The paragraph is an introduction to Elevance Health's Fourth Quarter Earnings Conference Call. The operator welcomes participants, notes that the call is in a listen-only mode initially, and mentions that there will be a Q&A session later. Nathan Rich, Vice President of Investor Relations, introduces the company's leadership team present on the call, including Gail Boudreaux (President and CEO), Mark Kaye (CFO), and others. Gail will review strategic progress and the outlook for 2025, while Mark will cover financial results and guidance. The call will reference non-GAAP measures, with reconciliations available on the company website, and will include forward-looking statements that are subject to risks and uncertainties outlined in recent filings. Finally, Nathan turns the call over to Gail.

Gail Boudreaux, addressing the impact of the Southern California wildfires, expressed gratitude to first responders and highlighted Elevance Health's commitment to supporting affected communities with essential health resources. She emphasized the company's mission to improve health care through compassion, leadership, and addressing industry challenges like rising costs and disparities in access. By collaborating with partners and leveraging digital tools like the Sydney app, Elevance Health aims to simplify and personalize health care for its members, enhancing their experience and efficiency.

Health insurers are crucial in making healthcare more affordable by providing high-quality care at reasonable costs and promoting preventative care. They achieve this through value-based partnerships, innovative plans like those in their 2025 Medicare Advantage portfolio, and programs like Total Health, Total You, which improve preventative service use and reduce hospital admissions. These efforts lead to better health outcomes and lower costs. Their value-based programs are expanding, with an increased percentage taking downside risk. The launch of Mosaic Health aims to enhance advanced primary care and physician support, serving nearly 1 million people in 19 states and priming further expansion.

The paragraph discusses the company's efforts in partnering with hospitals and physicians to reduce administrative burdens through real-time data sharing. This collaboration has led to fewer denied claims and improved health outcomes. The company aims to promote holistic health solutions addressing various health drivers and is committed to improving global health. Their financial results include a GAAP diluted earnings per share of $1.81 and an adjusted earnings per share of $3.84, in line with previous projections. Despite high Medicaid costs, the company’s initiatives, such as complex care management programs, have successfully reduced inpatient admissions by 7%. The integration of Health Benefits and Carelon platforms supports their ability to enhance health outcomes.

The paragraph discusses the company's strategic partnerships and performance across various segments, expressing optimism about future growth despite current challenges. In Medicaid, they expect rates to eventually align with costs. For Medicare, they predict growth following benefit reductions and market exits. Their commercial segment saw strong performance and new account acquisitions for 2025, with high retention rates attributed to their comprehensive medical and pharmacy offerings. They experienced significant growth in the individual exchange business in 2024 and anticipate continued success. The acquisition of CareBridge is highlighted as a strategic move to enhance Carelon's services in home health and community-based care.

CareBridge's innovative strategy, which integrates technology and clinical support, aligns with the enterprise's focus on whole health, leading to improved care quality, patient outcomes, and independence. The expansion of pharmacy, advanced primary care, and home-based solutions is driving growth for Carelon Services, exceeding revenue targets for 2024. Looking ahead to 2025, Elevance Health anticipates adjusted diluted earnings per share between $34.15 and $34.85. The company remains committed to managing costs, leveraging Carelon assets, and seizing growth opportunities, aiming for an average annual EPS growth of at least 12%. The paragraph also highlights the dedication of over 100,000 associates, who collectively volunteered over 280,000 hours, reflecting the company's commitment to community health improvement and its goal of being a trusted health partner.

The paragraph outlines the financial performance and strategies of a company as presented by CFO Mark Kaye. The company reported fourth quarter and full year adjusted diluted earnings per share of $3.84 and $33.04, respectively, consistent with expectations despite a challenging cost environment in their Medicaid business. Membership declined by 1.1 million year-over-year due to Medicaid redeterminations and geographical footprint changes but remained stable sequentially. Growth was seen in employer group fee-based offerings and ACA health plan products. The company generated $175.2 billion in total operating revenue for 2024, a 3% increase from the previous year, driven by premium rate adjustments and stronger customer relationships, especially in the Carelon business, despite reduced Medicaid membership. Acquisitions in pharmacy services and home health contributed to this growth. The benefit expense ratio for the year was 88.5%, aligning with guidance, and upcoming priorities include asset integration to enhance value and support growth in the Carelon business. Elevated cost trends in Medicaid remain stable from the third quarter.

The paragraph discusses Elevance Health's financial and operational performance, including improvements in Medicaid margins facilitated by state rate adjustments, a reduction in their operating expense ratio, and robust operating cash flow of $5.8 billion. The company repurchased $2.9 billion in shares, exceeding forecasts, and aims to balance shareholder returns with strategic investments. For 2025, they project adjusted earnings per share between $34.15 and $34.85, and anticipate growing their total medical membership to between 45.8 million and 46.6 million, driven by expansion in commercial, ACA exchange, and Medicare Advantage plans. They expect operating revenue to grow by high-single to low double-digits, supported by acquisitions like CareBridge.

The paragraph discusses several financial expectations for Elevance Health. The company anticipates a consolidated medical loss ratio of around 89.1% and an adjusted operating expense ratio of 10.4%, with a slight year-over-year improvement. For 2025, normalized operating cash flow is expected to be approximately $8 billion, with $2.3 billion allocated towards share repurchases, focusing on the first half of the year. Earnings seasonality predicts over 60% of adjusted EPS will be earned in the first half of 2025. The Board of Directors has approved a 5% increase in the quarterly dividend to $1.71 per share, marking a 14th consecutive annual increase. The company remains committed to delivering strong shareholder returns, executing strategic priorities, and investing in its diversified business model for long-term growth.

The paragraph discusses the performance of a company's Medicare Advantage business, noting that enrollment has met expectations, with strong member retention and stability despite market disruptions. Gail Boudreaux expresses confidence in the enrollment guidance, while Felicia Norwood highlights the success of the annual enrollment period. The company attributes its successful performance to a balanced approach and effective local strategy, allowing them to capture growth opportunities in core markets. Looking ahead, the Medicare Advantage margin in 2025 is expected to improve slightly but remain below long-term targets.

The paragraph discusses the company's satisfaction with its balanced growth strategy, highlighting strong Health Maintenance Organization (HMO) growth and controlled Preferred Provider Organization (PPO) growth in desired markets. With successful Annual Enrollment Period (AEP) results, the company is optimistic about meeting its 2025 Medicare Advantage growth target of 7% to 9% in member growth. The company plans to manage growth carefully, especially with new agents and dual-eligible individuals. On the margin front, they are confident in achieving stability by 2025 through disciplined cost management and strong retention. In response to Lance Wilkes' question, Mark Kaye mentions that cost trends in the fourth quarter were stable and predictable across lines of business, with Medicaid trends, particularly in behavioral health and inpatient services, remaining elevated yet stable like in previous quarters.

The paragraph discusses the impact of membership mix changes stabilizing and elevated cost trends in Medicare, particularly post-acute care services, which align with pricing expectations for 2025. On the commercial side, strong performance is noted due to a disciplined pricing approach. Elevated trends are expected to persist in Medicaid into the first half of 2025, while Medicare trends are expected to remain stable. The company's outlook for 2025 considers these dynamics, taking a prudent approach to guidance for sustainable long-term value. Stephen Baxter from Wells Fargo asks about the higher year-over-year Medical Loss Ratio (MLR) expectations for Medicaid in 2025, prompting Mark Kaye to provide more detail on the fourth-quarter Medicaid trend.

In the fourth quarter, Medicaid cost trends have aligned with previous expectations, maintaining the elevated levels seen in September due to membership stabilization following redeterminations. As these high cost trends, particularly in behavioral health and inpatient care, are expected to continue into the first half of 2025, there's concern that current rates haven't fully adjusted to these trends. This affects the anticipated rebound in Medicaid margins, which are expected to improve in the second half of the year as rate adjustments take effect. Gail Boudreaux then prompts Lisa Gill from JPMorgan to ask questions. Gill inquires about the impact of Part D redesign on the Medical Loss Ratio (MLR) and seeks clarification on the expected mid-teens growth for CarelonRx in 2025, questioning the extent of organic growth and the impact of investments on margin improvement.

The paragraph discusses the future outlook and growth strategies of Carelon. Mark Kaye addresses the projected Medical Loss Ratio (MLR) increase for 2025, attributing it to factors like strategic growth in Medicare, recent acquisitions, and medical cost trends. He highlights the impact of CareBridge and changes in Medicare Part D. Gail Boudreaux prompts Pete Haytaian to discuss Carelon's growth, noting a strong 24% growth in a recent quarter, with both internal and external growth opportunities being pursued, especially in oncology, behavioral health, post-acute solutions, and significant external revenue growth compared to 2023.

The paragraph discusses the growth and momentum of the company's services business, emphasizing significant growth projected into 2025, with over 50% growth expected, particularly due to the addition of CareBridge. The company is also experiencing over 20% organic growth outside of CareBridge. There's a strong focus on customer service and advocacy, which has helped win large accounts and improve patient experiences in both medical and pharmacy services. Gail Boudreaux highlights the company's strategy to enhance capabilities in Carelon for whole health risk management and the success they've seen in both internal growth and external client validation.

In the paragraph, Andrew Mok from Barclays asks about the company's Medicare Advantage membership growth for 2025, specifically regarding the Annual Election Period (AEP) growth and how it factors into the full year outlook. Felicia Norwood responds, stating that their AEP growth is strong, particularly thanks to group membership from a long-standing commercial account. She confirms that their individual Medicare Advantage growth aligns with their expectations. Felicia notes that their overall growth projection for the year is between 7% to 9%, with actions in place to manage growth for the rest of the year. Gail Boudreaux adds that they anticipate minimal growth with strong retention for the remainder of the year, consistent with market trends observed in previous years.

The paragraph discusses potential acquisition strategies and partnerships of the company led by Gail Boudreaux. While the company does not explicitly comment on acquisition plans, it maintains a partnership with Blue Cross Blue Shield Louisiana, collaborating on various health products. Pete Haytaian highlights the strategic focus of Carelon, which aims to deliver comprehensive health solutions emphasizing affordability and empathy. The strategy involves addressing complex healthcare issues through differentiated solutions in collaboration with health plan partners, with an open approach to opportunities, particularly in the pharmacy sector, to enhance the whole health experience.

The paragraph discusses the anticipated seasonality and operating margin trends for the health care benefits business in 2025. Mark Kaye outlines expectations for earnings, noting that more than 60% of the full year's earnings are expected in the first half, with slightly more than half of those in Q1. This pattern results from typical seasonal dynamics and the company's evolving business mix. The commercial business is expected to contribute a larger share of earnings in the first half of the year, similar to previous years, due to strong retention and disciplined pricing strategies.

The paragraph discusses the expectations and impacts on operating margins for a healthcare company. It mentions that Medicaid margins are expected to improve in the second half of the year due to rate updates. The company has accounted for changes from the Inflation Reduction Act affecting Medicare Part D and the leap year benefit in Q1. They anticipate a 25 to 50 basis point decline in operating margins year-over-year, partly due to non-recurring expense benefits cycling out in 2024 and changes in membership mix favoring Medicare over commercial lines. Excluding these discrete impacts, margins in the health benefits sector would be stable. Josh Raskin from Nephron Research then asks about the company's expectations for commercial trends and margin improvement, as well as the actions affecting growth in Medicare Advantage, which the company plans to address.

The paragraph discusses the current and future trends in commercial and Medicaid pricing strategies. It highlights that commercial cost trends are expected to remain above historical averages, but these have been accounted for in pricing strategies, ensuring competitiveness and underwriting discipline. The market is described as hard but rational, with strong retention, pricing, and robust margins. Gail Boudreaux expresses confidence in growth for the rest of the year, noting expected strong retention but no significant growth in new sales. Dave Windley from Jefferies questions about pricing, specifically regarding flat ASO (Administrative Services Only) revenue despite expected membership growth and stable Medicaid margins into early 2025. He inquires about the benefits of pricing adjustments on Medicaid and ASO.

In the paragraph, Gail Boudreaux and her colleagues, Mark Kaye and Felicia Norwood, respond to a question from Dave about their company's financial guidance and strategies. Mark Kaye explains that their service fee revenues are expected to stay flat year-over-year because they are shifting from fee-based to risk-based contracts within Carelon Services. Felicia Norwood discusses their efforts with state partners to secure actuarially sound rates for Medicaid, noting that they have insight into about 70% of their premium and expect improvement in the latter half of the year. Following their responses, the operator introduces a question from Joanna Gajuk of Bank of America.

In the paragraph, Mark Kaye addresses a question about not targeting a 6.5% to 7% margin by 2027 as previously indicated. He clarifies that while the company's long-term financial targets, including revenue growth and operating margin, remain unchanged from the 2023 Investor Day announcement, their business dynamics have evolved, particularly due to faster-than-expected growth in the Carelon businesses. This growth has exceeded initial projections, with Carelon services now expected to grow at over a 30% CAGR since 2022, well above the original target. Although this rapid growth is positive for earnings, it has impacted near-term margin expectations due to the time required for new deals to mature. Overall, the company's earnings power is strong, but the business mix and timing for achieving margin targets have shifted.

The paragraph involves a discussion during an investor call, where Erin Wright from Morgan Stanley asks about the implications of the advanced Medicare Advantage (MA) rate notice and regulatory effects on other business areas like Medicaid. Gail Boudreaux and Felicia Norwood from the company respond, indicating a positive outlook on the preliminary MA rate notice, emphasizing the importance of rate stability for maintaining valuable benefits for seniors. They highlight that over 34 million people choose MA for its high-quality care, and express satisfaction with the direction of the recent rate notice after two years of cuts to the MA program.

The paragraph discusses the need for adequate funding in a program, acknowledging that while progress has been made, the current base rate is still insufficient given recent cost trends. The speaker looks forward to collaborating with the new administration to propose changes to the advanced notice, particularly in reforming the Part D risk model and other policies to improve the program for seniors. Gail Boudreaux comments on Medicaid, highlighting the organization's expertise and history of providing critical benefits, and the potential for public-private partnerships to bring innovative programs that offer better value. The conversation then shifts to the next question from Sarah James's representative, Gabie, from Cantor Fitzgerald.

In the paragraph, Mark Kaye briefly discusses commercial cost trends, noting strong performance in the fourth quarter and throughout 2024. The trends, which included inpatient and some outpatient ER costs, were stable and aligned with expectations, having been adequately priced for. Looking ahead to 2025, ongoing pricing initiatives aim to expand margins, and they remain confident in their market positioning. Gail Boudreaux reaffirms their strong pricing strategy in the commercial sector. The conversation then shifts to George Hill from Deutsche Bank, who asks about expectations for enhanced subsidies amid political changes and the percentage of exchange members who have paid January premiums, considering the government's reactivation of income verification.

In the paragraph, Gail Boudreaux defers a question to Morgan Kendrick, who discusses the positive performance of the commercial Affordable Care Act (ACA) business. He highlights the company's strategic, methodical growth into new markets, noting expansion into three non-Blue regions. Despite potential market challenges, like subsidy reductions, he emphasizes confidence in the ACA market as a solid, complementary business for long-term growth. Mark Kaye adds there are no changes in effectuation rates and mentions that membership growth guidance includes conservative assumptions. Boudreaux concludes by noting ongoing federal government discussions, with no final policy decisions yet.

The paragraph discusses the flexibility Congress has in deciding on subsidy extensions, emphasizing it's not a binary choice and can involve full or partial adjustments. It transitions to a conversation where Scott Fidel asks Mark Kaye about the operating margin dynamics for Carelon by 2027 and whether the Health Benefits margin targets are still valid. Mark Kaye reassures that the long-term margin objectives for the Health Benefits business remain unchanged, expressing confidence in their ongoing earnings potential and growth. The changes made this quarter, partially based on investor feedback, reflect faster-than-expected growth in Carelon, and Mark mentions they will provide further details at the investor conference.

In the paragraph, Gail Boudreaux addresses a question about Elevance's 2025 Medicare Advantage (MA) growth guidance. She explains that the company has targeted specific growth areas based on marketplace, geography, and product, emphasizing their strong duals business. Boudreaux highlights the importance of retention in their individual Medicare Advantage segment, which she believes positions them well for long-term sustainable growth. She insists that these strategies are aligned with their long-term goals and mentions the significant positive growth in their group segment as well.

The paragraph discusses the company's strategy and performance regarding their Puerto Rico MA (Medicare Advantage) business. They made strategic decisions to reduce supplemental benefits, aiming to balance margins and membership for stabilization. This approach was successful in 2024, and they plan to continue it into 2025. The company feels confident about their strategic positioning in Puerto Rico and their ability to deliver value to its residents through the MA program.

The paragraph is a closing statement from Gail Boudreaux, expressing gratitude to the participants of the conference call and highlighting Elevance Health's commitment to making healthcare more accessible and affordable as they enter 2025. She conveys confidence in the company's future growth and invites listeners to access a replay of the conference, providing specific phone numbers for doing so. The conference is then concluded, thanking participants for their involvement.

This summary was generated with AI and may contain some inaccuracies.