Good day, and welcome to the Molina Healthcare second quarter 2021 earnings conference call. I would now like to turn the conference over to Julie Trudell, Senior Vice President of Investor Relations. Please go ahead. Good morning, and welcome to Molina Healthcare's second quarter 2021 earnings call. Joining me today are Molina's President and CEO, Joe Zubretsky, and our CFO, Mark Keim. A press release announcing our second quarter earnings was distributed after the market closed yesterday and is available on our investor relations website. Shortly after the conclusion of this call, a replay will be available for 30 days. The numbers to access the replay are in our earnings release. For those who are listening to the rebroadcast of this presentation, we remind you that remarks made herein are as of today, Thursday, July 29th, 2021, and have not been updated subsequent to the initial earnings call. In this call, we will 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 2021 press release. During our call, we will be making certain forward-looking statements, including, but not limited to, statements regarding the COVID-19 pandemic, the current environment, recent acquisitions, 2021 guidance, our embedded earnings power, and our longer-term outlook. Listeners are cautioned that all of our forward-looking statements are subject to certain risks and uncertainties that can cause our actual results to differ materially from our current expectations. We advise listeners to review the risk factors discussed in our Form 10-K annual report for the 2020 year filed with the SEC, as well as the risk factors listed in our Form 10-Q and our Form 8-K filings with the SEC. After the completion of our prepared remarks, we will open up the call to take your questions. Lastly, we want to invite you to attend our virtual 2021 Investor Day meeting, scheduled for Friday, September 17th, where we will share more about our future growth plans and longer-term strategy. I would now like to turn the call over to our Chief Executive Officer, Joe Zubretsky. Joe? Thank you, Julie, and good morning. Today, we will provide you with updates on several topics. We will present our financial results for the second quarter 2021, we will update our 2021 guidance, and we will summarize the status of our growth initiatives and outlook for the future. Let me start with the second quarter highlights. Last night, we reported adjusted earnings per diluted share for the second quarter of $3.40, with adjusted net income of $199 million and premium revenue of $6.6 billion. The 88.4% medical care ratio demonstrates solid performance while managing through pandemic-related medical cost challenges that increased the ratio by 110 basis points. The net effect of COVID decreased net income per diluted share by approximately $1. We managed to a 6.9% adjusted G&A ratio, reflecting continued discipline and cost management, which allowed us to harvest the benefits of scale produced by our substantial growth. We produced an adjusted after-tax margin of 2.9%, meeting our second quarter expectations. Our six-month year-to-date performance, highlighted by an 87.6% MCR, a 7% adjusted G&A ratio, and a 3.4% after-tax margin, were all squarely in line with our year-to-date expectations. This allowed us to produce, as projected, 60% of our full-year earnings guidance in the first half of the year. We accomplished all of this as we generated approximately 50% year-over-year premium revenue growth and successfully integrated businesses representing approximately $5 billion in annual revenue. In summary, we are pleased with our second quarter performance. We executed well, delivered solid operating earnings, and continued to drive our growth strategy. Let me provide some commentary highlighting our second quarter performance. First, I note that year-over-year comparisons are less meaningful than they would be in a typical year. The second quarter of last year was the first full quarter of the COVID-19 pandemic and was distorted by the significant positive net effect of COVID-19 that characterized that early phase of the crisis. In contrast, the current quarter was negatively impacted by the net effect of COVID-19. As a result, sequential comparisons are the more meaningful reflection of underlying business performance and will be the focus of our comments this morning. In the second quarter, we produced premium revenue of $6.6 billion, a 4% increase over the first quarter of 2021, reflecting increased membership across our portfolio. We ended the quarter with approximately 4.7 million members, an increase of 91,000 members over the first quarter of 2021. Our Medicaid enrollment at the end of the quarter was approximately 3.9 million members, an increase of 69,000 over the first quarter of 2021. This increase was due primarily to the continuing suspension of Medicaid redeterminations, although this growth catalyst seems to have moderated. Our Medicare membership was 130,000 at the end of the quarter, an increase of 4,000, and in line with our growth plan. Our Marketplace membership was 638,000 at the end of the quarter, representing growth of 18,000 over the first quarter of 2021, due to lower than expected attrition rates and membership additions during the extended open enrollment period. Turning now to our medical margin performance in the second quarter by line of business. Our Medicaid business achieved a medical care ratio of 89%. While we are dealing with the impacts of the pandemic on utilization and medical cost, as well as the continuing temporary impact of the risk corridors, we continue to execute on the underlying fundamentals. Our well-diversified portfolio of state contracts across all dimensions of the Medicaid product suite is performing well. We continue to deliver high-quality care at a reasonable cost, particularly to high acuity populations. The underlying rate environment is stable. Our hallmark medical management capabilities continue to deliver appropriate clinical outcomes for our members while achieving strong financial results. Our Medicare results were excellent, having posted a medical care ratio of 87.6%. We continue to produce excellent MCRs and margins in this portfolio of high acuity lives in both our D-SNP product and the MMP programs. Although our results were moderately depressed due to COVID utilization, and despite the temporary risk score softness for the current year, the underlying results were squarely in line with our expectations. Our marketplace results have been significantly impacted by direct costs of COVID-related care, as we posted a medical care ratio of 84.8% in the quarter. Many of the new members we attracted were in regions disproportionately affected by COVID, including California, Michigan, Texas, and Washington. With nearly 500 basis points of pressure on the MCR in each of the first two quarters, we can and should achieve mid-single-digit pre-tax margins as the pandemic subsides. In short, our second quarter and first half results across the entire portfolio continue to demonstrate our ability to produce excellent margins while growing top-line revenue, and successfully managing through the ongoing clinical and financial impacts of the pandemic. Turning to our 2021 guidance, beginning with premium revenue. For 2021, we now project premium revenue to be more than $25 billion, a 37% increase over the full-year 2020, and a $1 billion increase from our previous guidance. Specifically, our premium revenue guidance now includes Medicaid enrollment benefiting from the expected extension of the public health emergency period and the associated pause on membership redeterminations, which we are now projecting through the end of the fourth quarter. Recall that for each month the public health emergency is extended beyond the month of September, it increases our full-year revenue outlook by $150 million. Our updated guidance also contemplates the impact from retaining pharmacy-related premium revenue in California, New York, and Kentucky due to postponement of and changes to their respective pharmacy carve-out initiatives, and updated marketplace revenue reflecting the strong enrollment and retention performance mentioned previously. We expect to end 2021 with approximately 590,000 marketplace members. We have excluded from our premium revenue guidance any impact of the Affinity and Cigna acquisitions. We expect the Affinity acquisition to close in the fourth quarter, representing upside to our premium revenue guidance in 2021, and we expect the Cigna acquisition to close in January 2022. Turning now to earnings guidance. We are raising our full-year 2021 earnings guidance and now expect to end the year with adjusted earnings of no less than $13.25 per share, an increase from our prior guidance of no less than $13 per share. We remain on track for full-year after-tax margins of at least 3%. Specifically, the increase to our 2021 earnings guidance reflects our underlying outperformance, the increase in our revenue guidance and the associated margin, offset by a $1 increase in the net cost of COVID, which we now expect to be $2.50 per share for the full-year. We have been cautious in projecting our back half earnings due to a variety of exogenous factors. The Delta variant adds variability to any utilization forecast. While highly contagious, the Delta variant disproportionately affects the unvaccinated. Older and more vulnerable population cohorts have significantly higher vaccination rates. As a result, the Delta variant cases result in proportionately fewer hospital admissions and lower per admission costs, moderating the potential impact. In addition, it remains unknown how quickly and to what extent utilization will return to normal levels. This will depend upon the strength of the economy, consumer behavior, provider capacity, and the emergence of any new COVID variants. There is an inherent level of uncertainty with regard to new Marketplace member acuity levels and their susceptibility to COVID infection. The COVID-related risk-sharing corridors create an added element of variability. Turning now to an update on our growth initiatives. We continue to see many actionable opportunities in our acquisition pipeline, which remains an important aspect of our growth strategy. Our M&A team is fully deployed and is working an active list of health plan targets in our core businesses. Our acquisition strategy remains focused on buying stable membership and revenue streams, particularly focused on underperforming properties. Our M&A integration team is also fully deployed and successfully migrating our acquired properties to Molina operating infrastructure and cost structure to ensure we deliver the earnings accretion we expected. To date, we are on track to meet or exceed our earnings accretion commitments. We continue to pursue new Medicaid procurement opportunities. We have contract-winning capabilities, an aggressive in-state ground game, and a winning proposal writing platform. We are confident that we will continue to win new contracts that will contribute to our growth trajectory in 2022 and 2023. Finally, some comments about the longer-term outlook for our business. The current rate environment is stable and rational. We now have confirmed data points to support the continued belief that the Medicaid risk-sharing corridors related to the declared public health emergency will be eliminated as the COVID pandemic subsides. Pandemic-related corridors have already been eliminated for the 2022 state fiscal years in California, New York, South Carolina, and Michigan, with momentum towards similar outcomes in other states. The current Medicare risk score shortfall phenomenon is temporary, as our 2022 bids did fully account for the current assessment of next year's risk scores. We continue to be bullish about the performance of our acquired businesses. The operational integrations are proceeding as or better than planned, and we have high confidence in achieving our original accretion estimates and possibly even exceeding them. In the context of the pandemic subsiding and our acquisitions maturing, the incremental embedded earnings power of the business as it exists today is meaningful. With the increased outlook for the net negative effect of COVID-19, our incremental embedded earnings power is now more than $5 above our 2021 adjusted earnings per share guidance. In short, our pro forma run rate after the natural relaxation of these temporary constraints would produce adjusted earnings per share comfortably in the mid-teens and an after-tax margin of approximately 4%. I look forward to sharing more about our future growth plans and longer-term strategy at our Investor Day on September 17th. At our Investor Day, we will provide you with an initial 2022 revenue outlook. We will also provide you with an updated view of our long-term targets for revenue growth for our three lines of business, operating metrics for our three lines of business, and enterprise margin, net income, and earnings per share expectations. As importantly, as has been our hallmark style, we will provide you with our detailed playbook for achieving those results. We will continue not just to declare our goals, but to show you with transparency and specificity how we will achieve them. Suffice it to say, we are an inherently high-growth business and have demonstrated an ability to grow the top line and maintain an attractive margin profile even during a global pandemic. The political, legislative, and regulatory environments are all positive catalysts, and the social demographic profile of the U.S. population remains in significant need of the social safety net we manage. As I conclude my remarks, I want to express my gratitude to our management team and our nearly 13,000 Molina colleagues. Their skill, dedication, and steadfast service continue to form the foundation for everything we have achieved and everything we will achieve in the years to come. With that, I will turn the call over to Mark Keim for some additional color on the financials. Mark? Thank you, Joe. This morning, I will discuss some additional details of our second quarter performance and then turn to our growth strategy, the balance sheet, and some thoughts on our 2021 guidance. Beginning with some detailed commentary about our second quarter results. The net effect of COVID negatively impacted second quarter results by $77 million, or approximately $1 a share. This increased the second quarter MCR by 110 basis points to 88.4%. The impact was higher than our expectations and negatively affected all three lines of business. We experienced high COVID-related inpatient costs early in the quarter, which tapered off as the quarter progressed. We also saw increases in professional and outpatient costs, which we attribute to what may be the return to normal pre-COVID utilization patterns. In Medicaid, the net effect of COVID was a cost of approximately $25 million and accounted for a 40 basis point increase that is included within our reported 89% MCR. The first quarter Medicaid MCR had 150 basis point benefit due to COVID, which substantially explains the sequential increase in MCR. We continue to expect the full-year Medicaid MCR to be in the high 80%. In Medicare, the net effect of COVID was a cost of approximately $17 million, increasing the MCR by 200 basis points to 87.6% in the quarter. The first quarter Medicare MCR was increased by 400 basis points due to COVID. Sequentially, the MCR improved, driven by this lower net effect of COVID and improved underlying performance compared to the first quarter. We anticipate a full-year Medicare MCR in the high 80%. In Marketplace, the net effect of COVID was a cost of approximately $35 million, increasing the MCR by 480 basis points. The first quarter Marketplace MCR included a similar impact from the net effect of COVID, which increased the first quarter MCR by approximately 500 basis points. The resulting sequential increase in MCR versus the first quarter reflects the normal seasonality associated with members reaching their policy deductible limits. Due to the higher than expected impact from the net effect of COVID in the first half of the year, we now expect Marketplace pre-tax margins to moderate to low single digits. We expect that when the COVID pandemic subsides, our Marketplace pre-tax margin will be squarely on target with our mid-single digit pre-tax margin expectations. Turning now to our balance sheet. We received $145 million of subsidiary dividends in the quarter, which brought our parent company cash balance to $564 million at the end of the quarter. We have ample capacity to fund the announced acquisitions. At our current margins, we generate significant excess cash and additional debt capacity. After funding our announced pending acquisitions, we will have year-end acquisition capacity of over $1.4 billion. At the multiples we have paid in recent transactions, this gives us the ability to drive $3 billion-$4 billion in annualized revenue growth. More importantly, at our current level of performance, this level of acquisition capacity is generated each year. Our reserve approach remains consistent with prior quarters, and our reserve position remains strong. Days in claims payable at the end of the quarter represented 48 days of medical cost expense, unchanged from the first quarter. Prior year reserve development in the second quarter of 2021 was modestly favorable, but any P&L impact was mostly absorbed by the COVID-related risk corridors. Debt at the end of the quarter is 2.2x trailing 12-month EBITDA. Our debt-to-cap ratio is 50%. On a net debt basis, net of parent company cash, these ratios fall to 1.7x and 43%, respectively. These metrics reflect a conservative leverage position. A few additional comments related to our earnings guidance. We raised full-year 2021 adjusted earnings per share guidance to be no less than $13.25 per share, which reflects the following: Our underlying outperformance, an increase in our revenue guidance and the associated margin, the net effect of COVID expectations, which has increased by $1 per share and is now expected to be approximately $2.50 per share for the full-year, and continued caution in forecasting utilization trends in the remaining six months of the year due to the COVID pandemic. In a typical year, the seasonality of utilization and timing of open enrollment periods result in third quarter earnings being higher than fourth quarter earnings. However, this year, we expect second half earnings to be distributed more evenly between the quarters due to the net effect of COVID, and particularly the impact of risk-sharing corridors. As Joe discussed, we believe the incremental embedded earnings power of the company is in excess of $5. This is composed of several items. The increased net effect of COVID-19, which is now expected to create a $2.50 per share decrease that should dissipate as the pandemic subsides, Medicare risk score disruption that created approximately a $1 a share overhang. As we attain our target margins on Magellan Complete Care and Kentucky, and once Affinity and Cigna acquisitions are closed and synergized, we expect to achieve additional adjusted earnings per share of at least $2. This embedded earnings power does not represent 2022 guidance, but rather an accounting of the dynamic impacts that are temporarily depressing our earnings profile. There are many other items that will affect our actual earnings guidance for 2022, including several possible scenarios for the impact of Medicaid membership redeterminations. In short, o ur 2021 earnings jump-off point into 2022 is very strong. This concludes our prepared remarks. Operator, we are now ready to take questions. Thank you. We will now begin the question-and-answer session. The first question comes from Kevin Fischbeck from Bank of America. Please go ahead, Kevin. All right. Great, thanks. I wanted to maybe just dig into that last comment about the earnings power, and I guess your point about potential offset from redeterminations. Is there any framework that you guys have that you think would be helpful to think about how much redeterminations is adding to this base number, and how to think about the timing of when that might roll off? Kevin, this is Joe. Over the last number of months, we have formed a view of what's going to happen with the suspension of the redetermination pause. The way we now characterize it, we believe that this will be a very organized and orderly approach to move any members that are no longer eligible for Medicaid into the uninsured population or other forms of insurance. I cite three things. One, there is a reasonable possibility that the federal government actually extends the public health emergency. Second, many states are actually applying for types of waivers to manage their populations in different ways. Illinois has suggested to CMS that they want to continue the public health emergency for another year. New Jersey wants to redetermine its members on their anniversary date. We believe that this is going to be a very orderly transition. Nobody wants to have Medicaid members stranded without coverage. Bearing in mind, we have over 70 million members nationally that need to go through a redetermination process. The states just do not have the capacity to do this in the mandated six-month period of time, which suggests to us that the government and CMS may actually relax that standard and allow for more time to transition these members. We're looking at this as a protracted, orderly event over 2022, perhaps even into 2023, to make sure that all Medicaid members who are no longer eligible have the opportunity to age into a D-SNP product, to income up into a highly subsidized marketplace product, or, as they obtain work, end up in the employer-sponsored insurance marketplace. We will provide a variety of scenarios of what that might look like for 2022 at our Investor Day on September 17th. Okay, that's really helpful. I guess maybe just to wrap that up then, how do you think about the margin on that business? I guess, in general, you would think that anyone redetermined is probably a better risk pool and therefore a little bit higher margin. Should we be thinking about it that way, or are there offsets to be considering there? There are offsets. There is no question that if you look at medical economic data or actuarial data, that generally speaking, duration of membership causes acuity to decline, the level of acuity to decline. There's no question about that. The longer they're on the rolls, the less acute they are. Two factors as you reference offsets. One, many states took that into consideration in setting rates, so it's already in the rates that we have a lower acuity population. Second, bear in mind that while the volume won't get picked up by the risk corridors, any excess margin on those members is surely picked up by the risk corridors, and 30% of our revenue is already in the 100% tier. Yes, I would look at there is a margin on those members, but the margin is likely no more than a low single-digit target margin. We view that as attriting off the books over a very long period of time in a very orderly fashion, as I suggested. The way we look at it is the margin on those members is no greater or less than the average margin of the portfolio. That's helpful. Thanks. Thank you. The next question comes from Matt Borsch from BMO Capital Markets. Please go ahead, Matt. Yes. Good morning, thank you. I was hoping maybe you could talk a little bit more about the utilization and medical cost components during the second quarter. Specifically, I'm trying to understand how the direct costs of COVID have evolved in Marketplace and Medicaid relative to the non-COVID, if you're able to talk about non-COVID relative to sort of normal baseline. I'm just a little confused on how much pressure you're getting directly from COVID in particular? Matt, let me start with what we call just traditional normal utilization of healthcare services. We believe, and the data supports it, that the healthcare system is coming back to operating at full capacity. Not greater than full capacity and not lower, but at full capacity, which means utilization. All those types of procedures, the elective and discretionary procedures, wellness visits, preventive care, primary care visits for checkups, are all coming back to pre-pandemic levels. In fact, in our forecast, we actually trend off of 2019 medical cost data to make sure that we appropriately capture pre-pandemic utilization. In our forecast for the entire year, we trended off that full utilization baseline. We are assuming that the system has reverted back to pre-pandemic levels of utilization for all those types of services that were either deferred or eliminated during the pandemic. Now with respect to COVID, the situation, while similar, is actually somewhat different today than earlier in the pandemic. We are seeing the Delta variant, and the Delta variant is affecting the unvaccinated. The unvaccinated tend to be younger and healthier than folks that were vaccinated. While we're seeing prevalence of Delta variant COVID infection rates, fewer of those incidents are requiring hospital stays. Much of the care is being provided in an outpatient ambulatory setting. In the cases that do require an admission, the length of stay is shorter. There's a lower incidence of ICU utilization, which is expensive, and lower utilization of ventilator, which suggests lower acuity. While we're seeing a prevalence of Delta variant COVID-related cases, the severity of those cases is a lot lower than the severity of the cases earlier in the pandemic. During the quarter, we experienced about $95 million of COVID-related direct costs of inpatient care during the quarter, but it really tapered off. It was about $50 million in the first month of the quarter, about $30 million in the second, and about $15 million or so in the last month of the quarter. We expect that to resurge. The Delta variant infection rate is popping, particularly in states that have low vaccination rates. In our full-year forecast, we have forecasted forward a continuation of COVID direct related cost of care at a certain level. Hopefully that's helpful to your analysis. Yeah, very helpful. Thank you. Thank you. The next question comes from A.J. Rice from Credit Suisse. Please go ahead, A.J. Thanks. Hi, everybody. Maybe just to drill down a little bit on the public exchanges, and what you're seeing in the Marketplace environment is, sounds like the costs are running a little bit ahead or somewhat ahead. It sounds like a lot of that's COVID related, but can you talk about why that is, you think? Also, is the demographics of the new enrollees you've seen over the course of this year different than those that have traditionally been attracted to a Molina public exchange product? Sure, A.J. The first thing I would say is the infection rate is very geographically correlated, is probably the best word to use. While we wrote a lot of new membership in Texas, Washington, California, Mississippi, where the infection rates are high, we wrote new business at the beginning of the pandemic, not knowing and not realizing the pandemic was going to last this long and persist this long. Granted, we wrote new membership, purposely wrote to grow, at the early stage of the pandemic, and the pandemic has persisted longer than anybody imagined. Second, any product that has an extended enrollment period or a special enrollment period has the aspect of inviting adverse selection. If you can buy insurance anytime you want, you can buy it when you need it. Now, we don't think the adverse selection bias in this population was that high, but it's there. If you're writing with a selection bias into markets that are COVID prone, you're going to get COVID cases. When you strip it all back, 500 basis points of pressure in each of the first two quarters is the reason we are running in low single-digit margins and not mid single-digit. We absolutely believe as the pandemic subsides, we'll produce an 80%-ish MCR for the entire year and be squarely in line with those low single-digit margins and able to lift that into mid single digits into 2022. Okay, thanks a lot. Thank you. The next question comes from Steven Valiquette from Barclays. Please go ahead, Steven. Great, thanks. Good morning, everybody. I guess just in relation to the Medicaid redeterminations being pushed out. I guess on the one hand, you mentioned the incremental, $150 million of revenue for every month of extension, which I think you also stated several quarters ago. You mentioned again today that the impact has moderated somewhat. I think you talked more about a $300 million-$400 million incremental revenue opportunity in the remainder of 2021 last quarter, if delayed further. I guess I want to just confirm that within the $1 billion revenue guidance increase for this year, how much of it is tied to the redeterminations, just to triangulate all the numbers. Thanks. Sure. Well, I just said in my remarks, partially due to redeterminations, the marketplace, and the pharmacy carve-outs. I'll turn to Mark to walk you through the bridge. Yeah. On the incremental $1 billion that we're talking about $450 is the simple math on three additional months of the redetermination, three times $150. We've also done better on Marketplace, as you've seen in our numbers, both on OEP and SEP. We've picked up additional members as that market grows. That's probably another $150 on full-year. As we mentioned, some of the pharmacy carve-outs, there were three states, California, New York and Kentucky, all of which extended any view on carve-outs, which gave us about another $400. You put those numbers together, that's your $1 billion in upside. Steven, does that answer all your questions? Do you have any further questions? That's good for me. Thanks. Thank you. The next question comes from Justin Lake from Wolfe Research. Please go ahead, Justin. Thanks, good morning. Appreciate the comments on the RFP pipeline, Joe, during your prepared remarks. I was hoping you might be able to give us a little more color there in terms of what are some of the key RFPs we might be focused on over the next 12 - 18 months. Anything on how you think California shapes up. I know that's probably a couple years out from any kind of decision, obviously an important state. Sure, Justin. Well, as I said, we continue to be very bullish on our prospects in these open procurements, in new states. There are a couple states that we believe, Ohio and Michigan, which will be putting behavioral and LTSS into managed care sometime in the near future. Those are states where we already have entrenched relationships and feel very good about it. On the new, pointing to Nevada, Rhode Island, Georgia, Iowa, Tennessee is out there. Now, we may or may not bid on all of those. They have to be sequenced appropriately with re-procurement bids and other things you're working on. Those are four to five. Georgia, if I didn't mention it. Those are the four to five that come to mind over the next three or four years. Based on our track record, we feel we have contract winning capabilities, a great proposal writing team, and we've really amped up our in-state ground game, building those relationships years in advance of the procurement, in order to really understand the state program, and to have those relationships that are so important to a state contract. Your last part of your question, sorry, was California. They've announced a year-end dropping of the RFP with working on it in 2022. We're working on that timeline. These things have been delayed before. It's the first re-procurement in California, I think, in over a decade. I'm pretty sure about that, it's a complicated state. Every state, as you know, has a different managed care model. We do really well in L.A., in Sacramento, in San Diego, the Inland Empire, and we have every reason to believe that not only do we have every opportunity to defend our current positions, but to actually grow in a few other counties where we currently don't play. Thanks for the talk. You're welcome, Justin. Thank you. The next question comes from Dave Windley from Jefferies. Please go ahead, Dave. Hi. Good morning, thanks for taking my question. In your quantification of the $5 of earnings power, I think the last couple of dollars were from fully synergizing acquisitions. I wanted to make sure I was clear on whether that was just counting those that you've completed, or if you are also including those that you talked about completing at the end of this year and early next year. That's my first question. Dave, it's a little bit of both, and I'll kick it to Mark for the actual bridge. Yeah. Recall, the numbers total around $550. $250 of that was the net effect of COVID-19. We talked about the Medicare risk scores. You're pointing to the remaining $2 of M&A upside. Dave, that splits evenly between a $1 of incremental run rate on MCC in Kentucky. Those are the ones that are already in current year performance. In their second year, they'll mature to their full run rate. That gives you $1. The ones we've announced but not closed, will be in next year's performance. That'll give you the remaining $1. Got it. Joe, you talked about, and I think you had really touched on this maybe last time, but talked about the risk corridors going away and that you feel pretty comfortable that that's going to happen i n thinking about the state's kind of heads they win, tails you lose on this, that they put the risk corridors in to get money back when you were underspending, but in the event that utilization bounces back and you're overspending on medical costs, they've taken them away. How do you protect against that risk? It's a really good question because as you know, these risk corridors by rule have to be symmetrical. Anything you potentially give up on the upside, you get on the downside. Look, the targets have been set at a point where, as a company, our operators, Mark Keim, our Chief Financial Officer, and myself, don't even think about getting money back on the downside. It's possible, but we know there's lots of not-for-profit players that may get checks from the state governments because they're operating above. We are not operating anywhere near that target, which is why our quarters are substantial. We have some of the highest margins in the industry in many of our states, and therefore, whether $1 of outperformance is related to COVID-19 or just skill, you get it back in the corridor if you're in the 100% tier. We don't think about being protected on the downside because we're not skating that close to the edge at all. If we were, that suggests a different set of problems that we're not operating in an excellent way. We're nowhere near that territory. We're not at all relying on nor putting value in the upside protection of the corridors. Got it, thanks. A quick last one, you talked about the quantification of your buying power for new plans and a fairly substantial amount, and the ability to regenerate that as you cash flow. Where does your infrastructure stand? Are you making steady investments in infrastructure to be able to onboard that much revenue, or do you face a step function at some point in the next couple of years? I'll give you a quick answer, then kick it to Mark. We have a fully ramped-up integration team. Our analysis is we have lots of runway, many billions of dollars of revenue to add in our current infrastructure with our current cloud-supported applications, our data centers, which are now moving to the cloud. The entire physical infrastructure, application infrastructure, all the on-the-shelf applications we use all have the scalability to take on billions of dollars of additional revenue without hitting a step function. It's a question I've been asked before, and one I look at very seriously. There's not a big bang technology redo here because of our acquisition strategy. Our platforms can handle the additional scale. Thank you. Thank you. The next question comes from Scott Fidel from Stephens. Please go ahead, Scott. Hi. Thanks. Good morning, everyone. I want to ask a question just on going back to the marketplace, and just thinking about philosophically, how you've approached the pricing strategy for 2022. Targeting, wanting to get to that mid-single-digit margins that you feel that you have underneath the COVID impacts. Just interested as we think about how you've sort of inputted continued COVID impacts into next year, potential acuity dynamics relating to the members that came in this year, particularly related to some of the extended Biden SEPs. I guess, just game theory too, around the competitive environment with some of these newer players in particular, having been more aggressive on some of the pricing strategies. Thanks. Sure. This is a business, the marketplace business, putting a frame around it. First of all, it's a strategic adjacency to Medicaid. It follows our Medicaid footprint. It leverages our Medicaid network, both in terms of network adequacy and pricing. It's very much attached to the Medicaid business. The marketplace business will follow the Medicaid footprint. Strategically, it fits. At just over 10% of revenue, it's sort of in line with an adjunct, an adjacency that fits nicely into the portfolio. We like the position it has. To your point about 2022, you manage this business for margin first and membership later. Because it's a blind bid business where you're bidding against competitors not knowing exactly how they're going to bid, you have to be careful. When we established our 2022 bidding strategy, I'll stay away from geographic detail because I'd be giving away proprietary information, we pretty much used the higher cost baseline that we've been experiencing here early in the year. If that means somebody else took a flyer on it and decided that as the pandemic subsides, all this cost goes away, and they beat us on price, fine. We'll give up the member, and we'll make sure we have mid-single digit margins. In this business, because of the blind bid strategy, because of the inherent movement of members who will move for price, we are pricing for margin over membership. We believe we will continue to have a very robust and profitable business into next year. Again, following our Medicaid footprint. Got it, thanks. Just one follow-up question. Just given some of these unique dynamics, particularly relating to the corridors, when looking at the balance of PPS that you're expecting over the rest of the year, any insights you're willing to provide us just in terms of how the split may look between Q3 and Q4? Sure. In a typical year, you'd see a little better margin in the third quarter and a little taper off into fourth. In my prepared remarks, what I said is that we expect to see more of a level dynamic between Q3 and Q4. Partly, it's the utilization patterns just aren't like what we've seen in a normal year, right? We've got continuing COVID-19, potentially the Delta variant going into Q3 here. The other thing is just the leveling effect of these corridors level out the performance from one quarter to the next. Not quite the normal seasonality you'd expect to see. You might model something a little more level between the quarters. Okay, got it. Thank you. Thank you. Ladies and gentlemen, just another reminder, if you would like to ask a question, please press star then one. The next question comes from Josh Raskin from Nephron Research. Please go ahead, Josh. Thanks. Good morning. I want to get back to the sort of scalability question. You look at the quarter, and you added $280 million of revenues, and G&A was only up $11 million. I know typically we hear about new revenues coming in at less profitable levels, I know a large majority of that's on the MLR line and not necessarily the G&A. Just trying to figure out, you guys are now at an industry-leading level. How sustainable is that G&A, and do you think there's investments needed in certain areas? Maybe more specifically, is it cost savings that are coming, or is it really just leverage on new revenues? Josh, we continue to be disciplined on the cost line. When we talk about fixed cost leverage, hope is not a strategy. You don't hope that it happens. You actually manage to it. You bring on the Cigna book of business, an additional $1 billion of revenue. We can run it with half the people that were running it before because of our presence in Texas. At the corporate headquarters, you don't need to add more accountants, lawyers, and HR people in order to manage the business. We have a zog and nod strategy in terms of corporate overhead, and when we're bringing on bolt-on and tuck-ins in our existing geographies, we make sure that we appropriately resource the business to make sure that every member and provider is getting the service they need, but that we use local scale and only take on the variable cost to run the business. Mark and his finance team and the operators are really disciplined about doing that. Which is why we've said many, many times, and we'll say it again on the 17th, that whatever MLR pressure exists in this business, and it's managed care, so it's always exists, we believe can be overcome if we're successful in our growth strategy with fixed cost leverage. We're already starting to drive our SG&A ratio down below 7% on a consolidated basis. It's a lot lower than that in Medicaid. Obviously Medicare brings it up. Medicare has a mid-teens G&A ratio. The mix effect will affect that. We have every intention of driving this ratio, given our growth trajectory, down into the 6%. Okay, thanks. Thank you. The next question comes from Stephen Baxter from Wells Fargo. Please go ahead, Stephen. Hi, thanks. Just similar to how you broke down the incremental premiums that are included in guidance, it seems like there's an implied $1.25 of incremental earnings power when you think about raising the guidance and then flagging the extra dollar from COVID. I was wondering if you could, similar to how you talked about the extra $850 of Medicaid revenues, an extra $150 million of exchange premiums inside of that, any sense of what the extra $125 breaks down to in terms of the drivers there? That'd be helpful. Thanks. Sure. I'll take that in a couple of chunks. Obviously, the headwind there was $1 of incremental net COVID-19. Offsetting that, $1.25 of upside, right? It's probably broken into two components. I think about $0.80 of that $1.25 just relates to that $1 billion incremental revenue we talked about. Maybe an additional $0.45 is just on our underlying performance a little bit in the front half of the year and what we see for the second half of the year. That's things like our payment integrity programs, our UM, our CM, and some of that SG&A discipline that Joe was just talking about. The $0.80 on the $1 billion, the $0.45, just our underlying performance, that gets you to about $1.25. The point you made is really an important one. Even though the guide is optically only $0.25 higher on if you want to normalize the COVID-19, we're adding a $1.25 of really true earnings performance, and margin on revenue, which is a really good trajectory as a jumping-off point into 2022. Thanks. Then just one follow-up on the question Kevin asked before about redeterminations. When you talk about the overall redetermination population, you're not really thinking that's going to carry a different margin than the broader Medicaid book. Are you talking about a gross margin or an operating margin? I guess, how do you think about dealing with SG&A de-leveraging potential for that population? Thanks. We did have to take on additional resources to service the increased population. It's not as though we leveraged the complete infrastructure, and therefore it's only contribution margin it's going to leave. We will have some SG&A that will be able to depart the company. We took on contract resources. We worked overtime, we added resources in our call centers and in our clinical services, and those will be able to be relieved when that membership attrites. Again, the point I want to make is, we're at 680,000 members up organically since the beginning of the pandemic. That number's likely to be 750,000 by the end of the year. It's not going to zero. The structural level of unemployment, particularly in the lower wage service economy, that economy was far more stressed than the average economy. The stimulus checks and the unemployment benefits are still out there. That number is just not going to zero. Now, where it lands, we don't know. We believe, and it's been proven over 35 years, that any time there's been an event, usually some type of economic event or a recession, where Medicaid enrollment has swelled, that post-event, the membership, the enrollment nationally, has stayed at an increased level for years after the crisis has abated. We're pretty comfortable in saying that 750,000 we're likely to be up will not go to zero. Where it lands, we don't know, but the unemployment rates in many of our states, particularly in the low-wage service economy, are still quite high. The only other thing to sprinkle on top of that is, we'll talk more about this at Investor Day, but as that redetermination, the revenues from that obviously form a headwind. You talked a little bit about G&A leverage component. Don't forget, that'll be offset with our growth initiatives, our new M&A, right? We've got two deals that'll affect next year, new procurements and our other organic growth initiatives. It's still a growing revenue pie and still a very attractive G&A proposition. Got it, thank you. Thank you. This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.