The paragraph is an introductory section of the Centene Corporation Fourth Quarter and Full Year 2024 Earnings Conference Call. The operator welcomes participants, instructs them on how to listen and ask questions, and notes that the event is recorded. Jennifer Gilligan, the Head of Investor Relations, introduces the call, highlighting key speakers: Sarah London, CEO, and Drew Asher, CFO. She mentions that the call will include forward-looking statements subject to change and warns that actual results may differ due to various factors. Non-GAAP financial measures will be discussed, with reconciliations available in the press release on Centene's website. Finally, Jennifer hands over the call to CEO Sarah London.

Centene is entering 2025 with a strong strategic plan and positive momentum across its business lines. The company is focusing on modernizing its platform, automating processes with AI, and utilizing data to improve operations and healthcare quality. For the fourth quarter, Centene reported an adjusted diluted EPS of $0.80 and for the full year 2024, an EPS of $7.17, indicating stable earnings power. Strong results from Medicare enrollment and Medicaid expansion have prompted an increase in their full-year 2025 revenue guidance by $4 billion, although the EPS target remains above $7.25. Looking ahead, Centene plans to capitalize on opportunities within Medicaid, serving 13 million Americans, with expectations of member stability and equilibrium in rates and risk profiles following the post-COVID eligibility redeterminations.

The paragraph describes Centene's efforts to enhance Medicaid services and health outcomes by working with state partners to achieve favorable rate adjustments and developing innovative care programs. Centene is focused on providing local, integrated, and sustainable care to improve health outcomes. In Nevada, their SilverSummit team distributes tablets for prenatal and postpartum telehealth, addressing rural healthcare challenges. In Illinois, the Meridian team supports members with high blood pressure through a "food is medicine" program, offering nutrition counseling and providing medically tailored meals and healthy food options to encourage long-term dietary changes.

As we enter 2025, there is a focus on moving past the challenges of Medicaid redeterminations towards program stability, while collaborating with state partners on healthcare innovations. On the Medicare front, significant progress has been made, as indicated by improved Stars ratings for 2026 benefit plans, with 55% of members now in 3.5 star plans or better, up from 23% previously. The company has achieved year-over-year improvements in administrative measures and care gap closures, leading to a smooth transition for Medicare in 2025. A strategic refinement of the Medicare Advantage footprint to align with Medicaid capabilities has resulted in better-than-expected enrollment outcomes, with projections in the low-to-mid 900,000s. These successes are attributed to product design, effective distribution management, and local market insights.

The paragraph discusses Centene's positive outlook on its membership mix and growth opportunities related to Medicare Part D amid program changes from the Inflation Reduction Act. The company anticipates a significant increase in revenue and membership for Part D in 2025, with strong open enrollment results expected to generate approximately $16 billion. Centene remains confident in its financial objectives, including a 1% margin target for the PDP business in 2025, based on favorable member demographics and product selection. The paragraph also mentions a potential positive funding shift for Medicare Advantage following recent advance rate notices, with final rates expected in April. Centene is optimistic about building on its 2024 performance and operational progress to achieve breakeven in Medicare Advantage by 2027.

The paragraph discusses Ambetter's strong performance in the marketplace, highlighting its effective pricing and distribution strategies, leading to successful open enrollment and consistent membership growth. In 2024, Ambetter saw stronger than expected effectuated enrollment, largely due to high member retention, and is projected to have over 5 million members in the first quarter of 2025. The demographic remains similar to previous years, with a shift towards younger members and more members selecting silver plans. The company anticipates a return to pre-COVID membership trends by the end of the year and credits its early implementation of an agent of record lock for positioning itself strongly in the market.

The paragraph discusses Centene's outlook on membership impact from program integrity changes, noting that full effects on enrollment may take months to understand. The company highlights strong open enrollment results in Georgia and its support for the state's transition to a state-based exchange. Centene emphasizes the importance of Individual Coverage Health Reimbursement Arrangements (ICHRA) in the future of health insurance and introduces Alan Silver as the new President of Ambetter Health Solutions, who will focus on ICHRA initiatives. The paragraph concludes by recognizing the team's efforts in overcoming challenges to meet financial goals for 2024.

The paragraph outlines the company's strategic position and financial performance. For 2025, they plan to collaborate with state partners to improve Medicaid rates and focus on Medicare Advantage to reach breakeven by 2027. They aim to provide affordable healthcare to around 5 million Americans through their marketplace. The company anticipates significant earnings growth, projecting $3 to $4 in adjusted EPS. Financial results for Q4 2024 show $36.3 billion in revenue and $0.80 adjusted EPS, with a full-year adjusted EPS of $7.17, exceeding guidance. The company also mentions benefits from a CSR settlement and stable Medicaid trends after redeterminations, with some concerns in behavioral and home health costs.

The paragraph discusses the company's financial performance and outlook for Medicaid and other segments. In 2024, the Medicaid Health Benefits Ratio is high at 92.5% due to redeterminations but is expected to lead to increased earnings as rates and acuity better align. They project net rate increases for 2025, impacting 40% of their annual Medicaid premium, with membership stable at around 12.9 to 13 million. Strong Medicare and commercial performance in Q4 is noted, with resilience against the Inflation Reduction Act. The company anticipates entering 2025 in a robust position, focusing on Medicaid rate actions and initiatives to improve healthcare quality and affordability. The SG&A expense ratio improved, while operational cash flow was impacted by the timing of pharmacy rebates and other factors, with a stronger cash flow anticipated in 2025. They held $248 million in cash at quarter-end and repurchased 14.4 million shares for $930 million.

In 2024, the company repurchased 42 million shares for $3 billion, reducing overall shares by over 100 million in recent years. They maintained a debt-to-adjusted EBITDA ratio of 2.9 at year-end, with medical claims liability at $18.3 billion, equal to 53 days in claims payable. The company anticipates a reduction in days claims payable in 2025 due to growth in PDP following the Inflation Reduction Act. Despite challenges in 2024, adjusted EPS grew by over 7%, progress was made in Medicare Stars, and growth opportunities in marketplace and PDP were seized. Looking ahead, strong marketplace open enrollment sets the stage for 2025 goals, with an expected peak of over 5 million marketplace members in Q1, and Medicare volume exceeding expectations with stronger retention. The Medicare segment is projected to generate $2.5 billion more in premium revenue in 2025 than previously expected.

The paragraph discusses Centene's financial outlook and initiatives for 2025 and beyond. Centene is increasing its 2025 premium and service revenue guidance by $4 billion, reaching a range of $158 billion to $160 billion, due to anticipated Medicaid revenue and program changes. The company reiterates its 2025 adjusted diluted EPS guidance floor of over $7.25 and comments on the expected positive impact of Medicare rate changes. Centene highlights their initiatives to make healthcare more accessible and affordable and expresses pride in serving various healthcare programs. The paragraph concludes with the company opening the floor to questions, with Josh Raskin asking about expectations for the exchange market growth and details on the subsidy verification process.

In the paragraph, Sarah London addresses a question from Josh about enrollment growth, noting that CMS reported a 13% increase from January to January. She emphasizes that the crucial metric to track is effectuated membership due to changes in payment integrity. London mentions slower enrollment due to an agent of record lock but notes improvements over time, although some backlog remains. She discusses the failure to report process, which involves notifying members about tax filing requirements and its effects on enhanced APTCs. Sarah anticipates a possible impact in the second quarter and remains cautious about enrollment figures, indicating that while January's numbers were strong, they need more time to assess the overall effect. Josh Raskin asks for clarification on effectuation levels compared to past experiences, specifically about the difference (delta).

In the article paragraph, Sarah London discusses a discrepancy between enrollment growth and effectuated growth, indicating that while there is a historical norm alignment, their membership is slightly over 5 million, exceeding the 13% market growth. However, the overall market growth post-effectuation will depend on program integrity impacts in Q2. Justin Lake from Wolfe Research inquires about certain financial figures, specifically a PYD increase of over 400 million and Medicaid retroactive payments expected in the previous quarter but not realized. Sarah London responds that certain rate actions anticipated late in the quarter didn't occur and may benefit 2025 if they materialize, while the rates as of January 1st indicate some positive movement.

The paragraph discusses a financial update, highlighting progress in influencing state rates through data. Andrew Asher mentions prior-year developments with over $2.4 billion, including medical expenses (CSR). Stephen Baxter from Wells Fargo asks about Medicaid rate assumptions, suggesting a 2-2.5% update for the year. Sarah London responds that they expect a 3-4% composite rate for 2025, with data strengthening these projections, particularly for January 1, 2025 rates.

The paragraph discusses ongoing discussions with state partners about funding programs adequately and mentions an openness to retros and midyear adjustments. The speaker notes that states' willingness to address funding issues is greater than in the past, which positions them well for 2025. They acknowledge that aligning timing is crucial for achieving long-term margin equilibrium throughout the year. The paragraph then transitions to a Q&A section, with a question from AJ Rice at UBS about Medicaid utilization trends and Medicare medical loss ratio. Sarah London responds, indicating no significant changes in Medicaid trends and reassuring that there is nothing alarming, maintaining consistency with previous quarters' reports.

The paragraph discusses the financial performance and expectations for various healthcare segments, particularly focusing on Medicare and Medicaid. In Q4, Medicare finished strong, especially in the Prescription Drug Plan (PDP) area, which is encouraging as they prepare for changes due to the Inflation Reduction Act (IRA) in 2024 and 2025. The conversation then shifts to addressing concerns about seasonality for 2025. Andrew Asher explains expected trends: in Commercial segments, the Health Benefits Ratio (HBR) is predicted to start low and increase, while in Medicare, it should begin low and rise due to PDP revenue and IRA changes. For Medicaid, the HBR should improve in the latter half of the year compared to the first half.

In the paragraph, it is discussed that the company's earnings per share (EPS) are expected to be better in the first half of 2025 compared to the second half of 2024. An investor call highlights a 60-40 split in EPS favoring the first half of the year over the second half. Sarah James from Cantor Fitzgerald inquires about the unchanged EPS despite $4 billion more in revenue and asks about expected margins for exchanges and Part D. Sarah London responds that it is still early to determine exact outcomes but targets a 1% margin for the PDP book and 5% to 7.5% for the marketplace. Andrew Asher notes the $4 billion adds future earnings power, but it is too early to predict its effect on 2025.

The paragraph discusses expectations for operating cash flow in 2025, emphasizing that fluctuations in 2024's operations did not impact share buybacks. Andrew Asher clarifies that the cash flow from operations includes activities related to receivables and payables in statutory entities. Historically, they have averaged 1.3 to 1.4 times adjusted net income over a multi-year period, which serves as a reliable indicator. He reiterates their expectation of $2 billion in share repurchases in 2025, as previously shared at Investor Day. Despite weak cash flow from operations in 2024 due to shifts in receivables and payables, they still managed to buy back $3 billion worth of shares.

The paragraph discusses the impact of program integrity checkpoints on ACA (Affordable Care Act) enrollment. Despite initial expectations of muted growth due to these checkpoints, actual enrollment effectuation turned out to be slightly higher than anticipated. This led to a peak enrollment of slightly over 5 million. Andrew Mok from Barclays asked for clarification on the stronger-than-expected enrollment and the potential impact of expiring enhanced APTCs on membership, including whether buydowns were considered in the membership decline assumption. Sarah London explained that the program integrity measures had a more muted impact than expected, allowing for higher effectuation rates in line with historical norms.

The paragraph discusses the potential impacts on membership and planning strategies related to the FTR process and enhanced APTCs in Q1 and Q2. The company is closely monitoring these factors, which may affect membership numbers either as a temporary delay or a full-year benefit. Specifically, if enhanced APTCs were not renewed, a significant membership drop of 20% to 30% could occur. Various scenarios are being considered to mitigate impacts, including adjustments based on FPL percentages and product designs, with ongoing analysis and planning for the upcoming Open Enrollment cycle. The company is committed to keeping stakeholders informed as the situation becomes clearer.

In the paragraph, Sarah London discusses the company's activities in the Medicaid space, emphasizing a return to a normal RFP (Request for Proposal) pipeline by 2025 after dealing with a backlog from the COVID-19 period. She mentions ongoing legal issues in Texas and Georgia regarding protests, with expected clarity to come in the latter part of 2025. Additionally, London outlines the company's strategic priorities, highlighting a focus on evaluating opportunities for inorganic growth through mergers and acquisitions (M&A) and investments in enhancing business capabilities.

The paragraph discusses Centene's focus on ICHRA (Individual Coverage Health Reimbursement Arrangements) and its interest in supporting market infrastructure through partnerships and investments. It also addresses concerns about potential negative surprises in exchange margins due to changes in effectuation rates. Sarah London emphasizes that Centene is monitoring developments through the first and second quarters of the year to assess the impact on exchange growth and minimize negative surprises. Assumptions about these impacts have been built into their planning, and so far, the effects have been more muted than expected.

In the paragraph, Andrew Asher discusses the implications of not filing a tax return (FTR) and its impact on losing enhanced APTC, explaining that this adjustment is prospective. He mentions the strong start to the year and the importance of maintaining momentum into February and March. George Hill from Deutsche Bank seeks clarification on the effectuation rate and its potential impact on exchange membership outlook or guidance. Asher responds that while they are enthusiastic about the start, it's too early to adjust the $34 billion commercial revenue target until they see membership trends over the next few months. David Windley from Jefferies also joins the conversation, initially muted, to ask further questions.

In the paragraph, there is a discussion between an unnamed speaker and Andrew Asher regarding the analysis of zero utilizers in red states and federally facilitated marketplace states to identify potential issues with program integrity. Andrew Asher explains that they have conducted pricing for 2025, addressing broker disruptions and incorporating program integrity measures into their pricing strategy. He mentions that CMS adopted their idea, leading to some membership attrition in 2024, which they have now moved past. Asher expresses optimism about their current position, although it is early in the year. Following this, John Stansel from J.P. Morgan asks a question about the above-expectations enrollment growth in the PDP during the Annual Enrollment Period (AEP) and how the demographic component within standalone PDP might contribute in the future. Asher responds by highlighting their focus on product positioning in the PDP market, which contributed to their growth from 6.9 million to over 7.5 million members.

The paragraph discusses a company's strategy and performance in the Medicare Advantage, MAPD, and PDP businesses. It emphasizes the complementary nature and overlap between these sectors, highlighting the advantage of an excellent cost structure that adds value for members. The speaker mentions participating in a multi-year demonstration project where CMS can modify premium support annually. Despite potential changes in premium support, the strong cost structure is expected to sustain the business. During a Q&A session, it is revealed that PDP margins in 2024 exceeded the prior projection of 1%. Although this positive outcome is encouraging for 2025, each year's assumptions and pricing stand independently due to IRA changes. The strengthened performance indicates promising execution and growth for the company's $16 billion business. The session concludes with thanks from the operator.

In the paragraph, Sarah London expresses confidence in the progress made in Medicaid matching rates and the organization's positioning for 2025. She is optimistic about marketplace execution during open enrollment and the overall Medicare segment. Sarah looks forward to executing plans for 2025 and keeping the group updated on progress in the first quarter. The operator then concludes the conference call, thanking attendees and instructing them to disconnect.

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