Ladies and gentlemen, thank you for standing by, and welcome to the Elevance Health third quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session where participants are encouraged to present a single question. If you wish to ask a question, please press star then one on your telephone keypad. You will hear a prompt that you have been queued. You may withdraw your question at any time by pressing star then two. These instructions will be repeated prior to the question-and-answer portion of this call. As a reminder, today's conference is being recorded. I would now like to turn the conference over to the company's management. Please go ahead. Good morning, and welcome to Elevance Health's third quarter 2024 earnings call. This is Steve Tanal, Vice President of Investor Relations, and with us this morning on the earnings call are Gail Boudreaux, President and CEO, Mark Kaye, our CFO, Pete Haytaian, President of Carelon, Morgan Kendrick, President of our Commercial Health Benefits business, and Felicia Norwood, President of our Government Health Benefits business. Gail will begin the call with a brief discussion of the quarter and our revised outlook for the year and recent progress against our strategic initiatives. Mark will then discuss our financial results and outlook in greater detail. After our prepared remarks, the team will be available for Q&A. During the call, we will reference certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available on our website, elevancehealth.com. We will also be making some forward-looking statements on this call. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Elevance Health. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to carefully review the risk factors discussed in today's press release and in our quarterly filings with the SEC. I will now turn the call over to Gail. Thank you, Steve, and good morning, everyone. We appreciate you joining our earnings call. Today, we will review our third quarter financial results, discuss our outlook for 2024, and provide an update on the operating environment. During the call, we will also highlight fundamental drivers of long-term growth for Elevance Health, which remains strong. For the third quarter, Adjusted Diluted Earnings Per Share were $8.37, which was below our expectations, primarily due to elevated medical costs in our Medicaid business. The impact on the third quarter and our full-year outlook are being partially offset by focused medical management, the work we are doing with states to reflect the acuity of our members in rates, and proactive actions we are taking to enhance operating efficiency, which will strengthen our business for the long term. We are navigating a challenging and dynamic operating environment and have reduced our full-year outlook to prudently reflect these challenges. Given third quarter results and our expectation that timing disconnects between Medicaid rates and acuity currently facing the industry will continue, we have reduced our outlook for adjusted diluted earnings per share to approximately $33. Importantly, we are not leveraging the future to achieve short-term gains. We are investing to position Elevance Health for strong growth over the long term. The issues impacting the Medicaid business are time-bound, and our state partners are working constructively with us on rate renewals. We're confident that rates will ultimately reflect the underlying acuity of our members, albeit on a lag, as states often use data that is more than a year old in setting rates. These short-term headwinds are a byproduct of the large scale and unprecedented mix shifts associated with the end of the public health emergency. Over the long term, Medicaid managed care is an attractive business that is integral and complementary to our other health benefits and Carelon businesses and offers significant growth opportunities, notably serving specialized populations where we provide distinct value with our unique capabilities. Across our health benefits business, we are diligently executing on our growth strategy. Our Medicaid team is working tirelessly with our state partners, and we appreciate the collaboration. While the rate increases we've received are the highest in the past decade, they are still inadequate to cover 2024 cost trends that we now expect to be three to five times historical averages. We're confident that rates will reflect the acuity of our members as enrollment continues to stabilize, and we're acting with urgency to deliver significant operational efficiencies and appropriately manage the cost of care. Partnering with states as they expand managed care to beneficiaries with chronic or complex conditions aligns well with our specialized whole health solutions and is an important part of our growth strategy. In partnership with Blue Cross Blue Shield of North Carolina, we're pleased to be expanding our service to North Carolinians through the recent award of a sole source foster care contract covering nearly 60,000 new members. This marks the second sole source foster care win in 2024. In Medicare, we're taking deliberate steps to ensure the long-term sustainability of our business. We are now two days into the 2025 Annual Election Period and are pleased with our positioning overall. We remain disciplined in our approach to 2025 bids, building on the actions we took to position our Medicare Advantage business for sustainable performance heading into 2024. For 2025, we took a balanced approach to margin and membership. Prioritizing the benefits seniors value most to mitigate the impact of CMS's rate cuts on beneficiaries and promote access to high quality, comprehensive, and coordinated care for our members. Given the benefit reductions and meaningful market exits we made heading into 2024, we maintained greater stability in our offerings for 2025. As a result, we expect to grow individual Medicare Advantage membership in line or slightly better than the broader market in 2025 led by products where we have strong, sustainable market positions. Medicare Advantage Star quality ratings remain a key enterprise priority, and we're committed to our long-term goal of achieving and maintaining Star ratings at the high end of all plans in our markets. For payment year 2026, we improved our own performance across nearly 60% of Star measures and are pleased to be the only large payer to offer multiple 5-star plans. Unfortunately, we will see the percentage of our members and plans rated four stars or higher decline due to significantly higher cut points. The entire decline in our four-star member mix was due to one of our larger H-c ontracts narrowly missing a four-star rating by four ten-thousandths of a point. We have challenged our initial scoring with CMS and are considering all of our options. Our commercial businesses are performing well and are on track to achieve their financial targets. We anticipate further growth in 2025 to be driven by increased penetration of our best-in-class products and services, given momentum in both of our individual exchange and national account businesses. For the largest employers, we offer differentiated value in innovative and attractive solutions, and our focus on whole health in partnership with Carelon is resonating. In our individual exchange business, we're delivering particularly strong growth, with membership up more than 30% year to date. As we look to 2025, we're expanding our individual and family ACA plans in three states, Florida, Maryland, and Texas, under the Wellpoint brand, which will complement our existing presence in these states while driving growth for our health benefits and Carelon segments. Focused geographic expansion enhances our ability to serve as a lifetime trusted health partner to consumers in our communities. Turning to Carelon, we're making significant progress in scaling our enterprise flywheel for growth. CarelonRx continues to expand its customer base while diversifying its value proposition. Earlier this month, we closed the acquisition of Kroger Specialty Pharmacy, which is aligned with our strategy of controlling the levers that matter in delivering whole health affordably. Meanwhile, innovative solutions such as our Specialty Rx Savings Navigator, Weight Management Solutions, and EnsureRx continue to gain traction and drive savings for our clients. Growth in Carelon Services remains strong, and we are on track to exceed the upper end of our initial outlook for low 20s% revenue growth. This includes external growth above our initial targets for 2024, a proof point in first demonstrating our value proposition internally before driving growth externally. Carelon also recently entered into an agreement to acquire CareBridge, a value-based manager of home and community-based services for chronic and complex members that will serve as the foundation for Carelon's home health business, and we're excited to continue to serve all its customers and members. Carelon Services is expanding its capabilities to manage a growing proportion of healthcare spending, supporting the long-term growth of the business, and by extension, the value it creates for health plan customers. Despite the challenges of the current environment, we're investing to position Elevance Health for sustained growth over the long term, including through the application of AI-driven solutions that are enhancing member and provider experiences, reducing costs, and driving more efficient processes. We expect to realize operational and financial benefits in 2024, and greater impact in 2025 and beyond. For our members, we're integrating AI across touch points to provide personalized digital service, improve access to care, and further increase satisfaction. We're also improving provider interactions and reducing costs by streamlining administrative tasks, automating onboarding, and enhancing contract administration, and for our associates, we're investing in tools that increase productivity, reduce manual tasks, and enhance efficiency across the organization. These are just a few of the AI applications we anticipate in the coming years as we focus on programs that can have the greatest impact, guided by a mission to provide unmatched value to our members, providers, and associates. In summary, our businesses remain fundamentally strong, and we remain confident in the flywheel for long-term growth we're building with our complementary businesses. The issues impacting Medicaid are time-bound, and we're acting with urgency to improve performance and ensure adequate rates that reflect the acuity of our members. We are confident that we're making the right investments to position Elevance Health for strong and sustainable growth over the long term, in service of consumers across all age and income levels, and that we will emerge from this period of unprecedented change, stronger and even better positioned to serve the growing need for care management and cost containment in our healthcare system. Before closing, I would also like to thank our dedicated associates for their tireless commitment to our mission and for the work they do each and every day to deliver for all of our stakeholders. It is their dedication and passion for those that we're privileged to serve that is reflected in our ongoing recognition as a great place to work for the fifth consecutive year. With that, I'd like to turn the call over to Mark Kaye, our CFO, to provide more details on our operating results and outlook. Mark? Thank you, Gail, and good morning to everyone on the line. As Gail has shared, we reported third quarter results, including GAAP diluted earnings per share of $4.36 and adjusted diluted earnings per share of $8.37, which came in below our expectations. We ended the third quarter with 45.8 million members, flat sequentially. Growth in commercial was largely offset by the loss of approximately 85,000 Medicaid members due to a specific footprint change that took effect at the beginning of September. Year-over-year, commercial membership has grown by nearly 600,000, driven by strong fee-based and individual ACA health plan growth on the distinct value we deliver to large employers and the targeted local positioning of our products. Total operating revenue for the quarter was $44.7 billion, up over 5% year-over-year, reflecting strong re-acceleration in growth from the low point last quarter. The consolidated benefit expense ratio was 89.5 for the third quarter, an increase of 270 basis points year-over-year, principally due to Medicaid cost trend developing worse than expected. While Medicaid rate increases will reach record levels this year, they remain inadequate to cover cost trend that is in the range of 3-5 times historical averages. We are working closely with our state partners to ensure they fully capture the acuity of our Medicaid membership in future rates. During the quarter, we mitigated the impact through disciplined medical management and took further proactive actions to enhance operating efficiency across the enterprise. As a result, Elevance Health's adjusted operating expense ratio was 9.6%, an improvement of 150 basis points. Adjusted operating gain for the quarter was $2.4 billion and $8.3 billion for the year-to-date period, primarily reflecting declines in our Medicaid business. We maintained a consistent and prudent posture with respect to reserves. Days in claims payable at the end of the third quarter stood at 42.8 days, which remains slightly above our targeted range in the low forties. Given third quarter results and our expectation that cost trend in our Medicaid business will remain elevated through at least the fourth quarter, we have reduced our full-year outlook for adjusted diluted earnings per share to approximately $33. We now expect our 2024 benefit expense ratio will be more than 100 basis points higher than we anticipated last quarter, bringing the full year to approximately 88.5%. Full-year operating cash flow is now expected to be approximately $4.5 billion. It's important to keep in mind that the issues impacting the Medicaid managed care industry are time-bound, and we are confident that rates will ultimately reflect the underlying acuity of our Medicaid membership. It's also notable that in 2024, businesses representing more than half of our revenues will be operating at margins below their long-run potential. We expect margins will return to appropriate and sustainable levels over time. Turning to 2025, we expect continued momentum in our commercial business, bolstered by the expansion of our exchange offerings into three new states and the alignment of our value proposition in national and large group markets. We will deliver balanced growth in our Medicare Advantage business and stability in Medicaid as redeterminations return to a normal cadence. We will further scale Carelon, our enterprise flywheel for growth, with notable contributions from the expansion of specialty pharmacy dispensing capabilities in CarelonRx and continued momentum in Carelon Services as we drive greater product adoption internally and externally and build out our home and community-based business. Finally, we are undertaking bold actions to modernize and transform many of our core processes through the application of new technologies that will create structural efficiencies and long-term value. There is much to be excited about in 2025, and we expect strong acceleration in revenue growth, at least in line with our long-term growth algorithm in the high single-digit% range. While we are confident that the issues impacting the Medicaid managed care industry are time-bound, at this point in time, our outlook for 2025 adjusted EPS growth is at least in the mid-single-digit% range. This reflects our assumption that the timing disconnect between Medicaid rates and acuity will continue. We will navigate this backdrop with the same focus and discipline that has been central to the long-term success of Elevance Health. Importantly, the earnings power of our diverse and complementary businesses remains strong, and we are confident in our ability to deliver at least 12% growth in adjusted diluted earnings per share annually on average, over time. With that, operator, please open the call for questions. Ladies and gentlemen, if you wish to ask a question, please press star then one on your telephone keypad. You will hear a prompt that you have been queued. You may withdraw your question at any time by pressing star then two. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, we ask that each participant limit themselves to a single question to allow ample time to respond to each analyst that may wish to participate in this portion of the call. For our first question, we'll go to the line of A.J. Rice from UBS. Please go ahead. Hi, everybody. Thanks for the question. So in the slide deck, you're reiterating your expectation of 12% earnings growth from 2022- 2027, which off that 2022 base would suggest you get something like $51.27. But you're also saying off of the new base this year, you'll grow 5% next year, which would give you something like $34.65 high, something in the high $34s. I guess the question is, and it sounds like all of the short-term issues are around Medicaid: Is getting the right rates gonna be sufficient to get you the kind of accelerated earnings growth in 2026 and 2027 that would get you back on track to hit that long multi-year 12% CAGR target, or should we rebase that given what we're looking at in 2025 and 2024 and 2025? Thank you for the question, AJ. Let me provide a little bit of high-level perspective around that because I think there's, you have a lot of math in that question, but I think it's important, certainly appreciate the dynamic environment that we're currently operating in. I think to really start that, first, we believe that the earnings power of our diverse and complementary businesses remains strong. So feel good about thinking about at least 12% over the long term in an adjusted EPS over time. So I think that's important. As you heard, and we're thinking about what's happening in our business right now, I'd like to sort of reiterate some of the things that Mark shared in his opening comments. First, strong acceleration in revenue growth, at least in line with our long-term algorithm in the high single-digit%. So there's a lot, I think, to be excited about in our business, momentum in our commercial business going strong. We're entering several additional expanded ACA footprints next year. We feel good about the Medicare Advantage business, which we focus to be sustainable long-term growth. And Carelon is gonna deliver even greater value as we look at the internal and external growth we're seeing in services and the robust pipeline in CarelonRx. And then the last piece of that is continuing to realize substantial operational efficiencies. However, given, you know, the dynamics that we spoke about and the environment that we're in, we anticipate that Medicaid margins in 2025 are gonna remain below our long-term target. But again, this is a timing disconnect between rates and acuity, which we do believe is time-bound, but think that can persist through 2025. And also, it's really important that we are gonna continue to make ongoing investments in 2025 because we think that there's a powerful opportunity across our business. So taken together, we think that we're being prudent in how we think about 2025 and our expectations at this pace and timing, and that our guidance will give you a lot more detail in the fourth quarter. But I think you can rest assured we're gonna continue to navigate 2025 with the same focus and discipline that has been central to our long-term success. Next question. Thank you. Next, we'll go to the line of Stephen Baxter from Wells Fargo. Please go ahead. Yeah. Hi, thanks for the question. Just wanna come back to the Medicaid discussion. Obviously, the magnitude of the revision that's implied there is alarming, you know, particularly given that we're at the end of the membership impacts from redetermination. Just trying to understand better how things got so much worse so quickly. I guess, how much of this is actually new to the third quarter versus not having a good reading on where things were last quarter? And to the extent there are new developments in the third quarter, can you better help us understand, you know, perhaps what some of those are? Thank you. Thank you. Let me ask Mark Kaye, our CFO, to address your question. Thank you. Steven, good morning. Let me start off by noting that we experienced accelerated cost trends in Medicaid throughout the third quarter. And, additionally, we saw unfavorable prior period development related to the current year, specifically in our Medicaid business. If I sit back for a moment, you know, the Medicaid cost trends accelerated in the quarter. They restated negatively for the current year, and as such, we're tracking in the range of around 3.5x, 3x-5x the historical average, depending on the state. The elevated level of cost trend is driven, and you heard us address this in our prepared remarks, primarily by the higher overall membership acuity, given the redetermination cycle is now substantially complete. And, we are continuing to work with the states. We very much appreciate their collaboration. And while rate increases to date have also been higher than the historical average. They remain insufficient to fully cover the claims trends that we're seeing. And so it's important to keep in mind that the state processes themselves typically rely on reference periods that lag current experience by as much as one to two years. And while we are sharing more recent experience and trend information real time with the states, it's gonna take time before that's fully reflected in their rate schedules. Thank you. Next question, please. Next, we'll go to the line of Ben Hendrix from RBC Capital Markets. Please go ahead. Hey, thank you very much. Just wanted to kind of drill in a little bit more on the pacing of the catch-up and of rates to acuity that you may expect over the coming year. You probably don't have perfect visibility into it, but are there any pockets? I think Mark mentioned a big bolus of members that kind of came off recently. And just, are there any pockets of areas where you see a large bolus of members come off, acuity increase, and then have a state renegotiation that could be kind of a catalyst for creating some accelerated recovery? Or, you know, how do you think about pacing of the recovery throughout next year? Thanks. Yeah, thanks for the question, Ben. I'll ask Mark to comment on this as well. But remember, you know, this is one of the largest and unprecedented mix shifts we've seen in Medicaid as the PHE has unwound over the course of the year. And again, as Mark said, what we saw was this acceleration through the third quarter. So I think putting that in perspective is really important. We have not had an environment like this before in Medicaid, so it's a very unusual timeframe for us. But let me have Mark give a little bit more color on that. Ben, I think the only thing I'll add to Gail's remarks is that as we think about 2025, we do expect that mismatch between rates and acuity to narrow, especially as the state rate updates increasingly reflect the underlying member acuity. Thank you. Next question, please. Next, we'll go to the line of Ann Hynes from Mizuho. Please go ahead. Great, thank you. Can you just give us a little bit, more detail on the utilization trends? Like, what is increasing more than your expectations? Is it inpatient, outpatient, pharmacy? Any color you could provide would be helpful. Thanks. Oh, may I have Mark address that, please? Thanks. Maybe let me take this briefly from two perspectives. I'll do a little bit of Medicare, then I'll do a Medicaid. So Medicare in the quarter, you know what? Slightly elevated. It was manageable overall, reflected some incremental pressure related to the Two- Midnight Rule. We also saw a late summer surge in COVID. On Medicaid, as I spoke about trends a minute ago, we are seeing some ongoing pockets of elevated trends. They're most notable in the behavioral health area. Overall, that we do expect margins to continue to remain pressured through the rest of the year, and certainly for those two businesses, will remain below our long-term average in 2025. Yes. Thanks. And again, our results were predominantly driven by Medicaid. And as Mark said, we did see some slight pressure in Medicare, but feel very comfortable about where we positioned our bids for 2025. So thank you. Next question, please. Next, we'll go to the line of Andrew Mok from Barclays. Please go ahead. Hi, this is Tiffany on for Andrew. It looks like the two hundred basis points of 3Q Enterprise MR miss, like, translates to about five hundred basis points of Medicaid pressure in the quarter. One, is that the right ballpark to think about? And two, like, just given the apparent, like, hundreds of basis points of incremental pressure, is the Medicaid book profitable today? Thank you. I'll ask Mark to respond to that as well. Thank you very much for the question. The ballpark is about right for 2024, and as I think about the Medicaid business, you know, it is expected to be profitable this year, albeit below our target margin range, for the year itself. It's important to note that you really can't look at the Medicaid managed business in any particular single quarter. You know, there are normal quarter-to-quarter dynamics of the business, but importantly, over the long term, we do expect the Medicaid Managed Care business to be a profitable, and attractive one for us, and it's integral, and it is complementary to other health benefits and Carelon businesses. Yep. Thanks, thanks for that, Mark. And again, just want to reiterate that, you know, we do believe this is time-bound, and we also believe that Medicaid is a very good business, particularly the specialized populations where we have unique capabilities. But again, thank you for the question. And next question, please. Next, we'll go to the line of Erin Wright from Morgan Stanley. Please go ahead. Hey, thanks. And I wanted to ask on Medicare Advantage, just based on the analysis of sort of the MA landscape now and the latest kind of benefit design details, is the competitive environment playing out as you would expect in terms of being fairly rational, with a focus on kind of profit versus growth? Is it playing out according to plan there in driving some of that assumption in terms of your at or above-market growth in MA next year? Thanks. Thanks for the question, Erin. You know, first, I think it's really important to realize we feel well positioned in MA, and we took a number of actions, prudent actions last year at the beginning of the year to position the business for long term. Importantly, you know, we had a number of market exits of markets we didn't think we saw long-term sustainability, and this year we continued to look for stability and make sure that we are in this business for the long term. So I'm gonna ask Felicia to comment now that we're a few days into AEP and give you a perspective of our thoughts on the market. Thank you, Gail, and thank you, Erin, for the question. You know, our strategy as we look at Medicare Advantage really didn't start this year around our approach to balancing membership and margin. We started last year to really take strategic actions in order to create a sustainable foundation for growth in our Medicare Advantage business, and that included exiting several underperforming markets, and that represented about 85,000 members. In addition to that, we made significant reductions in our supplemental benefits in Puerto Rico on the heels of some losses in 2023. So as we put together our bid for 2025, we started the work with the foundation and wanted to make sure that we maintained stability where we needed to, but we wanted to be very focused on a balance between growth and margin, particularly in attractive and sustainable products and performance for us as we went forward. Specifically, we focused very much on our D-SNP business in our high-priority markets, where we have the assets and the cost structure to really support leading market share. Additionally, I want to note that our products are predominantly HMO, not PPO, and we were very prudent in our positioning, overlaying our local market dynamics and consumer preferences with our own market prioritization framework. So when we look at where we are now, only two days into AEP, we feel very good about how we're positioned in terms of our key products and our target market. We prudently navigated the environment, and as we sit here today, as you said, we really expect to grow in line or slightly better than the market, but competitively, feel we're very positioned well as we head into this AEP. Thank you. Thank you. Next question, please. Next, we'll go to the line of Justin Lake from Wolfe Research. Please go ahead. Thanks. Good morning. Wanted to follow up on your comments around Medicaid trend accelerating through the quarter and being 3x-5x typical. To your point, I don't think anyone on this call has ever heard of trend being discussed in terms of multiples of typical. And given it got worse through the quarter, just curious if you'd give us some color on what's going on through the quarter. Is it that you're seeing people come back on the rolls that are sicker, given the redeterminations themselves should have been, you know, give or take, run out at this point? Then, you know, given it looks like the exit rate in the quarter is, you know, the lowest margin, the highest cost, sounds like, can you tell us where you were ending the quarter and where you expect to be for the fourth quarter versus that 3-4% margin target that we all think about? Thanks. Justin, thanks for the question. Just a couple of thoughts, then I'll ask Mark to provide a little bit more perspective. You know, remember, again, this was the most significant change we've seen in membership in Medicaid, probably, as long as I've been in this business, coming off of the PHE. And again, the driver was this acceleration that we saw through the third quarter, and it we did plan for accelerated acuity in our business, which I think is important. But again, none of us, when you're planning for three to five times the cost structure, we've been working very diligently with our state partners, in terms of understanding those rates and where we need to be. Again, they are looking at data oftentimes a year in arrears and have been responsive to changing their process, but it has not kept pace yet, and we think it will take them some time. With that, let me ask Mark to give a little bit more perspective on some of the other questions that you had embedded. Justin, just to add additional color here, as you heard from Gail, you know, we definitely planned for an elevated level of trend in 2024 relative to the historic average Medicaid trend, which has run in the low single-digit% range. And to the point we made earlier, that trend is now running around three to five times historic average levels, of course, depending on the states and, you know, meaningfully above our expectations. And that's really driven by this unprecedented redetermination related activity, which has resulted in several downstream changes in membership mix, membership count, acuity program adjustments, etc. I'd also like just to reiterate, so that long-term target for Medicaid is in that 2%-4% range. Yeah, and finally, Justin, to your point, we've also not been standing still. Obviously, we've been very active in managing the things that we can control around cost structure and acceleration of initiatives that we had in place around AI and making our business sustainable for the long term. And again, very active with our state partners, proud of our teams for the work that they've done to bring this forward. But again, we do think this will take time to work with our state partners to get the match at the appropriate level. So thanks for the question, and next question, please. Next, we'll go to the line of Lisa Gill from JP Morgan. Please go ahead. Thanks very much, and good morning. Gail, one of your peers talked about accelerating Rx trends, and specialty. You know, we've seen changes to IRA around catastrophic coverage. So one, you haven't called out, you know, anything around RX as far as cost trend goes. Are you seeing that? How did you price for that going into 2025? And then just on the flip side, CarelonRx had very strong results. Is that a key driver of what we're seeing, especially on the specialty side and growth in specialty? So, thanks for the question, Lisa. Let me give a little perspective directly on your question, and I'll ask Pete Haytaian, who leads our pharmacy business, to provide some more context. So year to date, we have seen an increase in Medicare Advantage Part D, especially drug utilization, but the trends in unit costs have been in line with our assumptions, so we don't see it as a significant impact to what we've been talking about. Let me ask Pete to give you a little more perspective about what's happening in terms of overall pharmacy. Yeah. Thanks, Lisa, for the question. As you said, we're very pleased with what we're seeing, you know, in terms of our CarelonRx strategy and growth. We continue down our path of insourcing the strategic levers that matter, down our path of specialty pharmacy and infusion. We're making really good progress there. And as it relates to growth, you know, our story is resonating in the marketplace. We're beginning to see a lot of pull-through in that regard, and we've had some nice wins going into 2025 upmarket as well. So that's t hat is all proceeding as planned. In terms of our overall, you know, performance from an operating margin perspective, though, as Gail said, we did expect what we saw in the specialty pharmacy trends. We did see that increase, but it was really as expected. When you look at our overall margins, the outperformance in the quarter was largely due to a one-time favorable revenue adjustment that was intra-year. And when you even that out or spread that out through the year, you know, the full year still remains on track in terms of our initial guidance around the 6%-6.5% margin profile. So we feel overall very good about where we are, and where we are where we expected to be. Thanks, Pete. Next question, please. Next, we'll go to the line of Lance Wilkes from Bernstein. Please go ahead. Yeah, just a quick follow-up on the rate outlook for Medicaid. If you could just give some color on what you'd observed as far as rate increases, maybe historically or in the first half of the year, and then what you're seeing in the second half of the year, and what your outlook is based on how far you are along in early 2025. And then the broader question was just, are you anticipating making any strategic moves as a result of these pressures that, again, are time-bounded? And as part of that, does this make any change in how you might in-source all of the functions of your PBM? Thanks. So a lot of questions there, Lance. Thank you. Let me just address your question on strategy, then I'll ask Felicia specifically to talk about Medicaid. You know, we feel we've laid out a very comprehensive strategy around the growth drivers. And, the opportunities, as I shared in the first question, really how we see acceleration in revenue and, strong commercial business. We believe the time-bound issues around Medicaid, and we think we will work through those with the assets we have, and then Medicare being well-positioned. Carelon is a real accelerator for us, and as you saw, we announced an additional acquisition this morning as part of CareBridge that gives us home-based care and another pillar inside of our growth strategy for Carelon Services, where we can take significantly more pass-through of the type of medical expense we're managing inside of Carelon. I would say, you know, we're very focused on the long-term growth drivers and our flywheel for growth inside of Elevance Health, and feel very positive about the fundamentals of our business. Strategically, I think we're moving forward in the exact same path that we've laid out, and in the pharmacy side, taking more control of the levers that matter for us. You've continued to see us integrate the Kroger Specialty Pharmacy acquisition, our advanced home delivery. So feel very good about that progress, and we're dealing with the time-based issues in Medicaid right now. But let me ask Felicia to address the Medicaid specifically. So Lance, good morning, and thanks for the question. You know, as you can imagine, the rate negotiations with our state partners are ongoing. And when you take a look at how our portfolio of business is spread out across the year, we have about half of our states that are January states, then the other half that are July states and in the back half of the year. The work that we started with our states, certainly around the July states and rates, certainly took a look at the 2025 rates that they were working with us on, but we also put a lot of work into working with our states on understanding the trends that we're seeing in the first half of the year. As you heard earlier, the reference period for most of our states are 2023, when you think about the 2025 rate-setting process. So there will certainly be that misalignment and that timing mismatch as we talk about. When we look at the work that we're seeing with our state partners, some states have certainly been more receptive to going back and taking a look at those and addressing those rates now. We've had certain states that have given us mid-year rate adjustments, and more of those will happen as we go through the back half of the year and early next year as well. But as you heard earlier, this is a process which you clearly understand that will take some time to actually get total alignment between our rates and the acuity of the membership that we're seeing on the heels of an unprecedented change in mix with respect to this business. But I will tell you, we are going to continue our strong advocacy, working with our state partners, sharing up-to-date information around the changes that we're seeing, and we have full confidence that we will ultimately have rates that are aligned with the acuity of the membership in our population. So thank you for the question. Thank you. Next question, please. Next, we'll go to the line of Josh Raskin from Nephron Research. Please go ahead. Hi, thanks. Sorry to stay on the topic, but I'm still struggling with why this acuity rate mismatch is accelerating now, or why this cost trend is accelerating now. My understanding is that most of the redeterminations, you know, have been done, right? This started over a year ago, so felt like there was less redetermination activity in the most recent quarter than previously. And I think, you know, last quarter there was this conversation around higher utilization from members that were about to lose coverage, and so you would have expected that to slow. So I guess I'm still confused as to what's causing this big acceleration in this trend. Why is that happening so late in the process? Josh, good morning, and thanks very much for the question. Two key points I'd like you to keep in mind here. First, we've modeled a prudent view of costs for the fourth quarter. And you could think about that as us holding Medicaid trend approximately flat relative to where we were in September. And the second key point to keep in mind here is that we had unfavorable development related to the current year in the quarter. Next question, please. Next, we'll go to the line of Michael Ha from Baird. Please go ahead. Hi, thank you. So just to add on the Medicaid topic, so based on your 2024 guide, if I'm not mistaken, implied 4Q impact actually seems to be larger than your third quarter MR pressure. So it sounds like this is the case, but is this basically assuming the acuity rate mismatch worsens in the next quarter, even though you have all your September, October rate increases? And at this point, I guess in mid-October, do you think you now have enough data and visibility into your own acuity mix that you can pass along to these states in time for January 1 renewals, or just, you know, I presume draft rates are pretty already there. So could they open that back up and adjust, or is it too late? Thank you. Yeah, a couple of things, just high level. One, you also have to factor in a seasonality into the fourth quarter, so make sure you're doing that. And I'll ask Felicia to talk a bit about Medicaid and the process that just goes on in rate setting. Yeah, so you know, thank you so much for the question again. You know, at this point, we have about 55% of our rate visibility for premium for January. However, those are draft rates, so we spend a lot of time with our states right now, making sure that they understand the experience that we were seeing in the second and third quarters as we head into the rate setting process, so yes, when we have draft rates, the process is still iterative and ongoing, and we are continuing to make sure that the states have visibility around that information. So we have 55%, as I said, of visibility into the January renewals, but those are early discussions, Michael, and expect a lot of work to happen between now and the end of the year in terms of the work between us and our state partners. Maybe one comment just to add on to Felicia's remarks. Just to reaffirm, Medicaid trend is not expected to accelerate in the fourth quarter. It's primarily seasonality that's resulting in these numbers. Next question, please. Next, we'll go to the line of Ryan Langston from Cowen. Please go ahead. Hi, good morning. It sounds like you expect growth on the exchange side into 2025. So I guess in that context, how should we think about the margin profile for maybe just the exchanges in the overall commercial business? I think you can [audio distortion], where you're running this year? Thank you. Thank you very much for the question. We'll have Morgan Kendrick, who leads our commercial business, respond to that. Ryan, thank you for the question. We feel really good about our commercial business in aggregate, and certainly the individual ACA is a big, big piece of that. You know, we've taken a very disciplined approach over the last thirty-six months in gradually expanding our footprint and our competitiveness in our 14 geographies. As Gail mentioned in the prepared remarks up front, we're expanding that in other markets. So this year, we're expecting to have nice growth in our markets, probably improving share in the markets that we serve by about two points moving forward. That said, when I think about next year, we're positioned really well in the geographies where we've already served. We're in the process of sort of determining the positioning in the markets that we're moving into, but are really excited about that business and it also being in line with our expectations on the economics. Thank you, and just another thing to remember, those are states where we also have Medicaid and Medicare business, so it aligns with us knowing those states well. Thank you. Next question. Next, we'll go to the line of Scott Fidel from Stephens. Please go ahead. Hi, thanks. Just interested if you can maybe dimension for us and discuss some of the downstream impacts from the Medicaid environment to the Carelon businesses. You know that there's quite a bit of leverage or exposure in those businesses to Medicaid. So curious on how those businesses are performing and how you're positioning them around some of these dynamics that we're seeing in Medicaid. Thanks. Yeah, thanks for the question, Scott. I'll ask Pete to address your questions. Yeah, Scott, no, I think it's a great question. I appreciate it. First, just stepping back and thinking about Carelon overall, and as you heard in the prepared remarks, overall, very pleased with the growth trajectory of Carelon Services, exceeding 30% growth in the quarter year over year, and on a path to exceed initial guidance of the high teens, low 20s. So we feel very good about that. And as it relates to growing internally and externally, I'll say that we're continuing down the path that we've been in with regard to proving out our solutions internally and then growing externally. I did want to point out that and as Gail mentioned in the prepared remarks, seeing really nice traction externally. I'd say 4x, you know, improvement in terms of growth in 2024 and good visibility on 2025. As it relates to your question, specifically, you know, yes, we do have products oriented to Medicaid, Medicare. We are taking full risk. And as it relates to our performance overall, we are seeing some of those behavioral health trends play through. So when you look at the margin profile in the short term, we are being impacted by the behavioral health trends. We are also being impacted by the acceleration, some of the risk arrangements that we're deploying. And as you recall, I think I've said it in the past, early on, when we launched these risk arrangements, the margin profile is a bit more compressed, and then as it evolves, it improves. So the combination of those two factors is what's been affecting us in the short term. We feel very good about the long term and continuing to grow within the government program business as well as in the commercial business. We are pursuing a diversified approach, just like the rest of Elevance Health. Next question, please. Next, we'll go to the line of Whit Mayo from Leerink Partners. Please go ahead. Hey, thanks. I just wanted to go back and follow up. I think it was Justin's question. Not sure I actually heard the answer. Are the redeterminations coming back negatively impacting cost trend? Like, are they increasingly gaining access through the point of care, through presumptive eligibility at the hospital or something? Like, what is the actual care activity look like on the redetermination population? Whit, Mark here. Good, good morning, and thank you very much for the follow-up here. There are a number of trend factors that are remaining to various degrees, and certainly some have improved over the past quarter. Think about, like, the pull-forward effect, or think about member mischaracterization, and certainly some that are ongoing. What's really important here is that the state actuarial rate process and our ongoing discussions with them really aim to capture the overall cost to the members in ensuring the adequacy of rates over time. On your question specifically, you could think about a portion of trend as being attributed primarily to the acuity mix shift versus, I think we spoke about last quarter, so that same-store type trend or utilization. And you could think about approximately 60% of the trend as being related to acuity mix. And the key point, as I'm gonna sort of end here, is that, you know, our embedded Medicaid outlook really does include prudent assumptions for cost trend in the fourth quarter, inclusive of all the underlying factors. Thank you. Next question, please. Next, we'll go to the line of Sarah James from Cantor Fitzgerald. Please go ahead. Thank you. Mark, when you said Medicaid is profitable in 2024, is that across all states, or is it a mix of some profitable and some not? And then can you just help us understand the actuarial soundness protections? Is that a two-year or a three-year period? Because if we look at 2024 and 2025 as below target margins, but I think 2023 was a good year for you guys on Medicaid. Does that still give you a position to pursue retroactive rate increases on top of the mid-year rate updates you're targeting? Sarah, thank you very much for the question here. I'm not gonna talk about states specifically, but simply just to note, you know, Medicaid margins on the whole are expected to compress significantly this year. And, you know, we've spoken about this extensively. This is the industry-wide timing disconnect between rates and acuity. Our long-term expectations are unchanged, and that's because we are continuing to proactively collaborate with our state partners on integrating acuity into the rates that we're seeing. We know that's going to take time based on the state's processes, the collation of data, et cetera. And so we're very confident that over time, rates will certainly, appropriately, on an actuarial and otherwise basis, reflect the underlying acuity that we're experiencing. And so I would certainly say that we are confident in our long-term targets that we have set out, and we're committed to achieving them. Thank you. And just reiterating, I think, you know, we do believe Medicaid is a long-term, very good business for us. It's complementary to our other health benefits business, and particularly around other specific populations that we think we have very unique skills to serve those. So again, thank you very much for your questions. We see Medicaid as a long term and this being an industry time-bound issue. Next question, please. Next, we'll go to the line of Dave Windley from Jefferies. Please go ahead. Hi, good morning. Thank you for taking my questions. I wanted to try to understand, respectively, the comments about kind of the cadence of rate recovery or achievement in commercial and Medicaid, and then the confidence in MA bids for Medicare, and with the question being: In your mid-single-digit EPS growth for next year, do you expect margins in commercial and Carelon, respectively, to be up, flat, or down? Thank you. So thanks, thank you very much for the question. Let me ask, Mark first to address your questions on margins, and then, obviously, at this pace, we'll give you some directional commentary because it's still early in the year for 2025. But we'll give you at least a sense of how we're thinking. Mark? Overall, we expect for 2025, margins to continue to remain strong in commercial. Let me stop there. On the Medicaid side here, margins will remain below our long-term margin range, and that's really predominantly related to the timing mismatch that we've spoken about. You could think about them as effectively being stable year-over-year. And then on Medicare, because of the sustainability of our around our 2025 product positioning, we actually expect margins to improve in 2025 compared to 2024. Yeah. Thanks for the question. Next question, please. Next, we'll go to the line of Joanna Gajuk from Bank of America. Please go ahead. Hi, good morning. Thanks so much for taking the question. So just last question, I guess, on this Medicaid commentary, and I guess the margin commentary just made in terms of margins being stable for the end of next year. So, is that, I guess, confirmation that you assume that by the end of 2025, the Medicaid rate mismatch will be fully restored? Is that the way to read that, by the end of the year, it's gonna be restored? Thanks for the question. Let me actually step back for a second and think about more guidance for 2025. We're not looking to provide that necessarily today, but let me share a few modeling considerations that might help you. First, again, with respect to the third quarter, we had some out-of-period items, including unfavorable intra-year development for the Medicaid business, and we do not expect that to repeat. As we progress towards and through 2025, you could think about that as a first half, second half story, where we expect the rate versus acuity mismatch in Medicaid to narrow as the year progresses and as rates continue to improve. It's also important when you think about the modeling for the business, to remember that January 1st is a major renewal base in our commercial business. Right, and that marks the beginning of an end. We also mark the beginning of a new plan year for Medicare. So we're remaining intensely focused on the appropriate medical management, and that's gonna continue through 2025. I would say otherwise, it's too early to provide specific, individual line of business guidance as we head into next year. Right. And thanks, Mark. And just to reiterate that, you know, we're taking a prudent view of the timing on the mismatch in Medicaid, and wanna be respectful of the state process and the work we're doing. We feel that it has been a very good process with the states, but again, they have to get their data from prior periods, and so we're trying to update them on what we're seeing. So again, it's early in the timing, but we wanted to give some sense of our confidence in the long term of our business and the fundamentals. But again, wanna take a prudent view of what's happening in Medicaid, particularly on the state rates. We'll have one more question, please. And for our final question, we'll go to the line of George Hill from Deutsche Bank. Please go ahead. Hey, good morning, guys. And just kind of a couple of quick follow-ups here on the Medicaid, I guess. Number one, Mark, could you provide more color on what drove the PYD in the quarter? And then I guess from a state concentration perspective, is kinda, Is the discrepancy between rates and acuity broad-based or is there state concentrations here that we should be concerned about, like, that could speed the resolution of the issue? So in terms of your overall question, clearly, and we manage a portfolio of states, and we don't get into specific states, but every state's a little bit different based on the population we serve and the programs that are in place, so I wouldn't make it generalized across all states. Know that we are working very diligently with each of the states to make sure. And again, this is industry-wide, not just unique to Elevance Health, and we see this across everything. So thank you very much for the question. And now, we'll turn, I think, to first of all say thank you, operator, and thank you for all the interest and support of everyone who has been on the line. I just want to reiterate, we're confident that we're making the right investments to position Elevance Health for strong and sustainable growth over the long term, and that we are confident we're gonna emerge from this period of unprecedented change even stronger. Thank you, everyone, for your interest in Elevance Health, and thank you for joining us on this call. Ladies and gentlemen, a recording of this conference will be available for replay after 11 A.M. today through November sixteenth, two thousand twenty-four. You may access the replay system at any time by dialing 866-510-4837, and international participants can dial 203-369-1943. This concludes our conference for today. Thank you for your participation and for using Verizon Conferencing. You may now disconnect.