Elevance Health, Inc. Q4 FY2024 earnings call

• Gail Boudreaux extended sympathies to California wildfire victims, discussed healthcare challenges like rising costs and administrative complexity, and highlighted initiatives like targeted digital interactions via the Sydney app and innovative plan designs in Medicare Advantage.
• Mark Kaye discussed financial results, noting $175.2B total operating revenue in 2024, adjusted diluted EPS of $3.84 in Q4, and provided 2025 guidance including adjusted EPS range $34.15-$34.85.
• Pete Haytaian spoke about Carelon's growth, including strong internal and external growth, focus on whole health solutions, and momentum in services and pharmacy.
• Felicia Norwood detailed Medicare Advantage enrollment performance, emphasizing strong retention and alignment with expectations.
• Morgan Kendrick discussed commercial ACA performance, highlighting the business's strength and expansion into new markets.

Medicaid: Fourth quarter Medicaid cost trend remained elevated, with complex care management programs reducing inpatient emissions by 7%, though rates are insufficient to cover elevated cost trends. Medicare: Benefit reductions and market exits in 2024 created a foundation for profitable growth, with anticipated Medicare Advantage membership growth of 7%-9%. Commercial: Integrated medical and pharmacy offering resonated, with 18 new national accounts added in 2024 and individual exchange business growing over 30%. Carelon: In 2024, made progress against scaling the enterprise flywheel, with the acquisition of CareBridge bolstering home and community-based services, and Carelon Services experiencing impressive growth, positioned for revenue growth above long-term targets.

• Adjusted diluted earnings per share expected in range of $34.15 to $34.85.
• Projected total Medical membership to be 45.8 million to 46.6 million by year-end 2025.
• Anticipate Medicare Advantage membership of 2.2 million to 2.25 million by year-end 2025.
• Operating revenue expected to grow in the high-single to low double-digit percent range.
• Consolidated medical loss ratio expected around 89.1% ±50 basis points.
• Plan to allocate approximately $2.3 billion towards share repurchases.

• Risks related to healthcare cost trends, including elevated trends in Medicaid that may not be fully reflected in rates.
• Regulatory changes impacting Medicare Advantage and Medicaid programs.
• Market competition affecting enrollment and margin performance.
• Uncertainties in government policies related to healthcare subsidies and program reforms.

Q: A.J. Rice asked about Medicare Advantage enrollment and margins, including whether growth was reflective of full open enrollment view and margin expectations.

A: Gail Boudreaux and Felicia Norwood discussed strong retention and alignment with expectations, while Mark Kaye addressed margin stability through disciplined cost management.

Q: Lance Wilkes inquired about utilization trends by product and medical cost trend categories.

A: Mark Kaye stated cost trends were stable across lines of business, with Medicaid trends elevated and Medicare trends manageable, expecting elevated trends to persist in 2025.

Q: Stephen Baxter followed up on Medicaid MLR change and 1/1 rate repricing.

A: Mark Kaye explained Medicaid cost trends remained elevated, with rates not fully catching up, and expected improvement in the second half of 2025 as rate adjustments take effect.

Q: Lisa Gill asked about Part D redesign impact on MLR and CarelonRx growth.

A: Mark Kaye discussed MLR factors including Part D changes and acquisitions, while Pete Haytaian highlighted Carelon's growth, including over 24% growth in 2024 and strong organic growth.

Q: Andrew Mok sought clarity on Medicare Advantage membership growth and AEP growth.

A: Felicia Norwood explained AEP growth was driven by group membership and individual growth aligning with expectations.

Q: Ryan Langston inquired about Blue Cross of Louisiana acquisition and acquisition priorities.

A: Gail Boudreaux and Pete Haytaian mentioned working closely with Blue Cross Blue Shield Louisiana and focus on whole health solutions in acquisitions.

Q: Justin Lake asked about health care benefits business seasonality and margin guidance.

A: Mark Kaye discussed seasonality with more than 60% of EPS in first half, and margin decline due to non-recurring expenses and membership mix.

Q: Josh Raskin questioned commercial trend pricing and MA growth actions.

A: Mark Kaye and Gail Boudreaux addressed commercial cost trends being priced for and MA growth driven by retention and normal cadence.

Q: David Windley asked about pricing in commercial and Medicaid.

A: Mark Kaye and Felicia Norwood discussed service fee revenue shift to risk-based contracts and Medicaid rate discussions with state partners.

Q: Joanna Gajuk inquired about long-term margin targets and Carelon growth impact.

A: Mark Kaye explained long-term targets remain, with Carelon's faster growth shifting near-term margin dynamics.

Q: Erin Wright asked about Medicare Advantage rate notice and regulatory implications.

A: Felicia Norwood discussed positive rate notice direction and collaboration with administration on program reforms.

Q: Gabrielle Ingoglia asked about commercial cost trends and guidance.

A: Mark Kaye stated commercial trends were elevated and priced for, with continued strong performance.

Q: George Hill asked about ACA exchange subsidies and premium payment verification.

A: Morgan Kendrick and Mark Kaye discussed ACA business strength and consistent effectuation rates.

Q: Scott Fidel asked about Carelon margin dynamics and commercial risk enrollment growth.

A: Mark Kaye elaborated on Health Benefits margin objectives and growth opportunities, with Carelon's growth accelerating embedded earnings power.

Q: Michael Hall asked about MA growth conviction and margin confidence.

A: Gail Boudreaux discussed good retention, group growth, and alignment with long-term strategy.

Q: Whit Mayo asked about Puerto Rico MA business performance and margin impact.

A: Felicia Norwood discussed strategic adjustments in Puerto Rico MA and alignment with margin stabilization goals