Good morning, and welcome to the Molina Healthcare Q3 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Joe Krocheski, Senior Vice President of Investor Relations. Please go ahead. Good morning, and welcome to Molina Healthcare's Q3 2023 earnings call. Joining me today are Molina's President and CEO, Joseph Zubretsky, and our CFO, Mark Keim. A press release announcing our Q3 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 of you who listen to the rebroadcast of this presentation, we remind you that all of the remarks made are as of today, Thursday, October 26th, 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 Q3 2023 earnings release. During the 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 2024 outlook, our recent 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 our 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. I will now turn the call over to our Chief Executive Officer, Joe Zubretsky. Joe? Thank you, Joe, and good morning. Today, I will provide updates on several topics: our financial results for the Q3 2023, our full year 2023 guidance, Medicaid redeterminations, our growth initiatives, and our strategy for sustaining profitable growth, and our 2024 premium outlook. Let me start with our Q3 performance. Last night, we reported adjusted earnings per diluted share for the Q3 of $5.05, or 16% year-over-year growth on $8.2 billion of premium revenue. Our results reflect the continued execution of our strategy for sustaining profitable growth. Our Q3 88.7% consolidated MCR and 4.6% adjusted pre-tax margin demonstrate continued strong medical and operating cost management. Our year-to-date consolidated MCR of 87.8% is squarely aligned with our long-term target range, and our 5.1% pre-tax margin is above the high end of the range. We note that investment income continues to bolster our year-over-year earnings growth and already strong margin profile. Our Medicaid business performed as we expected. Our 88.8% MCR was within our long-term target range. Medical cost trend, including the net effect of redetermination acuity shifts in corridors in several states, was within our expectations. Medicare's results came in below our expectations, with a reported MCR of 92.4%. In the quarter, we continued to experience higher utilization of outpatient, professional, and in-home services, all of which we believe we appropriately addressed in our 2024 bids. And finally, Marketplace, with a reported MCR of 78.9%, continues to perform well. Medical cost trends are in line with our pricing assumptions, and our improved risk adjustment performance is meaningful. Our small, silver, stable strategy is working. In summary, our Q3 results build on our strong first half performance. Turning now to our 2023 guidance. Based on our Q3 results, we are affirming our full year 2023 adjusted earnings per share guidance of at least $20.75, or 16% growth year-over-year, consistent with our long-term earnings per share growth target of 15%-18%. Our Q4 outlook takes full account of our year-to-date performance and considerations for seasonality and conservatism. Now, a few words about Medicaid redeterminations. As of July, all our Medicaid states had begun disenrolling members. Despite the redetermination activity, our Q3 Medicaid membership was nearly unchanged from the Q2. Growth, driven by the initiation of the Iowa contract and the closing of the My Choice Wisconsin acquisition, offset the 200,000 member decrease from the net impact of redeterminations and new enrollment. While many uncertainties remain on the ultimate impact of redeterminations, we now believe it prudent to lower our retention assumption from 50% to 40%. Mark will address implications for revenue and our unchanged outlook for $38 billion in premium revenue for next year in his remarks. Although the medical cost profile of members who have left the Medicaid rolls continues to be more favorable than the portfolio average, when combined with the impact of corridor offsets in several states, our overall Medicaid MCR was within our expectations. Mark will provide more color on redeterminations during his remarks. Turning now to an update on our growth initiatives and our strategy for sustaining profitable growth, beginning with our recent state wins. The implementation of our new California contract, which will nearly double the size of our current membership in the state and add approximately $2 billion in annual premium, is proceeding as planned for a January 1, 2024, start date. In July, we finalized our contract for the Texas STAR+ program, retaining our entire existing footprint. With numerous new entrants likely attracting low share, we expect our share of membership in the state to grow, driving incremental annual premium revenue of approximately $400 million. Also in July, we successfully launched our Iowa Health Plan, serving approximately 180,000 members, consistent with our expectations. Our Nebraska implementation is tracking to a successful launch on January 1, 2024, and will contribute an estimated annual premium of $600 million. In August, we announced that we will once again be serving Medicaid beneficiaries in the state of New Mexico. We expect the new contract to begin mid-2024 and produce approximately $500 million in annual premium revenue. In Indiana, the state deemed us not to have met the readiness requirements for a Medicaid contract due to our Medicare D-SNP product becoming available in the state on January 1, 2025, and not by January 1, 2024, as required. We are proud to have won the initial award as testimony to our proposal skills, but disappointed we did not meet that one readiness requirement. Our growth agenda is in full gear. Even with the development in Indiana and changing assumptions for redetermination retention, all of these new contract wins and reprocurements combined keep us on track for approximately $38 billion of premium revenue in 2024, as previously forecasted. Shifting to our M&A activity. In early September, we announced the closing of the My Choice Wisconsin acquisition. Recall, this transaction adds approximately 40,000, mostly MLTSS members and approximately $1 billion in annual premium revenue. The regulatory approval process for the Bright Medicare acquisition is proceeding as planned. We continue to work with Bright management on satisfying the remaining closing conditions and continue to expect to close by the Q1 of 2024. Now, looking ahead to 2024. Assuming a timely close of the Bright Medicare acquisition, we remain confident that all of the known building blocks provide line of sight to approximately $38 billion of premium revenue in 2024, which represents 19% year-over-year growth, even before executing on additional strategic initiatives. While there are many positive earnings catalysts going into next year, which Mark will speak to in a moment, there are also some factors which have not yet fully developed. As is customary, we will provide our specific earnings guidance with you in February. Recall that at our Investor Day earlier this year, we announced our long-term financial targets, the centerpiece of which is a long-term earnings per share compound annual growth rate of 15%-18%. With the visibility we have into our earnings trajectory, we are comfortable in reaffirming our commitment to that compound annual growth rate target over the next three years. As always, I would like to thank our management team, who work tirelessly every day to deliver these results. Our team has evolved to keep pace with our growth and to execute each stage of our strategy. Recall that most recently, we promoted both Jim Woys and Mark Keim to the position of Senior Executive Vice President, with Jim adding the title of Chief Operating Officer. In further shaping our lineup under Jim and Mark, two Molina veterans, Executive Vice Presidents Deb Bacon and Dave Reynolds, will now lead our flagship Medicaid business. We're also adding additional management talent in our Medicare and Marketplace businesses and scaling up our integration platform, all to support our substantial growth. Marc Russo will be leaving the company with our thanks for his service. Not only our executive team, but all of our colleagues throughout the enterprise and across the nation are vital to our success. I want to extend my special thanks to our nearly 18,000 associates who are dedicated to deliver access to high-quality healthcare to our members. It is my privilege to serve with such a committed and capable group of professionals. In summary, we are very pleased with our performance this quarter. We have maintained our attractive margin profile during this unprecedented industry-wide redetermination process, while continuing to generate double-digit growth. With that, I will turn the call over to Mark for some additional color on the financials. Mark? Thanks, Joe, and good morning, everyone. Today, I'll discuss some additional details of our Q3 performance, the balance sheet, and our 2023 guidance and embedded earnings. I'll also provide an update on redeterminations, our 2024 premium revenue outlook, and some early thoughts on the drivers of 2024 earnings. Beginning with our Q3 results, for the quarter, we reported adjusted EPS of $5.05, and a consolidated MCR of 88.7%. In Medicaid, our reported MCR was 88.8%. The MCR included a moderate impact from the net effect of redetermination acuity shifts and corridors in several states. Our Q3 MCR was also slightly elevated from a provisional retroactive rate adjustment in New York State. Across our Medicaid segment, the major medical cost categories were largely in line with our expectations and normal quarter-to-quarter trend fluctuations. In Medicare, our reported MCR was 92.4%, above our long-term target range. During the quarter, we saw a continuation of increased utilization of outpatient, professional, and in-home services. Recall, we observed these trends emerging in the Q1 and Q2 in time to inform our 2024 bids and benefit design. We are confident our 2024 bids will produce target margins next year. In Marketplace, our reported MCR was 78.9%. This strong result reflects our pricing strategy to return this business to target margins. Our enhanced focus on silver and renewal members helps us to drive strong performance and risk adjustment. Based on our year-to-date performance, we are well positioned to exceed our mid-single-digit target margins for the year. Also, in Marketplace, we recorded a non-recurring charge in the quarter on our Texas Marketplace risk adjustment receivable from 2022 due to the financial difficulties of one major program participant in that state. While we have made our best estimate of the shortfall in collections, we will continue to pursue regulatory paths to collecting the full receivable due to us. Given its unusual and one-time nature, we have excluded it from our adjusted earnings. Our adjusted G&A ratio for the quarter was 7.1, consistent with our expectations. This result includes new business implementation spending for new contract wins in Iowa, as well as several new contracts beginning in 2024. Turning now to our balance sheet. Our capital foundation remains strong. We harvested approximately $175 million of subsidiary dividends in the quarter and used a similar amount for our Wisconsin acquisition, leaving our parent company cash balance unchanged quarter-over-quarter at approximately $500 million. Debt at the end of the quarter was unchanged at just 1.6x trailing 12 month EBITDA, with our debt-to-cap ratio at 38.3. Net of parent company cash, these ratios fall to 1.3 and 33.2, 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 51, elevated from normal levels due to the inclusion of My Choice Wisconsin and our new Iowa plan. Adjusted for this temporary impact, our reported DCP would have been consistent with Q1 and Q2 levels. Now some additional color on our 2023 guidance and embedded earnings. We are affirming our full-year 2023 adjusted earnings per share guidance of at least $20.75. Our full-year guidance, now effectively the remaining Q4, reflects our Q3 results, which were largely consistent with our expectations and includes considerations for seasonality and conservatism. New store embedded earnings remains unchanged at $5.50 per share, comprised of $4 for our recent new contract wins and $1.50 for acquisitions. The $4 per share for our new contract wins now includes approximately $0.50 for the combination of Texas STAR+ and New Mexico, replacing the same amount previously expected from the Indiana contract. The $1.50 per share of acquisition earnings includes achieving full run rate accretion from AgeWell, My Choice, and Bright Health's Medicare business. Turning to redeterminations. As we discussed on prior calls, we have built robust tracking and monitoring systems to maximize retention of members who meet the eligibility criteria and to also promptly understand any financial impacts of redeterminations. Across our states, approximately one-third of our members reviewed have been termed, of which over 70% have been procedural disenrollments rather than due to verification of actual ineligibility. As a result, we are seeing nearly 30% of those termed being reconnected, and we expect these numbers to grow. In the quarter, we estimated we lost approximately 200,000 members due to the net impact of redeterminations, bringing the year-to-date figure to approximately 300,000. Given the high number of procedural terminations and increasing state and CMS interventions, we expect reconnects will likely continue, decreasing currently reported membership losses. As we interact with members who lose eligibility, we seek to warm transfer them to our Marketplace team for potential enrollment in that product. Throughout the process, we are seeing an increasing rate of former Medicaid members, both ours and our competitors, enroll in our Marketplace products. Turning to our observations on the margin impact of redeterminations. We see that terminated members have lower medical costs than the portfolio average. However, combined with the impact of corridors in several states, the net effect from acuity shifts remains well within our expectations and our overall MCR outlook for the year. Of course, as trends have emerged, we are working with our state partners to ensure rates reflect the impact of redeterminations, either prospectively in the normal fiscal year rate cycle, off cycle, or retrospectively if necessary. In our states, through the end of September, 10 of 12 with draft or final rates have included an acuity adjustment, with several considering retroactive or mid-cycle adjustments. Lastly, some additional color on 2024, starting with our premium revenue outlook. As Joe mentioned, we have line of sight to the building blocks that are expected to deliver approximately $38 billion in premium revenue for 2024, or approximately 19% growth off our 2023 premium guidance of $32 billion. These building blocks include $1.1 billion of organic growth in our current footprint, plus approximately $4 billion from our recent state contract wins, with the expected premium from our Texas STAR+ and New Mexico contracts, largely replacing the approximately $500 million that we had previously projected from Indiana next year. To this, we add approximately $2.4 billion of acquisition-related premium, consisting of a full year of My Choice Wisconsin and the Bright Health California Medicare acquisition. Partially offsetting these growth drivers is $1.6 billion for the impact of redeterminations and known pharmacy carve-outs. We have revised our original 50% retention assumption to 40%, reflecting the earlier redetermination activity we have seen and a generally conservative approach to forecasting. While this changing assumption will lower 2024 premium revenue by $300 million, we expect that gains in Marketplace through increasing cross-sell in SEP and an expected strong OEP will effectively offset this result. We maintain our $38 billion in premium revenue outlook for 2024. Finally, some early thoughts on the drivers of 2024 earnings. We note the following elements that will positively influence our 2024 earnings trajectory. We have a solid 2023 earnings baseline off of which to grow. Our new store embedded earnings remain unchanged at $5.50 and continue to provide meaningful visibility into our future earnings growth potential. Investment income will likely continue to be strong. We believe our Medicare performance will improve as a result of our 2024 bids, and the impact of new business implementation costs of $0.75 a share this year go away as we begin recording premium revenue on our new business wins. However, there are some remaining variables as we close 2023 and move into 2024. First, our 2024 outlook will be better informed with another quarter of redetermination activity observed. Second, rates impacting 60% of our 2024 Medicaid premium revenue are still unknown, but we are confident that the principle of actuarial soundness will prevail, including appropriate acuity adjustments for redeterminations. We do note that rates have been finalized to date have generally been satisfactory. Finally, the first-year earnings contribution from the Bright acquisition is still under review. In summary, we are very pleased with our Q3 performance and the momentum we have established toward achieving our growth targets. 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 one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Josh Raskin from Nephron Research. Please go ahead. ... Thanks. Good morning. I want to pick up on that last thread around the exchange growth from the redeterminations and what you're seeing early. I'm curious in terms of trends and members coming in. And then is it fair to assume that that would be better risk? They're coming into your product, and they've probably been previously insured, right, coming out of Medicaid. And then I'm just curious if this early experience, I understand a little less retention, does that change your view of the exchanges in 2024? I think last quarter you said that they would be relatively low growth, for, in terms of premiums for 2024. Josh, when it comes to the exchange business and the special enrollment period, we are seeing an increase in special enrollment, monthly special enrollment. It was averaging 8,000-9,000 a month until the redetermination process happened, and it's increased to 12,000 a month and growing. So we are getting membership flow into the Marketplace from Medicaid redeterminations, not only from our book of business, but from competitors' book of business. We do have a product in every place we have a Medicaid footprint, but in many cases, that product isn't as competitively priced as our competitors. So where we're competitively priced, we're getting Medicaid membership from other competitors, and we're getting Medicaid Marketplace membership from our own book of business. So we're pretty pleased that we did not forecast Marketplace membership growth. We continued it upside to our membership case, and we're seeing a nice result there. Mark, anything to add? Sure. Josh, I added about 40,000 members through SEP in the quarter, compared to the 200,000 net we lost in Medicaid. So if you put some conversion rate on how many of the 40,000 came from our Medicaid book or someone else's Medicaid book, that conversion rate is pretty good, call it, you know, 15% or 20%. On the rate that they're coming in at, it looks like they're coming in pretty much at our portfolio run rate within Marketplace. We're not seeing pent-up demand or anything like that, so we're liking the pickup and the implications for future volume, and those margins, so far are looking pretty good to us. The second part of your question, Josh, you asked about the retention percentage. We just follow the data, and with 300,000 membership losses to date, the first thing we say is it's ill-advised to extrapolate any current result. Many of our states front-loaded the process, and by front-loading, we mean they specifically targeted members more likely to lose eligibility. And the fact that 70% of the terminations were procedural means that the reconnect rate has been high, averaging 25 and now moving to 30% of those members who have lost eligibility. So we just follow the data, and we originally said we would lose 400,000 of the 800,000 members we gained during the pandemic, and now that number has increased to 480,000. I suppose that would mean that it is likely that whatever we're seeing in terms of Marketplace pickup would likely increase as well. Perfect. Thanks. The next question comes from Kevin Fischbeck, from Bank of America. Please go ahead. Great. Thanks. I guess two questions. One, on within the Medicaid business, as you talked about how, MLR is coming in line with expectations, seems like every time we do that, you also mention that, you know, net of risk corridors and, and things like that. Is there any way to quantify what the pressure would have been without the offset of risk corridors? And then as far as the MA, you know, commentary, it sounds like you're saying Q3 came in worse, but you still caught it in time for your bid. So I'm trying to figure out how, how MLR in Q3 could be higher than expectations but, but not be a problem for 2024 if you submitted bids in June. Thanks. On the Medicaid MLR, I'll kick it to Mark here for more color. But as we've always said, and we made a big point of this at Investor Day, on the pre-COVID minimum MLRs and corridors, that set sort of an industry benchmark of medical margin performance, we have routinely outperformed those benchmarks, which gives rise to a payback to the state in the form of a liability in many of our states, and some of those corridors were deep into them, meaning that we're in the 100% tier. So, with that having been said, if performance deteriorates during the year for any reason, whether it's an acuity shift, redetermination, whether it's a trend inflection, whether it's flu or COVID, for whatever reason, that liability acts as sort of the first financial cushion to absorb it before rates pick up. Meaning the acuity adjustments, trend assumptions, always being baked into rates, fulfilling the concept of actuarial soundness. And we've said that from the beginning of this process, that this is developing exactly as planned. We knew there'd be an acuity shift, manageable and modest as it is. It would put pressure on the underlying MCR. Our corridor liabilities would act as the first point of financial cushion until the rate process takes full credit of the acuity shift and trend, and that's exactly what's happening today. Right, and just to put a little color around that, if in normal times you're booking corridor expense and underlying trend increases quarter to quarter, in our situation, I'll just book less corridor expense. But it's important to note, I still booked meaningful corridor expense in the Q3, so it's not like the corridors have completely been offset. We're still booking corridor expense, and we still have a significant ultimate on those liabilities. Now, as Joe mentioned, that corridor works well in the current fiscal year, and then it's about the new rate cycle. But remember, we tend to be best-in-class margins, which means that new rate cycle always works for us and replenishes our corridor position and keeps us in the mode we're currently running. Kevin, the second part of your question was on the Medicare MCR, which admittedly ran hot in the quarter at 92.4% and was running in the high 80s earlier in the year. We're still on target to produce 2.5%-3% pretax margins in that business. It should be twice that. Our target is 5%-6% pretax. And yes, we saw some trend inflections in the Q3 that were higher than we observed in the first part of the year. But we're conservative pricers. We caught some of these trends early in the year, whether outpatient, professional services, screenings, and PCP visits are back, both on the medical side and on the behavioral side. LTSS hours, the hours assigned to the frail members who are getting in-home services increased slightly in the quarter. All in, we believe we captured a conservative view of medical cost trend, which right now is running at 7% year-over-year, higher than we had expected, but we believe we've captured that in our 2024 bids and fully expect our Medicare business to be back to 5%-6% pre-tax margins in 2024. Great. Thanks. The next question comes from Nathan Rich, from Goldman Sachs. Please go ahead. Great. Good morning. Thanks for the questions, and thanks for the detail on the earnings drivers for next year. Joe, I think you kind of framed the 15%-18% EPS growth as the average over the next three years. You know, I guess, could you maybe just go into a little bit more detail on sort of the biggest unknowns in, from your point of view on, that could impact growth next year relative to that 15%-18% range? And then just a quick clarification. On the retroactive rate adjustment in New York, is it possible to quantify what impact that had in the quarter? And do you see a potential for an adjustment to this, going forward, potentially to be more favorable? Thank you. Sure, Nathan. I'll provide the framing and then kick it to Mark. And I think Mark gave some of the building blocks in his prepared remarks. First and foremost, we're very confident in the $38 billion revenue outlook for next year. That's 19% year-over-year growth, and a year where we're still producing best-in-class margins. First, I would say we're starting with a very high quality, solid 2023 earnings baseline. We generally grow organically in our footprint. Embedded earnings of $5.50 a share, both new states, both M&A and new contract wins, is certainly a catalyst into next year. Those implementation costs of $0.75 reverse. We believe interest rates will continue to be high. Bear in mind that half our investable base is in intermediate-term bonds, so they're locked in, and then the rates on the short-term portfolio are going to fluctuate with what the Fed does. But, you know, all outlook there is that interest rates will remain high going into next year, even to the end of next year. The 3 variables that we need to see more of before giving a specific earnings per share forecast for 2024 is: how does redetermination experience emerge in the Q4? To date, it has been completely in line with our expectation. We did increase our ultimate loss assumption, as spoken. And we'd like to see how the rates develop on our 60% of our Medicaid revenue for next year. We know about rates on 40% of our Medicaid revenue next year. Those rates have been actuarially sound. We've been satisfied with the Acuity Adjustments. As Mark said, those Acuity Adjustments were present in 10 out of the 12 rates that we already know about, but we want to see how the rates develop on 60% of the book. So those are the variables going into next year. As you cited at the beginning of your question, we are confident and committed to the 15%-18% long-term earnings per share growth rate off of the 2023 baseline, which means that 2026 earnings per share will be 52%-64% higher than 2023, of $20.75. Mark, anything to add? Yeah, the only other thing, Nathan, I think you asked about the rate adjustment in New York. We reported, as you know, an 88 in Medicaid for the quarter. I'd estimate someplace around 30 basis points is related to that specific phenomenon. And the reason it's a little uncertain is, in several of our states, the retro rates constantly get revisited. I'm optimistic that this one gets a little bit better, but at the moment, we book that adjustment. Thank you very much. The next question comes from Justin Lake, from Wolfe Research. Please go ahead. Hi, Justin. Good morning. Sorry about that. Appreciate the question here. The two things I wanted to touch on were, you know, you had a fair amount of prior year development in the Q3 kind of abnormally high relative to previous. Just curious, which segments of the business might have drove that and the potential, you know, impact to earnings there? And then secondly, on Joe, you mentioned investment income. I'm curious, as you're having these conversations with the states on rates, just want to confirm, like, historically, my understanding is states didn't really take when they set your margin, you know, your rates actuarially sound with a margin target behind it. That margin target was before investment income. Are they looking at investment income and saying, geez, maybe we could pay you a little bit less because your earnings are higher because of the investment income, or is that still left outside of the calculation? Thanks. I'll answer the second question first. Investment income is not only generally, but almost entirely outside the conversation of rates, which generally focus on what we call medical margin or trend assumptions. In some cases, they also focus on a G&A load, but that's rare and infrequent. On the PYD, I'll kick it to Mark, because we're very confident in the strength of our balance sheet. Two points I'll make. From a business perspective, our payment integrity routines are both prepay and post-pay. And a post-pay routine, where you identify things that you should not have paid for and recover it from providers, by definition, that is accounted for in prior period development because it relates to prior periods. That is a large share of any prior period development that we report. Second point to note is, don't forget, we have corridor liabilities relating to some of these prior periods, and to the extent the PYD went against a state in a period where a corridor liability existed, then it was muted in terms of its financial impact. That's exactly right. Payment integrity has become such a fundamental part of our operations, and, and we do it fairly well. That prior year amount that you pulled from the earnings release was largely offset by corridors. Now, more to the point, when we see strong prior period development, it's tempting to be concerned about current reserving. Did they somehow offset to make earnings, something like that? Look, I'd point to the strength of our current reserve position, 51 days DCP, the growth versus revenue. So I feel both good about our current reserving position, but the strength of this prior year exercise as well through our payment integrity function. Our next question comes from Calvin Sternick from J.P. Morgan. Please go ahead. Yeah, thanks. Maybe just switching gears here a little bit. I'm curious what you're seeing the cohort of members who haven't reconnected within that 90-120 day window, but, you know, realize afterwards that they're still eligible for Medicaid. What are the membership positions looking like there relative to what you expected? And I know you've talked about in the past, investing in quality initiatives to move up in the Auto-Assign algorithms. So just wondering if you're seeing those efforts bear fruit here, or if it's still too early to tell, or just too much noise going on with redeterminations. I think you answered the question in your last statement. Because that gap is 90-120 days, we've seen very little of it, given that the redetermination was in full throes, you know, May and June. But your supposition, your theoretical supposition is correct. That member is going to go to the doctor or to the pharmacy, for a service or a script, realize they don't have service, and then reconnect, obviously, with no retroactivity back to the date of termination. So we suspect that member will come back in somewhere around the portfolio average because they'll be requiring services. Anything to add, Mark? Yeah. When we talk about reconnects, just to set the stage for everybody, we tend to think about two categories. Most of them are what we call seamless. That is, within 90-120 days, they realized they lost coverage, contacted the agency, and got back on as though they never lost coverage, and we pick up the retro premium. Now, as Joe mentioned, we're, you know, only 3, 4, 5 months into this dynamic, so the people that are outside the 90-120 day window are only starting to emerge now. We call those reconnects with a gap. They will come in through the typical auto-assign process, and through a number of algorithms, we're getting better and better on auto-assigns in states. So I feel good about our recapture of those reconnects with a gap. Thanks. If I could just ask a follow-up, and I apologize in advance if this is nitpicking a little bit, but you said the rates are generally satisfactory. Was that just a hedge against New York maybe coming in a little bit lower? Just curious what you're seeing on the rest of the book, if things are generally better, in line, or if you have something on the other side that aren't as good as you expected. Thanks. So I think we use the word generally, obviously, because we're reporting a retroactive rate that not only us, but the entire industry is advocating against. So that was the reason for the term. But for the most part, on the 40% of rates that we know about, that impact 40% of our revenue for 2024 in the Medicaid business, the rates have been actuarially sound and have included what we consider to be actuarially reasonable adjustments for acuity. Great. Thanks. The next question comes from Stephen Baxter from Wells Fargo. Please go ahead. Yeah. Hi, thanks for the question. I just wanted to come back to the acuity discussion. I think you mentioned it was running, you know, in line with your expectations at this point. I guess, how do you think about the higher level of procedural dis enrollments, you know, having impacted that? I guess, like, how much does that make it challenging for you to feel like you have ... good visibility there at this point. And then I think you mentioned that, you know, the reconnect population, you expect that the MLRs there will be in line with sort of like the rest of the stayers. I guess, do you have data at this point to support that? Or, you know, can you look back and see what the utilizations looked like over the past couple of years for those people? So I'm just wondering if that's based on data at this point, or it's still kind of a working theory. Thank you. So on the reconnects themselves, we're seeing them come back in closer to the stayers average, the portfolio average. Now, I appreciate your question about historical benchmarks of data, but the problem is, over the last 2-3 years, we didn't really have such a phenomenon. But I am feeling pretty good about the MLR of these reconnects, both seamless and with a gap. At the end of the-- maybe the last point to make on this point is a really important one. Durational acuity, and leavers, stayers, and joiners is not a new phenomenon to tracking a book of business. It's just that in this environment, it's more important to track it and to be able to forecast it. People come in to Medicaid because they need services. They come in higher than the portfolio average, and by the time they leave, they're using fewer services and leaving out lower than the portfolio average. That's the way the business works, and we have produced, through all of that, an on average, an 88, you know, between 88% and 89%, 88.5% on average, MCR. That's the way the business works. The issue here is because of the redetermination pause during the PHE, there's twice as many people leaving than joining. So this has always been a phenomenon. We've had tracking mechanisms for durational acuity. We understand the leavers, stayers, and joiners analysis really well, but it is very early in the process, and I come back to the point we made earlier. It is ill-advised to mathematically extrapolate any of these data points. Certain states front-loaded the process, and as you suggested, with the procedural termination rate being so high, the reconnect rate is higher than anybody expected and likely growing. Next question comes from Scott Fidel from Stephens. Please go ahead. Hi, thanks. Would appreciate if you can just give us a sort of a, I guess, your sense on your comfort levels right now with the current performance and then the bid positioning of the Bright Medicare asset that you're going to be acquiring. And maybe just sort of talk about how you're thinking about, you know, sort of factoring that into your 2024 outlook and maybe some of the downside protections that exist, you know, if that performance does come in, let's say, you know, a bit meaningfully below optimal levels. Thanks. Well, Scott, we're very pleased with the strategic complement to our Medicare business, taking it from a $4 billion business to nearly a $6 billion business in a very important state for us, obviously, in California, where we're doubling the size of our Medicaid business. So from a strategic rationale perspective, we're very excited about it. In our embedded earnings is a run rate accretion level of $1 of earnings per share, ultimately. Given the way the CMS pricing cycle works, it is going to take us a little longer than normal to get there, but we're confident in doing so. I'll stop short on commenting about their financial performance. They're a public company. This is immaterial to their operations, so I would allow them to report on how they're doing. But, we do have visibility into how they're performing. And when we said that one of the variables going to next year is how will it perform in the first year, we don't yet know because we don't know where it will be performing when we close on it. I'll stop short of commenting on their performance because that would be inappropriate. Obviously, they'll report earnings soon, and you can get a view as to how the Medicare business is doing. Our next question... Oh, sorry. Our next question comes from A.J. Rice from UBS. Please go ahead. Thanks. Just maybe to ask about the exchanges a bit more. It sounds like you've got some conservatism, at least you believe you have in the Q4, baked in. I know you've been running a pretty low MCR year to date in exchanges. Are you allowing for significant uptick? Sometimes we see that in utilization, obviously, as people hit their deductible limits, et cetera, in the exchanges. Can you give us any sense of what you've baked in? And I think the comment was made that as you look ahead to 2024, you're not expecting a lot of premium growth. It seems like, you know, you've repriced the business pretty well. Why not take a little more active approach to growing that product line next year, given it sounds like you're, you know, hitting your margin targets pretty easily this year in that product, or maybe I'm missing something? No, you're not missing anything. Thanks for the question. Let me frame it in terms of, you asked two questions, one about the MCR and one about membership growth. On the MCR, when we gave guidance at the end of the Q2, we built in roughly an 85% back half MCR, and obviously, we outperformed that in the Q3. We continue to bake in something in the mid-80s for the Q4, which would put us at 76% for the full year, which is 200 basis points below the low end of the range. This business is going to produce 8.5%-9% pre-tax margins for the year. Small, silver, and stable work, given the potential for inherent volatility in the risk pool. I think we have this right. Now, to your point,... Mark mentioned in his prepared remarks, it was subtle, but he mentioned it, that we do plan to grow the Marketplace business next year. We plan to grow it measuredly and modestly. The early read on our pricing competitiveness, I'll just give you one stat that's really important. In our silver product, which is our flagship product, we are now number one or number two priced in 30% of our counties versus 20% this year. It will grow next year. We plan to do it measuredly and modestly, all with the view of producing at least mid-single digit pre-tax margins, which this year will be very high single digit pre-tax margins. Anything to add, Mark? A.J., the only thing I'd add is Joe's been adamant about small, stable, and silver in this product, and so when we set rates last June, we set them on our discipline, on our margin expectations. It looks like the risk pool next year is stabilizing with some of the more strangely priced players dropping out, which means the risk pool for the rest of us has stabilized. As a result, on pricing we committed to last June, we're seeing a much better competitive position. Joe mentioned 20% of our counties now growing to 30%, where we're number one or number two, which means I'm expecting to get more volume than I thought before at margins that conform with our discipline. So we're feeling good about that outlook. Okay, thanks. The next question comes from George Hill from Deutsche Bank. Please go ahead. Hey, good morning, guys, and thanks for taking the question. I guess with respect to the retrospective rate adjustments that you guys talked about, is there any way to quantify both how far you guys are through the process, and simplistically speaking, I guess, how much money you guys think you might be owed from rate adjustments that kind of didn't, that need to be trued up historically? So I'll take that. Obviously, I'm in no position to comment on retro rates that haven't been contractually committed to by our state partners. But with our actuarial team and our data-driven process, we're in there working with them, and I'd say there's, you know, a handful right now where the data is compelling, the state is receptive to the discussion, and we'll let that play out. And of course, I'll book those benefits if and when they come. Okay, thank you. The next question comes from Gary Taylor from Cowen. Please go ahead. Hi, good morning. I had two questions. One was just on the $5.50 of embedded earnings, which I think you reiterated. I think a portion of that historically was Indiana, that, that might have only been sort of 15 or 20 cents. So just wanted to make sure understanding what sort of backfilling that to keep the embedded earnings at $5.50. And also, if you would agree, it sounds like maybe just the Bright year one profitability is the biggest, I guess, question mark right now in terms of how much of that embedded earnings will get realized in 2024. Is that fair? First question, Gary, this is Joe. Yes, in embedded earnings, you're absolutely right. We removed Indiana from embedded earnings, but replaced it with New Mexico and an expansion in Texas now that the contract is finalized. Yes, as I said, we're very confident that we can get Bright to target margins after a two-year period and achieve the $1 earnings per share accretion number. Again, we're just saying that we just don't know what we're going to inherit in terms of earnings picture at closing to forecast the first year. Given that that company is going into OEP themselves, they're probably still working through what their outlook is for next year. It's definitely too early, given the situation, for us to comment on that one. Thank you. The last question comes from Sarah James from Cantor Fitzgerald. Please go ahead. Thank you. One clarification on the rejoiners. Can you give us a split of what's coming back in exchanges versus coming back on Medicaid? And then in the, the 2 of the 12 states that didn't put in the acuity adjustments, are you able to see any pattern there, either in how the cost data is coming in, maybe the, the timing that they started redeterminations, or how the rate is structured with risk corridors, that you're able to determine maybe why those 2 were outliers? I'll kick it to Mark for the color on these, but the first point I'll make is on your second question. I think we appropriately need to include the word yet in the two that haven't. Bear in mind, some of our rate cycle actually incepts only as the redetermination process was starting, or even before it started, which makes it not possible for any Medicaid department to project what the acuity shift would be. So I would introduce the word yet, and who knows? Maybe we'll get a retro or a mid-cycle adjustment on those two states. Mark? Hey, Sarah, on the reconnects, when we use the term reconnects, both seamless and with a gap, that is purely a Medicaid concept. So that 25% going to 30% that we're seeing is strictly within Medicaid. Then separately, as I mentioned earlier, we're picking up members in Marketplace. I mentioned closer to 40,000 through SEP in the Q3. So that would be a different concept, and obviously, as an enterprise, only helps in the overall membership story. And then Joe's exactly right on the 2 of the 12 states, where we haven't seen it yet. There's a few things driving that. The timing of when folks started impacts, you know, how quickly data develops to have a data-driven process. The timing of the fiscal year is definitely a component, but in all cases, the concept of actuarial soundness just means it's a matter of getting the data and the timing consistent with fiscal years and appropriate retro periods. So, we feel good about that process, and again, the vast majority have already given us those concessions, so we feel good about how the process will unfold. That's helpful. 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.