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 [12][14] - 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 [14][15] - The consolidated benefit-expense ratio was 91.3%, aligned with expectations, while Medicaid performance faced pressure from elevated acuity and utilization [14][15] 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 performance [6][15] - CarelonRx revenue grew 20% year over year, driven by strong momentum with large clients, while Carelon Services grew by more than 50% due to robust organic growth [16][17] - The ACA market is expected to face challenges due to the anticipated expiration of enhanced subsidies, which could significantly impact membership in 2026 [8][14] Market Data and Key Metrics Changes - Medicaid operating margin is expected to be modestly negative for 2025, with a projected decline of at least 125 basis points in 2026 due to ongoing acuity and utilization trends [15][18] - The company anticipates a high single-digit decline in full-year operating margin for the ACA business, while commercial group margins are expected to remain consistent with prior expectations [15][16] - The anticipated expiration of enhanced subsidies could lead to a material contraction in the ACA marketplace, affecting overall membership [40][41] 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 [4][10] - Elevance Health is committed to disciplined capital allocation, balancing investment and growth with consistent shareholder returns, including share repurchases [11][18] - The company is investing in technology adoption, Carelon capabilities, and operational initiatives to enhance performance and support long-term growth [30][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the dynamic external environment but expressed confidence in the company's strategy and execution to drive sustainable value [11][20] - The company is proactively working with state partners on rate alignment and program improvements to ensure the sustainability of Medicaid programs [9][26] - Management expects 2026 to be a trough year for Medicaid margins, with a return to a more balanced earnings growth profile anticipated in 2027 [24][66] Other Important Information - The company is integrating recent acquisitions to expand Carelon's capabilities while maintaining a strong balance sheet to support growth objectives [11][18] - The company is embedding AI and digital tools across operations to enhance member and provider experiences, aiming for improved affordability and operational performance [30][35] Q&A Session Summary Question: Medicaid margin outlook and state discussions - Management indicated that Medicaid margins are expected to be slightly negative for 2025, with a projected decline of at least 125 basis points in 2026 due to elevated acuity and utilization trends [22][24] - Discussions with states are constructive, with states exploring ways to reduce overall Medicaid program costs and improve affordability [25][26] Question: Investment spending impact on 2026 - The company plans to make several hundred million dollars in discrete investments to advance strategic goals, which are expected to impact EPS positively in the long term [29][30] Question: ACA membership impact from subsidy expiration - If enhanced subsidies expire, a material contraction in the ACA marketplace is expected, leading to lower enrollment and higher premium increases [40][41] Question: Medicaid risk pool shifts and coding trends - Management noted that elevated acuity and utilization pressures have led to a below-breakeven Medicaid operating margin, with ongoing efforts to improve coding accuracy and compliance [76][78] Question: State partners considering benefit adjustments - States are looking at various levers, including potential program changes, to improve affordability in Medicaid, with adjustments typically aligning with new contract years [81][83]