Good day. Welcome to the Centene Corporation 2026 second quarter 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 the two. We do ask that you please limit yourself to one question. Please note today's event is being recorded. I'd now like to turn the conference over to Jennifer Gilligan, Senior Vice President of Investor Relations. Please go ahead. Thank you, Rocco. Good morning, everyone. Thank you for joining us on our second quarter 2026 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. 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. Specifically, our commentary on our full year 2026 outlook, including the drivers of such outlook, are forward-looking statements. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in our second quarter 2026 press release and other public SEC filings, which are available on the company's website under the investor section. 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 2026 press release. With that, I would like to turn the call over to our CEO, Sarah London. Sarah? Thanks, Jen. Thanks everyone for joining us on the call. This morning, we will review our second quarter results and provide details around our improved full year 2026 financial guidance. Q2 adjusted diluted earnings per share of $2.51 exceeded our previous expectations, with outperformance driven by underlying business strengths and a more fully informed view of our Marketplace risk adjustment positioning. Thanks to strong first-half results, we now expect full year 2026 adjusted diluted earnings per share of greater than $4.80, up from our prior outlook of greater than $3.40 provided during our April update. We are excited by the positive momentum we have built and remain focused on our goal of delivering industry-leading health outcomes with an industry-leading cost structure. Now let's talk about the business. Starting with Medicaid. Medicaid results were in line with our expectations for the quarter, driven by disciplined execution against our operational and financial goals. We ended the quarter with just over 12 million members, a slightly larger step-down in membership than anticipated. While some of this was driven by state-specific program changes, we also saw an uptick in activity around enrollment and eligibility in certain states. As we look at core medical cost drivers in the quarter, the big rocks remain consistent with past quarters, with behavioral health, home health, and high-cost drugs among the top contributors. We did see a slight uptick in acuity from the expansion population, directly consistent with the increased attrition in the quarter, but we were able to absorb that given the strength of our execution across quality and affordability initiatives. Rates remain a critical lever and continue to develop positively, with seven one rates coming in better than expected. This improves our full year 2026 composite rate forecast from roughly 4.5% to roughly 5%. The tone and tenor of our state rate conversations remains constructive, rate development continues to be supported by the incorporation of more current data. As you think about our guidance, we are now expecting lower year-end membership than our previous outlook, with the increased enrollment and eligibility activity as we move through the back half of the year. As is typical, we assume that additional attrition will impact acuity and have set guidance to account for that possibility in the second half of 2026. As you would imagine, we are heavily engaged with our state partners as they prepare for OB3 implementation, we are working hard to minimize unnecessary membership disruption. This includes investing in near real-time data exchange with states to inform ex parte member eligibility, exemption validation, and member outreach. We are also activating a nationwide playbook, building on the work programs we already have in place across our states to help members identify community engagement, education, and workforce opportunities. We are engaging with state actuaries about the best approach to OB3-related rate adjustments. Given recent cost pressures in the business, we haven't talked as much about quality, but it is worth sharing that behind the scenes, we have been systematically driving improved quality performance across our Medicaid markets. Over the last three cycles, through expanded data capture, scalable member engagement programs, and targeted provider incentives, we have delivered improvement in more than 90% of our core clinical measures, ensuring Centene members receive more complete and better quality care each year. In this cycle, we are targeting more than 75% of our Medicaid health plans NCQA quality ratings to be at or better than three and a half stars. Ultimately, the value of Medicaid managed care is ensuring high-quality outcomes at lower costs, we are building tangible momentum around both. Turning to Medicare, our Medicare segment once again delivered outperformance in Q2, with continued strength in both our PDP and our Medicare Advantage businesses. PDP benefited in the quarter from the true-up of certain prior period items, but the results also reflect fundamental favorability. While we continue to see elevated levels of specialty drug trends, they remain lower than our original expectations through the first half of the year. As a result, we now expect PDP to deliver a pre-tax margin greater than 3% in 2026 versus the 2% we guided to at the beginning of the year. Our PDP team once again took a thoughtful approach to the 2027 bid process, prioritizing sustainable profitability. As this business hits post IRA stability, we look forward to delivering consistent margin on what is now roughly $25 billion of premium revenue and successfully leveraging our greater than $60 billion in pharmacy spend through our partnership with ESI to deliver industry-leading cost structure to our state customers and members across lines of business. Solid execution from the Medicare Advantage team led to outperformance once again this quarter. Medical costs remain elevated when compared to historical averages, but year-to-date trend is running modestly favorable to expectations. Key medical cost drivers were stable quarter-over-quarter. D-SNP members now represent approximately 40% of our Medicare Advantage portfolio, and that cohort continues to perform favorably. Looking ahead to 2027, we plan to further simplify our Medicare Advantage footprint, focusing our benefits increasingly on the duals population, where our deep expertise in Medicaid allows us to deliver a local, integrated, and differentiated experience to these members. On the Stars front, we are once again seeing year-over-year improvement in raw performance, supported by the full range of quality initiatives we have deployed over the last three years. That said, we, along with the industry, are facing headwinds from artificial cut point increases and overall Stars program methodology changes, not to mention uncertainty around the future of the program overall. As you'll recall, the company took steps coming into 2025 to de-risk Stars results more broadly as we considered our Medicare Advantage strategy of focusing on lower income, complex populations in the face of a Stars program that fails to effectively risk adjust for these members. Thanks to these actions, including portfolio optimization, strong operational execution, and SG&A management and strategic duals growth, we are seeing accelerated margin improvement, and we are confident in our plan to deliver break even or better results in 2027 and margin improvement thereafter. Overall, we are pleased with the momentum building in our Medicare segment thus far in 2026 and look forward to leveraging that strength as we prepare for 2027. Last, but certainly not least, Marketplace delivered excellent Q2 results after more than a year's worth of focused execution to achieve meaningful margin recovery in that business. Recall that we moderated our pre-tax margin expectations for the Marketplace at the end of Q1. Our 3% pre-tax guidance at the time accounted for elevated utilization patterns we observed in Q1, largely driven by our silver tier members, and did not fully reflect the corresponding risk adjustment offset we anticipated given the level of observed membership acuity. A posture that we felt was prudent in advance of receiving the first full Wakely report, which includes the first view of overall market acuity. Rolling those assumptions forward to Q2, first, we continued to see higher utilization patterns among our silver tier members, but these moderated over the quarter compared to what we assumed in our guidance. At the same time, a thorough analysis of the highly anticipated June Wakely report not only confirmed our hypothesis about the relative acuity of our population, but has also allowed us to revise our view of full year performance for the Marketplace business. Finally, we received favorable development on our final 2025 CMS risk adjustment reconciliation to the tune of $180 million in the quarter. In light of the aggregate first half results, we now expect to deliver a pre-tax margin between 4.5% and 5% for the Marketplace business for the full year, an improvement compared to our previous guidance as well as our initial guidance issued in February. While the year is not finished, it feels important to pause and reflect on the strength of these results. I would be remiss if I did not take this opportunity to very publicly acknowledge and thank our Marketplace team for the exceptional leadership and discipline they demonstrated over the last year to get us to this point. They saw and called a market-wide issue first. They leveraged more than a decade of experience and the breadth and depth of data that comes with operating in 29 markets to comprehensively diagnose the issue at hand, quickly translate that into actionable insight, execute in a very tight window to appropriately reprice our business for 2026 while correctly and conservatively planning for how 2025 would ultimately unfold. I am humbled by their expertise and grateful to have them guiding this business through an unprecedented year of turbulence and uncertainty. Looking to the rest of 2026, we are jumping off a Q2 membership of roughly 3.5 million members, slightly better than previous expectations, with metal tier distribution, age, and other key demographics largely unchanged from our Q1 results. We continue to expect membership to decline as we move through the rest of the year, consistent with a return to more regular seasonality, and our guidance has accounted for membership impacts related to various ongoing CMS program integrity efforts. As a leader in this market, we will continue to push for and promote transparency and policy stability as we believe that regardless of the origin story you give it, the individual market is a compelling future-proof platform that can deliver access to high-quality health care for hardworking Americans and small business owners, and increasingly serve as a flexible, portable, and affordable alternative to employer-provided insurance options. Overall, we are very pleased to deliver a quarter of solid performance and year-over-year progress in each of our business lines. While this dynamic healthcare operating landscape has presented challenges, it has also provided important opportunities at the enterprise level to enhance the way we do business. We are taking advantage of this moment to lean in and transform our organization to better serve the needs of our members, state partners, and stakeholders. This includes thoughtfully reviewing our portfolio to position each business for long-term earnings growth, maximizing our talent bench, organizing our teams in a way that even more fully leverages our scale, and of course, deploying data, technology, and AI to streamline our service delivery and improve our member experience. While we have made progress across all of these categories, I'd like to touch briefly on our AI strategy. You've heard us reference examples over the last few quarters of high-value AI-enabled use cases, including integrating AI into our forecasting processes to improve precision and the always-on suite of fraud, waste, and abuse algorithms that learn from our inbound claims data every day. There are others. Even our legal department has several high ROI adjunctive use cases in production, including one agent that reviews invoices from outside counsel firms and now saves us a point and a half in our legal bills every month. We view these early successes as proof points for a much larger opportunity ahead. As we look to the next phase of our AI strategy, our focus is increasingly shifting from individual use cases to the underlying capabilities that make AI scalable across the enterprise. As a Medicaid-first company operating in a margin-conscious environment, we take a deliberate approach to where we invest. That means prioritizing investments in foundational capabilities such as trusted data products, dynamic context management, and open standards that keep business knowledge reusable and portable as the technology evolves. We believe long-term differentiation will increasingly come from proprietary data and context as model technology becomes more commoditized. This disciplined approach positions us to unlock the full potential of AI while maintaining a relentless focus on ROI. It also provides a governed, predictable foundation for AI, which is critical in a regulated environment where consistency, auditability, and compliance are non-negotiable. This work, like all of our transformation efforts, is designed in service of delivering industry-leading outcomes with an industry-leading cost structure, fulfilling our mission and ultimately supporting our ambition to not just manage care, but to power health for the communities we serve. In closing, we are making meaningful progress on our path to margin restoration while advancing the platform and processes that will modernize and improve the way we do business. This momentum is visible in our strong second quarter results and our increased earnings outlook for 2026. With our members at the center of every strategic decision we make, we see significant opportunity to reshape the healthcare experience for millions of Americans. With that, I'll turn it over to Drew to provide more details on the quarter and our updated full-year outlook. Thank you, Sarah. Today, we reported very strong second quarter 2026 results, including $44.4 billion in premium and service revenue and adjusted diluted earnings per share of $2.51. As you evaluate Q2 in the context of a baseline for 2027, we had approximately $0.50 of earnings in the quarter relating to settlements of 2025 items in amounts that we wouldn't expect to recur in 2027. About $180 million related to Marketplace final 2025 risk adjustment, net favorability relative to our prior guidance, and about $160 million in our Medicare segment, largely favorable PDP 2025 risk adjustment and quality settlements. These items took strong execution by the team, we wanted you to understand these drivers since the $0.50 will be a reconciling item when we provide a bridge from 2026 to 2027 in a couple of quarters. That aside, any way you slice it, this was a fantastic quarter. Our consolidated HBR was 89.6% for Q2, down from 93% in Q2 of 2025. Let's dig into each segment. In Medicaid, at a 93.9% HBR, we are right on track with our prior forecast and are still expecting a full year HBR around 93.5%. This is down from our original expectation of 93.7%, as we covered on the Q1 call. Consistent with our prior commentary, we expect Q2 and Q3 Medicaid HBRs to be higher than Q1 and Q4. As we look ahead to Q3, our 7/1 rate cohort, which represents about 20% of our membership, came in strong. This 7/1 cohort provides a nice sequential benefit from Q2 to Q3 to make progress toward matching rate and cost. Overall, we now expect the full year 2026 rate impact to be approximately 5%, up from 4.5%, with no change in our view of fundamental trend of mid-four for the year. As some of you have written about, we did continue to see attrition in our Medicaid membership, ending Q2 with 12.1 million members, and we expect some states to continue to trim Medicaid rolls leading up to any OB3 implementation in 2027. For now, we are holding the incremental 50 basis points benefit of the rate improvement to account for a little higher membership attrition in the back half of the year, including the associated acuity impact. To be more specific, we expect full-year Medicaid membership to be down 8%-9% compared to 12/31/2025 versus our prior view of being down 6%. Overall, Medicaid was right on track in Q2 with good signs of medical expense execution coupled with progress on rates. There's more work to do over the next couple of years to restore margin. Medicare segment results were strong in the quarter, including an HBR at 89.5%, inclusive of the 2025 item discussed a minute ago. PDP, with good visibility once you get through two quarters, is having another strong year. We now expect a full year pre-tax margin of greater than 3%, compared to original guidance of 2%. Strong execution by the team, coupled with very good product positioning and being another year removed from the inception of the Inflation Reduction Act, have all contributed to the improvement in our 2026 PDP forecast. Medicare Advantage, representing a little over 40% of segment revenue, continued to perform well, getting closer to break even for full year 2026 performance. The commercial segment, led by Marketplace, had a very strong quarter with an HBR of 79.2%, compared to prior year 90.6%, driven by the convergence of three positive factors. One, a strong end to 2025, as discussed a minute ago. Two, confirmation of 2026 market acuity, and particularly our relative risk adjustment position being better than reflected in our prior guidance. Three, tapering medical trend driving better than expected Q2 medical costs. While we were optimistic after seeing the new Wakely March demographic report that we helped initiate, as discussed on the Q1 call, as you know, we are waiting to see corroboration from the first Wakely claims reports received in late June. This data helps us understand our acuity relative to the market. Essentially, the data confirmed we took the correct swift actions in the summer of 2025 when we refiled 2026 rates with the visibility we had at the time of last year's major market shift. Accordingly, we now expect a Marketplace pre-tax margin of 4.5%-5% in 2026, back on track after a temporary industry detour in 2025. As you can see, Marketplace membership was reasonably stable compared to Q1, at 3.5 million members, and we continue to expect a little more attrition as eligibility verifications may step up in the back half of the year. While we are still vigilant about pricing for risk shifts due to program integrity measures and changes affecting eligibility prospectively, we would expect the Marketplace to be a more stable business for Centene as we look out over the next couple of years, compared to the prior periods of abrupt program changes and the expiration of eAPTCs. Our adjusted SG&A expense ratio was 6.9% in the second quarter, compared to 7.1% last year, reflecting continued discipline and scale, as well as product mix. As Sarah referenced, we are taking actions as part of an enterprise optimization to drive efficiencies and support the affordability of healthcare in 2027 and beyond. These actions, including further digitization, more ubiquitous use of technology and AI, and improvements in the customer experience alongside operational efficiencies, should help us not just adapt to volume changes in our business, but also drive margin restoration over the next few years. Q2 is initial evidence of that momentum. We ended the quarter with $715 million of cash available for general corporate use. During the second quarter of 2026, we repurchased $260 million of senior notes in our continued effort to delever to create capacity to seize future opportunities. Accordingly, we ended the quarter with a debt to cap ratio of 41.6%, down from 46.5% at year-end. Our medical claims liability totaled $20.3 billion and represents 47 days in claims payable, a decrease of one day as compared to the first quarter of 2026, driven by timing of State Directed Payments. Cash flow provided by operations was $8 billion year- to- date and $3.6 billion for Q2, primarily driven by net earnings and the net impact of temporary passthrough payment receipts, state premium payments, and Marketplace-related payments to CMS. As a heads up, in Q3, we expect to pay out over $3 billion of Medicaid passthrough payments that are sitting on our balance sheet at the end of Q2. As you've seen in our disclosure definitions, passthrough payments merely go through premium tax revenue and premium tax expense on our P&L and do not impact any key operating metrics like HBR, SG&A rate, or DCP. Overall, given the strength of the quarter, we now expect greater than $4.80 of adjusted EPS in 2026, inclusive of the $0.50 that we wouldn't expect to recur in 2027. This increase from prior guidance of greater than $3.40 is primarily driven by an improved Marketplace pre-tax margin of 4.5%-5%, and PDP margin of greater than 3%. Our Medicaid HBR forecast is consistent with prior guidance. The forecasted enterprise adjusted SG&A rate for 2026 is better by 10 basis points. Total revenue is up $6 billion from prior guidance. Only $2 billion of that is actually premium and service revenue, with a billion and a half attributable to Marketplace and a half billion for Medicaid. The remaining $4 billion is merely premium tax pass-through revenue. While we have reported year-to-date adjusted EPS of $5.88, we expect a little above breakeven in Q3 and a loss in Q4 due to the seasonal sloping of our Medicare Part D and commercial products. This second half trajectory is consistent with prior year and commentary we provided on the Q1 call. You can see other guidance elements that were modified in our guidance table. Our workforce and enterprise optimization is expected to drive an estimated $480 million midpoint of SG&A costs in 2026 that are part of GAAP guidance and highlighted in the reconciliation table in the press release. We look forward to showing continued progress toward restoration of earnings as we look ahead. For those of you who hung in with us through 2025 industry turbulence, joined us since, or are thinking about jumping in, we thank you for your interest in Centene. Rocco, let's open it up for questions. Yes, sir. We will now begin the question and answer session. To ask a question, you may 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'd like to withdraw your question, please press star then two. Once again, we do ask that you please limit yourself to one question. Today's first question comes from John Stansel at JP Morgan. Please go ahead. Great. Thanks for taking the question. Wanted to ask about Medicaid enrollment. Just firstly, as you think about the high acuity population stepping down, any particular areas that are driving that? Then just as we think about overall acuity shifting in the population within 2026, how you view that with a bridge to next year. Are you seeing this as pull forward, or is this kind of incremental to anything we think about for OB3 impacts next year? Thanks. Thanks, John, for the question. As we said, we did see slight incremental attrition compared to expectation in Q. Mostly, that was in the expansion population. Some of it was driven by state-specific changes, more of the uptick, as you pointed out, in terms of the enrollment and eligibility activity in certain states that are starting to tighten in general, consistent with what we've seen over the last year or so, also starting to think about and prepare for OB3. We saw a slight uptick in acuity in Q2 around that attrition. Obviously, we're able to absorb that given the strength of the execution on initiatives. As Drew talked about, as we think about guidance for the back half of the year, we're for now holding back that 50 basis points of favorability in the rate in order to see how the additional membership attrition, so the move from 6% to 8 to 9%, impacts acuity in the back half of the year. If we take a big step back, I think your question is exactly right, which is, to what extent is this sort of not just a preparation, potentially a pull forward of some of the activity. Again, obviously not formal implementation of OB3, states starting to tighten those criteria and starting to prepare and sort of categorize populations, and in some ways, I think probably prevent enrollment that would otherwise have had to go through a work requirements process. I think it's possible that that will end up being some degree of pull forward. Again, we're accounting for that as we think about guidance for the back half of the year. Then, as I mentioned, we are very deep in the planning process with all of our states and thinking about how they're going to go through not just the ex parte process, trying to maximize the data they have for that, so that we ensure that folks who are eligible today and have clear data behind that don't face any coverage disruption. Then where there's opportunity for us to lean in and leverage all of the work we've done in terms of building out networks of community engagement, job programs for our members. We already had those in 17 states coming into this year. That's given us a fantastic blueprint to build out and obviously have the latitude from CMS guidance to really help members through that process. As we think about this process compared to the broader redeterminations process, it's obviously very different in terms of scope and scale. It's a much more targeted population. We have a much higher degree of impactability than we had during that process, in terms of being able to support members who want to be eligible and who need avenues for engagement, then continue to have very constructive conversations with our state partners about the right way to implement rates that will account for the acuity shift that we would expect as part of the Medicaid expansion population moves. Thank you. Our next question today comes from Ann Hynes at Mizuho. Please go ahead. Great. Thank you. I got a lot of questions just on the Medicaid margin progression, given all the OBB changes. I know it's a little too early to provide 2027 guidance, would you expect margins and Medicaid to expand just given the dynamic environment with all the regulatory changes? Thanks. Ann, thanks for the question. I'll go back to sort of where I just landed in John's question and expand that a little bit as we think about our, first of all, overarching commitment to continued margin progression in Medicaid. That includes this year and moving from the 93.7% and 93.5% and continuing to hold ourselves to a high standard of execution, certainly going to try to improve that the rest of this year. If we think about the number of different policy changes that are going to collide for states next year, it is certainly impactful. It is not something that we can or should hand wave. Again, I'll sort of tick through a couple of things that I think are helpful to think about and the things that we're thinking about as we approach kind of planning for 2027, guiding for 2027, that give us a sense of confidence in terms of, again, that goal of continued margin progression through the headwinds of OB3. First is that point about scope and scale. Obviously, a very different population than what we went through with the broader redeterminations PHE unwind. Some data points for context. We came into the year with our expansion population as 20% of the Medicaid portfolio. We will end the year with that being roughly 18%. If you just take some of the rough estimates that have been put out there, whether it's RWJ or CBO of, call it, 25%-40% of that may roll off. You're talking either way, sort of mid-single digit attrition. That would be over 2027, 2028, possibly 2029, if some states delay. Think about that number in the context of the fact that we just said what we anticipate an 8%-9% membership drop this year and are still committed to margin progression. The second piece is this point about impactability. As you think about the cohorts that the expansion members are going to fall in, one is going to be that ex parte eligible, where there's very clear data, whether they off of claims data run through the frailty algorithm, they're automatically eligible. You have a bigger cohort that is what I would sort of describe as practically eligible, right? They are engaged in community activities. They are going to school. They are serving as a caregiver. All that needs to happen is they need to appropriately document that. That's a cohort that, again, we can support and we're trying to maximize all the sources of data around that. That's a population that we would want to see maintain their eligibility because they're doing all of the right things relative to the legislative guidance. The third cohort are folks who are not currently eligible, again, they can become eligible. That's part of the playbook to offer them opportunities to engage in the community. Workforce opportunities, job training. If you separate for just a second kind of the perspective on the legislation as being sort of a pay for, when you get down to the state level, even in some of the more ambitious red states, the goal is really for people to be engaged in their own care and their own sort of forward-looking trajectory, not necessarily to keep people from getting healthcare coverage. I think we're talking about a very different kind of impactability to this overall program than we saw with the PHE. The last thing quickly is just rate. The fact that coming out of the PHE, we did not have, I don't know if you should ever call trend a tailwind, but we did not have the tailwind of having heavy trend in that lookback base period like we do if you think about the trend that we've been managing in 2024 and 2025 and 2026 as we roll into 2027. That's a little bit of a difference in terms of air cover to the degree there is a dislocation between rate and acuity. We also didn't have the explicit guidance that CMS has given in terms of mid-cycle and retro rate adjustments. We didn't have the need for states to document the OB3 rate considerations as they sent rates up to certification. We just have a different set of tools at our disposal as we think about managing this over the next couple of years. All of which is to say, again, you cannot hand wave it. We do think it is a more manageable effort than what we went through with redeterminations, and our goal remains margin recovery for the Medicaid business, even through the OB3 headwinds over the next year or two. Thank you. Our next question today comes from Justin Lake at Wolfe Research. Please go ahead. Thanks. I had a few questions on the exchanges quickly. First, your 10-Q indicates the 2025 risk adjustment settlement benefited the company by $481 million for the year. You talked about $180 in the quarter. Just wanted to get the delta there and what's driving that, and how we should think about that versus that non-recurring benefit you talked about, Drew, for the year. What are you assuming for the full year 2026 risk adjustment in the exchanges? Lastly, maybe just a quick comment on the lower cost trend in Q2 and what's driving that. Thanks. Sure. I'll hit those in reverse order and let Drew walk through sort of the mechanics of the 2025 risk adjustment. First, in terms of overall utilization, we did see that moderate in Q2 from Q1 expectations. Again, if you think about how we set guidance on the Q1 call, we saw that uptick in utilization in Q1, initially called it out around specialty drugs. Our hypothesis at the time was that we had retained and attracted a higher acuity Silver membership, and the utilization was consistent with that hypothesis. We didn't yet have the full view of the market acuity from the Wakely data. What we essentially assumed in guidance was a continuation of that step-up and did not sort of give full credit for the risk adjustment offset. What we saw in Q2 was a moderation from Q1 expectations and utilization patterns that are very consistent with the higher acuity Silver membership that we do in fact have, as confirmed by the Wakely data. If you just look at some of the disease states and the drug categories, again, consistent with what we called out in March, around chronic conditions, anti-inflammatory, oncology. These are conditions and drugs that have high HCC coding and therefore have pretty robust risk adjustment associated with them. All of that really came together essentially as we expected it to, maybe even a little bit better than expected, in Q2. For full year 2026, we are now assuming a meaningful receivable in our 2026 risk adjustment position. I'll turn it over to Drew to walk through the mechanics of the 2025 reconciliation. Yeah, Justin, you're right. The 481 is in the 10-Q. That's an absolute number. You may recall every year we have explicit margin on these estimates that gets released and then reestablished largely the same amount. That's about $250 million. That doesn't benefit the P&L relative to our prior guidance, because that's expected to roll each year. That gets you down to about $230 million. There's about $50 million of other deducts, VBC. We had a little bit of refinement in Q1, which leaves $180 million better than our previous guidance. Thank you. Our next question today comes from Andrew Mok at Barclays. Please go ahead. Hi, good morning. Morning. Given the increased visibility into this year's ACA acuity and higher full-year margin outlook, can you share how you're thinking about pricing for 2027 and the balance between further margin recovery versus membership growth next year? At this point, do you expect the ACA market, as a whole, to grow? Thanks. Yeah. Thanks, Andrew, for the question. As usual, we are taking a state-by-state approach to pricing. The goal is a competitive and balanced portfolio. There has obviously been some movement in the market in terms of market exits, the competitive landscape has changed slightly. Our bronze strategy has not changed as we think about 2027, and so it's a little bit too early to say. We're still in the pricing process, and we'll get visibility into our competitive positioning as we get into Q3. You can imagine our goal has been margin restoration for that business, and that will continue to be our focus and has underpinned the strategy relative to 2027 pricing. Relative to overall market growth, I think our view is that once we got through the implementation of various policy changes, that this market would return to normalized growth. It continues to be a popular product and in many geographies is increasingly the only point of access for folks to affordable healthcare. We are watching some of the lawsuits that are out there, and the different rules that may impact membership. As right now, all of those have either been vacated and are on appeal or have been stayed, and so that would probably mute some of the membership impacts that those would otherwise have. We need to see how those are going to play out as we step into open enrollment, and we'll obviously be able to give you a better viewpoint on that on the Q3 call. Thank you. Our next question today comes from Kevin Fischbeck at BofA. Please go ahead. Great, thanks. I want to follow up on some of the other conversations about Medicaid rates and acuity, because I think that is a concern that people have is that rates will catch up, but then the acuity keeps shifting, making it hard to fully recapture the margin. I would've thought that we would start to see a little bit more progress in 2026, relative to that. Is there a time period where you feel like the data really does inflect and that we should be seeing it in the whatever it is, the January 1 rates next year, the mid-year rates next year? Is there a time period where you say, "Yeah, mathematically, this is the time we should be expecting it"? Is there anything that you think about as far as the risk pool, the data points you gave about the risk pool rolling off was very helpful. Is there anything that you think about as far as MLR impact of that risk pool relative to the MLR impact of the membership that has already dropped? Is there a reason to believe the work requirements will be better or worse, neutral relative to the overall risk pool? Thanks. Thanks, Kevin. On your last point, do you mean relative to those who dropped during redeterminations or those who have already rolled off in some of this early attrition, if you will? Well, yeah, I guess versus the comparison period that we're looking at. I guess, if you have 1 million people drop off, in each period, is the 1 million dropping off now sicker, healthier than the 1 million who dropped off a year or two ago and is now in the base data? Got it. Okay. Let me talk a little bit about overarching arc. As we come into 2026, obviously, we've been very focused in the last year on the multi-tenant program in terms of execution and discipline on cost trends. As you know, and everyone knows, incrementally every quarter, we have more and more of the trend that we've seen in that base period, and that's why I think we continue to see strength in the development of the rates. I think what we are seeing a little bit now and what we're at least accounting for in the back half of 2026, and frankly, to some degree, what we've seen in that kind of point to point and a half of membership attrition that we originally accounted for, obviously it's a little bit higher now, I do think is some degree of pull forward of the OB3 impact. Those things are sort of colliding, if you will, in the back half of this year. We're able to demonstrate that we're still powering through that, again, with some degree of benefit from the tailwind of the rates, and not necessarily with the explicit input into the rates of the OB3 impact that we believe are to come. If you think about the 71 rate cohort, a few of those states did put in explicit factors for the OB3 implementation, but all of them have committed to looking at those rates 1/1/2027 and thinking about mid-cycle adjustments as we step into the year when those impacts are going to come. Again, in terms of that delta between when do we see the impact, when do we get rate for it continues to feel as we look at OB3, that there's going to be a tighter coordination between states knowing that these impacts are going to come, actually being able to better calculate what those will be, and then accounting for those in the rates ahead of time. Again, to the extent that there's a dislocation, I think we have the tailwind of strength in rates from trend. All of that said, I think this is exactly what you're getting at in your point, I do think that that will mute the full potential of margin recovery that we would want to see from our efforts as we think of back half of 2026 and part of 2027. Once we get to back half of 2027, I think what we will start to see is the ability to impact underlying trend, have the benefit of the tailwind of rates from the base period, and then the benefit of explicit adjustments in the forward-looking rates relative to OB3. That's when I think we start to get acceleration on margin recovery. Again, our goal is to continue to drive margin improvement regardless. Maybe, Drew, do you want to talk just a little bit about sort of the relative acuity of the populations that have been rolling off sort of quarter-over-quarter, and if we see any changes there? I think, to reinforce something Sarah said earlier, really important to understand this in the context. I know, Kevin, you do, but for the broad audience, the expansion population, historically about 20% of our membership as of June 30th, 19%, we expect within our guidance and our forecast down to 18%. It is an isolated population that we can track the data on, which gives us comfort with what we've seen so far in terms of acuity moves as that population is slowly shrinking with the pull forward, that we've got that covered in our guidance, inclusive of the benefit that Sarah covered on the 7/1 rates. Pleased with the discussions with our state partners, as she said, in terms of the explicit acknowledgement in terms of adding into the rates for a few of the states, the acknowledgement that once those states decide how they're going to implement OB3 or any pull forward of expansion membership verifications, that the rates would be reconsidered at that interim point in 1/1, really before much of the impact were to occur. There's a lot to execute on, we're sort of all over it with that isolated population really focused in the expansion population. Thank you. Our next question today comes from Stephen Baxter at Wells Fargo. Please go ahead. Hi. Thanks. Just a couple of more clarifications on the improvement in the exchange outlook. Is the out-of-period 180 basis points included in the margin revision that you gave us? I think it's worth about 50 basis points of the improvement. If we think about the other improvement that you're seeing, I think you're saying both that risk adjustment is improving versus the, I think it was a slight receivable before, now a meaningful receivable, and cost trend is a little bit favorable to what you previously assumed. As we think about the remaining 125 basis points of improvement, I guess how should we think about the relative contribution of those two factors? Thank you. Yeah, you're right. We're going from a 3% pretax margin in prior guidance to 4.5%-5%, midpoint 4.75%. Yeah, I think you got the math right. The $180 million is about 60 basis points on the full year, but there's some additional improvement in there, and you sort of have to look at these in tandem, both from the improvement relative to prior guidance in our relative risk position. I mean, we had the hypothesis, as you may remember from the Q1 call, with the early Wakely demographic data, that report that we helped drive for the first time this year, and we got the corroboration in the actual claims data, four months of claims data in the June Wakely. You have to look at that in the context of cost trend. Both of those things were positive drivers in the quarter and for the full year. We're also being thoughtful, in our guidance about we increased the sloping of the HBR in terms of thinking through the benefit plan rollout, especially with a higher bronze population, for us. We were thoughtful about any potential revenue reconciliations relative to eligibility verifications. As we thought about making sure we're covered in that 4.5%-5% for any potential aberrations in the back half of the year, though Q2 looked pretty good in terms of a jumping-off point for Q3. Thank you. Our next question today comes from A.J. Rice at UBS. Please go ahead. Hi, everybody. I know you're undertaking some initiatives to just impact the overall company cost structure. I think you instituted some employee buyouts in the quarter. Drew's also talking about the technology and AI investments you're making. Can you just comment on how that in and of itself, regardless of what's happening with the cost trend, impact your cost structure, maybe your G&A ratio, and how you think about how that may improve going forward? Yeah. Thanks, A.J. Coming out of sort of the back half of 2025 and coming into 2026, you heard us talk a lot about our focus on multi-year margin restoration for the business and also a view that there was an opportunity in this moment, for a lot of different reasons, to really optimize the enterprise for what we see in the future. That has taken a number of different shapes and forms, including simplifying the organization, simplifying our operating model, ways of working, really thinking about how to even further leverage the size and scale of the organization for the benefit of member experience and obviously being sort of good stewards of taxpayer dollars. Really simplifying our interaction with members and providers, and then again, leveraging data and AI to modernize our operations overall. We touched on a couple of those. I think we'll continue to share the impacts of those and the different opportunities. It really is in service, as I've said a couple of times, of delivering industry-leading health outcomes. Really thinking about the quality impact to our members, making sure they have access to high-quality care, that they are actually sort of seeing improvements overall, which impact the HBR, but also doing that with an industry-leading cost structure. That's something that we're focused on. I think you see good SG&A results this year. We're going to continue to focus on that as we go forward because we believe that there is opportunity in that area, and that's part of the goal that we've set for ourselves over the long term. Thank you. Our next question today comes from Lance Wilkes at Bernstein. Please go ahead. Great. Thanks. Could you talk a little bit about your ICHRA business and in particular, kind of size of membership, sales outlook, margin performance, and the types of clients that are interested in that thus far? Maybe just two quick cleanup clarifications. One would be, what are you seeing as far as low utilizers over in Medicaid? I think you've commented on that previously. Maybe you could just update us on how that is looking. In the note or in the press release, you talked about particular areas of medical cost management that you were performing well in. Maybe you could just highlight what those were within Medicaid. Thanks. Yeah, sure. Medicaid, in terms of medical costs, fundamental trend drivers were consistent with past quarters. We've talked about behavioral health, home health, high cost drugs. We did see a second quarter of year-over-year moderation in behavioral health, particularly in ABA, and I think that's a direct result of our focus in the space and the work that we've talked about and done really over the last 12 to 18 months in terms of everything from member outreach, educating providers on standards of care, influencing state policy, and then, of course, aggressive fraud, waste, and abuse in such a fragmented provider network. That is a space that we really are seeing the impact of our efforts. There are other places that we made progress in the quarter. One example around payment integrity is really in those areas that are susceptible to more of the AI upcoding. We've talked a bit about sepsis and the fact that we started to see an uptick on that, as well as it showing up on lower duration stays, and showing up as a diagnosis code without the underlying clinical documentation to support the level of acuity that diagnosis would suggest. We made great progress in the quarter in terms of implementing algorithms, and some of that is the AI I talked about, but also kind of clinical conversations and making sure that we're actually paying correctly for the care that's delivered. Those are the two areas, and then as we've talked about, we have a pretty robust pipeline. Let me just talk quickly about ICHRA, and then I'll turn it over to Drew to talk about the low utilizers in Medicaid. Our ICHRA business is roughly 50,000 members today. That's a two and a half times growth since last year. Great growth rate, small numbers. I would say that there is no shortage or abatement in the interest and energy around ICHRA as an alternative. Some of that is driven by the fact that employers, and we're among those, are seeing the pressures of cost drivers going up and those getting passed through to us. It's also the fact that in a number of geographies, the options for small group are deteriorating. We think there is, continue to believe that there is a great opportunity there. As I think many know, we offered ICHRA as a benefit to some of our employees and have used that to get a really good sense of the benefits that that can give employees as an alternative in terms of choice and portability, and frankly, greater affordability. We continue to be bullish about that. It's obviously a much smaller portion of our portfolio, but we think it's a great option for the future. Over to Drew on low utilizers. Yeah. Lance, we track low, zero utilizers in all of our lines of business. As you understand, in an insurance business, you have sort of this gamut of high utilizers, and you always have a cohort of low and zero utilizers. When you look at that for Medicaid specifically, you're right. We've seen a drop in those low utilizers, zero utilizers, from the PHE, public health emergency period, as you would expect, making our way towards pre-PHE. Interestingly, which ties back to our discussion about the expansion population and the slight acuity shift that we're noticing and we're planning for, it's the most pronounced. The drop is most pronounced in the Medicaid expansion population as a subset of our overall Medicaid portfolio. Thank you. Our next question today comes from George Hill at Deutsche Bank. Please go ahead. Hey, good morning, guys. I'm going to ask Steve's question, but from the PDP perspective. If we back out the PDP adjustment, it looks like that's about 60 basis points, if I'm doing the math right. The margin expansion is going from expectations going from three versus two. I guess I would ask, is that 50 basis points of real margin expansion versus the prior expectation? How do you think about the risk in the balance of the year as those beneficiaries hit their MOOPs, and do we see a step up in utilization in the back half of the year? Just how we're thinking about risk to the organic margin expansion. Thanks. Yeah, good questions around PDP. A business that's performing well. Once you get through the second quarter, George, you have a pretty good, since it's a pharmacy benefit only, while it's complex, it's a pharmacy benefit only. You've got a pretty good read on the year, you're absolutely right. Tracking through the Maximum Out-of-Pocket MOOPs through the year, having visibility of the prior years that were impacted by the Inflation Reduction Act, quite frankly, triggering some additional utilization and specialty as we covered about a year ago. That's performing well. You may have noticed we said greater than three, not just three. We're bullish about sort of our positioning for this year. We're sitting on greater than three right now. You're right on your math in terms of the benefit that we had in the quarter for the settlement of prior year risk adjustment and quality items that we wanted to make sure you understood as you think about rolling this year into 2027. Thank you. Our next question today comes from Sarah James at Cantor Fitzgerald. Please go ahead. Thank you. I wanted to drill a little bit into the AI investments in G&A. On AI, your shift in focus to platform related items, trusted data products, dynamic context management. Can you help us understand on a more practical level what that means, is it a platform build or a vendor relationship? Second, in the 10-Q, you guys mentioned that you're considering early adoption of ASU 2025-06. If you do that, how meaningful of a tailwind could it be to G&A, is any of that overlapping with the $480 million enterprise optimization of G&A, or is it a separate lever? Thanks. Yeah. Thanks, Sarah. My comments were to go a little bit deeper on strategy, less so a shift, but more to point out that we've made good progress in terms of high ROI use cases and deployment of AI. It is still early. It's a little bit more of a philosophy, which is, I think it's easy to get on an earnings call and say, "We're doing AI everywhere, and we've got all these great partnerships." Our view is that there is also a risk of spending a lot of money on AI and getting no return for it. That's not something that we can afford to do as a Medicaid first company, in a margin compressed environment. We are really strategically thinking about this around first, the greatest value that will come from all of this and sort of the ability to maximize AI is really predicated on the command you have of your data, the ability to build differentiated data products and to maintain and own the context layer. If you think about being the largest Medicaid managed care, the largest government sponsored programs company in the market with 25 years of history and context, that's really where we are focusing in terms of the foundational work. While we'll continue to highlight places where we're then leveraging that to deploy use cases, we are also holding ourselves to an extraordinarily high bar in terms of the ROI. That we aren't just going to deploy AI to talk about AI, we're going to deploy it where there is very clear, tangible return on that investment. We think the way to do that is by this foundational focus on data and context, in the short term. More to come on that, it was really just trying to sort of click down and give folks a sense of our philosophy and how we're being prudent about investments in that space. Yeah, as far as the early adoption of that internally developed software pronouncement, that's not going to be material to the company. What you're seeing in SG&A is sort of real true substantive execution and action. As you heard from Sarah, as we look ahead, we're very optimistic about our ability to deliver an industry-leading cost structure, including the SG&A element, on behalf of state and federal customers and ultimately taxpayers. Thank you. Our next question comes from Scott Fidel with Goldman Sachs. Please go ahead. Hi, thanks. Good morning. Wanted to just tack on, I know there's been already a couple of questions about the outyear dynamics of Medicaid with OBBBA. I feel like one area that the work requirements get a lot of attention, and rightfully so, but the other regs seem to get a lot less attention in the discussion in terms of the Medicaid SDPs and the provider tax reform and then the budget neutrality of the 1115 Waivers. Just effectively around how much more limitation on the states that's going to create on their funding as the feds look to sort of bring the matching back down and balance to where it used to be more traditionally. Just would be interested in your thoughts there in terms of ultimately how you think the funding environment may evolve with the states and how that sort of intersects with your efforts to get rates back up above cost trends and then continue with margin recovery, more looking out sort of into FY 2028, 2029, and 2030. Thanks. Yeah. Thanks, Scott, for the question. You're right to point out sort of what I referenced before, that there are kind of multiple components of this that are colliding that aren't just work requirements. What's interesting is, and it goes back to kind of what is the value of managed care, one of the biggest values that we deliver to the states is being able to help them contain their budget and have budget predictability. What we have found is that when states go through periods of budget pressure, it actually creates strength in the partnership. It's part of why we've talked, you've seen over the last year, a different level of engagement and movement in terms of program changes and benefit changes. A lot of that is because states look to us for ideas and for opportunities to maintain the fidelity of the benefits that they want to offer to the Medicaid population, but doing so within a more budget-constrained environment. It's also a time where we've seen much more movement of specialty populations into managed care. The states are absolutely sort of wrangling all of those pieces at the same time, but we actually think it's an opportunity to have productive conversations about where they can get savings without further cutting into the Medicaid program. Think about carving in more populations. It actually could be a period of potential further growth. You're seeing a little bit of that come through in the RFP cycle. Again, it's certainly going to be a number of things that we've got to work with them on over the next couple of years, but I think it's a much more balanced view than just feeling like all of these policy changes are going to create pressures, ultimately, on rates. I think they need to fund the programs, and I think we've got great ideas about how they can do that, and have the opportunity to, and are engaging with them on that front already. Thank you. Our final question today comes from Michael Ha at Baird. Please go ahead. Thank you. Just wanted to follow up on Kevin and Lance's question, I guess asking it in a different way, just looking for more granularity since it's such an important topic. I understand, Drew, you said the remaining low no utilizer Medicaid members, much lower now than the last few years, and you only expect a very modest acuity shift into next year. That said, I know this year, a bit higher member attrition, you're leaving some rate cushion on the table for back-half acuity shifts, potentially. I was wondering if you could provide just more granularity around, excuse me, what you mean by low utilizer today, specifically, like what MLR range would you even consider low utilizer, and how has the distribution of members across these buckets changed in your expansion book since redeterminations first began in 2023? Thank you. Yeah. We take a look, we can slice the data so many different ways, and then you also have to think about we're only six months into the year and factor that into the cohort you're looking at because obviously you have to compare that to like periods. If you step up and look at fundamentally, as you would expect, the let's say zero utilizing population is down from that PHE time period, as I said before. The med expansion population, where we are seeing slight, I mean, I'm talking slight acuity in terms of what we expect this year, which the 50 basis points should more than cover in terms of the back half of the year. We're being thoughtful about there is an impact when you shed lower utilizing members, when states may not adopt OB3 early, but some states are explicitly taking action, effectively pulling forward some of that impact. That actually gives us really good data to be able to share with other states. There's one state, as you know, that adopted the OB3 provisions early, so we're getting early data on that state. It's pretty immaterial, but it's data nonetheless. We're confident we can manage through this, but it's good to be able to have these discussions with our state partners to acknowledge that when actions are taken on the expansion population, which is not in all of our states, but those actions will have rate consequences, and we're already seeing traction, not just in discussions, but in actual rates being provided in advance in seven one in a few states. We're optimistic we can roll through this, and it's really good to have the muscles that have been built, both on the payer side, but also on the state side in terms of the acknowledgment of what acuity shifts mean in Medicaid. Thank you. That concludes our question and answer session. I'd like to turn the conference back over to Sarah London for any closing remarks. Thanks, Rocco. Just to wrap up, obviously feel great about the progress so far this year on our margin restoration agenda, and feel like we have a prudent posture as we look at the back half of the year. Just want to thank everyone for joining us this morning, for your interest in Centene. A big thank you, as always, to the Centene team. It is an honor to be on this mission with you. Have a great day. Thank you, ma'am. This does conclude our conference call for today. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.