Good morning, welcome to the Molina Healthcare First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then 1 on your telephone keypad. To withdraw your question, please press Star then 2. Please note today's event is being recorded. I would now like to turn the conference over to Joseph Krocheski, Senior Vice President, Investor Relations. Please go ahead, sir. Good morning, and welcome to Molina Healthcare's first quarter 2023 earnings call. Joining me today are Molina's President and CEO, Joe Zubretsky, and our CFO, Mark Keim. A press release announcing our first 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 the earnings release. For those who listen to the rebroadcast of this presentation, we remind you that the remarks made are as of today, Thursday, April 27th, 2023, and have not been updated subsequent to the initial earnings call. On 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 first quarter 2023 press release. During our call, we will be making certain forward-looking statements, including, but not limited to, statements regarding our 2023 guidance, Medicaid redeterminations, our recent RFP awards and related revenue growth, our acquisitions and M&A activity, our long-term growth strategy, and our embedded earnings power and margins. Listeners are cautioned that all of our forward-looking statements are subject to certain risks and uncertainties that could 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 filed with the SEC, as well as the risk factors listed in our Form 10-Q and Form 8-K filings with the SEC. After the completion of our prepared remarks, we will open the call to take your questions. Lastly, we want to invite you to attend our 2023 Investor Day meeting scheduled for Monday, May 15th, where we will share more about our future growth plans and longer term strategy. Details for the event can be found at our investor relations website. I will now turn the call over to Chief Executive Officer Joe Zubretsky. Joe. Thank you, Joe. Good morning. Today, we will provide updates on our financial results for the first quarter 2023, our full year 2023 guidance in the context of our first quarter results, and our growth initiatives and our strategy for sustaining profitable growth. Let me start with the first quarter highlights. Last night, we reported adjusted earnings per diluted share for the first quarter of $5.81, or 19% year-over-year growth. Total premium revenues at $7.9 billion were as expected, representing a 5% increase over the prior year. Our 87.1% consolidated MCR in the first quarter demonstrates continued strong operating performance. We produced a 5.5% adjusted pre-tax margin, 4.1% after tax, a very strong result that is above the high end of our long-term target range. In the first quarter, we continued to generate excellent margins in our Medicaid business with a medical care ratio of 88.4%. This result was in line with our guidance and long-term target range. Our portfolio of 19 state contracts in 2023, growing to 21 states in 2024, provides earnings ballast and diversification related to rate setting and contract reprocurements. Actuarially sound rates prevail as the rate setting process continues to capture a credible medical cost baseline with forward trend and benefit changes, and core medical cost trends remain stable and well controlled. In Medicare, our reported MCR was 88%, which is at the high end of our long-term target range as a result of driving growth in the high acuity, low income consumer segment. In Marketplace, we ended the quarter with 271,000 members. Our Marketplace business is appropriately sized to the overall portfolio, given the inherent volatility of that risk pool. Our first quarter Marketplace MCR was 68.6%, significantly below full year expectations, even when considering seasonal patterns. This result reflects the successful implementation of our pricing, metallic mix, and membership continuity strategy to restore this business to mid-single digit target margins. In summary, 2023 is off to a very strong start. Medicaid, our flagship business representing over 80% of revenue, continues to produce strong, predictable operating results and cash flows. Our high acuity Medicare niche serving low income members continues to grow organically, and Marketplace is now well positioned to achieve target margins in 2023. Turning now to our 2023 guidance. Based on our strong start to the year, we are increasing our full year 2023 adjusted earnings per share guidance to no less than $20.25, or 13% growth year-over-year, even after absorbing $0.75 of one-time implementation costs for new contract wins. We have deliberately refrained from increasing our guidance beyond the first quarter outperformance as we continue to apply appropriate conservatism to our forecasts. We believe this conservative discipline is appropriate for several reasons. First, we would not project our significant first quarter marketplace outperformance to be repeated for the balance of the year. Second, we are not forecasting short term interest rates to remain at their current levels. Third, as a general matter, at this early stage in the year, it is prudent to anticipate potential medical cost variations. Fourth, and lastly, we do not believe the acuity shift due to redeterminations will have a significant net margin impact. There is the potential for some sporadic and isolated shifts in acuity. If that were to be the case, there are significant mitigants to any potential impact. These mitigants include a commensurate mix effect premium benefit, experience rebate, and minimum MLR offsets in certain states, and of course, actuarially sound rate adjustments, both retrospective and prospective. Being said, we believe that any potential shift in Medicaid member acuity that could increase medical costs for 2023 is captured in our 88.5% Medicaid MCR guidance for the year. Turning now to an update on our strategy for sustaining profitable growth. Building on our momentum from last year, we are off to a strong start in 2023. At the end of January, the Texas Health and Human Services Commission posted its intent to award our Texas Health Plan a contract for all our existing 8 service areas in the state. Given the continuity of coverage in these service areas and strong brand loyalty, we expect to see continued market share gains and revenue upside in Texas. In March, we announced that our Indiana Health Plan was awarded a 4-year contract to provide managed long term services and supports. We believe this contract will commence in mid-2024. As 1 of 4 managed care organizations in the program, we expect to serve approximately 33,000 members, resulting in annual premium revenue of approximately $1 billion. With the addition of the Indiana LTSS win, our five recent state RFP wins drive more than $5 billion in incremental revenue, with a portion included in our 2023 guidance, most emerging in our 2024 outlook and achieving full run rate in 2025. Based on known building blocks, we now have line of sight to $36 billion of premium revenue in 2024, or 13% growth before additional strategic initiatives. Our new store embedded earnings are now $4.50 per share, providing meaningful visibility into our future earnings growth potential. We see an additional $2 per share of embedded earnings upside if and when the several remai ning COVID-era corridors are eliminated. Our acquisition pipeline remains replete with actionable opportunities. While the timing of transactions remains inherently difficult to predict, the strength of our pipeline and our track record of success give us confidence in our ability to drive further growth from this important element of our growth strategy. The company's performance continues to validate our long-term strategy and its value creation potential. Our strategy is sound, and it's working. We are delivering top-line growth both organically and with accretive acquisitions while sustaining industry-leading margins. Our model is clear and proven. We will grow organically in our existing footprint. We will win new state contracts and sign new acquisitions, building clear visibility to new store revenues and their related embedded earnings. We will harvest the embedded earnings and include them in our guidance as the contracts incept and the acquisitions close, all the while adding yet additional new revenue streams to our forward outlook. I look forward to sharing more about our future growth plans and longer term strategy at our investor meeting on May 15th. As is our hallmark style, we will provide you with our detailed playbook for achieving our growth targets and maintaining industry leading margins. We will not only declare our goals, but also show you with transparency and specificity how we will achieve them. Our May 15th Investor Day session is appropriately titled Sustaining Profitable Growth: The Next Wave. I will turn the call over to Mark for some additional color on the financials. Mark? Thanks, Joe. Good morning, everyone. This morning, I will discuss some additional details of our first quarter performance. I'll then turn to the balance sheet and some thoughts on our 2023 guidance. Beginning with some detailed commentary on our first quarter results. Our consolidated MCR for the first quarter was 87.1%, reflecting continued strong medical cost management in each of our segments. In Medicaid, our reported MCR was 88.4%, a strong result that was in line with our expectations and long-term target. During the quarter, flu, RSV, and COVID-related medical costs were minimal. The major medical cost categories were largely in line with our expectation and normal quarter-to-quarter trend fluctuations. In the quarter, our Medicaid results were burdened with some prior period premium adjustments. Absent those adjustments, our MCR was at the low end of our long-term target range. In Medicare, our reported MCR was 88%, also within our long-term target range. During the quarter, we saw sharply lower flu and a continuing decline of COVID-related costs, somewhat offset by the impact from continued growth in our D-SNP and MAPD products. In Marketplace, our reported MCR was 68.6%. This strong result reflects our pricing strategy to return this business to target margins as well as seasonal patterns which favor the first half of the year. Recall, our pricing strategy increased our premium yield by approximately 9% this year, and with approximately 3/4 of our book in renewing members and 2/3 in Silver metallic products, our risk scores should be optimally valued. We feel well positioned to achieve our mid-single-digit target margins in this business for the year. Our adjusted G&A ratio for the quarter was 7.2%, which includes new business implementation spending ahead of the new contract wins incepting in July and next year. Turning now to our balance sheet. Our capital foundation remains strong. We harvested $100 million of subsidiary dividends in the quarter, and our quarter-end parent company cash balance was $283 million. Debt at the end of the quarter was unchanged and just 1.7x trailing twelve-month EBITDA, with debt-to-cap ratio at 42.3%. Net of parent company cash, these ratios fall to 1.5x and 39.3%, respectively, reflecting our low leverage position and ample cash and capital capacity for additional growth and investment. Turning to reserves. Our reserve approach remains consistent with prior quarters, and we continue to be confident in the strength of our reserve position. Days in claims payable at the end of the quarter was 1 day higher sequentially at 48 days of medical cost expense. Prior year development was favorable in the quarter, demonstrating the integrity of our actuarial reserving practices. I would note that the reported favorable prior year development includes the release of margin on the prior year reserves, which is reestablished in the current quarter. Remaining P&L impact was largely absorbed by prior year minimum MLRS and experience rebates. Finally, a few comments on guidance. We increased our 2023 adjusted earnings guidance by $0.50 to at least $20.25 per share. This increase is driven by first quarter performance above our expectations, partially offset by additional new store implementation costs for our recently announced Indiana LTSS win and some general early in the year conservativism. We project a little more than half of this year's earnings in the first two quarters. As Joe mentioned, our new store embedded earnings in 2023 is now expected to be $4.50 per share, comprised of two components. $4 per share, up from previously reported $3.50 for our recent new contract wins in California, Iowa, Nebraska, and now including our new Indiana LTSS contract. Plus $0.50 per share for the AgeWell and My Choice Wisconsin acquisitions achieving their full run rate accretion. We continue to carry approximately $2 per share for COVID-era risk corridors, providing additional potential upside to the $4.50 of new store embedded earnings. Within our guidance, our outlook on the resumption of redeterminations and the impact on our business is unchanged. Through March closing, we estimate we gained approximately 800,000 members organically since the start of the pandemic. We continue to expect to retain roughly half of the members gained. We expect the premium impact to be approximately $1.6 billion, and at portfolio average margins, the earnings impact to be approximately $1 per share. Due to the timing of when members disenroll, we are projecting one-third of the premium and earnings impact to emerge in 2023, with the remainder mostly in 2024. Given that redetermination and disenrollments have just begun on April 1st in only one of our markets, we are unable to share additional data-driven insights. However, we remain comfortable with our outlook on margins as we expect numerous items to minimize any potential trend impact from redetermination. First, as discussed in past quarters, our internal membership cohort analysis indicates limited acuity shift potential from several perspectives. Second, the mix effect of impacted membership cohorts dampens any impact. To be clear, redetermination likely affects lower PMPM members, so any cost pressure would be muted by the weighted average of continuing higher premium PMPM members. Third, the gradual rate of disenrollment over the course of 2023 into 2024 dilutes any ultimate impact ahead of normal rate cycle adjustments. Fourth, the remaining COVID era risk corridors and pre-existing experience rebate mechanisms and minimum MLRS in many states provides a cushion to absorb potential adverse trend development should it emerge. Finally, rate adjustments, both on cycle and off cycle, prospective or retrospective, will counter emerging trends as states honor their commitments for actuarially sound rates. In summary, we are very pleased with our first quarter performance in each of our segments and our increased full-year earnings guidance. We look forward to sharing more about our growth strategy and compelling value creation story at our May fifteenth investor day. This concludes our prepared remarks. Operator, we are now ready to take questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Today's first question comes from Josh Raskin with Nephron Research. Please go ahead. Hi. Thanks. Good morning. Appreciate the comments you just made, Mark, on the reverification impact and that you'll keep 400 of the 800,000 lives that you've gained since the start of the pandemic. Of the 400 that get redetermined, can you just update us on your views on how many you think end up in, you know, of those Medicaid lives end up choosing exchanges? How granular can you be in terms of assisting your specific reverified members to find the exchanges? You know, for example, can you target specific populations or even specific individuals in terms of trying to get them to choose exchange products? Thanks. Great. Thanks for the questions, Josh. Take the second one first. The states have a lot of different protocols and policies about how we can interact with members ahead of redetermination. You know, the good news is they're giving us the lists of at-risk members months ahead of time, which is very helpful to reach out to them, interact with them, see if we can reverify them, or in many cases, put them into a marketplace product if appropriate. Now, in the cases where members are being redetermined, they lose their eligibility, which we're estimating is about 50%. I don't know that I have great insights on specifically where they'll go. Josh, it's complicated because what we see is some will get reverified, lose eligibility, and move right into another product. Others may go uninsured for a few months and then eventually wind up in one of those products. I don't have good estimates on that. The only other thing I'll remind you of is we didn't put any upside on retaining redetermined members in our marketplace outlook. Anything that we pick up through redetermination is upside to our marketplace outlook. Perfect. Thanks. You bet. Thank you. Our next question today comes from Stephen Baxter at Wells Fargo. Please go ahead. Yeah. Hi. Thanks for the question. Appreciate that your thinking on redeterminations hasn't really changed. Over the past few months, though, we have seen a lot of states come out with their own projections on membership losses. It does seem like these estimates would generally skew towards lower levels of retention than the 50% you're assuming. I assume you spend time, you know, talking to the states about their expectations. I'm curious what you think is the key difference between what they're assuming and what you think will play out. Thanks. Stephen, our analysis is bottoms up state by state. Of course, we are in active discussions with our state-based customers and helping them manage the 90 million people nationwide who are gonna go through the redetermination process. As Mark mentioned, many of the states have various protocols and different protocols on how interactive we can be, but we are in very active discussions with our state-based customers. They have given us lists of what they consider at-risk members, meaning members that will likely have to go through a reverification process. From everything we've learned, since this all started months ago, and now has only started in 1 state, actually, in the month of April, we stand pretty firm that our 800,000 member increase during the pandemic will decrease by 50% and end up at 400,000. Just to put a point on what Joe said, Stephen, maybe what you're reacting to is some of the at-risk member data points. The states are putting those out specifically so that managed care organizations can reach out to those members, and whether it's eligibility issues or verification issues, interact with those members to minimize it. The, the list of at-risk is certainly bigger than the list of folks that will actually lose eligibility. Thank you. Ladies and gentlemen, our next question today comes from Justin Lake at Wolfe Research. Please go ahead. Thanks. Good morning. a couple things. One, Medicare Advantage, you talked about, mix pushing you to the higher end of the MLR range there. What is the long-term MLR range you expect for Medicare Advantage? Can you give us a little color on the mix of business and why it's pushing it towards the higher end? Lastly, just a number question on investment income. What is assumed in your guidance for investment income this year? Thanks. Justin, on the MLR for Medicare, we continue to hold firm on our long-term forecast of between 87% and 88%. I would just summarize it by saying the faster we grow, it would push you toward the higher end of that range because the members we get are not yet risk scored, they're not yet into care management programs, and it takes a while for that, a year or 2 for that MLR to settle back into our target range. If we're growing nicely, which we are today, at greater than 10% a year, it'll push the MLR up into the higher end of that range, and we're very comfortable with that. On investment income, sure, short-term interest rates are very high currently. As our guidance suggested, we do not forecast them to remain at this level. I will remind you that half of our investable base is locked in at two to three-year duration in short-term bonds, but the other half is entirely floating. It's cash, it's floating at short-term rates. Mark Keim and his team were, I think, appropriately cautious in projecting those rates to decline for the balance of the year. That's exactly right, Joe Zubretsky. The things to think about there is the investable balance will decline over the year from where it is. I'm about $8.2 billion right now. It'll decline as we pay down previous year corridors, minimum MLRS, things like that. Second, we're mostly in cash, which means we're instantly responsive to any cuts in rates. When I look at the Fed funds outlook, most folks are baking in maybe another raise in the second quarter, but likely two cuts in the back half of the year. We are cautious in our outlook. Thank you. Ladies and gentlemen, our next question today comes from Nathan Rich at Goldman Sachs. Please go ahead. Great. Thanks for the question. Wanted to ask on the marketplace business, you know, how much of the MCR outperformance do you see as sustainable? It sounded like it was mainly driven by pricing and I guess helped by strong retention. You know, I guess, do you have an updated view of where MCR will land for the year? Enrollment was a little bit lower than we had expected. I was just wanting to get your updated thoughts on if 230,000 members by year-end is still the right target. Nathan Rich, it's Joe Zubretsky. Our strategy is working. The strategy to reallocate capital to businesses that had less inherent volatility, like Medicare and Medicaid, and to keep this at about 5% of the portfolio, keeping it small, 5% of the portfolio, keeping it silver, with two-thirds of our members in silver products and keeping it stable, 75% of the members renewing, not only has us projected toward our target mid-single-digit pre-tax target margins, but probably with less inherent volatility. We're really pleased with that. The first quarter MCR had some seasonality aspects to it, and we did outperform. I would say that our guidance includes something closer to the bottom end of our long-term range of 78%-80%, perhaps a little lower than that. Particularly that more of the business was bronze than we had projected, and bronze has higher deductibles. The seasonality tilt is a little steeper than we originally projected. We're on target for the bottom end of our 78%-80% long-term target range for the full year. Thank you. Our next question today comes from Scott Fidel at Stephens. Please go ahead. Thanks. Good morning. I was hoping to get some of your analysis on the final 2024 MA rates and then on the risk model as well in terms of what your estimated MA rate impact will be. And then maybe give us some insights just into how you're thinking about the impact of the risk model to your particular, you know, membership base, which is heavily weighted obviously towards D-SNPs. Thanks. Scott, it's Joe. Yes, there are a variety of factors, regulatory factors that have been introduced in the past number of months that have caused folks in the Medicare Advantage business to think differently about the earnings trajectory. First, let me remind everyone that Medicare is only 15% of our total book. Also remind you that of that Medicare book, half of it are the MMP demonstrations. Now, while the MMP demonstrations aren't totally insulated from these industry dynamics, they do not have stars scores. They're not subject to the rate notice, although rates come in a different way. 40% of that revenue is actually Medicaid driven and not Medicare driven. I wouldn't say we're insulated from it, but with half the book being an MMP which is not responsive to those various rate type actions, we're pretty well insulated. It does relate to our D-SNP book. We believe that our product is competitive, it is replete with value-added benefits. Many of these factors affected the entire market. If we have to pull back on value-added benefits to keep the product at zero premium and competitive, we think we can do so. I think we're well positioned for a couple of another good years in Medicare. Thank you. Our next question today comes from Michael Ha with Morgan Stanley. Please go ahead. Thank you. Just quickly, first on Medicaid revenue PMPM, looks like it was roughly flat year to year, which may have driven your Medicaid revenue to be slightly below the street this quarter. I'm having a tough time just thinking of what could have driven this, especially given, you know, higher LTSS mix, which presumably would have increased the blended PMPM. Any color you could provide there? On your comments about redetermination, not expecting the acuity shift to have net margin impact, but could see some sporadic cases. I know you mentioned, Joe, that the shift in acuity is captured in your current 88.5% guide. Comments today do sound a bit more optimistic. Is it fair to say what you've learned since fourth quarter about the acuity of your at-risk redetermined lives might be more incrementally positive? I'm gonna take the second part of the question first and kick it to Mark for the analysis of Medicaid revenue. No, we know very little more than we knew at the fourth quarter. Only one state has actually started the redetermination process, and it's a very small state for us. No, we believe that our cohort analysis, which analyzes various aspects of durational acuity, how many members do you have greater than a year, less than a year? How many members do you have that have 0% to 25% MCRs? What's your lapse rate? Didn't go to 0, it decreased, but members were terminating during the pandemic. What's your coordination of benefits rates? It's up slightly, but not a lot. The data does not suggest that there's a huge shift of members, durational acuity members, and we start there. Second, all we did was mention the mitigants that if something should occur somewhere in one of our markets, there's premium adjustments, premium mix will help us. If we're deep into a rebate mechanism or a minimum MLR in that market, that'll be the first cushion for potential effect. Of course, you're into the rate cycle. We believe, not only we believe, we know that the states and CMS have been in active discussions about what could potentially happen, and they're not only amenable, but they're very supportive of potential retrospective or prospective rate actions. That's our point of view. It really hasn't changed from the fourth quarter because we know very little more today than we knew at that point. Michael, it's Mark. Let me just take the first question. On Medicaid, not sure what your model was, the Medicaid revenue for me came in right about on expectation. You know, there's things that can move it a little up, a little down quarter to quarter, which might be driving some of what you're seeing. You know, certainly mix changes quarter to quarter, year to year. Retro premiums, which are driven by a number of different items, retro membership updates, things like that certainly drive variations in revenues. Don't forget, when we book corridors, minimum MLRS or any form of experience rebate, those run through the revenue line as well. You put those things together, my hunch is that's what explains what you're seeing. Overall, I think we're pretty close to just about everybody's model on first quarter. Thank you. Our next question today comes from George Hill at Deutsche Bank. Please go ahead. Good morning, guys, and thanks for taking the question. Joe, one of your competitors talked about kind of getting enhanced data from the states as they start to go through the redetermination process. Would just be interested to hear kind of like what kind of data that you guys are having access to as this process begins to kick off and kind of how that impacts your early thoughts about 2024? Sure. I'll send to Mark. For the most part, what we're getting from states is what we're calling members at risk. Members that will have to go through some form of process, either specifically, or on an ex parte basis to be redetermined. Mark, you're closer to the situation. Absolutely. We started one state in April, but the vast majority of my states won't actually go through eligibility and redetermination until June and July. We're fairly back-end loaded here, which is why we're a little limited on data just at the moment. We've got one state. As Joe mentioned, the way this works is long before a member would actually get redetermined or lose eligibility, they go on an at-risk list. The states define at risk in two ways. One, places where they have some data that suggests the member will lose eligibility, some data point that suggests that, or just verification failures where they can't reach that member. They're giving us those lists months in advance. I'm mostly back-ended for June and July, but in many cases, I have lists of those members already. We can start reaching out to them, contacting them through all of our different channels long in advance. That data is not particularly helpful on what will happen because the whole point of that data is to preempt some of the people that shouldn't lose coverage. It's very helpful on us retaining members, but it's not helpful in saying from a data perspective, how many will we lose or what would the economic impact be, if any? The real data points on real stayers and leavers don't happen until redetermination actually occurs. Again, for us, that's just one state so far. The states publish files, 834s, 820s, which let us know specifically who's coming and going, who the stayers and leavers are. We're way too early to have real insights on that, given one state so far. Okay. Maybe just a quick follow-up would be to simplify this is what you guys largely have now is kind of the medical data and the claims data on all these members. You guys don't have the economic and eligibility data, and it's kind of the eligibility. I'm trying to figure out what is the data like? Like, what changes from a data access perspective that kind of better informs what you guys see? It sounds like it's really kind of like the eligibility data and the at-risk lists. I, just because a member has been identified as someone who will have to go through the re-eligibility process, by the way, that data is very immature. It's not in hundreds of thousands of members, it's tens of thousands of members. We can extrapolate very little from that. So it's way too early to draw any conclusions from the early at-risk member data that we've seen. It'll build over time, as we have insights and we report quarters, we'll fill you in on where we are. Appreciate it. Thank you. Okay. Thank you. Our next question today comes from A.J. Rice at Credit Suisse. Please go ahead. Hi, everybody. Thanks for the question. Two, I guess really. One, when you think about the flow of information as it comes in both on your enrollment assumptions and whether they're correct, and then also on the risk pool itself and what's happening there, and you think about claims experience, et cetera. How do you see incremental information developing? At what point, you know, over the next 12 months do you think you'll have a pretty good sense that, hey, our estimates are pretty accurate on enrollment, our estimates about the risk pool are pretty accurate? I guess I'm trying to figure out, is that a fourth quarter of this year? Is it a first half of next year? Or any thoughts on that. You've mentioned a couple of times, some protection from being in a Medicaid corridor payable position. I guess I'd love to get a little bit more color, if there is any, on how extensive that is across your Medicaid book rather, and how much protection you think that provides on any kind of deterioration in the risk pools. AJ, I'll answer the second question first. We talked about risk-sharing corridors during the pandemic that were introduced in 12 of our states as a direct result of the pandemic, reminding everyone that pre-pandemic, you know, dating all the way back to, you know, earlier in the decade, various types of mechanisms existed in 17 of our states. MLR floors, experience rebates. Those have always been in place. Because of our performance, we routinely pay into them. The better you perform, the more you'll pay into them, and the more you pay into them, the greater the cushion should your fortunes reverse later in the year. We're not gonna go through the actual numbers because it actually matters where you're in the money, in what state, and it's way too difficult to project anything other than, we have routinely paid into these mechanisms, these experience rebates. We did last year in 2022 because we were very profitable, reminding you we still have best-in-class industry margins even after having paid into them. Yes, should an inflection occur later in the year, for whatever reason, a redetermination for any other reason, these payables act as the first cushion to financial performance. Mark, do you wanna take the question about, what quarter we'll have visibility? We've talked about that a lot, and it's likely third, but more likely fourth. Absolutely. I mentioned that the majority of our states don't actually redetermine members, that is, take members off the rolls until June and July. We, across our 18 Medicaid states, are very back-end loaded. That means the true data development won't really start to accrue till Q3 and Q4. Remember, these states have a year to go through this process. Some will move a little faster, some will move a little bit slower. But picture a weighted average going down over time. This data will start to develop, and I think we'll have meaningful discussion in Q3 and Q4 on real data-driven insights. Okay. Thanks. Thank you. Thank you. Our next question today comes from Calvin Sternick with JP Morgan. Please go ahead. Yeah, thanks for the question. Sort of a follow-up to AJ's question. You know, in terms of the potential mitigants, you know, as you go through the discussions with the states and as they finalize their implementation plans for determinations, do you have a sense for how they're thinking about making the rate adjustments? Or most looking at it, doing it on a retrospective basis, or is it mostly prospective? Do you have a sense for what level of margin degradation needs to occur before the state sort of look to step in there? And any color on whether like, you know, how many could look to do it off cycle versus how many would look to do on cycle adjustments? Thanks. Calvin, I'll start, and I'll kick it to Mark for more detailed discussion. The timing of how the redetermination process is unfolding couldn't actually be better timed with the timing of our rate cycles. We have a September 1, we have an October 1, but for the most part, we're January 1. In early discussions with many of our states. They're willing to have discussions about both retrospective rate adjustments and prospective rate adjustments, and they're willing to have the conversation on cycle and off cycle. The conversations have been very productive. I can't speculate as to how much of an acuity shift would actually cause them to take action, but their actuarial resources, CMCS's actuarial resources, are all very much geared to engaging in a conversation, both on a retrospective and prospective basis, and both on and off cycle. As this information unfolds, we will be smack dab in the middle of our January 1 traditional rate cycle, which couldn't be better timing. Hey, Calvin, it's Mark. Joe's got it exactly right. The majority of our states, the calendar year is the same as the fiscal year, which means if data is developing in the 3rd and 4th quarters, it positions you very well for an on-cycle rate review. At least 2 of our states have already committed to a mid-cycle rate review as well, anticipating that at least we should look at the data together. We feel good about that. Overall, I think, on the topic of retrospective and prospective, states have been really open to both, and in many cases, I think they're waiting for the initial glimpse of data, to decide on cycle, off cycle, retrospective, prospective, how they might do that. The general signal from states is very much of a partnership here to work through this rate cycle. Thank you. Our next question today comes from Sarah James, Cantor. Please go ahead. Hello, Sarah. Is your line muted, perhaps? Yes. Sorry about that. I wanted to follow up on the timing as far as your discussions with states goes. They've 12 months to get through the redetermination, but some of the states have been vocal about staffing issues on teams that would be evaluating that. As you talk to them, what kind of color are they giving you on how ratable or front-end loaded their process might be? Then just to follow up on your earlier bronze mix shift in the exchanges, has that influenced how you accrue for risk adjusters versus past years given the shift in metal tier? Thanks. Sarah, I'll answer the last question first, and Mark and I will tag team the question on timing. With respect to bronze, we've limited bronze to 4 markets. 3 markets require us to sell it. In Florida, we actually want to sell it because it's a bronze market, and it's very profitable. We sold more in Florida this year, which accounts for most of it. The shift to bronze wasn't significant, but it was entirely accounted for our Florida sales efforts. It's very profitable in Florida. It does add to the seasonality tilt since bronze has higher deductibles. We're very comfortable on the profitability of the bronze book because most of it's in states where we actually want to sell and try to sell. Mark, the other question? Yep. Hey, Sarah. On your question about timing, don't forget the states have 12 months from the end of the PHE to complete redetermination. The PHE ends in May. Even though some states began redetermination in April, the clock starts ticking as of May. 12 months from May, I think there may be a difference between states intentions of how fast they move versus how fast they actually move. We're seeing a little bit of that in some of our partnership discussions with them. We'll obviously be accommodative of any schedule they want to roll out. Staffing issues, resource issues, it'll be interesting to see how the next 13 months here play out. I'll give you the editorial comment. We have not projected it to take longer than we said originally, but I expect that it would. States are gonna be most states will be very careful to make sure they don't strand members without coverage if they're in fact eligible. We're not projecting it to take longer, but it could be more back-end loaded than we have projected. Great. Thank you. Our next question today comes from Steven Valiquette with Barclays. Please go ahead. Great. Thanks. Good morning. For the first quarter itself, Mark, you mentioned that the major medical cost categories were largely in line with your expectations. I guess just trying to reconcile this with some of the strong inpatient and surgical volume growth trends coming out of the public hospital companies this quarter. Just curious if you can just remind us what magnitude you may have anticipated this and factored that into the guidance, you know, across the different books of business as far as any sort of extraordinary growth in inpatient. Your Medicaid and Medicare MLRS were still both up year-over-year in 1Q 2023 versus 1Q 2022, despite the MLR beat versus the street. Again, just curious how much elevated inpatient costs, you know, may or may not, have been a factor in the MLR dynamics in the first quarter? Thanks. Stephen, our medical cost trends were completely in line with expectations. Flat in Medicaid, you know, 2% in Medicare, 3% in Marketplace, year-over-year. We saw an increase in utilization, but it's important to note when we say that to make the companion statement that expensive inpatient stays were down, but less expensive outpatient services, ambulatory services were up. Units of utilization were up, but the intensity of service and the types of services really reduced unit costs. Our trends were completely in line. We saw nothing in the quarter that wasn't expected or anticipated. Trends are completely in line with what we assumed in pricing. Right. On inpatient, I hear you on the data points, we're seeing just something just a little bit different. Lower surgical and obviously lower COVID, as the effects of the pandemic are diminishing, also increasingly outpatient site care for COVID cases. As Joe mentioned, a fairly light trend for the first quarter. COVID has gone from almost being completely an inpatient phenomenon to almost completely a laboratory phenomenon. You trade one inpatient, you know, the cost of one inpatient stay for one lab test, you know, all the time. It's, it has changed dramatically year-over-year, some pandemic related and some just trend related. Okay, that's helpful. Thanks. Thank you. Ladies and gentlemen, our last question today comes from Gary Taylor at Cowen. Please go ahead. Hi, good morning. two quick ones for me. Just one, I think I missed just a little bit of the opening comment on exchange, so I just wanna go back to that for a second. I know that trended better than you thought, but I didn't hear if that changed where you thought you would land on your original 78-80 for the year. I just also wondered if anything you've seen so far makes you change your outlook on whether you're have a receivable or a payable accrual in exchange for 2023. Gary, our fast start to the year in the exchanges at 68.6% gives us great comfort that we'll operate at or below the low end of our long-term target range of 78%-80% on the MCR. A little bit more seasonality due to the heavier than expected bronze mix, but completely in line with expectations. We are on target to hit our mid-single digit pre-tax margin target for the year. You know, with respect to the risk pool, the risk pool has really stabilized. A lot of the irresponsible pricing is out of the market. We have our arms around special enrollment. It's coming in at much lower levels due to the cutoff at 150% of FPL. We have our arms around that. The risk pool has somewhat stabilized, which gives us really good visibility, not only into the acuity of our members, given that 75% of them are renewed members, but also two-thirds of them are in a silver product, which gives us the opportunity to optimize the value of a risk score. We're in good shape in the marketplace so far, and we expect to operate at the low end of our long-term target range for the full year. The only thing I'd add to that is, with risk adjustment, the correlation between medical cost experience and risk adjustment at this point is pretty tight. If the risk pool changes a little bit, I'm expecting effectively a hedge from our performance on risk adjustment. Just one last quick one, if I could? You mentioned the prior period premium adjustments in Medicaid having impact on Medicaid MLR. I mean, presumably there's a pre-tax and earnings headwind that you bore in the quarter for that as well? Yes. given where we perform. I'm sorry, we couldn't hear the first part of your question. You're referring to Medicaid, correct? Medicaid, yeah. Thank you. Yes, as I said, 17 of our states have always, for a long period of time, had mechanisms, experience rebate mechanisms, minimum MLR mechanisms, which are set at pretty low levels, which allow you to actually earn excellent margins as we have been, even though we've still been paying into these mechanisms. Yes, as I mentioned, last year, we had a good year and paid into them. In the first quarter, again, good first quarter, we also paid into them in the first quarter. We don't disclose how much, but it's a routine part of the business. It's part of the overall earnings trajectory of how we think about the business. The first quarter was business as usual. Excellent margins in Medicaid and still paid into these corridors. Rebates. Thank you. Thank you. Ladies and gentlemen, this concludes today's question and answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.