Good day, welcome to the Centene second quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, today's event is being recorded. I would now like to turn the conference over to Jennifer Gilligan, Senior Vice President, Investor Relations. Please go ahead, ma'am. Thank you, Rocco. Good morning, everyone. Thank you for joining us on our second quarter earnings results conference call. Sarah London, Chief Executive Officer, and Drew Asher, Executive Vice President and Chief Financial Officer of Centene, will host this morning's call, which also can be accessed through our website at centene.com. Ken Fasola, Centene's President, will also be available as a participant during Q&A. Any remarks that Centene may make about future expectations, plans, and prospects constitute forward-looking statements for the purpose of the Safe Harbor Provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in Centene's most recent Form 10-K, filed on February 21, 2023, and other public SEC filings. Centene anticipates that subsequent events and developments may cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. The call will also refer to certain non-GAAP measures. A reconciliation of these measures with the most directly comparable GAAP measures can be found in our second quarter 2023 press release, which is available on the company's website under the Investors section. The company is unable to provide a reconciliation of certain 2024 measures to the corresponding GAAP measures without unreasonable effort due to the difficulty of predicting the timing and amounts of various items within a reasonable range. With that, I would like to turn the call over to our CEO, Sarah London. Sarah? Thank you, Jennifer Gilligan, and good morning. Thank you for joining us for Centene's Q2 earnings call. Our second quarter performance demonstrated Centene's ability to deliver solid results amid a dynamic healthcare landscape. We reported $2.10 of adjusted diluted EPS for the quarter and lifted our 2023 premium and service revenue forecast by another $1.8 billion. We now expect to deliver at least $6.45 of adjusted EPS for full year 2023, a $0.05 increase compared to April guidance. We are proud of the progress we are making with respect to the execution of our strategy, achieving operational milestones while delivering on the financial commitments we've made to our shareholders. Importantly, our balanced portfolio of core businesses delivered strong second quarter financials, with marketplace growth and Medicaid performance both running slightly ahead of expectation. Let me provide a few updates related to our progress in each business line and then share the latest on our value creation work. Let's start with Medicaid. Since our Q1 call, Medicaid redeterminations have formally kicked off in every one of our 30 active states. The time our team spent over the last 18 months preparing for redeterminations has positioned us well to support our state partners, establishing timely information exchange and shared workflow, as well as reaching out directly to members to provide education around process and enrollment options. Year-to-date, we have made 9 million outreach attempts, with early indications of higher-than-normal member engagement. These outreach efforts, inclusive of more than 15,000 community events, also contribute to our ability to recapture members, even if initially disenrolled as part of redeterminations. We are actively tracking the number of members that we are recapturing post-procedural disenrollment and expect the percentage to meaningfully advance as this process unfolds. At an enterprise level, net Medicaid membership is consistent with expectations. We have seen ebbs and flows from month to month as states continue to evolve and refine their processes. Given the recent news that CMS is requiring states, certain states to pause redeterminations and reinstate members who were dropped for procedural reasons, we will be closely tracking any impact this may have on the membership slope over the next few months. Much of the redeterminations journey remains ahead, and we continue to monitor the major levers, including rate, acuity, and membership. Based on our most recent analysis and informed by member lists and acuity projections from our state partners, our expectation around member acuity for 2023 remains unchanged. As we assess who is staying versus leaving, we are tracking consistent with the acuity modeling we discussed on our first quarter call in April. Medicaid rate conversations continue to be constructive. We are consistently seeing states take acuity adjustments into consideration in their rate updates, at an enterprise level, we remain on track with our expectations for 2023. Overall, we are grateful for the partnership and trust placed with us by the states we serve, and for the leadership CMS has shown in helping us to ensure that eligible Medicaid members do not experience unnecessary coverage gaps as states work through the unprecedented scale of this redeterminations process. From a Medicaid business development standpoint, we chalked an exciting new business win in June, as our team in Oklahoma was selected by the Oklahoma Health Care Authority for statewide contracts to provide managed care for the SoonerSelect and SoonerSelect Children's Specialty Plan programs. The team delivered a strong RFP response and was the sole source winner for the Children's Specialty Program, designed to serve children and families involved in the child welfare and juvenile systems, including foster care. This represents Centene's 31st state and our sixth sole source foster care contract. Overall, Medicaid, our largest and longest-running business, delivered strong results in the second quarter. Our market teams continue to prove the value of the local approach, demonstrating innovative and comprehensive support for our members and state partners as we continue to execute against redeterminations in the coming months and quarters. Turning to Medicare, our quarter-end membership was 1.3 million, with approximately 47% of Medicare Advantage lives associated with value-based care arrangements, a 300 basis point increase for Investor Day as we've added key VBC partners to our network. Second quarter results reflect some slightly higher outpatient claims experience within Medicare during the month of May. Drew will provide more detail on this, as well as our bid posture for 2024, but it is worth noting that our increased 2023 adjusted EPS guidance incorporates our latest view of trend and pockets of slightly higher Medicare utilization in the back half of the year, should that occur. Given our discussion in Q1 around Stars, I'd like to provide an update on what we expect to see in October and what we are seeing year-to-date around Stars improvement efforts that will inform future results. As a reminder, on our Q1 call in April, I shared that I expected minimal progress in 4-Star plans, but that I anticipated solid overall contract improvement, reflecting the operational investments we have made. With more complete program data, our projections show some more pressure on 4-star results, but we are still expecting solid overall contract progression, thanks to strong improvements in admin and ops and pharmacy measures, which have been our focus in this first cycle. With several contracts close to the bubble, variability in cut points means we could end the cycle with no 4-star contracts, compared to our current single contract, representing 2.7% of members. While this is disappointing, we do expect to see meaningful movement in our 3 and 3.5 star bands in October, and roughly two-thirds of our members are in plans showing year-over-year improvement. Pulling up these underperforming contracts represents tangible progress in delivering economic value to Medicare as we look to 2025 and beyond. As a reminder, in Q1, we reset our quality strategy to maximize contracts that reach the 3.5 Star threshold, consistent with our renewed focus on serving complex and dual-eligible members beginning with our 2024 bids. Put simply, Star strategy is different when you're managing complex and dual populations. Strong performance at 3.5 Stars with Centene's target member mix will give our Medicare business the economics necessary to serve these populations well and support our multi-year performance goals. With this in mind, we have set a revised target of reaching 85% of members in 3.5 Star plans by October of 2025. We are closely monitoring in-year Star metrics and continue to see important markers of sustained improvement, consistent with our remarks on the Q1 call. A few examples include a 27% reduction in year-over-year call volumes, resulting from a redesigned member onboarding process that features digital outreach and member self-service. Consistent 4-star performance in our core admin and ops metrics. Call center service levels for members, providers, and brokers at or above target, with first call resolution in the mid-80s. Year-to-date, member, provider, and broker satisfaction scores in the mid-90s, and the addition of 24,000 new physicians across our Medicare network year-to-date, as we look to ensure robust access options for our members. Medicare Advantage provides Centene with an important opportunity to serve low-income and medically complex seniors. It also represents a significant long-term earnings opportunity as we strengthen the overall performance and trajectory of our program. Moving to Marketplace, our Ambetter Health franchise continues to outperform. This truly differentiated asset creates a unique growth opportunity for Centene, both near and long term. We ended the quarter with 3.3 million marketplace lives, exceeding our previous projections. Our strong membership results were driven by strategic product design, long-standing and differentiated broker relationships, and overall market growth. Our large and growing marketplace platform is well positioned to provide coverage to beneficiaries losing Medicaid eligibility from redeterminations, and we are leveraging our networks and engagement tools to support members during this transition. Where states allow, we are educating our Medicaid members about marketplace options and are working to proactively communicate with members who we predict will likely be eligible for Marketplace in order to preserve continuity of coverage. During just May and June, Ambetter Health successfully outreached to potential members with more than 160,000 digital touchpoints via email or SMS as part of our redetermination efforts. We expect this dynamic will continue to fuel growth in Marketplace throughout the remainder of the year and into 2024. Finally, our value creation initiatives are advancing well. We continue to take a rigorous approach to streamlining core SG&A as we focus and fortify the organization for the future. This includes additional work to standardize our operating model while maintaining the hyper-local care that differentiates Centene in the market. The implementation of our new PBM contract remains on track, as we've achieved all first half 2023 milestones and look forward to our first go-live dates in early 2024. Our portfolio review work also continues. In June, we closed the divestiture of Apixio to New Mountain Capital. We structured the transaction to maintain an ownership position as well as a long-term contract, because of our view that Apixio's proven artificial intelligence tools are uniquely positioned for this moment in healthcare technology. We believe that partnering with New Mountain will allow Apixio to innovate rapidly through continued investment, while we continue as an influential customer and minority owner. This is a great example of our thoughtful efforts to maximize long-term value as we reposition non-core assets. In parallel, as our value creation efforts create operating bandwidth, we continue to build our M&A pipeline and look forward to diversifying our capital deployment as strategic opportunities for inorganic growth emerge. Overall, Centene delivered another quarter of solid financial results while executing against a robust list of transformative initiatives to move our company forward. With half of 2023 in the books, we are excited to leverage our positive momentum as we work to support our state partners throughout the duration of redeterminations, maintain our leadership position in Marketplace, and strategically realign our Medicare Advantage business, building momentum around stars and positioning our products for long-term growth and profitability. Centene's improved earnings power in 2023 is a direct result of the focus and hard work that our organization is demonstrating every single day across our markets. We remain confident in our ability to achieve greater than $6.60 of adjusted earnings per share in 2024, as we continue to execute against our strategic framework, creating value for members, customers, and shareholders alike. With that, I'd like to turn the call over to Drew to review the quarter and our financial outlook in more detail. Drew? Thank you, Sarah. Today, we reported second quarter 2023 results of $35 billion in premium and service revenue, an adjusted diluted earnings per share of $2.10, up over 18% from $1.77 in Q2 of 2022. Our Q2 consolidated HBR was 87.0%, consistent with our expectation and on track with our full year guidance range. Medicaid, at 88.9%, was a little favorable from the item that we mentioned on the first quarter call, so far, so good on matching rates with Acuity, though it is still early in the redetermination process. Medicare, at 86.2%, was a little higher in the quarter than planned, as we also saw May outpatient incurred claims higher than the January through April period, largely in outpatient surgery. With respect to progression, May outpatient trend was higher than April, then it came down in June. July, so far, is steady with June. Inpatient was on track, and our previous guidance already assumed the Q1 Medicare HBR favorability would not continue. The commercial HBR of 81% was consistent with our expectations, inclusive of continued strong marketplace growth of 200,000 members in the quarter. Recall that special enrollment period members start with a lower margin profile and therefore higher HBR than full year members, due in part to risk adjustment mechanics, where the shorter duration doesn't get full credit for health conditions, though if retained for the following year, the SEP cohort has proven to be attractive. Our guidance contemplates growth to a peak of approximately 3.6 million members in Q4. On the topic of marketplace risk adjustment, 2022 was recently finalized by CMS, and we received our first view of the 2023 risk adjustment from the Wakely data in June and July. Overall, no surprises in marketplace risk adjustment, and as of June 30th, we have lowered our booked risk adjustment revenue estimates by a cumulative $314 million, given the financial condition of a couple of marketplace competitors. Though we have made this prudent adjustment to our revenue over each of the past five quarters, we plan on fully asserting our rights to collect what we are owed for risk adjustment. To be clear, we have already absorbed this $314 million hit, and this was the biggest reconciling item between the CMS published amount owed to us for 2022 and what was on our books prior to June of 2023. Moving to other PNL and balance sheet items, our adjusted SG&A expense ratio was 8.6% in the second quarter, compared to 8.2% last year, consistent with our updated mix of business. Cash flow provided by operations was $2.5 billion in the second quarter, primarily driven by net earnings and the timing of premium payments from our state partners. Our domestic, unregulated, and unrestricted cash on hand at quarter end was $200 million. During the second quarter and through July, we repurchased 10.5 million shares of our common stock for $700 million. Year-to-date, we have repurchased 15.4 million shares for $1.08 billion. We also reduced debt by $300 million in the quarter and achieved debt to adjusted EBITDA of 2.9 times. Our medical claims liability totaled $17 billion at quarter end and represents 52 days in claims payable, compared to 54 in Q1 of 2023 and 55 in Q2 of 2022. The decrease was driven by state-directed payments that we collected over prior quarters and paid out in a lump sum in Q2, the largest related to California Hospital and Prop 56 payments, representing $713 million or 2.2 days sequentially. Outside of adjusted earnings during the second quarter, divestiture activity produced a net $0.11 gain in the quarter, and we also recognized additional real estate impairments of $0.02, consistent with our ongoing real estate optimization initiatives. Now let's turn to the full year of 2023. We are pleased with the performance of the company in the first half of the year and are increasing our outlook to at least $6.45 of adjusted EPS for 2023. We are increasing 2023 premium and service revenue by $1.8 billion to reflect an additional $800 million of state-directed payments, as well as refinement in Medicaid and marketplace premium revenue progression throughout the year. Our 2023 guidance continues to include an approximate $200 million premium deficiency reserve for Medicare, as we discussed on the Q1 call. The PDR would be recorded in Q4 of 2023. 2023 guidance also includes a little over $1 billion in investment income, excluding divestiture gain and losses. To go a little bit deeper in Medicaid for 2023, during our first quarter call, we discussed many of our assumptions related to redeterminations that supported our forward projections. We have continued to monitor the actual member data against our projections by state and subpopulation, and as of July, we are tracking consistent with that updated forecast that we provided in April. The matching of rates to acuity continues to be a very important lever for the company as we navigate the redeterminations process. 14 of our 30 states provide rate updates between 7/1 and 10/1 each year. 12 of those have provided us rates, all of which include acuity adjustments. The other two are still working on rate updates, based upon discussions, we expect those also to include acuity adjustments. Beyond 2023, we are continually assessing our positioning for 2024, whether analyzing redetermination data and rate actions, assessing our 2024 bid assumptions in Medicare against current data, or examining our continued growth and performance of Marketplace. Accordingly, we continue to have confidence in our 2024 adjusted EPS floor of greater than $6.60. To give you a little bit more color on 2024, that $6.60 has an embedded forecasted ballpark $0.80 loss from Medicare Advantage. In other words, if we were merely break even in Medicare Advantage in 2024, that $6.60 would be approximately $7.40. Let me close by addressing some of the concerns I've heard over the past few months. Number one, redeterminations. Our early results are playing out well compared to our assumptions. States understand that in order to have actuarial soundness, acuity adjustments are necessary. Still plenty of execution ahead. Being on track is a good start. Number two, Medicare trend. We came into the year assuming double-digit outpatient trend and did so again for 2024. As you know, our Medicare business is under construction for 2024, as we are investing in certain products and pulling back in others. Based upon current forecasts, we expect our Medicare segment to produce approximately 14% of our premium and service revenue in 2024, compared to 16% in the current quarter. Any change in our view of 2024 margin in Medicare, better or worse, by the time we get to the fourth quarter of 2023, merely flexes the PDR we book in 2023, up or down. Number three, growth. We couldn't be more pleased with our performance in the Oklahoma RFP for both broad Medicaid and foster care. We look forward to the state of North Carolina implementing Medicaid expansion. We continue to execute well in Marketplace, where our industry-best overall position has enabled us to grow Marketplace membership 62% year-over-year. While, yes, we have to get through the rest of redeterminations, we still have value creation initiatives to execute upon, and we have years of work ahead on Stars, there's a lot to like here. While the market trades us at 10 to 11 times earnings, we'll keep on executing, buying Centene shares, and building up our M&A pipeline to acquire as we create operational capacity. Thank you for your interest in Centene. Operator? Rocco, you can open the lineup for questions. Thank you. If you would like to ask a question, please press star then one on your telephone keypad. If you're using a speakerphone, we ask that you please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We do ask that you please limit yourself to one question. Today's first question comes from Stephen Baxter at Wells Fargo. Please go ahead. Hey, good morning, and thanks for all the details. I still think there's maybe a little bit of confusion out there about the adjustments you're talking about on the exchanges in the quarter. Maybe you could break down those adjustments a little bit further just so we can really assess core performance. I guess, you know, potentially, what was the benefit related to the 2022 plan year that you saw in the quarter? You're also talking about lowering booked revenue, I think, related to the financial conditions of some of the potential payers in the market. Is that related to 2022 or 2023, or some combination of both? I guess just trying to understand the underlying components of that $315 million figure you cited a little bit better. Thank you. Good morning, Stephen. Thanks for the question. Appreciate it. This is obviously an important dynamic to understand. I'll let Drew walk through the mechanics and address your question, but there's one important point and takeaway that I do want to make sure we don't lose, which is that it is a testament to the strengths and experience of our Ambetter team, that we're not only demonstrating tremendous growth, but ensuring that growth is profitable through risk, prudent risk adjustment planning. I think that's sort of the overlay to all of this, but let me make sure that Drew walks through all of the mechanics. Yeah, Stephen, understandably, it's a little complicated and it's difficult to divine some of these numbers with public information heretofore, so let me try to make it clearer. Let's start with 2022 risk adjustment. The CMS final announcement was that we were owed $648 million, as you did, and others, you could look back at our 10-K and see that we had $58 million on our books at year end. It's a $590 million difference. You heard the $300 million plus item. That's almost completely related to the 2022 year. We have a little bit of that for 2023, as one of those competitors was in the exchanges in certain markets for about a half a year this year, and appeared to be out now. 300, over 300 is the largest reconciling item. Then, similar to what you heard yesterday from, from one of my peers, there was margin on estimates. Just like in IBNR, you put margin on estimates because you never want to book to an exact 50/50 outcome. That margin rolls every year. That's about $100 million. That doesn't drop to the bottom line. It gets reestablished. Then breakage for minimum MLRs, where we're really performing well in some of our contracts. We have RADV rules. You get through all of that, you get down to $39 million, would have been the PNL benefit for recognized in 2023 for the final issuance of what we were owed by CMS, and that was recognized over first and second quarter. Now let me jump to 2023. 2023, you can see we've shifted. We've got about $300 million on our books for 2022 receivable. We've shifted to about $1.5 billion net payable for 2023, which demonstrates the strength of the acuity of the population and our estimates, partially informed by the Wakely data we got in June and July, of where we expect to be relative to our peers. We also booked that with some margin, consistently year-to-year. We'll see how that shakes out, but we see that as a good sign, and you always have to look at that in tandem with the acuity of the population, including our excellent growth this year. Thank you. Our next question today comes from Josh Raskin at Nephron Research. Please go ahead. Hi, thanks. Good morning. Just looking at 2024 and adjusting for the PDR, you know, EPS next year would be, if you sort of moved it, you know, from this year to next year, you know, EPS would be down, call it mid-single digits. Can you just help us bucket broad strokes? How much is, you know, Medicaid headwind from redeterminations? How much is MA? I think you sized the loss there. How much is earnings from ex- exchanges? You know, how is that going to rise? I'm sure there's a benefit from, you know, lower GNA dollars. There's the share buyback. Just any directional commentary to help us understand sort of the, the puts and takes. Just lastly, help us understand the PDR and why that doesn't cover the entirety of the loss for Medicare Advantage next year? Yeah, let me start. Thanks, Josh. Let me start with, your, your last question. Yeah, it's the accounting rules around PDRs. You really only pick up, think of it as like the marginal loss and, you know, direct costs necessary to administer the contract, including, distribution costs. There's a lot you can't pull into a PDR, in that SG&A. That's why we still have an $0.80 loss, in the ballpark of $0.80 loss, embedded in that $6.60 in 2024, despite the fact we're rolling, a projected $200 million, or call it $0.27 or so, PDR into 2024. If you step back and think about, we've given a number of these elements of 2024, even though, you know, typically we give 2024 guidance at Investor Day in December of 2023. We've given a lot of information, so let me try to summarize some of that. Medicaid, about a $7 billion incremental revenue headwind. We've all known that for a while, and that's built into the figures we gave out in Q1. About a $77 billion Medicare revenue premium stream in 2024. A little bit of a headwind there in terms of volume. If you'll recall, the bridge that we walked through in Q1 of HBR, going from a projected 89.8 in 2023 to a 90.1, inclusive of an allowance for some potential pressure and a mismatch between acuity and rates, as well as some benefit from our PBM arrangement. There's a couple of, you know, headwinds in Medicaid. Obviously, we talked about the, the $0.80 headwind, which is not just the $0.80, but it's, you know, we're making a little bit in Medicare this year. We expect to. It's that swing. Marketplace, you're absolutely right. Not just, you know, not just the continued push on margin in marketplace, but the growth this year and how that matures into next year, the sophomore year of special enrollment period members, is attractive, as I mentioned in the script. Then you're right, we've got other elements like the annualization of this year's share buybacks. Those are the pieces that get you to the $6.60, inclusive of the $0.80 headwind that's embedded in that, which we expect to recover over the next, you know, couple, few years. Thank you. Our next question today comes from Justin Lake at Wolfe Research. Please go ahead. Thanks. Good morning, really appreciate all the color as well. I've got a few, hopefully simple number of questions I'll rattle off to you here, and we'll see if what you can answer. The first one is, I've got you at about three and, or I should say 20% of your Medicare Advantage members right now in 3.5 star plans. Sarah, I appreciate you giving the 85% for 2026. I was hoping you might be able to give us a 2025 ballpark there, where you expect to be in October for 3.5 star plans. Drew, you said 14% of Medicare revenue, 14% of revenue in Medicare. What does that imply for MA membership next year? Then just lastly, on the rate increases you're getting in the third quarter, how are the overall rates coming in versus typical 1%-2% that I think you guys talk about? Thanks. Thanks for the questions, Justin. I'll take the first one and then turn it over to Drew. We're still a little bit early relative to cut points. Again, that 85% target for October of 2025, then to your point, revenue year 2026. We're seeing really solid improvement, as I pointed to, in terms of two-thirds of our membership moving in contract improvement year-over-year. Directionally, again, it's still the numbers are not final, but just to give you a sense, if we, this year, are sitting in about 50% of plans that are in three star or above, we expect that to be around 90% of members in three star or better, come October. So the exact numbers that fall in 3 or 3.5, really depends on those cut points that we don't have yet, but just so you understand sort of the magnitude of directional improvement that we're tracking. Justin, I tried to give you all the inputs, but let me do some math for you. Last quarter, we said $128 billion for next year's revenue. Obviously, we'll refine that as we get through the year. If you multiply that by 14%, that's $18 billion. Our Medicare segment includes MA and PDP. PDP is in the zone of $2 billion, you can get down to about $16 billion of MA revenue. If you did the same exercise for this year, we'd be in the zone of $20 billion in MA revenue. Then part three was the third quarter rates. Yeah, they're sort of, they're consistent with our expectation. They're all over the board because, you know, if you're deep into a payable, risk corridor in a state, then ultimately they're gonna recalibrate the rates to that, although there's no net impact to the company, if we're, if we're in the, in the corridor. It's not that instructive to go through, and we never go state by state. Let me just step up to a higher level and say, we've been working well with our states and, and, you know, the typical back and forth with states on the non-acuity parts of rates and, call that normal course. Thank you. Our next question today comes from Lance Wilkes with Bernstein. Please go ahead. Great. Just a couple questions on kind of capital deployment and, and, and raising capital. As far as the MA business, could you talk a little bit about variability of profitability by geography? Obviously, part of that would be, are there opportunities to maybe sell off portions of that business, lower performing portions or whatnot? I guess related in the other direction is, you mentioned MA pipeline. Just interested in what the priorities are as you're looking at deploying capital. Yeah. Thanks, Lance, for the question. Relative to Medicare Advantage, I think our view is, to your point, we take a geography by geography approach to looking at that portfolio. Our lens is through bid construction as we look at 2024 and 2025 and where there are less profitable products that we've put out there. We talked about this on the Q1 call, we've been very focused as we constructed 2024 bids on this idea that there are less profitable or less aligned products, that's where we are sort of aggressively pruning. Directionally aligned, but not through the lens of divestiture, more through the lens of right sizing and realigning the MA book overall to create that solid platform for growth and the synergy that it provides with the focus on lower income and complex members to our Medicaid footprint. For the M&A pipeline, again, we continue to be focused on opportunities that are, we consider sort of right down the fairway relative to our three core business lines, that being our primary focus. Also acknowledging that we have two strong and important retail businesses, which is how we think about marketplace and Medicare, and the platform that we think marketplace provides in terms of long-term growth relative to what we're seeing from gig workers, contract workers, ICHRA, and sort of this burgeoning individual marketplace. What are some of the capabilities that we think are gonna be important to own those distinctive competencies? So those are also part of the consideration in the overall M&A pipeline. Thank you. Our next question today comes from A.J. Rice at Credit Suisse. Please go ahead. Hi, everybody. Just to circle back to a couple of things on the Medicaid reverifications. Obviously, it's sort of a herculean task for the states to go through this process, it seems like, and everyone involved. Is it having any impact? It doesn't seem like it, but I'll ask the question on either RFPs working through the system or RFPs that are being awarded, being stood up. Have you seen any spillover impact on any of that? This is to follow up on Drew's comment on the acuity adjustments. Just give us the latest thinking on how quickly those acuity adjustments may happen, as data rolls in, and are there any states that are saying, "Hey, we'll help you out," prospectively, anticipating some change? Yeah, thanks, A.J. I'll let Drew talk about the rates, but it is important just to, as a reminder, that, you know, we saw, we have a number of states that had a 7/1 renewal and had very constructive conversations. All of those states have included acuity adjustments, and we're seeing that trend carry forward, but I'll let him get specific on that. Relative to the overall Medicaid redeterminations landscape, you are right that this is sort of an unprecedented scale of effort, and we've been really pleased with the level of partnership that we've seen from the states and, and in general, a trend that states are leaning into the value of the public-private partnership that we offer. You know, Ken's been out talking with, our Medicaid directors and our governors, very closely over the last, weeks and months, so I'll let him, provide a little bit more color on that, and then kick it over to Drew to just talk a bit about the rate discussions. Yeah, thanks, A.J. In fact, we were with, geez, nearly 14 governors last week, had an opportunity to spin through the Republican Governors Association. In every conversation we had, redeterminations came up with an eye towards, you know, one, what are we seeing by virtue of the view we have across multiple markets, best methods, and genuine appreciation for opportunity that's available to provide more informed counsel to members through outreach. Sarah mentioned the, the millions of interactions that we've had, the collaboration with the departments. Clearly an eye towards, you know, doing the best to give members a chance to make an informed decision, and when there's procedural disenrollments, to move quickly to provide the opportunity to get those folks either into the right spot, whether it's in Medicaid or, and we're seeing opportunities in the marketplace. Finally, to your point about whether it's gonna slow the pipeline, there's no indication of that with respect to procurements and reprocurements. Drew? Yeah, A.J., on acuity, over the-- really, over the past year, we've been putting data in front of our state partners and working collaboratively with them and their actuaries in anticipation of the commencement of redeterminations. Often, really, on behalf of all the payers in the marketplace in Medicaid, we're, we're working with the state and the associations to, to influence for what we think is appropriate in terms of not just rates, but the acuity component within rates. Then by definition, the 7/1 rate increases, and we still have two outstanding between 7/1 and 10/1, but the 12 that we've gotten so far, all of which, have had acuity adjustments, with a focus on the redetermination impact, by definition, those are prospective, you know, except for maybe the couple of months that we have under our belt so far in redeterminations. Pretty pleased with the partnership with our, our state partners, and, you know, plenty of work to do, A.J. Rice, but, it's a good start. Thank you. Our next question today comes from Kevin Fischbeck, Bank of America. Please go ahead. Great, thanks. I wanna follow up on the comment that redeterminations is going as expected. It seems like when you read some of the news articles, that things are going, still being kicked off faster. Obviously, the administration is stepping in, which implies that things are going maybe a little bit faster. We'd love just to kinda hear how you're thinking about it, what it exactly means to have this delay. Would you expect, you know, the pace to change dramatically, or have you, have you changed your view about the pace of enrollment losses through the year? Is this slowdown that the administration is pushing, is it more about the timing of how things go the rest of this year, or do you think that ultimately it will change the number of people who get redetermined off of the enrollment? Thanks. Thanks, Kevin. Yeah, we had always anticipated the upfront bolus of redeterminations just because of the fact that there were certain states that were moving faster than others, and others, you know, that had taken a more ratable approach. I think the idea that there is an amount, a big amount of upfront data, is helpful, but not unexpected. And then that has also given us some visibility into where there may be data issues, that are causing or sort of the procedural disenrollments are higher than the states might have originally been expecting. In aggregate, though, as we said, our membership is on track with our expectations, and we are recapturing members who fell off but still have eligibility. Because of all of the outreach efforts we're making, we're able to bring those members back on and track the fact that we're able to successfully reenroll them. Again, we do expect that number to grow over the course of the program. Relative to the CMS intervention, our view is that CMS has provided great flexibility for the states to go a little bit slower. Obviously, in recent weeks, they've taken a bit of a stronger stance relative to a certain cohort of states. It's still too early to see whether that will have a major impact on the slope. Obviously, they've asked certain states to pause for a month. In other states, they're looking to extend the grace period relative to members replying to enrollment requests. Again, hard to say whether that's a slowdown to make sure that states are getting the process right so that they can continue at pace, or whether for those states that were quick out of the gate, it slows them down overall and what that does to the slope line. That's something we're obviously gonna be tracking very closely over the next couple of months. Yeah, just one last data point. The ultimate, sort of roll-off of redeterminations, our view hasn't changed. Still about 65% of what we grew since the onset of the pandemic, 3.6 million members, would have been the growth. 65% of that rolling off would be 2.3 million-2.4 million members, about $9.5 billion-$10 billion of cumulative revenue. That's already factored into the numbers we gave in Q1, the $77 billion, for instance, of forecasted Medicaid premium. Thank you. Our next question today comes from Scott Fidel with Stephens. Please go ahead. Hi, thanks. Appreciate all the details that you gave us on some of the dynamics in the marketplace. May be helpful, too, just to bring it up to sort of the high level, if you wanted to share, you know, what type of commercial MLR you're now sort of embedding in the 2023 guide and then in the 2024 floor of at least $660. Then inside of that, definitely appreciate the conservatism around some of these receivables from some of these plans out there that are in a tough condition. Would you be willing to maybe just give us a little insight into how you sort of developed that $315 million reduction in terms of, you know, sort of, I guess, how that breaks down between Friday Health Plans and Bright Health, or, or just how your methodology works? Is it just sort of a general level of conservatism that, that you're, you're building in there? Thanks a lot. Yeah, the team, thanks, Scott. The team does a lot of work to mine out balance sheet positioning and statutory capital of our peers, you know, that are in potential financial difficulty, looking at what assets are backing reserves on their balance sheets. You're right, hopefully taking a conservative approach on that and doing that different depending on the carrier situation. We'll see how that plays out. You know, I hope to get every nickel of that $314 million, but trying to be realistic and prudent, but we will fight for it 'cause that's shareholder money. On the HBR for commercial, commercial includes both marketplace, and we've got about $3 billion of commercial group business, which runs sort of meaningfully higher structurally than our marketplace business. We still expect to do a little bit better than last year. Last year, commercial, we posted an 81.1%, but thinking about the SEP membership rolling in with a little bit higher HBR, now that's not for a full year, so you have to sort of slope that through. From a progression standpoint, because the deductible natures of the commercial business, you should expect, like, an ongoing tick-up of that total commercial HBR, but it's sort of on track to, to what we expect. Again, just important to remember that the, you know, the performance of the core business and marketplace is allowing us to absorb that SEP growth, and those members tend to become more profitable in their sophomore year. Assuming good retention, the, the book that we're building this year will have incremental contribution next year. Thank you. Our next question today comes from Michael Ha with Morgan Stanley. Please go ahead. Thank you. Maybe just quickly first on Medicaid acuity adjustments. Wondering, were these adjustments assumed or embedded in your 1.4% composite rate increase guide for 2023, or are you now tracking better than that for 2023? Trying to understand if these mid-year renewals actually represent upside to your guide. On stars, I believe you're originally targeting 20% of members in 4-star plus plans at your measure day. Now, that came down to about 14%-18% last quarter and now 0%. I'm trying to understand what exactly changed since last quarter. It sounds like you might not have received top points yet, or? Maybe I'm, I'm wrong, you did, and they were far more difficult. Was it driven by the two key outlier deletions? I'm just trying to get some more insight on what changed from last quarter to now, and does that even influence your 2024 MA growth assumption? Yeah. Let me hit stars and sort of rebate. We did at Investor Day, we were looking at 20% in 4 stars. On the Q1 call, because of what we saw in terms of the overall Medicare rate environment, some of the changes that we had made coming into the year relative to a focus on duals and what we were planning to do for 2024 bid construction and going forward, we walked through the fact that for our target population, right, which is increasingly going to be low-income, complex, and duals members, that 3.5 stars is the more appropriate focal point for our star strategy. That is really how over the next three to four cycles, we're looking at success in stars. And so I also, on that call, pointed out that we were seeing, four star progress in the measures that we had visibility into at that point, which were those core admin and ops and pharmacy measures, which were our focus in this first cycle, but that we had a number of contracts that were on the bubble and that we were taking a conservative approach and actually assuming minimal progress. The takeaway from the Q1 call was minimal progress in four star off that 2.7% baseline. What we're saying today is with additional view of HEDIS and CAHPS, and some degree of sort of case mix, that there's a little bit more pressure in that four star. Again, it's too early to say because we don't have cut points, but we want to be very transparent, and we used very conservative assumptions. This does not impact 2024, right? Because we already know the revenue for 2024, it certainly was an input as we looked at 2024 bid construction relative to what we thought about in terms of 2025, 2026, and sort of the multi-year performance targets for the Medicare book. Again, important to note that we are seeing really solid underlying improvement in, in the program and really taking a chapter by chapter approach to moving up all of our underperforming contracts into that 3.5 star band, which is where we start to get important economics. Drew pointed this out on the Q1 call as well, that folks know the, the economics associated with the 4-star, but there's a 3%-6% economic lift that comes with moving into that 3.5-star band. When you combine that with the profile of a, a largely or heavily duals-based population, those economics actually work very well relative to the performance we're looking for. Michael, on the 1.4% composite forecasted rate that we laid out at Investor Day in December of 2022, that would have partially reflected our view at the time of what we thought might be necessary for acuity adjustments. The reason I say partially is because you'll remember, we basically pulled forward, you know, sort of a lot of the forecasting for the next couple of years of acuity, as we got into the first quarter of 2023. What we know now would push that number up, but there's also a counterbalance to that as we continue to perform well, especially in states with paybacks, where we're forecasting for 2023, sort of the calendar year of 2023 to be in paybacks to the tune of about $1.3 billion in Medicaid. That would be a counterbalance to that, because states ultimately adjust the rates, by looking at the pool of participants in Medicaid and their positioning in risk corridor paybacks. Sort of a stale number at this point, but those are two factors that would push and pull at that number. Thank you. Our next question today comes from Sarah James at Cantor Fitzgerald. Please go ahead. Thank you. I was wondering if you could quantify what the redetermination impact was in the quarter. If we're thinking about the sort of April and May cohort, especially April, coming up towards the end of their 90-100 day, 20-day response period, and I know you guys only have a couple of states in that, that cohort, but could you talk a little bit about what sort of information you get? Do you know who is responding of your members, and have you gotten any information on what a success rate looks like for that April cohort? Yeah, Sarah, on, on the on the question about the impact, you can look at the sort of the membership progression. We're down 263,000 members from 03/31/2023 in Medicaid. That's sort of right on track with what we expected in terms of the impact. We can look at. It's a good question on looking at each of those monthly cohorts independently. We can actually see sort of the you know, members boomeranging back at a much higher rate with April. To your point, you know, we're a few months out from that incurred month, as opposed to July, which would be a lower number. There's still some runway there for members to boomerang back. So far, you know, that month is in the 20s in terms of percentage of members who lost eligibility, that have now regained it without, importantly, 85% of which, without any break in coverage period. There are some members, the other 15% of what we're seeing, are being reinstated back to, you know, maybe one or two months after they lost eligibility. It's very early. There's not a lot of redetermination activity in April. It'll be interesting over the next few months to see that dynamic of members getting reinstated. Thank you. Our next question today comes from Gary Taylor with Cowen. Please go ahead. Hey, good morning. Had two questions for you. One, a couple of your competitors mentioned that the second quarter results bore a not immaterial MLR headwind from the California court settlement related to COVID costs out of period. Just wondering if your quarter did, this quarter did reflect that or if you had already booked that. Secondly, just sort of coming back to Scott's question, I just, I just want to ask about commercial MLR again, looking at this year-over-year, just to exclude sort of the deductibility seasonality. In the first quarter, your commercial MLR was down 290. This quarter, it's up 350. A small portion of that is SEP. A small portion of that, I think, is the smaller, you know, year-to-year RAF accrual true-up. It, it really did seem to deteriorate. I know you're saying, I think you felt it was in line, and you think the year is still going to come where you expect to land on commercial MLR. I just wanted to understand that, that movement between 1Q and 2Q a little better from your view. Yeah, on SB 510 in California, we booked that in Q1 when we got that information, which is, I think we explained this on the Q1 call also, is why we were a little bit high at 90.0. Then we had a really good quarter in Q2, so year-to-date, we're looking good in Medicaid. Then you're right on commercial. You've got the dynamic of Q2 2022 having a really, you know, sort of a good guy. You know, we didn't have any insolvency issues from the 2021 calendar year, so that wasn't chipping away at the final settlement from CMS like it is over the last five quarters, you know, including, you know, this quarter as well. That's sort of the swing item. Our growth, our growth was excellent last year. It is tremendous this year. While that puts a little bit of pressure on the near term, we're thrilled that, you know, with our number 1 market position, leveraging the Ambetter brand, we're able to grow a lot this year, which will give us earnings power for 2024 and beyond. That does show up in the current period HBR a little bit. Thank you. Our next question today comes from Calvin Sternick with JP Morgan. Please go ahead. Yeah, thanks for the question. Just a clarification in terms of the Medicaid retention rate. I know about a third you expect to end up with, but in terms of timing, just given that we have these, you know, 90, 120 day sort of re-enrollment windows, do you expect to land at that one-third number, I guess, you know, second quarter of 2024? Or is there going to be sort of a couple of months lag where maybe it'll take another quarter before you, you know, end up landing at that 1/3? Well, part of that depends on whether or not, people finish in that 14-month time period, and, you know, who knows what might be going on by the time we get to Q1 or Q2 of 2024. Tough to predict exactly when each state will end. We think that's, you know, the, the numbers we gave without trying to predict exactly the month we hit that, we think that's the ultimate outcome, and that hasn't changed. Again, all those outreach efforts that I mentioned are designed to try to minimize the, the span between someone who's dropped eligibility but is still eligible and the recapture. That includes, obviously, the direct outreach, but also relying on primary care physicians and providers in general, so that we're not recapturing folks when they're showing up at an emergency department. I think that outreach has also proven to be successful, at least in these early months. Thank you. Our next question today comes from Steven Valiquette with Barclays. Please go ahead. Great, thanks. Good morning. Maybe just to shift gears on the Medicare side for a moment, and your comments around the cost trends, which were definitely helpful. There's still a lot of different theories out there as to why Medicare is seeing elevated cost trend in 2023, specifically, particularly in outpatient, while Medicaid and commercial are not really seeing the same elevated trends. I was just curious to get your thoughts and any additional color on why you think this is happening in Medicare, specifically this year. Thanks. Yeah, I mean, it's, it's tough to speculate here and don't plan on it, but y- you could probably think about our-- the composition of our members. You know, 49% of our members in Medicaid are under 19 years old, so there's probably not a lot of cardiac or ortho or cataract, which is what we're seeing on the Medicare side. Other than that, you know, can't really explain, other than saying what we're seeing in, in Medicaid and Marketplace, is pretty stable relative to the pop we saw in May, which w-- it's not alarming. Figured it would be helpful commentary for you guys, you know, given some of the, you know, noise around the industry and the fact that our Medicare HBR was a little bit higher than we expected in the 2Q. Thank you. Our next question today comes from Nathan Rich at Goldman Sachs. Please go ahead. Hey, good morning. Thanks for the questions. Just a couple clarifications. Maybe just sticking on that last question, Drew, I'd be curious, you know, if you could maybe frame the magnitude of this kind of step down that you saw in June when you're thinking about kind of monthly cadence and how you're expecting that to play out over the back half of the year. Then a quick follow-up on the marketplace margins and expectations for next year. You know, given both the growth you're seeing, the SEP enrollment, you know, as well as kind of pricing plans for 2024, what type of margin improvement you'd expect to see in the commercial business next year, just as we think about progression into 2024? Thank you. Well, we definitely have priced for and, and expect margin progression as, as we get into 2024. We'll have to give you more of an update as we get towards the end of the year at Investor Day for more specific 2024 guidance elements, that detailed. Then on your 2023 question related to trend, as Sarah said in her script, you know, we've got, we've got accommodation in our at least $6.45 adjusted EPS guidance for some continuation of this. Although, to your point, we did see a step down, not all the way back to April, but a step down in June and sort of that holding in July with respect to, you know, the relativity from what we saw with May and incurreds through their second month of development. Thank you. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Sarah London for any closing remarks. Thanks, Rocco, and thanks, everyone. We appreciate the interest and all the great questions. We look forward to providing additional updates on our progress as we move through the back half of 2023. I hope you all have a great day. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.