boudreaux: At the same time, we're partnering with states to rethink care delivery. Our long-term care model continues to deliver better outcomes at lower cost by integrating home-based services, behavioral health and care coordination.
Gail Boudreaux: Our recent acquisition of Centers Plan for Healthy Living in New York will expand our whole health approach to deliver improved care for members and greater value for the state.
Gail Boudreaux: In Medicare Advantage, performance was consistent with expectations, retention remained strong, and growth was targeted and disciplined, supporting worth margin and membership sustainability.
We remain confident in the long-term outlook for MA.
Gail Boudreaux: Stronger retention non-alien proves member satisfaction. It's associated with better care coordination, fewer inpatient stays, and lower overall Medicare spending.
In commercial, we're seeing strong engagement with our integrated offerings.
Gail Boudreaux: Employers increasingly value our differentiated approach, which brings together advocacy, behavioral health, pharmacy, and specialty care into a seamless experience.
Gail Boudreaux: We're encouraged by the momentum we have heading into the 2026 selling season.
Gail Boudreaux: and while individual ACA effectuation rates have been lower, we still expect solid growth in 2025.
Gail Boudreaux: Our expansion into three new states supports our broader strategy to build lifetime value through coordinated ACA and Medicaid coverage.
Gail Boudreaux: Caroline continues to be a strategic growth engine for Elevance Health.
Gail Boudreaux: In the first quarter, we significantly expanded our relationships with external payers, including many blues plans.
Gail Boudreaux: for solutions in post-acute, behavioral health, specialty care and palliative, further validating Caroline's ability to deliver outcomes beyond her own membership.
Gail Boudreaux: These relationships underscore the strengths of Caroline's operating model and its alignment with what clients are asking for, solutions that drive outcomes, reduce cost and simplify care.
Gail Boudreaux: We're executing with consistency, advancing our strategy with discipline, and delivering measurable value across the enterprise.
Gail Boudreaux: What sets Elevance Health apart is not just how we perform, but why we perform.
Gail Boudreaux: Through a purpose-driven model that focuses on whole-person health, supports our partners, and delivers outcomes that matter.
Mark: Before I turn it over to Mark, I want to thank our more than 100,000 associates.
Mark: Their commitment and passion continues to define our culture, power our performance and strengthen our impact.
Mark: Reflecting both the values we uphold and the difference we strive to make every day.
Mark: With that, I'll turn it over to our CFO , Mark Kaye, to take you through the financial results and outlook. Mark?
Thank you, and good morning everyone.
Speaker Change: As you just heard from Gail, we're encouraged by our strong start to 2025, delivering results that are aligned with the expectations we laid out at the beginning of the year.
Speaker Change: In the first quarter, and as we reported on our form 8K filing last week, gap deluded earnings per share was $9.61 and adjusted deluded earnings per share was $11.97, reflecting year over year growth of more than 10%
Speaker Change: Undescooring the resilience of our diversified business and disciplined execution across our strategic initiatives.
Speaker Change: We ended the first quarter with 45.8 million medical members, up 99,000 from year end, driven primarily by targeted expansion and better than expected retention rates in Medicare advantage.
Speaker Change: While our individual ACA membership grew approximately 11% sequentially, we anticipate a moderation in membership during the second quarter, as effectuation rates on renewing members are tracking below our initial expectations.
Speaker Change: Operating revenue in the quarter was 48.8 billion, an increase of over 15%, principally driven by higher premium yields in a health benefit segment, growth in our Medicare Advantage and individual ACA membership, and Kellan R.R.X. product revenue.
Speaker Change: In addition, our revenue result reflects contributions from recent acquisitions, particularly in pharmacy services and home health.
Two areas critical to advancing our whole health strategy.
Speaker Change: These investments strengthen our ability to deliver more connected care and we are actively integrating these assets across our health benefits and care on platforms to improve outcomes for members and accelerate our enterprise flywheel.
Speaker Change: Our consolidated benefit expense ratio was 86.4%, an increase of 80 basis points year over year.
Speaker Change: The increase was due to higher cost-trained on Medicaid business partially offset by out-of-period Medicaid premium taxes that had no material impact on operating gain.
Speaker Change: Deratio also benefited from favourable seasonality in Medicare Part D, specifically related to inflation reduction act changes.
Speaker Change: Overall, utilization patterns in our health benefits segment remain elevated, but consistent with the assumptions embedded in our full year guidance.
Speaker Change: In our Medicare Advantage business, the first quarter developed in line with expectations that high cost trends would persist in 2025 and we have maintained a prudent posture in our outlook appropriate for this early stage of the year.
Speaker Change: The adjusted operating expense ratios to the 10.7% and improvement of 60 basis points, reflecting our commitment to discipline expense management and thoughtful prioritization of strategic investments.
Speaker Change: benefits operating gain of 2.2 billion declined slightly on higher Medicaid costs, partly offset by operating efficiencies.
Speaker Change: Kellan's operating gain of 1.1 billion grew 34% driven by growth in pharmacy volumes and the improved performance of deployed risk-based capabilities.
Speaker Change: Nathan Baseman Income exceeded our expectations for the first quarter. The factors driving this out performance were incorporated in our full-year guidance, though the timing was earlier than anticipated.
Speaker Change: As such, we continue to expect our 2025 net investment income to align closely with our initial guidance.
Speaker Change: Turning to our balance sheet, we ended the quarter with a debt to capital ratio of approximately 41%, preserving flexibility for strategic investments and future capital deployment.
Speaker Change: Days and claims payable were 44 days as of March 31st, when adjusted for the acquisition of Cambridge. The increase in DCP of 0.5 days sequentially reflects our consistent and prudent approach to reserving. The increase in DCP of 0.5 days sequentially reflects our consistent and prudent approach to reserving.
Speaker Change: We continue to expect DCP to trend towards the low 40s over time.
Speaker Change: Operating cash flow totaled $1 billion and reflected timing-related items that negatively impacted working capital in the quarter.
Speaker Change: Importantly, we expect these timing items to reverse at the year progresses, with our outlook for operating cashflow of approximately $8 billion remaining unchanged.
We continue to approach the pacing of sharey purchases opportunistically.
Speaker Change: In the quarter, we repurchased 2.2 million shares of common stock for approximately $880 million, demonstrating our confidence in the intrinsic value of our shares.
Speaker Change: Overall, we are pleased with our start to the year and are reiterating our guidance for just the deluded earnings per share to be in the range of $34.15 to $34.85.
Speaker Change: Regarding earning seasonality, we continue to expect more than 60% of adjusted earnings per share to be realized in the first half of the year. And with that operator, please open the call for questions.
Speaker Change: Ladies and gentlemen, if you wish to ask a question, please press star then one on your telephone key pet. You will hear a prompt that you have been cute.
Speaker Change: You may withdraw your question at any time by pressing star than two. If you're using a speaker phone, please pick up the handset before pressing the numbers. Once again, we ask that each participant limit themselves to a single question to allow ample time to respond to each participant that may wish to participate in this portion of the call.
Speaker Change: For our first question, we'll go to the line of A.J. Rice from UBS. Please go ahead.
Hi, everybody, and thanks for the question.
Speaker Change: Maybe just try to flush out some of the issues that have been raised regarding Medicare Advantage. I know it's not as large of businesses for you as it is for some others, but certainly there's been some discussion about Group M.A. Are you seeing anything unusual there? There's concern about the IRA. The IRA.
Speaker Change: Impact, how is that shaping up so far relative to the changes and how you've incorporated them in their outlook. And then I know you said you've got an elevated trend that seems to be in the individual market tracking your expectations is. Thank you so much.
Speaker Change: Do you feel like you got a good read on it or do we really need to get the second quarter before we have slow visibility on how that's all trending? Thank you very much.
David Windley, David Windley, David Windley, David Windley,
Thank you.
Speaker Change: AJ, good morning and thanks for the very comprehensive first question there anticipating we're likely to get a couple of questions on trend during the time together this morning. Let me start from a broad perspective.
Speaker Change: Medicare costs overall remain elevated but manageable to start the year. Very consistent with our fourth quarter experience and very much in line with our expectations for the first quarter. Effectively, nothing has materially changed with respect to our prior commentary.
Speaker Change: In the first quarter, we did see flu and respiratory illnesses caused slightly higher utilization. Those costs moderated as the quarter came to a close, very much as you'd expect for seasonal conditions.
Speaker Change: and that's going to enable us to detect shifts and respond accordingly, but based on the most recent data review that we've conducted by our teams, we remain comfortable with the trained environment and the cost trajectory we've seen here today.
Speaker Change: Thanks for the question, AJ, and sort of just reiterating what Mark said. I think we feel very much aligned with our expectations to start the year. So again, appreciate the question and next question please.
Speaker Change: Next, we'll go to the line of Lance Wilkes from Bernstein. Please go ahead.
Lance Wilkes: Yeah, thanks so much. Could you talk a little bit about the Carolina services really strong growth and in particular
Lance Wilkes: Can you talk to cross sales into the anthem book of business and how that's progressing? Thank you.
Lance Wilkes: and then maybe if you could quantify or give us more details on sales into blues and other plans there and I guess as part of that if you want to talk a little bit about especially pharmacy ramping into carol on our ex as well and how far along you are in that process that would be great thanks.
Gail Boudreaux: Thank you, Lance. A number of questions there. We'll try, I'll ask Pete Haytaian to address those, but appreciate the recognition of the very strong results that we've seen in both internal external growth with carol on services and carol on our exopete.
Pete Haitayan: Alright, thank you, Lance, great question. Like Gail said, we're really pleased with the momentum we're seeing on the service of the side in Caroline.
Pete Haitayan: I think you saw it in the quarter, we had over 60% growth.
Pete Haitayan: We continue to track to the 50 percent, at least 50 percent for the year. And to your point, we're seeing really nice balanced growth internally and externally.
To speak first internally, you asked about that.
Pete Haitayan: We're seeing really nice expansion. You heard it in the prepared remarks around products like Total Cost of Care for Oncology.
Pete Haitayan: which we've been expanding last year into our commercial business now into Medicare this year, so we're seeing that proliferate across the portfolio, as well as in Medicaid and areas like behavioral health, where we continue to expand our seriously mentally ill offering, as well as other offerings.
Pete Haitayan: and then externally, we came off a really strong year in 24, as you know, and heard around a count on services growth.
Pete Haitayan: As it relates to this year, we feel very confident in the growth that we're seeing this year in 2025 across
Pete Haitayan: Dr. Carolyn Services, and again, we're seeing diversity in what we're selling.
Pete Haitayan: across all our offerings, across paths, across our specialty care services business.
Pete Haitayan: across behavioral health, and then of course with the addition of Carebridge, which we're really excited about.
Pete Haitayan: So we will see in 2025 the most significant external growth.
Known across the Caroline services. [inaudible]
Pete Haitayan: Portfolio. As it relates to Carolina Rex, again, very confident and happy about performance.
Pete Haitayan: as it relates to our strategy there, continuing to follow through as it relates to specialty RX and our migration.
Pete Haitayan: in that business. As you know, we started with acquiring Bioplus and then Cobra specialty pharmacy, and so we're being very thoughtful about how we manage that, very thoughtful around the patient and the provider experience.
Pete Haitayan: and we'll continue to migrate scripts both for Elevance as well as Kroger over the next year or so, in addition to the work that we're doing around Paragon and our infusion businesses. So, overall, very, very pleased to cross the portfolio on Caroline. Thank you, Pete. Next question, please. Thank you.
Speaker Change: Next, we'll go to the line of Stephen Baxter from Wells Fargo. Please go ahead.
Speaker Change: Hi, thanks for the color on the exchanges. I was hoping if you could expand a little bit maybe quite a bit lately.
Speaker Change: I guess how much of a membership step down, you know, you're expecting when we get to the second quarter and how much if it all are these dynamics impacting, how you're thinking about exchange profitability for the year inside your guidance. Thank you.
Speaker Change: Steve, thanks very much for the question. We've been very pleased without sustained growth in the individual ASEA market, and we expect 2025 to be another year of growth likely at or above market levels.
Speaker Change: who have paid their premiums are indeed tracking a little bit lighter.
Speaker Change: then our initial expectations. And this is really doing part to a surge in passive renewals among people transitioning from Medicaid who are now paying premiums in 2025.
Speaker Change: Given the 90-day grace period is now ended, we do project membership attrition.
Speaker Change: in the mid single digit percent range in early Q2, after which we'll anticipate our membership or ACN membership base.
Speaker Change: Will Stabilize for 2025. But importantly, these revised membership assumptions are factored into our reaffirmed 2025 EPS guidance. And so you could think about commercial risk-based membership really ending the year in the range of 4.9 to 5 million members.
Thank you. Thanks, Mark. Next question, please.
Speaker Change: Next we'll go to the line of Andrew Mock from Barclays. Please go ahead.
Andrew Mock: Hi, good morning. It looks like today's MLR finished better than what was implied from your comments at our March conference. Can you help us understand what developed favorably in the back half of March to drive that better MLR performance? And how is that shaping your view on trend for the balance of the year? Thanks.
Andrew, thank you, thanks very much for the question.
Andrew Mock: As expected, I'll Medicare Part D medical cost ratio in the quarter
Andrew Mock: Ended up where we expected. And the primary drivers here really come from Boise, IRA. [inaudible]
Andrew Mock: as well as a premium tax that we incurred that was larger than anticipated.
Andrew Mock: specifically on the premium tax related to one of our larger Medicaid states.
and that premium tax had the dual effect.
Andrew Mock: of both lowering current period benefit expense ratio and increasing the current period operating expense ratio but importantly with no material impact and overall operating earnings.
Andrew Mock: and this adjustment effectively accounts for the majority of that positive variance that you're seeing between our reported benefit expense ratio and the updated analyst consensus estimates.
Thanks, Mark. Next question, please.
Speaker Change: Next, we'll go to the line of Lisa Gill from JP Morgan. Please go ahead.
Lisa Gill: Thanks very much and good morning. I appreciate comments around Medicare elevated but manageable. Can you maybe just talk about new members versus existing members and how those new members came on when we think about risk coding?
Speaker Change: and then just last thing Mark, can you help us understand on part D and it changes on IRA with this specific impact wise to medical cost trend or MLR in the first quarter?
Let me maybe start first with the Part D piece. [inaudible]
Speaker Change: We've received a lot of questions from investors on this topic in the last little while, so let me take maybe a moment just to first provide some additional context about the Part D inflation reduction act changes, and then I'll get to your specific question.
Speaker Change: There are really two key factors at play here in 2025.
Speaker Change: First is the lower $2,000 member maximum out-of-pocket cap, which really accelerates when beneficiaries reach their cost-sharing limit, and that effectively shifts more liability onto the health plants early in the year.
Second is the offset from the enhanced CMS direct subsidy.
Speaker Change: that replaced some of that cost-driven burden that members and plan sponsors carried in prior years.
Speaker Change: And when taken together, these changes effectively reverse the usual courtly seasonality patent for party, and that results in stronger financial performance in the earlier quarters and lower margins in the later quarters.
Speaker Change: And although it's still early, we are seeing this new seasonality pattern.
Speaker Change: Playhouse from both a pricing and a forecasting perspective. And so to your question you can think about party seasonality now much more closely resembling that of a broader medical benefits business with a much steeper slope. [inaudible]
Speaker Change: as more members enter into the catastrophic phase of coverage as the year progresses.
Speaker Change: and then briefly just on Medicare Advantage membership, we are carefully managing new volume and we are delivering targeted growth across specific populations, products and geography.
Speaker Change: and the geography. So in terms of the strategy that we laid out last year and shared with you, we feel that that's playing out and feel this is very consistent with the expectations we set. So thank you and next questions please.
Speaker Change: Next we'll go to the line of Ann Hynes from Mizzouho Securities, please go ahead.
Hi, good morning.
Anne Hines: Earlier in the conference call, you cited that Medicare trends were in line with your expectations. Can you actually remind us what is embedded in guidance, meaning you were assuming 2024 trends growing high single digits or mid single digits. Any clarification, I think would be very helpful. Thanks. Thanks.
Speaker Change: Thanks very much for the question this morning. I think we feel pretty comfortable that trains have emerged consistent with the expectations.
that we're managing. [inaudible]
Speaker Change: and maybe if I take this question from a slightly different angle thinking through the margin perspective, we really do feel good about our positioning in Medicare, having seen the composition of our membership, and importantly the results to start the year. Just as a reminder, we do expect to see stable margins in 2025, and that's going to come through strong retention rates, discipline cost management. Thank you very much.
Speaker Change: and, importantly, the improved recognition of that member of CURITY, following the elevated utilization trends that we've seen in recent years. So, thank you very much. Next question, please.
Speaker Change: Next, we'll go to the line of Ryan Langston from TD Cowan. Please go ahead.
Speaker Change: Hi, thanks. You mentioned flu and respiratory was affecting the quarter. Sorry if I missed it, but can you just give us a sense on how much of the specific impact that was on the first quarter MLR? And if those respiratory trends were different between your service lines or patient populations, thank you.
Speaker Change: Thanks for the question. We entered the year modeling and influenza and influenza-like season to follow the pre-COVID norms.
Speaker Change: which are somewhat higher than what we observed during the pandemic era. And despite those prudent assumptions, you know, first quarter, the fluid driven cuts came in modestly by their own expectations.
Speaker Change: and, importantly, here, you know, the severity of those flu cases wasn't in line with our assumptions.
Speaker Change: and given the recent decrease in flu incidence rates, you know, we don't anticipate any outsides impacts in the second quarter. So for the first quarter to your question, you could think about the impact of the benefit expansion ratios between 15 and 20 basis points. Thank you.
Thank you, Mark, next question please.
Speaker Change: Thanks, Erinn, we are pleased with our results in the first quarter with say seasonality consistent with what we anticipated in the January guidance, a couple of key factors to call out here at first half first quarter benefit expense ratio did benefit from net favorable workday calendar that effectively pulled forward some earnings.
Into the first quarter.
Speaker Change: And as you noted was the part D benefit design changes and that is notably shifted that earnings cadence of a Medicare drug plans and we'll expect that part D seasonality.
Speaker Change: Forward to more closely resemble our medical benefits business as I mentioned earlier and then finally, we are seeing a more front loaded earnings contribution thanks to our shift in membership mix, namely lower Medicaid membership and then higher ACI growth and all of this gets back to a point of continuing to expect more than 60% of earnings to be realized in the first half.
Speaker Change: Of the year.
Speaker Change: Thanks, Thanks for the question and sort of just reiterate based on the number of questions sort of on our expectations I guess I would say we came into the year, a very respectful of the environment and had planned and are seeing an elevated season, but feel that we have accounted for that and feel.
Speaker Change: Quite frankly that we're just going to continue to monitor the situation, but as Mark has shared feel comfortable in the ranges and the reiteration of our guidance next question. Please.
Speaker Change: Next we will go to the line of Ben Hendrix from RBC capital markets. Please go ahead.
Ben Hendrix: Hey, great. Thank you very much I was getting a lot of questions about our visibility into the remainder of the year and I. Appreciate your comments about a new members and your ability to detect trends sooner, but I was wonder if you could specifically talk about your new member engagement strategy, how many of those new members you've actually.
Ben Hendrix: I reached out to and engaged in and kind of how you're thinking about that translating into primary care activity enough patient referrals later down the road. Thanks.
Speaker Change: Thanks, I'm going to ask Felicia Norwood, who leads our government business to address that.
Felicia Norwood: Good morning, and thank you for the question I mean, certainly as soon as members come into elephants health. We are very focused on making sure that we engage those members early a very dedicated focus around getting individuals to have their annual wellness visits expediting here early on and making sure we understand.
Felicia Norwood: And what their health risk assessments look like so that we are able to be very focused on the type of care that they need in the care coordination that comes from our clinical team.
Felicia Norwood: Previously, we would have waited longer on some of those we've accelerated a lot of those to make sure that we are doing complete and accurate capturing those.
Felicia Norwood: Those individuals in their health conditions.
With the expectation that we do everything that we can to maintain quality and make sure that those individuals have a theory strong experience with us. So we're very focused on making sure that individuals get the care, they need and being able to get them to see their physicians early in establishing a plan of care early.
Speaker Change: Into our relationship with them going forward. So thank you very much for the question. Yes. Thanks, Felicia just a few other things that I would like to read reiterate about our membership one.
Speaker Change: If you think about our product mix, it's heavily HMO and we've also been moving much more aggressively into value based care, where our physicians are much more actively engaged with their patients earlier in the year and specifically increasing our upside downside risk percentage of that so if we look at our Medicare book, we feel very good about the active.
Speaker Change: And the more accurate capture of our clinical conditions across the board.
Speaker Change: And again as we shared I think in some of our comments we feel good about the disciplined strategy that we executed this year around growth in geographies and specifically on our product type so overall.
Speaker Change: We feel that that's playing to the expectations that we laid out and are going to continue to manage it and continue to engage our patients to ensure that they get the right care and that we align them appropriately with our value based providers, but thank you very much for the question and next question. Please.
Speaker Change: Next we'll go to the line of Josh Raskin from Nephron Research. Please go ahead.
Thanks, Hey, good morning, as you think about your MA bid strategy in the coming years, how important is the lifetime value of the member and the opportunity to penetrate that member with additional say Caroline services, and which Caroline services, specifically benefit most from that growth in EMEA.
Speaker Change: Well, thank you Josh I'm going to ask Felicia first suggest address our overall Medicare strategy and then Pete to comment a little bit about how we're embedding both the Carolina services, but also as I mentioned a minute ago, our value based care. So Felicia first and then Pete Yeah.
Speaker Change: And thank you very much for the question, Josh I mean, we absolutely want to make sure that we have members for a light.
Speaker Change: At the end of the day, we want to be a lifetime trusted partner and really value the relationship that we have with our members.
Speaker Change: Members choose Medicare advantage because of the value that it brings and we think that value is significant relative to fee for service you know as we think about our bid strategy for 2026, it's certainly still early but I can assure you that it will be up there a thoughtful and disciplined one that's very much focused on.
Speaker Change: On stability and sustainability in our Medicare advantage program, and making sure that we are leveraging and engaging our carillon partners and making sure that those individuals receive the highest quality care, particularly for those with complex conditions Pete.
Pete Haitayan: Thanks, Felicia I think it's a really great great question.
Pete Haitayan: Josh I appreciate it very much we're trying to be very targeted around what we do and as Felicia said, we face off with our health plan partners. In this case to your question Felicia in the government program seemed identify those areas of complexity and high cost and how we can effectively build clinical and engagement strategies around that and if you look at our portfolio of offerings for them.
Pete Haitayan: Being very very intentional about that so starting off on our value based care strategy and how we're approaching that through mosaic you've heard us talk a lot about post acute care and what we're doing through our pass offerings.
Pete Haitayan: Most recently with care bridge, and I think a real differentiated way to managed care in the home highly scalable I think in a capital efficient way and then services at the end of life and in some cases and the most complex periods of members around palliative care on.
Pete Haitayan: On the pharmacy side, you look at the areas that we're very focused in on around specialty Rx et cetera, So we're being very thoughtful around.
Pete Haitayan: Government programs business around Medicare, specifically and trying to touch members in the moments that matter in these areas a real high cost complexity and health care.
Pete Haitayan: And it's really what what power supply, we'll talk about in the company.
Pete Haitayan: Next question please.
Speaker Change: Next we will go to the line of Sarah James from Cantor Fitzgerald. Please go ahead.
Speaker Change: Thank you I wanted to go back to the rock score availability, because I think that's an important point and likely knowable at this time. So one of your peers saw a lower portion of new members Onboarding with RAF scores than normal how did the portion of new members that onboarding with existing RAF scores compared to historical average.
Speaker Change: Alabama and can you give us some context of what the typical step up is.
Speaker Change: What question New members have Ralph scores typically versus year two when they are renewing with you what portion have asked the question.
Speaker Change: Sarah Thanks, very much for the question so risk adjustment remains a critical component of how we ensure that member benefits are aligned with their health care needs and over the past couple of years, we've navigated two consecutive years of that reimbursement changes to the program.
Including shifts in the underlying risk model.
Speaker Change: And while the base with the recent base rate release was more reflective of actual trained it doesn't fully restore the impact of prior under funding and.
Speaker Change: You could think about US is remaining disciplined in how we approach benefit design and coding.
Speaker Change: And I'll focus on accurately documenting member conditions.
Speaker Change: Bidder ensures we can support their clinical needs and ultimately we do see a risk adjustment is helping to ensure seniors received the comprehensive care. They deserve while also supporting a sustainable stable marketplace for the long term.
Speaker Change: And thank you thanks, Mark and I would just say our members are aligned with the expectations. We set so thank you for the question.
Speaker Change: Next we'll go next question please.
Speaker Change: Thank you next we'll go to the line of Justin Lake from Wolfe Research. Please go ahead.
Justin Lake: Thanks. Good morning can you tell us how Medicaid MLR margin trended from Q4 last year to Q1 this year.
Speaker Change: Just flat up down and then does your guidance still anticipate Medicaid margins being flat year over year in 2025 before improving in 2026.
Speaker Change: Okay.
Speaker Change: Justin Thanks, very much for the question maybe at a very high level. The benefit expense ratio did decrease sequentially more from the fourth quarter of last year to the first quarter of this year than is typical and you could think about that really is being driven by a workday dynamics in the first quarter.
Speaker Change: <unk> and Medicare part D seasonality changes.
Speaker Change: On Medicaid I would say trends remain elevated but decelerated as expected.
Speaker Change: During the first quarter and that reflects the stable membership levels and utilization patterns and this really aligns with our broader view that recovery Medicaid margins is likely to be a tale of two hogs, we're going to see stabilization early in the year and then improvements materializing in the latter half of the year at rate as rate updates continue.
Speaker Change: <unk> come in.
Speaker Change: Thank you next question please.
Speaker Change: Next we'll go to the line of Julian <unk> from Bank of America Securities. Please go ahead.
Julian: Hey, good morning, Thanks, so much for taking the questions actually to follow up on the slots coming out in terms of Medicaid rate outlook like you're saying you expect some improvement in second half. So any update you might have I mean, I understand that the July great updates right.
Important here, but any indications there and also when will you know those.
Julian: July rate update thank you.
Felicia Norwood: Thanks for the question Felicia.
Speaker Change: Good morning, gentlemen, and thank you for that question you know our Medicaid team is in constant communication with our state partners advocating for Actuarially sound rates that adequately account for it that elevated acuity and cost trend that we certainly experienced late last year.
Speaker Change: To date, our January and April rate renewals were in line with our expectations and really reflect progress towards bringing rates back to a level that will prospectively cover cost trends.
Speaker Change: When we think about July Alright July renewals represent about one third of our membership and early discussions with our states are underway, but it's far too soon to comment.
Speaker Change: Around where we are because those discussions are really just commenced I will say that we will continue to provide regular updates to our state partners and work very closely with them to make sure that our go forward rate aligned with the level of trend we're experiencing in our Medicaid book.
Speaker Change: Thanks, Felicia and as we said I think they've been very constructive discussions with our state to line rates to the acuity of the population.
Speaker Change: Next question please.
Speaker Change: Next we will go to the line of George Hill from Deutsche Bank. Please go ahead.
George Hill: Good morning, guys and thanks for taking the question. This is probably one for Mark and for Pete I had a question about <unk> 28, and I guess can you talk about the <unk> your expected impact from the <unk> model change this year kind of as it relates to last year and what I'm really trying to focus on is is this kind of a lapping effect as it relates to the implementation of the risk model or a <unk>.
Speaker Change: Stacking effect and I don't know if its too early to think about like what happens as we move from 'twenty five 'twenty six.
Speaker Change: George Thanks, very much for the question I'll get started here the 2008, our risk adjustment model has introduced changes to the way that the Medicare advantage plans, obviously receive funding based on members at clinical and demographic profiles.
Speaker Change: And these modifications obviously affect how we documents and report.
Speaker Change: Chronic conditions and factors it really ultimately help line.
Speaker Change: <unk> payments with the health care needs of our members that said these changes were anticipated.
Speaker Change: And incorporated into our 2025 planning and pricing and we're going to continue to take a disciplined approach to benefit design and remain focused on driving that valley Easter strong member engagement and effective care coordination overtime, we really believe our operational execution and our diversified portfolio position.
Speaker Change: Put us in a good place to navigate through this transition.
Speaker Change: Thank you next question please.
Speaker Change: Next we'll go to the line of Whit Mayo from Leerink partners. Please go ahead.
Thanks, just wanted to follow up on group in a I don't think I heard you directly comment on this but are you seeing any different trends with care activity or utilization patterns versus individual MA now versus your expert taste expectations per se, but just anything different.
Speaker Change: About group in any thanks.
Speaker Change: Very much appreciate the follow up here.
Speaker Change: Utilization patterns that we observed in the first quarter do not indicate any meaningful acceleration in cost train five group MA business and just to remind you that represents about 15% of our total Medicare advantage enrollment.
Speaker Change: As a reminder, our EMEA growth. This year does include meaningful contribution from really one large group MA account and so retention across our book remains strong and we are also continuing to approach the statement with discipline, ensuring that the offerings are sustainable and aligned with our long term margin objectives. So I'd say while trends are elevated it's early in the year for <unk>.
Speaker Change: <unk> factors to fully mature, but we've not seen changes in utilization patents from what we expected. Thank you. Thanks, Mark and I think we have one last question in the queue.
Speaker Change: For our final question will go to the line of Michael Hall from Baird. Please go ahead.
Speaker Change: Alright. Thank you regarding part D. I, just wanted to double click into it a bit more.
Speaker Change: Based on the emerging part D claims data you're seeing year to date was wondering.
Speaker Change: <unk> discussed in utilization what percent of your part D members already through their maximum out of pocket limits.
Speaker Change: That compare to your expectations basically how much clarity do you have on the new normal of utilization behavior and I guess, if there is if there was going to be higher than expected part to utilization levels and it doesn't materialize until the back half of this year, then plans may end up missing it in their June beds. So is there any way.
Speaker Change: At all of that you could help us sort of assuage those concerns. Thank you.
Speaker Change: I appreciate the question, perhaps the best place for me to start is to say that we are comfortable with the mix of our Medicare advantage membership that we've attracted this year, we always balance benefit design against risk management and price discipline. So that ultimately we remain confident that our MAA.
Speaker Change: Membership mix is aligned with a sustainable high quality risk pool with respect to part D. We've also not observed a substantial variation to our plan this year and any higher utilization that we might hypothetically see would of course, Michael as you know the balanced by risk corridors rebates and other contractual.
Speaker Change: <unk>.
Speaker Change: Think about this.
Speaker Change: Thank you Mark that was the last question I just want to reaffirm a few things one.
Speaker Change: That we were pleased with the start of the year. We're remaining disciplined we're respectful of the environment and Youll continue to see that from US for the course of this year and I also want to thank everyone on the line for your questions today and your interest in elegance health. We're pleased as I said with the strong start to the year and we're confident that our actions are going to have and make meaningful impact in may.
Speaker Change: Health care simple affordable and accessible for our members communities and care partners. We look forward to updating you on our progress in the quarters ahead have a great rest of week. Thank you again for joining us.
Speaker Change: Ladies and gentlemen, a recording of this conference will be available for replay. After 11 am today through May 22025, you may access the replay system at anytime by dialing 800.