Financial Data and Key Metrics Changes - Elevance Health reported third quarter GAAP diluted earnings per share of $5.32 and adjusted diluted earnings per share of $6.03, reflecting enhanced medical cost management and expense discipline [14][15] - Total operating revenue for the quarter was $50.1 billion, up 12% year over year, driven by higher premium yields and growth in Medicare Advantage membership [15] - The consolidated benefit-expense ratio was 91.3%, aligned with expectations, while Medicaid performance faced pressure from elevated acuity and utilization [15][16] Business Line Data and Key Metrics Changes - In Medicare Advantage, approximately 55% of members will be in four-star or higher contracts for the 2027 payment year, up from about 40% for 2026, indicating improvement in STAR ratings [8] - CarelonRx revenue grew 20% year over year, driven by strong momentum with large clients, while Carelon Services grew by more than 50% [17] - The ACA market is experiencing higher acuity, and the anticipated expiration of enhanced subsidies could significantly impact membership in 2026 [9][10] Market Data and Key Metrics Changes - Medicaid operating margin is expected to be modestly negative for 2025, with a decline of at least 125 basis points anticipated for 2026 due to elevated acuity and utilization trends [16][20] - The company expects a high single-digit decline in full-year operating margin for the ACA market, while commercial group business margins remain consistent with prior expectations [16][50] Company Strategy and Development Direction - The company is focused on lowering the total cost of care and improving member experience through an integrated clinical and benefits approach, leveraging value-based care [6][10] - Elevance Health is committed to disciplined capital allocation, balancing investment and growth with consistent shareholder returns, including share repurchases [12][13] - The company is investing in technology, particularly AI, to enhance member and provider experiences, aiming for long-term growth [34][38] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by rising medical and pharmacy costs and regulatory changes impacting coverage for millions of Americans [6] - The company is approaching 2026 with a prudent and practical posture, setting expectations that reflect current realities and uncertainties [7][22] - Management is confident in the strategy and execution, aiming for sustainable value for stakeholders despite a dynamic external environment [13][22] Other Important Information - The company is expanding external relationships and scaling pharmacy, behavioral health, and specialty care management, embedding value-based care principles throughout [9][10] - By year-end, over 10 million members will have access to the AI-enabled virtual assistant, enhancing access and engagement [11] Q&A Session Summary Question: Medicaid margin outlook and state discussions - Management discussed the expectation of a 125 basis point decline in Medicaid margins for 2026, driven by elevated acuity and utilization trends, and noted constructive conversations with states regarding rate adequacy [24][28][27] Question: Investment spending impact on 2026 - Management clarified that several hundred million dollars of investment is planned for technology adoption, Carelon expansion, and operational initiatives, which are expected to enhance long-term growth [32][34] Question: ACA membership impact from subsidy expiration - Management indicated that if enhanced subsidies expire, a material contraction in the ACA marketplace is expected, leading to lower enrollment and higher premium increases [41][45] Question: Medicaid membership outlook - Management anticipates a modest decline in Medicaid membership for 2026 due to ongoing re-verification processes and state program changes [75][76] Question: Medicaid coding trends and provider engagement - Management is actively working with providers to ensure accurate clinical documentation and is taking steps to improve oversight and compliance [81][84]