Hello, everyone. Welcome to our next session. I'm A.J. Rice, the Healthcare Services Analyst here at UBS, and we're very pleased to have Centene Corporation, Sarah London, Chief Executive Officer, and Drew Asher, Chief Financial Officer. I think you guys were going to make a little bit of an opening comment. Yes, just a couple of updates in there. Yeah, okay. Without lots of questions. First of all, thanks for having us. Thanks, everybody, for taking the time to tune in. I think, as all of you know, we recently reported our Q3 results, which came in better than expectations against the July forecast. Included in that, we were pleased with the fact that we're starting to make progress on sequential progression in Medicaid, HBR, and then ultimately raised our full-year outlook to at least $2. We just closed October, so our results continue to track in line with that full-year expectation. A couple of quick highlights on the business, or just updates, starting with Medicaid. We recently, and I'm sure many of you know, got notified that we were not awarded the CMS Florida contract, a sole-source contract that we've been serving for the last six years. We obviously know that population very, very well, which was evidenced in a very strong RFP response by the team. You guys can see that in the data. Unfortunately, in the final negotiations, we were not able to get comfortable with some of the terms of the go-forward contract, consistent with our strategy of having sustainable margins so that we can appropriately invest in the kind of high-quality and complex care that that population needs. We do not intend at this time to protest that award. Instead, we are very focused on a seamless transition of those members. In Medicare, obviously, in the middle of annual enrollment, so far, so good on that front. As we've said in previous years, we're more focused on margin versus membership. Also, pleased with how the PDP products are competitively positioned and do expect growth there. We are just over a week into open enrollment, so it is, for the Marketplace product, a little bit early to talk about trends there. We are obviously tracking very closely. There are a lot of moving parts to that, so making sure that we are appropriately supporting members who are asking questions, seeking to understand what some of the rate changes mean for them. So far, so good on that front. There is obviously very active discussion as we speak around the enhanced subsidies and whether, over the next couple of weeks, Congress can come together and find a path forward for these tax credits, which we continue to believe have a material impact for hardworking Americans. There is a lot more still to play out there. We're tracking that very closely and prepared for a variety of scenarios in terms of what may or may not happen by the end of the year. All in, very consistent with where we were as we came out of Q3, obviously continue to be extremely focused on driving margin improvement and building momentum as we close out 2025 and turn into 2026 with that same mandate. No, that's great. I know you haven't given guidance for next year at this point, and you often don't talk about specific contracts, but is there any way to size the impact of that Florida decision? Yeah, so this year it's about a $5 billion revenue stream. Next year we expect it to be about a $4.5 billion-$9.3 billion. That's the contract end date. Under this year's construct, including the rate increase, the substantial rate increase we just got, it is a very low single-digit pre-tax margin, and that's before all of the changes that were promulgated in the new contract and what we were requested to do in the BAFO, which we declined. Yeah. And so the runoff will really be in 2027 that you'll feel the bulk of it, is that right? Right. The other thing you did not mention, but your vendor mentioned it was this new PBM contract, or extended, I guess, PBM contract. That was not up for renewal. It sounds like they came to you and asked for an extension through the end of the decade. What are the implications of that? It sounds like, at least if you hear what they are saying, you must have gotten some concessions, incremental concessions. So it sounds like a positive. Give us flavor for what happened there and what the implications of that might be? We've been very pleased with the partnership thus far, but I'll let Drew talk a little bit about those details. This is not our first rodeo. Yeah. You'd be disappointed if we didn't renegotiate that every year, wouldn't you, A.J.? Yeah. Good partner. We're constantly working together with Express Scripts to work on cost of goods sold, to keep healthcare affordable, and to put our products in the most competitive position possible. Yet another good partnership. Yeah, we had to negotiate some things this year, not all economics, some operational, some cash flow. We're pleased with how that relationship and contract is going so far. Did you have the information about this new contract when you did the PDP bids and so forth? Did you know that, or is that something that's happened since then? We've been working on it all year, so there was quite a bit we had visibility into, even though the final touches weren't on the signatures. You said that Medicaid will be consistent in margin next year versus this year. That's a little bit different than what we're hearing from some of the others. Is this new PBM contract a factor in that? Is that a meaningful reason why you have more confidence than maybe some of your peers? I think our view is, one, starting point matters, right? Again, we're coming off a very high HBR in Q2 and looking for sequential improvement. I think there are a number of levers that go into our view, not the least of which is just continuing to push for improvement in all the levers that we can pull. Whether that's, obviously, rate negotiations is a big piece of that, appropriate utilization management, and getting as efficient as we can there. We've talked a lot about fraud, waste, and abuse. We've talked about working with the states on clinical program changes. We've seen states make some important policy decisions around high-cost drugs and GLP-1s that we know will go into effect in 2026. That has an impact, and a lot of that information and data obviously comes from our experience working through what's now close to $50 billion in pharmacy spend and the outcomes that we see across our membership base. It all goes into the soup. Our view is we're at a better trajectory than we were coming out of Q2, which is why we've sort of guided to kind of consistent profitability next year. As I've said before, I would be disappointed if that's all we can deliver, but it's a question of what are the levers you can pull and feeling like we have been doing that for almost a year and have good momentum around that, and then continued momentum around states bringing forward appropriate rates. Okay, okay. I want to drill down on a bunch of those comments there, but maybe just to tie up the PBM discussion, one last thing. They're talking Cigna's going to, or Express Scripts to a rebate-free model. On your exchange business in 2028, when they are going to say that's completely in place, are you planning on going to that rebate-free model, or is that still under discussion? Yeah, we've got, since the inception of our relationship with Express Scripts, 100% pass-through, 100% transparency. We go to the market together, whether it's manufacturers, whether it's network solicitations. We're getting the benefits of a completely transparent deal. We'll always look at their product creativity and figure out what's the best low-net cost for the member. We'll, I'm sure, look at that, but we don't need that to get the transparency, which I think is some of the intent behind that product. Okay, okay. We are just to maybe talk a minute about the Marketplace. So we're one and a half weeks into it. As you say, you probably don't have that much information, but we're just trying to understand how much confusion is there because of these premium changes. Are you getting your call centers overloaded with people trying to figure out what happened here, or is the reaction not that significant? We've been reading the press, 24 million people are going to lose coverage, but what's the reality on the ground? Do you have a sense of that at this point? We've definitely seen an uptick in call volume, which we were prepared for. We're not overloaded, but it is consistent with what we expected in terms of members shopping, trying to understand what the changes mean, looking for rate relief in terms of who's sitting in those low-cost silver positions. Still very, very early, but I think the need to be engaging members, helping them understand the changes, helping them understand options. We're obviously very engaged with the broker community as well because they're going to need to be trusted navigators for members. Very, very early, but I think the uptick in communication, bidirectional communication, is consistent with a membership base that's trying to, to your point, understand changes and then also tracking sort of this macro conversation that's happening around the enhanced subsidies and how that may or may not impact them. We have had this debate about, a lot of people are going to trade down to bronze and they can still have a zero premium, but obviously maybe they do not really understand what that means from an actuarial value versus just dropping off. I know it is early, but every week we would like to have a little more information. Have you got any sense of how people are trending? Are they making the decision to trade down? Are you seeing people disenroll? I think at one point there is an estimate it could be as low as mid-teens disenrollment. The high end seems like people thinking 30% disenrollment. Yeah, so we put the bands between sort of high teens and mid-30s with the idea that even if the final rule stays stayed and those program integrity measures do not go into place for this open enrollment, and if the enhanced subsidies were to be extended, that there is still a high teens degree of breakage in the market just from the level of confusion and the fact that members are getting letters today that say one thing that may change and they may not come back and make a second decision. We do anticipate there to be market contraction almost regardless of any scenario. In that upper bound is that sort of high 30s, and that is if sort of the full impact rolls through and we do not have the subsidies extended. It is still super early, right? Even if you tried to look at the fine signal in the noise of the data, you've got a lot of folks who are getting sort of auto-re-enrolled in the plan that they're in, and we won't actually see if they make a different choice until they make that choice or until we get to effectuation data and understand who's actually paying the changed premium. We're watching the data very, very closely and trying to understand how the choices are being made. Frankly, a lot more of that information comes out anecdotally through conversations with brokers. Again, that's where we're hearing about more active shopping and people sort of seeking rate relief if and as they get those letters and those numbers compared to whoever's sitting in that lower-cost silver position has changed. I know you guys have been actively engaged with congressmen, senators, state governors on the issue of extending the subsidies. I think the reaction in the market was, this doesn't look good based on what happened over the weekend. What's your updated thought about it all? I think it is valuable that we are on the verge of the government reopening. I'm not sure that we were going to get to a deal in the paradigm that had been set up. I think getting through that and getting a little bit more sort of stability and folks kind of having a clean playing field to have the conversation. We're obviously up against a very tight deadline. The question of what could get done, can something get done, we are still optimistic. I think the question is going to be, and you're sort of seeing it in the conversation that's rolled through the last 48 hours or so, is a desire for, one, I think real bipartisan acknowledgement that the tax credits are benefiting working Americans and that that's a very important base regardless of which way you vote to support. I think you're also seeing a desire from the Republican Party to reform some of the current policies in the ACA and particularly around these tax credits. The question is how much of that can get done in a short period of time versus creating some extension to then have deeper conversations in 2026 about reform. I think that's the question, is sort of there are probably three tracks. One is that they expire. One is that you get maybe a one-year extension so that they can actually work through reform. Then perhaps there's enough alignment around sort of the highest value items relative to reform that that could come together quickly. We have obviously, just as a reminder, we said this before, but we obviously built up our pricing for 2026 in the event that the EAPTs expire, in the event that the final rule were to come into place with those in program integrity measures. We feel well-positioned and well-protected relative to how this may play out, but obviously trying to bring forward data and perspective to help those conversations in the hopes that something gets done to support these folks. I mean, there had been an assumption that a lot of the people that would drop off would be these sort of younger, healthier that were not paying very much with the enhanced subsidies. If there is some sort of an extension, how easy is it to get in touch with those people and get them to re-sign up? Are they mostly working with brokers at this point? Do you have to go direct to them? Are they going on healthcare.gov? Just do you have any sense about that? It is broadly a very broker-engaged population. We have very close ties to the broker community. That would be a huge leverage point in terms of communication. Really, sort of multimodal outreach would be the goal. Frankly, sort of above-brand marketing, just that there is a level of awareness if we got there for people to come back. Some of that depends on whether there is a special enrollment period that gets attached to an extension. TBD on that front, but it is part of why we talked about rolling some of that SG&A favorability into Q4 so that if there is a need to educate more broadly or reach out to those members and bring them back, we have some flexibility to do that. You said your pricing envisioned the possibility that enhanced tax credits just go away. Is that pricing sufficient given your assumptions about risk profile, et cetera, et cetera, to get you back to profitability on the exchanges next year? I know maybe it will not be the mid to high single digits, it is a long-term target, but at least to the low single digits. Is that the thought? We talked about the goal in putting together the pricing was to account for really sort of the four major building blocks. One was the significant uptick in baseline morbidity that we saw in 2025 through the weekly data. The second was trend. The third was the enhanced subsidies. The last was the collection of program integrity rules. You can imagine sort of if we're accounting for all of those and saying the goal in pricing was meaningful margin improvement, you can sort of infer where we were headed with that. The idea that these things are literally still playing out as we speak, that'll obviously inform where a bunch of that lands as we get to late January, early February, will inform a more specific view for 2026. Okay. Just technically, you had had some cushion in there for the back half of the year and an uptick in utilization, and then you had absorbed some of that in the third quarter, but then you added to the number. Maybe talk a little bit about what you did there and why you think that is enough, actually, because a lot of it happened in September. If you sort of annualize or quarterize what you saw in September, it might even be a little more than the $200 million that you're taking in and maybe like more like a $225 million run rate. Anyway, I don't want to get bogged down too much into the numbers, but just maybe comment on what you're thinking there with that adjustment. Yeah, I mean, I'll comment at a high level and then Drew can talk a little bit about sort of the calculus. In general, we see an uptick in Marketplace as we go through the fourth quarter and folks are kind of using services as they get to the end of the year. I think the view, and frankly, our hypothesis all year has been that some of the uptick in utilization that we have been seeing has been driven by this concern from the population that they are going to lose the subsidies. For some, as information has become more complete as we got closer to open enrollment, this idea that they may in fact not be able to afford health insurance next year. Part of our thinking was that we may have more of an uptick in Q4 even than we normally do, which is, I think, sort of what drove the decision out of prudence, but you want to talk a little bit about that. Yeah, yeah. We did see in September, and one month usually does not make a trend, but we had other favorable elements of Q3, so we figured we would top off and put another $75 million into the Q4 forecast for Marketplace. As you heard earlier, we got October now closed as of last night under our belt, consistent with the forecast that we laid out for the company on the Q3 call. Okay, okay. Maybe to switch over to Medicaid, there is a little bit of a differential view. It sounds like you think some of that is geography, some of it is starting point where you are looking for consistency next year. Others, two of your big peers are saying they are going to be down. One of your peers maybe is actually still thinking they will be up. Help us rationalize all that. I know it's hard to comment on your peers, but. What I'd love you to do is actually get our peers' Medicaid HBR, and then we could actually compare and we would really know who's going up, who's going down. In the absence of that, yeah, I mean, I'm not sure that others have a 94.9 in their base period, which was our Q2 HBR, or a 94.2 for the first half of the year. I would think about it more as our guidance for Q4 Medicaid HBR is a 93.0. You can get there through all the math and the data and the actual numbers that we've provided. We're exiting at a 93.0 and we're saying we're going to be consistent in the zone of that 93.7, which is the full calendar year 2025 as we look at 2026. A lot of the things that Sarah mentioned, the levers that we pulled, the annualization of that benefit, the fact that we saw this quickly in Q2 in terms of behavioral health, home health, high-cost drugs. Already see a little bit of relief in high-cost drugs, including policy improvements for 1126. All of that goes into the formula of thinking that that's sort of the appropriate place at this early timeframe to establish for what we believe 2026 will look like. When you think about being consistent, is the rate updates next year sort of that you're expecting consistent with the trend and you're just not catching up? Is that the way to think about it? Are you still finding that the trend's going to be above the rate update and there's other levers you're pushing to get there? Trend would be above the rate update, but then actions we're taking to contend with trend and policy improvements. There is another state, we've mentioned this before, that enabled the payers to reestablish management of the PBM effective 10/01/2025. You get the annualization of that. Yeah, we'll have more details on the Q4 call when we give all the guidance elements for 2026, but think that that's a good, reasonable, and call it prudent position to look at a starting point of 93.7% for 2026. You made a comment on the third quarter call that half of the above baseline trend is related to behavioral. How much is behavioral as a% of your overall spend? Are states looking at that and saying, "Hey, because this is part of our cost, we have to do something, change benefit design or whatever?" What is happening around behavioral if it is such a pressure point? Yeah, I mean, I think part of the answer is yes relative to states' behavior, but not even specific just to behavioral health, right? The areas that we've called out, behavioral health, home health, home and community-based services, and high-cost drugs, all of those areas that are pushing trend are obviously top of mind for states because they're looking at what the drivers are. The idea that some of those trends are being driven, some of those trends are controllable by either policy design or kind of network design. One of the things that we spend a lot of time doing because of our relationships with the states is bringing forward that data and then bringing forward alternative ways to look at either benefit design or how stringent they want to be around provider requirements. We pointed a couple of times to states that have looked for the right reasons to expand access, but in doing so have actually invited in quite a bit of fraud, waste, and abuse. It is top of mind for the states because at some point you can't just continue to increase rates. They have to have a balanced budget. They have to have actuarially sound rates. The question is, what else can we do? Are there ways to optimize the program, to optimize the benefit that don't ultimately impact outcomes? We pointed to a number of those examples. I think one I mentioned on the Q3 call was that some of the states who are newly considering the CCBHC model and sort of these community behavioral health clinics, we were able to show them data about how that created significant costs in other states if you do not put the appropriate guardrails in ahead of time. They are listening and they are making those changes in more of a preventative measure. I think overall for behavioral health, I think our numbers are pretty consistent with the rest of the industry. It is roughly 20%. Yeah, around 20% of the medical PMPM of Medicaid. Obviously a growing percentage of that pie driven by outpatient. One last thing maybe on Medicaid. You all seem pretty sanguine about the work requirements and the impact that's going to have on your business primarily in 2027, but some states are thinking about doing it early. I don't know if any of them will really get it done. Maybe just give a little bit of thoughts on how you see that playing out. Is that a whole many redeterminations again that we've got to go through for that expansion population? Or what's your thinking there? I certainly wouldn't want to give the impression that it's no big deal, right? I think what we've been trying to project is preparedness and the idea that we learned a lot, to your point, going through a much larger redeterminations process about how the process will go state by state, where there are sort of points of friction, right, or points of inefficiency, and how can we step in and support states and support members. Frankly, we have a good partner in CMS in this. Their goal is to try to leverage data, to leverage technology and digital connections to try to sort of overlay where some of the inefficiencies were in the broader redeterminations process as we look at this population. There's still a lot to play out. We're waiting for guidance from CMS that probably won't come until the summer. To your point, harder for states to mobilize around that until they have clear understanding of what is the definition of able-bodied, where will there be exceptions, what other populations might states have flexibility to carve in from an eligibility perspective. We have a whole team that's been tracking this for six months now at this point and again, leveraging everything we've learned in the redeterminations process, but also the fact that part of our mandate in most states is actually to help people graduate off of Medicaid. We have work programs in 17 states. We fund scholarships. We train Medicaid members to be community health workers, doulas, peer counselors. We are a convener in many places of community organizations where members can get access to community service opportunities. To me, the big thing is going to be around the data. Not just thinking about where is there data that we as MCOs have that the state can use for ex parte eligibility, but what are the other data sources and other players that can come in and help to make sure that we're maximizing eligibility for those who are actually eligible. I think just sizing the impact, the expansion population is roughly 20% of our membership today. The question is, how do you define able-bodied? What is the impact to that population? Obviously, a little bit different state by state depending on how they take up the guardrails of the program. Okay. Yeah, which means it'll be a lot more focused than the broad redetermination effort, obviously just on the expansion states and then within that cohort, which I think that plus the learnings of the states from the redetermination and the actuaries getting used to ingesting more recent data and seeing the impact of that, I think will help in those states where you're targeting the non-able-bodied or the able-bodied portion of the population that doesn't qualify for all of the exceptions. Right. Okay. Maybe to pivot over to Medicare and MA quickly. Obviously, again, we're early in open enrollment. I know your target is to get to break even by 2027. Can you comment on what you've seen? What are some of the building blocks that you need to put in place to get to that break even? What's sort of the interim 2026 look like? Still early, but so far, so good on AEP. I think when we think about delivering margin improvement in 2026 and then sort of that next step to 2027, there are a couple of key components that we've called out consistently. Obviously, having sufficient rates has been helpful as we think about 2026. We'll want to see what the rate environment looks like for 2027. Relative to things in our control, we look at STARS improvement, SG&A, and then clinical initiatives. The team has done a really good job, I think, making progress on all three of those. We've had a multi-year progression from a STARS standpoint, came out with slightly better than expected four-star results this year, which then helped 2027. Really thoughtful about how to, as efficiently as possible, run the Medicare business within the larger organization. Over the last couple of years, have really moved from what had originally been, as WellCare came into Centene, more of a kind of push to decentralize, bringing that back together in a centralized organization. We talked about this a lot in the context of quality, but it was really sort of more of a macro operating model move. The idea is that we leverage the local knowledge, the local relationships with key providers, value-based providers, but we get the efficiency of operating the book nationally at scale. I think that has helped from an SG&A standpoint. We still think there's opportunity there. The team is very focused on that as we move into 2026. Obviously the value of providers who can help with STARS results, can help with total cost of care, thinking about them as partners in the clinical initiative work that we're doing. That's a couple of things that we've pointed to are really leaning into those value-based models. Also the clinical interoperability that we think will help make that data exchange more seamless and the ability to partner most closely for providers to intervene on those members. Are you finding it challenging to find providers? I mean, we've had a lot of providers that have struggled, that have taken on risk arrangements. Are you having to rework your deals with them and give them some concessions? What are you finding out there in those value-based arrangements? We still think there's opportunity. We've been looking at those contracts over the last couple of years. The one thing I will say is in the past, historically, Centene was not as focused on that value-based framework, so call it three, four years ago. The team has done a lot of really good work in terms of aligning our membership to the highest performing providers. Over time, making sure that those contracts are structured in a way that you're either working directly with providers who know how to operate in a value-based way, or you're sort of stepping them through that progression of upside to upside and downside risk. It is an ongoing set of work. To your point, there have been provider groups that have sort of come into the space and moved out of the space. We're constantly looking to optimize. It is part of why we've said that we don't think it makes sense for us to own providers because that gives us the flexibility to align in any given geography to the highest quality, highest performing providers. I know it's early for you to comment on your own enrollment situation, but there has been this debate about the overall MA enrollment trend. I'm seeing us put out some stuff thinking it's going to be flat year to year. Do you have any early view on where the overall industry is? One of your peers said no. They think it's sort of in the 4-5% range similar to this year. Any thoughts on that at this point? I don't think we have a macro view. I mean, our focus has been margin over membership. So we're not looking to grow. It's hard to imagine given sort of just the competitive dynamics. I think our view would be it's probably somewhat similar to what we've seen over the last two years. Okay. Obviously, some noise around GLP-1s in the last 48 hours or so. Have you been able to assess that? Do you have any view on whether the plans are going to be asked to take that on mid-year? Do you get the protections of the high-cost thresholds? What's your thought on that? Still early. I think we're in conversation with the administration to understand design for that. We're obviously the largest PDP participant. I think there's an opportunity. The general view, I think we have partners who are cognizant of what it means to introduce changes post-bids and thinking about that for 2026. We are interested to learn more about what that's going to look like driven out of CMMI relative to a demonstration on opt-in, and then what that's going to look like as we roll forward into 2027. I don't know if you. Yeah, we just need more data information from the administration. We're picking up pieces from pharma, from peers, and through the general discussions with our governmental partners, but need to see the real details on what's the '26 set of rules, and then probably more importantly, the '27 set of rules so we can prepare for that if necessary in our '27 bids. Right. Right. I mean, do you get the sense that they understand that changing post-bids is a very challenging thing? They do understand that. They do. And then as you referenced in Medicare Advantage, you have the introduction of what a 0.1% new drug gets carved out into fee for service. And it sounds like what we heard in GLP-1s is moving towards the voluntary demo position, but we'll have to see for '26. Okay. On the capital structure, you're 45%, 45.5, I think in the quarter debt to total cap. Any comments on capital priorities real quick? And what is your goal? Where would you be comfortable? A lot of guys talk about 40, but I think you've always run a little bit higher. What's the thought on that? Yeah, that's really driven by our non-cash goodwill charge. And we would like to be lower than the 45.5 and rest below that 40 for the purpose of seizing opportunities. So not just for the sake of the metric, but to be nimble to seize opportunities. So you'll probably see us trim debt a little bit over the next year or two. But we're generating cash, and we look forward to, I mean, we hope to add an acquisition here or there along the way. And we'll look at all the methods to deploy capital. And just maybe finally, because we've had two unusual years, when you think about the long-term growth algorithm, we get on the other end of this, what does that look like for Centene, you think, when we come out the other end of this? Well, to your point, the world has changed a lot since we originally put out that algorithm. I think what has not changed is our conviction in the value of the platform and the fact that being positioned in focus on government-sponsored programs is a growth area. There's obviously quite a bit of embedded earnings power in the platform as we stand here today and short-term margin improvement opportunity. But I think also longer-term, not just organic growth, but really interesting disruptive opportunities around things like ICRA. So we are laser-focused in the short term on mining as much of that value out of the margin improvement work, but also with an eye on the further growth in Medicaid, in the doules opportunity, and then as marketplace stabilizes, I think a real opportunity to talk about disrupting employer-sponsored insurance with ICRA. Okay. That's great. Well, I appreciate the management from Centene for participating. I would just note for people in the room that Sarah is going to do a panel this afternoon on women in healthcare. So take note of that. It should be a good group and a lot of interest in that. And thanks, everyone, for participating. Thank you.