Elevance Health, Inc. Q1 FY2025 earnings call

• Patient advocacy solutions supported over 6 million members with a 95% satisfaction rate, providing personalized guidance. • Scaled HealthOS digital platform supporting over 88,000 care providers and 1,200 provider organizations. • Expanded value-based oncology care model to Medicare Advantage with reduced inpatient admissions and higher treatment adherence. • Carelon Services launched new post-acute and behavioral health contracts, and completed acquisition of CareBridge, strengthening home and community-based services. • Medicaid made progress on rate alignment with April adjustments and partnered with states on care delivery rethinking. • Medicare Advantage performance consistent with expectations, strong retention, and targeted growth. • Commercial saw strong engagement with integrated offerings, valuing the differentiated approach.

Health Benefits: Operating revenue for the quarter was $48.8 billion, an increase of over 15%. The consolidated benefit expense ratio was 86.4%, an increase of 80 basis points year-over-year. Medicare Advantage and Individual ACA membership growth, along with CarelonRx product revenue, contributed to the revenue. Carelon: Operating gain was $1.1 billion, growing 34%, driven by growth in pharmacy volumes and improved performance of risk-based capabilities. Revenue from recent acquisitions in pharmacy services and home health also played a role.

• Reaffirmed adjusted diluted earnings per share range of $34.15 to $34.85. • Anticipated moderation in Individual ACA membership during Q2 due to lower effectuation rates on renewing members. • Net investment income expected to align closely with initial guidance. • Debt-to-capital ratio at approximately 41%, preserving flexibility for strategic investments. • Health Benefit segment utilization patterns consistent with full-year guidance.

• Elevated trend environment impacting utilization patterns in the Health Benefit segment. • Potential membership attrition in early Q2 for Individual ACA due to lower effectuation rates. • Impact of Medicaid premium taxes and Part D Inflation Reduction Act changes on benefit-expense ratio and operating earnings.

Q: Flesh out Medicare Advantage issues, including group MA, IRA impact, and trend visibility.

A: Mark Kaye stated Medicare costs elevated but manageable, consistent with expectations, and flu/utilization moderated as the quarter ended.

Q: Talk about Carelon services growth, cross sales, and specialty pharmacy.

A: Pete Haytaian discussed Carelon services growth, internal and external expansion, and progress in specialty pharmacy, including migration of businesses like BioPlus and Kroger Specialty Pharmacy.

Q: Quantify Individual ACA membership step down and impact on profitability.

A: Mark Kaye said membership attrition in the single-digit percent range in early Q2, with revised assumptions factored into the reaffirmed EPS guidance.

Q: MLR performance and trend impact.

A: Mark Kaye explained MLR driven by the Inflation Reduction Act and a larger-than-anticipated Medicaid premium tax, with no material impact on operating earnings.

Q: New members vs existing members and risk coding.

A: Mark Kaye discussed risk adjustment importance, disciplined benefit design, and how it aligns plan payments with member healthcare needs.

Q: Medicaid MLR margin trend and 2025 guidance.

A: Mark Kaye said Medicaid benefit expense ratio decreased sequentially, with trends elevated but decelerated, and recovery expected later in the year.

Q: Medicaid rate outlook for July.

A: Felicia Norwood said early discussions on July renewals were underway but far too soon to comment, with ongoing communication with states.

Q: V28 risk model change impact.

A: Mark Kaye said V28 changes were anticipated and incorporated into 2025 planning, with a disciplined approach to benefit design.

Q: Group MA utilization patterns.

A: Mark Kaye stated no meaningful acceleration in Group MA cost-trend, with strong retention and disciplined approach.

Q: Part D utilization and new normal.

A: Mark Kaye said comfortable with MA membership mix, and Part D utilization balanced by contractual offsets like risk corridors and rebates.