Elevance Health(ELV) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported third quarter GAAP earnings per share of $5.45, reflecting a strong performance despite a charge taken during the quarter [64] - Adjusted earnings per share was$ 8.99, showing growth of approximately 20% over the third quarter of 2022 [107] - Operating revenue in the third quarter was $42.5 billion, an increase of 7.2% over the prior year quarter, driven by rate increases and double-digit growth in CarelonRx [123] Business Line Data and Key Metrics Changes - The Health Benefits division delivered robust results, with operating margin improvement of 30 basis points year-over-year [126] - CarelonRx achieved 17.5% revenue growth, propelled by growth in pharmacy customers and the acquisition of BioPlus [126] - The individual membership grew by 27% year-to-date, with ACA membership growth rate more than tripling that of competitors in the 14 Blue states [110] Market Data and Key Metrics Changes - Nearly three-quarters of Medicaid beneficiaries terminated in the company's markets have lost coverage for administrative reasons, with 37% of attrition driven by individuals under 18 [68] - The company expects re-enrollment to accelerate in the coming quarters, anticipating a slowdown in membership attrition associated with redeterminations [69] - The company is seeing encouraging signs in some Blue states, with over 30% of Medicaid members who were terminated returning or retaining coverage [79] Company Strategy and Development Direction - The company is focused on enhancing operating efficiency and optimizing its physical footprint, resulting in a business optimization charge of approximately$ 700 million [52] - The strategy includes investments in technology and automation to improve service delivery and member experience [85] - The company is committed to delivering whole health solutions that are affordable, personalized, and simple, with a long-term target compound annual growth rate in adjusted earnings per share of 12% to 15% [65] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with recent Star quality ratings but remains committed to improving this line of business for the long term [96] - The company anticipates continued momentum in Carelon, driven by new product launches and the ramp-up of BioPlus [97] - Management is confident in the ability to deliver strong growth in adjusted earnings per share in 2024, despite headwinds related to Medicaid membership attrition [119] Other Important Information - The company is on track to launch its advanced home delivery capability in the fourth quarter, enhancing consumer experiences and affordability [115] - The integration of BioPlus is ahead of schedule, with plans to migrate specialty scripts from the legacy pharmacy platform early next year [82] - The company has repurchased approximately 1.1 million shares of common stock for $480 million during the quarter [127] Q&A Session Summary Question: Can you discuss the commercial margin improvement story and underlying cost trends? - Management noted that the team has balanced membership retention and margin improvements, indicating a multiyear journey in the commercial business [4] Question: How is Medicaid disenrollment trending compared to expectations? - Management indicated that Medicaid disenrollment has been front-loaded, with many members returning after temporary disenrollment [8][10] Question: What are the expectations for Medicare Advantage membership growth? - Management stated that it is too early to provide specific guidance but is optimistic about growth based on early responses from brokers [31][162] Question: How is the company addressing the recent decline in Star ratings? - Management acknowledged disappointment in Star ratings and is committed to improving quality measures through value-based care initiatives [102][112] Question: What actions are being taken to mitigate financial impacts for 2025? - Management is exploring contract diversification, operating efficiencies, and capital deployment alternatives to address potential financial impacts [81][137]