Good morning, and welcome to the final day of the Goldman Sachs Healthcare Conference. I'm Scott Fidel. I'm the healthcare services analyst with Goldman Sachs. Really pleased to have Elevance Health with us this morning. Elevance is one of the largest health benefits and health services companies in the country, and we've got two of the senior leaders with the company today, Mark Kaye and Felicia Norwood. We're going to have a great conversation. Just want to say, the stakes aren't too high for you guys. The last two fireside chats were managed care that we did at the conference. Alignment was only up around 25%, and Oscar was only up around 15%. Mark and Felicia, no pressure there. Just kidding. Obviously, I'm sure you'll do just as well. Let's start. We've got a number of great questions for you guys. Mark, I thought maybe kick off to you first and just want to topically talk about the CMS MA sanctions update there. You did recently receive some favorable news on the CMS MA sanctions two weeks ago. Can you discuss the remaining actions you are taking to reach a full resolution from here? Does Elevance now expect that in the most likely scenario, there will be no material impact on MA enrollment or margins if CMS confirms that all required remedies have been addressed and the regulatory review is now resolved? Scott, good morning, and just a big thank you from both Felicia and I for hosting us at the Goldman Conference today. We're very pleased to be here. We are encouraged by the progress we've made with CMS and the clearer path we now have towards a resolution. We've completed the most significant steps required to date, including submitting the requested data through CMS's systems, and CMS has notified us that it will not impose intermediate sanctions at this time. Between now and July 31st, the remaining work is largely procedural and technical, providing any additional detail CMS requests, addressing technical submission items, and working through any necessary payment reconciliation. We also made an initial remittance to CMS in late May of approximately $340 million, and that's primarily related to dates of service between 2015 and 2018 and was fully contemplated within the $935 million accrual we recognized in the first quarter, and that remains our current best estimate of the probable exposure associated with this historical matter. To your question, based on what we know today and assuming we complete the remaining process as required, we do not expect any impact of note on Medicare Advantage enrollment, our current margin outlook, or our participation in the annual election period this fall. Finally, I just want to reinforce an important point that we spoke previously to. This matter really relates to a historical payment dispute involving the interpretation of risk adjustment policy. It doesn't reflect how we operate the business today. We remain confident in the integrity of our work and our current risk adjustment practices and our compliance framework. Thanks, Scott. All right, great. Well, glad we didn't do anything with the model before, because now we won't have to change anything now. That's an encouraging update. Maybe we'll move over to utilization. I'd probably be tarred and feathered by investors if I didn't ask for this question. Just wanted to try to sort of hone in on utilization here and sort of thinking about the second quarter cost trend. Putting together all the pieces of your health benefits business, just are there any call-outs that you want to provide a 2Q trend, either positive or negative, just any material developments, either at the industry or the company level that would suggest that cost trend is not currently tracking to plan in the second quarter? I very much appreciate the question. Given how central utilization is to the investor discourse at the moment, I would have been surprised if you didn't ask it. Let me start with the headline. Then I'll walk through what we're seeing by line of business. As you saw in the 8-K that we filed this morning, the trends that we've observed in April and May reinforce our confidence in the second quarter earnings guidance we previously provided and in our full-year benefit expense ratio outlook. With that, let me take a moment to talk about what we're seeing in each of the businesses so far in the quarter. In Medicare Advantage, performance continues to be favorable to our expectations. That reflects the deliberate portfolio actions we took for 2026, the composition of the membership we retained, and the impact of our care management and navigation programs. The favorability has been broad-based. We continue to see strength in our dual-eligible membership, where our capabilities are particularly well-aligned. In individual ACA, experience is tracking in line to slightly favorable versus our expectations. We feel good about the morbidity of the population relative to how we price the business, but we are staying prudent, and the meaningful shift towards bronze plans will likely push more plan liability into the back half of the year as members move through deductibles and as we continue to monitor lapsation and utilization patterns as the year develops. In Medicaid, cost trend remains elevated as expected, driven by both utilization and, to a lesser degree, acuity, behavioral health, outpatient surgeries, Emergency department visits remain areas of high trend, and that really reinforces why we have maintained a prudent posture in our Medicaid outlook, and the business remains on track with our full-year margin expectation of approximately -1.75%. Last, employer group performance is also in line with our expectations. The market remains reasonably firm and quite rational. As we previously noted, we priced this year with discipline, and we remain focused on providing our integrated medical pharmacy and advocacy solutions to our clients. When I put that all together, let me simply conclude by saying we remain encouraged by our positioning this year, and we'll provide greater detail when we provide our second quarter results next month. Great. Wow, that was more than I was expecting there. Really appreciate all that detail. Just to sort of frame it out, sounds, in my words, Medicare Advantage seems like trending very favorably. Exchanges coming in moderately favorably, in line to moderately favorable. That's pretty consistent around what we heard from Oscar Health as well, in terms of moderately favorable. Sounds like Medicaid is still the tougher part of the business in terms of some of the cost trends and that commercial, where the industry and Elevance Health with pricing discipline, the pricing is tracking to a still continued robust consumption environment. Is that fair way of sort of framing things, you think? I appreciate the additional superlatives that you may have added in there, but I think the gist of the comments is correct. Okay, perfect. Thank you. Let's try to sort of translate that over to the core earnings power. The first quarter was driven by stronger underlying claims, ACA timing, and a meaningful non-recurring investment gain. How should we think about the underlying earnings power of the business coming out of the first quarter? What are the specific P&L drivers that provide you with confidence that the core 2026 trajectory supports your 2027 EPS growth framework of 12%+? Scott, that's an excellent question. Overall, our first quarter reinforced our confidence in the earnings path ahead. That's why we reiterated our expectation to return to at least 12% adjusted EPS growth in 2027 off of our ending earnings baseline this year. We view 2026 as a year of repositioning and execution. In health benefits, we are focused on the actions that strengthen the earnings base, disciplined pricing, tighter medical management, stronger payment integrity, better care coordination, and really just continued progress towards a more sustainable performance delivery in ACA and Medicare Advantage. Those actions are already underway, and we expect them to contribute more fully as we move into 2027. Carelon continues to be an important source of growth, the combination of our clinical expertise and data allows us to create a more personalized set of interventions, as well as improve the cost and quality of care. This supports both the performance of our health benefits business and continued external growth. Importantly, the value of Carelon is not just growth in isolation. It also strengthens health benefits by helping us identify needs earlier, intervene more effectively, and really just manage costs with better data and clinical capabilities. We also see meaningful opportunities to create leverage through technology, automation, and AI, we are applying those capabilities in practical areas such as in provider workflows and member services, where they can really improve execution and support margin expansion over time. Finally, disciplined capital deployment remains an important part of our EPS growth framework. Our cash flow generation does give us the flexibility to keep investing in the business while returning capital to shareholders in a very disciplined way. In summary, I'd simply say our confidence in returning to at least 12% adjusted EPS growth in 2027 is supported by a solid 2026 earnings baseline and multiple operational levers that are already in motion. Great. All right. Thank you, Mark. Felicia, let's try to get you in the conversation here as well. Why don't we go right to Medicaid and pick up on some of the comments that Mark just started with. Also, let's maybe frame it in that concept of 2026 as trough. Elevance has described 2026 as the trough year for Medicaid margins. What are the specific inputs that make you fully confident in the outlook for Medicaid margins to improve in 2027 and beyond? If you're not fully confident, what are the specific milestones from a rate and cost perspective for that to prove true, that you would like to see to occur to achieve full confidence on 2027 Medicaid margin expansion? Thanks for that question, Scott. As Mark said, as you mentioned, we expect 2026 to be our trough year in terms of our margin. Our early experience this year certainly leads us to believe, we still believe, that our outlook will have -1.75% margins for 2026. We head into 2027, how do we think about 2027? We think about 2027, we are focused on a couple of things. First and foremost, our clinical management. We have to do greater peer coordination, certainly leveraging predictive analytics to help us think about our business in a very different and trend-specific way at a local market level. A great example is that when we take a look at claims that we're seeing, we saw a spike recently in ER claims. When we saw that spike in ER claims, 70% of those claims were around same-day discharge, when at the end of the day, they were deemed critical care. If it's critical care and you're talking about same-day discharge, no observation or overnight stay, it certainly lets us know that we're seeing some things from a claims perspective that we need to dig deeper in. Sure enough, the analytics gave us the ability to go in, drill deep, and understand what was happening there from a performance perspective. I will say that the analytics becomes an incredibly important ingredient for us as we think about those trends as we go forward. When you step back and we say, how do you get prepared for 2027? It's around three things. It always starts with rate advocacy. At the end of the day, we're seeing more recent trends being priced into the rates as we move forward, so that 2025 experience, 2026 experience coming into the rates. The second thing, I will say that the incremental acuity impacts are less severe. Where we are today, we have the post-PHE behind us, everything that we're seeing so far, that severity of acuity is really getting tighter. Versus what we saw as we came out of the PHE. Finally, it's around execution with respect to cost management. That's execution with respect to all of those trend drivers that we are looking at. That includes our behavioral health trends, our emergency department trends that we're seeing in specialty pharmacy. Execution on that becomes critical. It's really three levers that we have to be very focused on as we head into 2027. When we step back and take a look at it, I think we're getting a very good handle on all of those, we still believe that this is a very strong business for us as we look forward, as you put into play all of those factors to really compel the changes that we need to see from a margin perspective. Okay. That first point you made was interesting as well, just as we're always trying to hear about some of these new emerging anecdotes around different things going on with coding and with submissions and with AI and providers and hospitals potentially using that. Do you think that that may have been something that could have been falling into that AI type of deployment around that, or is it hard to parse that out? At the end of the day, we're very much aware that our providers are using AI, and we have to use AI as well. Yeah. I think the analytics are going to allow us to really get ahead of emerging trends and being able to identify things earlier so that we can take actions appropriately. At the end of the day, it really powered, I think, our ability as well as providers' ability to take a look at what's going on. When you see a pattern like that, think about it. Yeah. 70% deemed critical care, there is no overnight stay and no observation. It gives us certainly the ability to then understand that we need to revise our protocols and put in place the appropriate things to make sure that we are mitigating those kinds of drivers as we go forward. Yeah, got it. That's a really interesting real-time call out there for that, appreciate that. Wanted to maybe think about the current description of the environment and then 2027, then thinking about in the context of the Big and Beautiful Bill coming out and the provisions there going into effect on the forward. The question would be how you're balancing your views on 2026 and that being a trough year for Medicaid. Obviously, a trough year, margins are pretty tough. Then thinking about the policy headwinds coming to the market over the next, really more three years. Particularly what we're really focused on would be the Medicaid state directed payment reforms and the proposal that came out. Also the Medicaid work requirements as well. Good question. We certainly appreciate the uncertainty that surrounds the policy changes that we're going to be seeing. When we step back and take a look at what we know now, we now have, as of June 1st, the federal framework from CMS. What that framework does is provide the foundation for what we should expect with respect to the policy changes. States were left with a lot of flexibility, and I think that as we sit here today, we are still waiting to hear more from our state partners around implementation. The flexibilities there lead us to believe that the assumptions that we had made around what would happen with respect to the specific policy changes, particularly the Work Requirement, as well as the six-month re-verifications, are going to be aligned with the assumptions that we made as we were working to think about 2027. The states also get flexibility with respect to allowing individuals to do self-attestation, for example, in the first year. That could certainly mitigate the impact of what we would expect to see. We're going to be working closely with our state partners. As you know, we will not have the same flexibilities that we had before, but we still have the flexibility to do outreach, help educate members around what this means. At the end of the day, the requirements and policy changes will only apply, for the most part, to the expansion population. That only represents about 20% of our book. When we think about the overall impact of the changes that are going to be coming, they're going to be phased. They will be state specific, and at the end of the day, I think they're going to be very manageable. Great. We actually had some of the senior CMS representatives here yesterday, they were emphasizing that same part about the phasing and not just even at three years, that a lot of the phasing takes up to 10 years, I guess, to fully play out. Appreciate the call-out, too, on the Medicaid expansion mix. I will say also on the state directed payment, obviously that will be a change that happens later in the process. At the end of the day, states are going to have to step back, recalibrate rates, take a look at benefits and program design to make sure that going forward, you end up with a program that is actuarially sound and stable as we all move forward, and we're going to look forward to working with our states on that. Yeah. This is going to be a real moment for the states. It's going to be a moment to step back and sort of evaluate Medicaid and the financing and the structure on the forward. Certainly, it's going to be interesting times. All right. Maybe just one more question on Medicaid and just go right to what investors care so much about, which is that rate versus cost trend gap and the spread. In terms of the numbers, Elevance has described that Medicaid rates are coming in around the mid-single digit range, which historically is a pretty. I'm covering the space. You've been in it a long time, too. That's a historically healthy number, but still remains below cost trend. How should investors think about the path to closing that gap, especially with a meaningful portion of the book resetting soon in July? First of all, I will say, as I always do, we can't just look at the one lever around rates. It has to be all of the other things that I just referenced in terms of rates, medical cost management, and a more stable risk pool. On the rate issue, 40% of our membership has a July renewal, so we are in the thick of a lot of the renewals that are coming from our states. I have to say, once again, we say it a lot, the rate discussions have been very constructive, and they are coming in right in line with our expectations and slightly better. We have a little bit more work to do with our states to firm up July, and a couple of those are outstanding, but they are in line with the expectations with respect to the rating environment. Still not where we need to be in terms of the full gap closure, but as I said before, more recent experience coming into play by virtue of the 2025 experience that we're now seeing in the rates. That's incredibly helpful. We also have to be very focused on the things that I referenced around medical cost management, particularly around the trends that we're seeing in emergency use, outpatient surgeries, behavioral health interventions, and equally important, things that we'll need to focus on with respect to payment integrity. The environment is going to continue to be very dynamic. I am starting to see, and we are starting to see traction around the programs that we have put in place, as I said before, between analytics and our cost management tools and the work that we continue to do with Carelon. The rates are in line with expectations, and we continue to make progress with our states in terms of closing that rate to trend gap. Okay. Why don't we move over to commercial, and looking forward to this, because actually this is the first time I think we'll be talking to you about commercial, which is now part of your portfolio. Looking forward to your perspectives on that. Maybe we'll talk about the 2027, given where we are right now, it's perfect timing, in terms of selling season and demand. So far, the company's described a strong 2027 pipeline with continued employer focus on affordability, simplicity, and integrated offerings. What seems most differentiated in the current selling season 2027 relative to prior years? We are right in the midst of that 2027 selling season right now. Frankly, affordability and simplicity are still at the top of the list from an overall employer perspective. We're seeing a robust year, a pipeline that has over 2 million members, and the Second Blue bid actually even extends that opportunity. When we think about the things that are valuable to our employers, it still remains affordability and simplicity. We've had very strong performance from a national account selling perspective. Over the last five years, we've had 40 customers who have made Anthem their sole source carrier, so some very solid results there. We continue to have a very strong value proposition in terms of our integrated medical and RX offerings, which has been very powerful for us. As we think about 2027, we've seen some really nice early wins, and we expect that momentum to continue throughout the selling season. All right, great. Many businesses, so little time. We'll move on to MA, I don't want to talk about what already you've updated us about, but do want to go right at the margin recovery and how things are progressing there. Certainly appears from the updates that you gave today that, and Mark, we'll get you back in the conversation here. It appears like Elevance remains on track for at least a 2% margin in 2026, following the product reposition and the selective market exits. How much of the recovery is now embedded in the book based on the actions that were implemented for the 2026 AEP? Versus being dependent on execution on incremental initiatives through the rest of this year. A super question, Scott. I think about the Medicare Advantage margin recovery really in two parts, the structural actions that are already embedded in the 2026 book, the execution initiatives that build on that foundation over the balance of the year. The structural component is quite meaningful. Over the last several years, particularly in our 2026 bid and AEP strategy, we deliberately prioritize margin sustainability over membership growth. We repositioned the portfolio. We exited select markets and plans where the economics were not attractive, and we really focused our resources on products where we see the strongest long-term value, particularly D-SNP and HMO. That repositioning is now largely reflected in the membership mix and benefit design of the 2026 book, it's a key reason we remain confident in achieving at least a 2% Medicare Advantage operating margin in 2026. At the same time, as you know, the recovery is not simply a one-time portfolio action. We still have important execution work underway around clinical programs, around care navigation, around pharmacy management, that really allows us to continue to deliver throughout the year. The way I'd frame it really is that 2026 portfolio actions created the foundation for margin recovery. Ongoing execution is really what sustains and extends that progress. I think we feel very good as a management team about the stability we've created in that core portfolio, we are well on our way to improving affordability and trend management as we progress towards our 3%-5% long-term Medicare margin target. Great. All right. Thanks, Mark. All right. Why don't we try to get maybe a question on the exchanges, certainly you'll want to get some time here for Carelon as well, of course. I'm thinking maybe, Felicia, Mark, we could sort of get you both just to sort of come in here and maybe start, Felicia, with you. Just starting with now that we're sort of completed the post-effectuations, the grace periods, how the underlying risk profile of the book compares to expectations. Mark, maybe if you want to come in afterwards just to comment around the bronze mix shift, which you already just highlighted, maybe just talk about how investors should think about the economics around that, particularly with some of the shifting of seasonality for the back half of the year. I will say that as Mark mentioned earlier, things are in line with the expectations in terms of the performance in the exchange business. As we sit here today, membership probably will end the quarter right around 1.2 million members, and we expect, as we said before, to end the year right around 900,000 members at least in the business. We had very strong pricing, the height that we expected to see, and certainly a very dynamic environment from an overall ACA perspective. As we sit here today, the business is performing very much in line, slightly favorable to our expectations. Okay. To your point, Scott, and just following up on Felicia's comments, we did see a meaningful shift towards bronze plans in 2026, with bronze now representing about half of our ACA membership versus roughly a third a year ago. We do view that as a pretty encouraging sign of market resilience. In many cases, consumers appear to be choosing to maintain coverage rather than exiting the market altogether. That mix shift, to your question, does affect the timing of earnings in 2026. Bronze members typically have higher member cost sharing, so plan paid medical costs tend to emerge later in the year as members move through the deductible period. That dynamic certainly helped first quarter seasonality, but it also means a portion of the expected medical cost is likely to be deferred into the back half of the year. We've anticipated that pattern, and we've incorporated that pattern into our outlook. Briefly, longer term, the key question is really whether the market stabilizes around coverage that consumers can afford and carriers can price too sustainably. We think the shift to bronze is very consistent with that direction, and we'll continue to monitor retention and utilization and maintain that discipline within our ACA business performance. All right. Great. I think we had a pretty thorough discussion there of the benefits business, so that was great. I wish we had as much time to do Carelon, let's try to get right over there as quickly as we can. Mark, maybe we'll sort of think about from the earnings path, right? Obviously, we all care about that. Carelon remains a key long-term growth driver for the company. Near-term results still have reflected even earnings cadence as some of the newer risk-based programs. How should investors think about the path for more visible earnings contributions from Carelon over the next one to two years? Carelon's strategy is to address complex high-cost areas of healthcare through a whole health model that integrates medical, pharmacy, behavioral, and home health capabilities. The objective is pretty straightforward. It's about improving outcomes, lowering the cost of care, and creating a simpler experience for our members, our providers, and our clients. We are investing behind the capabilities that make that model scalable and durable. Those investments are really intended to help us identify member needs earlier, to be able to intervene more effectively, and really to deliver measurable value both for our health benefits business and for external clients. Near term, Carelon's earnings cadence really reflects two dynamics. We are continuing to invest in the platform, and we're scaling newer risk-based programs that naturally take time to mature. This is not simply about adding assets. We are building repeatable capabilities that can be proven inside our health benefits business first, and then scaled externally where we have demonstrated outcomes. On the Carelon services side, briefly, we are seeing tangible proof points through our oncology-based programs and CareBridge's home health-based capabilities. In CarelonRx, we're continuing to see meaningful runway to expand employer penetration. Clients that are aligned with medical and pharmacy benefits are seeing savings up to $100 per member per month, supported by fewer emergency room visits and reduction in high-cost specialty drug administration. I certainly appreciate the investment phase can create some unevenness in quarterly earnings, but we do expect Carelon's earning contribution to become increasingly visible as the programs mature over time. Great. There's two sort of key themes that I want to maybe sort of tie in together to get both of you to comment and just on the consideration of the time here as well. One would be maybe Mark, just sort of you could continue on that risk-based sort of expansion. That's something that we've focused a lot a bit in our research, and we've talked to you guys about quite a bit and just given the backdrop of obviously the environment around consumption and some of the programs that you've been focusing on there with oncology and post-acute behavioral. Maybe if you want to, you just mentioned that proof point, but just sort of more generally even as well, just sort of give us an update on how those programs are coming in relative to your expectations as you've been scaling them, and sort of keeping in mind that they could add to the volatility of the profile. That Felicia, maybe as well, we can get you to come in and sort of bring the bigger picture up around thinking about the integrated value proposition that Elevance has spoken to from aligning the medical and pharmacy relationships, and having that combined health plan plus Carelon model. Scott, super question there. Probably a couple embedded in there. Yeah. Let me go ahead and start off by just saying that it's important to understand why we are expanding risk-based capabilities. Members with complex chronic conditions often experience a very fragmented healthcare system, Carelon is designed to make that experience more coordinated, more convenient, and really more effective while lowering the total cost of care. The important proof points are clinical outcomes, cost outcomes, and disciplined risk selection. Maybe briefly first on the clinical outcomes, we are seeing that stronger member engagement can translate to better health and lower avoidable utilization. The example I'll give here is really around serious mental illness. Our teams have driven higher medication adherence, and that's leading to a 10% reduction in inpatient admissions through more effective member engagement. The second example I'll give here is on cost outcomes. CareBridge is a great example of how the model can scale. We are giving members twenty-four-seven access to a clinical team that helps guide them to the right care at the right time, and most importantly, the right setting. That's generated mid-teens medical cost savings over multiple payer relationships. Maybe with the time, let me turn it over to Felicia for a moment. No, I'll just piggyback a little bit on Mark's reference to CareBridge, which I think is the real powerful example of the integration coming together. Frankly, when we brought CareBridge into the organization, the focus was really on Medicaid. One of the things that we've done recently is to move CareBridge to our D-SNP population. As Mark mentioned earlier, D-SNP is where we have our focus from a Medicare Advantage perspective, where we're going to have our growth, and these individuals, that dual population, typically can have some of the most fragmented care when you're doing point solutions. Having CareBridge work collaboratively with our teams to bring together the medical, the specialty pharmacy, home-based solutions to our members that have very complex conditions represent a great opportunity for us. That alignment between Carelon and the health benefits team, I think can drive not only powerful savings, but much better outcomes in care for some of our most vulnerable members. A real opportunity there to do more. Great. Well, that 35 minutes went really fast. I could have had you guys up here for another 350 minutes, but I'm not sure if I would've been allowed to stay that long. That was a great conversation. Thank you so much for coming to the conference, and hope that the day is productive for you. Thanks a lot. Thank you, Scott.