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]

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 $6.30, reflecting enhanced medical cost management and expense discipline [17][19] - 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 [19][20] - The consolidated benefit expense ratio was 91.3%, aligned with expectations [19][20] Business Line Data and Key Metrics Changes - Medicaid performance faced pressure from elevated acuity and utilization, with expectations of a modestly negative operating margin for the full year 2025 and a decline of at least 125 basis points in 2026 [20][24] - Medicare Advantage costs were marginally better than expected, with an anticipated slight increase in operating margin for 2025 [20][21] - The ACA market showed favorable development compared to expectations, but cost trends remain significantly above historical levels [21] Market Data and Key Metrics Changes - The company ended the quarter with 45.4 million medical members, with Medicaid membership concentrated among lower acuity members due to stringent eligibility reviews [19][20] - In the ACA market, the anticipated expiration of enhanced subsidies could significantly impact membership in 2026 [10][21] 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 [5][6] - Elevance Health is committed to disciplined capital allocation, balancing investment in growth with consistent shareholder returns, and prioritizing returning capital to shareholders through share repurchases [15][23] - The company is investing in technology adoption, Careline capabilities, and operational initiatives to enhance performance and member satisfaction [42][44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by rising medical and pharmacy costs and regulatory changes impacting coverage for millions of Americans [5][6] - The company is approaching 2026 with a prudent and practical posture, setting expectations that reflect current realities and uncertainties [6][14] - Management expressed confidence in the strategy and execution, anticipating a return to a more balanced earnings growth profile in 2027 [27][86] Other Important Information - The company is expanding external relationships and scaling pharmacy, behavioral health, and specialty care management, with external revenue growing double digits year over year [11][12] - The company is embedding AI-enabled tools to enhance access, efficiency, and engagement across its platform [13][44] Q&A Session Summary Question: Medicaid margin expectations and state discussions - Analyst inquired about the Medicaid margin outlook and the company's discussions with states regarding rate updates and cost trends [29] - Management clarified that the Medicaid trend assumption is anchored to expected fourth quarter exit rates, with elevated acuity and utilization driving pressures [32][33] Question: Investment spending and its impact on earnings - Analyst asked about the nature of investment spending and its potential transitory impact on earnings growth [40] - Management indicated that investments are focused on technology adoption, Careline scaling, and operational improvements, aimed at long-term growth [42][44] Question: Impact of enhanced subsidies on ACA membership - Analyst sought clarity on the potential impact of enhanced subsidies expiration on ACA membership [50] - Management acknowledged that expiration could lead to a material contraction in the ACA marketplace, with expectations of lower enrollments and higher morbidity risk [55] Question: Medicaid risk pool shifts and coding trends - Analyst inquired about the expected risk pool shifts and updates on coding trends from providers [101] - Management noted that elevated acuity and utilization pressures have not been fully offset by rate updates, and they are working on improving coding accuracy and compliance [104][106] Question: State partners' potential benefit adjustments - Analyst asked if state partners are considering pulling back on benefits to improve affordability [110] - Management confirmed that states are exploring various levers, including program changes, to enhance affordability in Medicaid programs [112]

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]

Financial Data and Key Metrics Changes - GAAP diluted earnings per share was $9.61 and adjusted diluted earnings per share was $11.97, reflecting year-over-year growth of more than 10% [18] - Operating revenue in the quarter was $48.8 billion, an increase of over 15%, driven by higher premium yields in the Health Benefits segment and growth in Medicare Advantage and individual ACA membership [19] - The consolidated benefit expense ratio was 86.4%, an increase of 80 basis points year-over-year, primarily due to higher cost trends in the Medicaid business [20] Business Line Data and Key Metrics Changes - Health Benefits operating gain was $2.2 billion, slightly declining due to higher Medicaid costs, partially offset by operating efficiencies [20] - Calon's operating gain grew 34% to $1.1 billion, driven by growth in pharmacy volumes and improved performance of deployed risk-based capabilities [21] - The company ended the quarter with 45.8 million medical members, up 99,000 from year-end, primarily driven by targeted expansion and better-than-expected retention rates in Medicare Advantage [18] Market Data and Key Metrics Changes - Individual ACA membership grew approximately 11% sequentially, but a moderation in membership is anticipated during the second quarter due to lower-than-expected effectuation rates [18] - In Medicaid, progress on rate alignment is ongoing, with April adjustments coming in as expected and discussions for the July cohort underway [12] - The company is expanding its value-based oncology care model to Medicare Advantage, following success in the commercial segment [10] Company Strategy and Development Direction - The company is focused on advancing its purpose to improve the health of humanity through investments in patient advocacy solutions and digital platforms [7][9] - Elevance Health is expanding its integrated offerings, which combine advocacy, behavioral health, pharmacy, and specialty care, to enhance employer engagement [14] - The acquisition of CareBridge strengthens the company's capabilities in home and community-based services, supporting its whole health approach [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term outlook for Medicare Advantage, citing strong retention and disciplined growth strategies [13] - The company is monitoring trends closely, particularly in Medicare costs, which remain elevated but manageable [28] - Management reiterated guidance for adjusted diluted earnings per share to be in the range of $34.15 to $34.85, with expectations for more than 60% of earnings to be realized in the first half of the year [24] Other Important Information - The company was recognized as one of Fortune's 100 best companies to work for and included in the Just 100 by Just Capital, reflecting its commitment to values and impact [17] - The debt to capital ratio was approximately 41%, preserving flexibility for strategic investments [21] Q&A Session Summary Question: Medicare Advantage trends and IRA impact - Management indicated that Medicare costs remain elevated but manageable, with no material changes to prior expectations [27][28] Question: Growth in Carillon services and cross-sales - Carillon services experienced over 60% growth, with strong internal and external expansion noted [35][36] Question: Effectuation rates and membership expectations - Effectuation rates are tracking lower than initial expectations, with projected membership attrition in the mid-single-digit percent range in early Q2 [42] Question: Medicaid MLR margin trends - Medicaid trends remain elevated but decelerated as expected, with stabilization anticipated in the latter half of the year [92] Question: Part D utilization and new normal - Management is comfortable with the mix of Medicare Advantage membership and has not observed substantial variation in Part D utilization [112]

Financial Data and Key Metrics Changes - In Q1 2025, GAAP diluted earnings per share was $9.61, and adjusted diluted earnings per share was $11.97, reflecting year-over-year growth of more than 10% [25] - Operating revenue for the quarter was $48.8 billion, an increase of over 15%, driven by higher premium yields in the health benefits segment and growth in Medicare Advantage and individual ACA membership [26] - The consolidated benefit expense ratio was 86.4%, an increase of 80 basis points year over year, primarily due to higher cost trends in the Medicaid business [27] Business Line Data and Key Metrics Changes - Medicaid membership is progressing with rate alignment, and the long-term care model is delivering better outcomes at lower costs [16][17] - Medicare Advantage performance was consistent with expectations, with strong retention and disciplined growth [17] - The health benefits operating gain was $2.2 billion, slightly declining due to higher Medicaid costs, while Calon's operating gain grew 34% to $1.1 billion [29] Market Data and Key Metrics Changes - Individual ACA membership grew approximately 11% sequentially, but a moderation in membership is anticipated in Q2 due to lower effectuation rates [25][56] - The company is expanding into three new states to build lifetime value through coordinated ACA and Medicaid coverage [19] Company Strategy and Development Direction - The company is focused on transforming healthcare experiences to be simpler, more affordable, and more human, with sustained investments in patient advocacy solutions and digital platforms [9][10] - Elevance Health is expanding its value-based oncology care model to Medicare Advantage, following success in the commercial sector [12] - The company aims to deepen collaboration with providers and close gaps in care through risk-based arrangements, which have driven nearly $100 in per member per month savings [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term outlook for Medicare Advantage, emphasizing strong retention and targeted growth [17] - The operating environment remains elevated, but the company is managing costs effectively and expects to see stabilization in Medicaid margins later in the year [117] - Management reiterated guidance for adjusted diluted earnings per share to be in the range of $34.15 to $34.85 [33] Other Important Information - Elevance Health was recognized as one of Fortune's 100 Best Companies to Work For and included in the Just 100 by Just Capital, reflecting its commitment to values and impact [22] - The company repurchased 2.2 million shares of common stock for approximately $880 million, demonstrating confidence in its intrinsic value [33] Q&A Session Summary Question: Concerns regarding Medicare Advantage trends - Management indicated that Medicare costs remain elevated but manageable, with no material changes in expectations [39][41] Question: Growth in Carillon Services - Carillon Services experienced over 60% growth, with strong internal and external expansion [47] Question: Effectuation rates and membership attrition - Membership attrition is projected in the mid-single digit percent range in early Q2, with expectations for stabilization thereafter [57] Question: Medicaid MLR margin trends - Medicaid trends remain elevated but decelerated as expected, with improvements anticipated in the latter half of the year [117] Question: Part D and IRA impact - Changes from the Inflation Reduction Act are expected to shift the seasonality pattern for Part D, resulting in stronger financial performance in earlier quarters [68][70] Question: New member engagement strategy - The company is focused on early engagement with new members to ensure timely care and accurate health assessments [93] Question: Group MA trends - Utilization patterns for Group MA do not indicate any meaningful acceleration in cost trends compared to expectations [133]