Second, even in a dynamic environment, we are acting decisively in the areas within our control to strengthen margins, reduce volatility, and improve the consistency of our performance. And third, as those actions take hold, we expect to return to at least 12% adjusted EPS growth in 2027 off our ending 2026 earnings baseline supported by the earnings power of our diversified platform. Consistent with that approach, we are establishing 2026 adjusted diluted earnings per share guidance of at least $25.50. As ...

Financial Data and Key Metrics Changes - Elevance Health reported second quarter GAAP diluted earnings per share of $7.72 and adjusted diluted earnings per share of $8.84, with a revised full year 2025 adjusted EPS guidance of approximately $30 [14][19] - Operating revenue was $49.4 billion, an increase of 14% year over year, driven by higher premium yields and recent acquisitions [14][15] - The consolidated benefit expense ratio increased to 88.9%, up 260 basis points year over year, primarily due to pressures in the ACA and Medicaid businesses [15][17] Business Line Data and Key Metrics Changes - The Medicare Advantage portfolio showed continued strength, with cost trends in line with expectations [6][17] - CarillonRx experienced over 20% growth in operating revenue, while Carillon services delivered more than 50% growth in revenue [18][19] - Membership decreased to 45.6 million, down approximately 200,000 sequentially, attributed to a reduction in Medicaid membership and lower effectuation rates in the ACA business [14][15] Market Data and Key Metrics Changes - The ACA market is experiencing elevated morbidity due to shifts from Medicaid, with approximately 70% of the total impact attributed to risk pool acuity [26][36] - Medicaid cost trends decelerated in the second quarter but at a slower pace than expected, with higher acuity and increased member utilization [16][17] - The company anticipates a broader market reset in 2026 due to the expiration of enhanced subsidies, which may lead to further risk pool changes [12][20] Company Strategy and Development Direction - The company is focused on executing a clear strategy to strengthen structural performance across the enterprise, with an emphasis on managing costs and deploying targeted investments [5][8] - Efforts are being made to stabilize trends in high-cost areas, including specialty services and post-acute care, while enhancing care delivery through streamlined prior authorization processes [9][10] - The company aims to improve visibility and consistency in operations while preparing for potential policy changes affecting Medicaid and ACA markets [20][62] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the disappointment in revising guidance for the second consecutive year but emphasized the commitment to transparency and strong execution [13][19] - The company is taking proactive steps to address elevated medical cost trends and is not relying on near-term recovery assumptions [7][12] - Management remains confident in the strength of the enterprise and the ability to create long-term value through operational discipline and innovation [13][19] Other Important Information - The company is utilizing AI-enabled tools to streamline clinical workflows and identify fraud, waste, and abuse [10][69] - Approximately one-third of benefit expenses are now in downside risk arrangements, supporting improved care coordination [10][12] - The company has returned approximately $2 billion to investors year-to-date, with a focus on maintaining flexibility for strategic investments [19][72] Q&A Session Summary Question: Can you help delineate the pressure you're seeing in the ACA business? - Management identified three principal factors: increased risk pool acuity, higher utilization in several cost categories, and inappropriate coding tactics contributing to inflated costs [22][25] Question: Can you size the relative impact of ACA and Medicaid in the guidance revision? - The reduction in guidance is slightly more weighted towards ACA, with ongoing enrollment losses in Medicaid contributing to elevated morbidity [29][35] Question: How do you think about the dynamic of Medicaid margins? - Management expects Medicaid margins to show year-over-year improvement in the back half of the year, despite ongoing challenges [42][100] Question: Can you talk about Medicare Advantage trends and bid strategy? - Medicare Advantage trends remain elevated and consistent with expectations, with a disciplined approach to bids for 2026 focused on margin recovery [46][48] Question: What are you doing differently in terms of cost structure initiatives? - The company is transforming processes using technology and AI to manage costs and identify trends earlier, with a focus on responsible innovation [66][69] Question: How is the current environment affecting capital allocation strategy? - The company is maintaining a flexible capital allocation strategy, focusing on opportunistic share repurchases while integrating recent acquisitions [72][73]