Elevance Health Inc at Goldman Sachs Global Healthcare Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : So thank you all very much for being here. Glad you made it in last night despite the weather. Maybe if I could just start with you at a high level, you had an 8-K out this morning, reiterating guidance. Can you maybe just give us an update on how utilization trended -- has trended so far in the second quarter, maybe across the different lines of business as we think about that? How 2Q played out relative to the reiterated outlook?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : Great. Maybe just a couple of follow-ups there, if I could. Isn't in Medicaid, I think you talked on the last quarter about having sort of visibility on 75% of your Medicaid revenue for the year as of the first quarter? When we think about this lag in some of the state rates relative to the acuity that you're seeing, you're kind of talking about that 25% of your book where there's still uncertainty on where rates will be set over the -- as those come out over the course of the rest of the year. And that's where maybe those are the states where you're seeing that variability?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : And I guess maybe just to be clear, just in terms of, if you look on a same member basis kind of month to month how that has progressed? Have you seen any kind of increase in the kind of per member utilization within the Medicaid book?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : Okay. And then you kind of talked about your assumptions for rates over the balance of the year. I guess as you get that visibility, do you kind of feel like there will be that adequate matching between rates and acuity as we think about kind of the longer-term in trajectory into '25? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 5:20PM, ELV.N - Elevance Health Inc at Goldman Sachs Global Healthcare Conference

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : Okay, great. And then maybe one follow-up on Medicare utilization. You kind of mentioned the two-midnight rule, how long do you think it kind of takes to get to that new equilibrium between inpatient and observation? And are we there yet?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : Great. And maybe just because Medicare has been so topical this year and the bids were due last week, obviously, there's been a lot for plans to navigate for the upcoming year. So I guess can you maybe just talk about how Elevance kind of approach to their bids from a strategic perspective for '25?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : I guess, is there anything from a plan design standpoint that you did to guard against excess growth?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : Yes. And I guess maybe the other side of that coin is if you do see excess of growth above maybe what you expected, which I think kind of like in line with the market, kind of plus or minus, is that necessarily bad if you kind of priced the plan design correctly?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : Great. I appreciate those comments. Steve, maybe if I could bring you in at this point. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 5:20PM, ELV.N - Elevance Health Inc at Goldman Sachs Global Healthcare Conference

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : I think Elevance has kind of taken a different approach to care delivery than some of its peers. You did the deal with CD&R. Can you maybe talk about why apree health and MPG were the right assets for Elevance? And how that fits into sort of the strategic vision for Carelon?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : Yeah, and maybe just following up on the synergy point that you made, kind of how do you accelerate the growth of those two businesses, the apree and MPG. And where maybe do the synergies lie within the insurance book of business in terms of the number overlap and how it kind of quickly can maybe roll out --?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : I kind of wanted to ask on that, how does this kind of maybe accelerate the percentage of the business that's in risk-based arrangements? And does this result in more global accounts or not necessarily?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : And I think the company, and Gail and maybe in particular, has really talked about kind of proving it inside, taking it outside, is sort of your approach a lot of these services that you're building, whether it be pharmacy or on the health services side. You talked a lot about kind of where you are in that process to be able to have proven it inside and start to take it outside. And how does that differ between the different, you know, businesses within services and on the pharma --?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : You guys have been working quite a time on the PBM and pharmacy side, kind of the PBM, maybe traditional PBM (technical difficulty) some of the specialty capabilities a little bit more recently. What does it take? I mean, you're going up obviously against a lot of big incumbents in that space. How you feel like that business is coming together to be in a position to maybe sell more broadly externally and kind of compete in those --?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : How important is that specialty piece because you bought BioPlus, Paragon, Kroger Specialty's coming in, hasn't closed yet. Can you talk maybe just about where sort of that integration stands and like the capabilities that you've acquired and built? Are they integrated? Are you at a point where you can handle Eleveance's volume? What does that transition look like? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 5:20PM, ELV.N - Elevance Health Inc at Goldman Sachs Global Healthcare Conference

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : And can you maybe help us think about how the economics ramp because it feels like you're maybe in kind of build-out mode now, maybe a little bit investment heavy at this point. How long does it take to kind of get to mature margins in either like specialty pharmacy or infusion as we think about what that curve looks like?

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : Yeah, great. Morgan, maybe if I can bring you in. So the company kind of started on this, I think, two years ago on this process of improving commercial margins on the back of COVID. I think you had talked about a path of several hundred basis points at that point. I guess kind of from where you stand today, kind of how you're tracking relative to that target? And also, can you continue to kind of price for kind of margin expansion on top of trend and remain competitive and continue to kind of grow that commercial book of business? Morgan Kendrick - Elevance Health Inc - Executive Vice President and President, Commercial and Specialty Health Benefits Yeah, Nate. Thanks for the question. And as you indicated, in July marks two years of the endeavor to actually improve and correct those fully insured risk margins back to pre-COVID levels. And we're pleased that we've done that. To answer your question directly, I do think there is incremental opportunity to price trend and a little extra, and continue to grow that in '25. We saw this occur in '23, '24, now it'll occur in '25. And I also think there's a bigger opportunity, quite honestly, we think about our higher margin fee-based business growing into it. And we announced at our I Day last year that we're going to grow that fee-based earnings across the organization 50% over the next five years. That includes a lot of what we're working with Pete's team to build for purpose to solve customer problems as well as pharmacy integration, things of that nature. So we think there's a real opportunity to not only -- we've got the business in the right spot. So now we've got a growth opportunity with large group risk, and we've got opportunities with our very large fee-based organization as well.

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : And I guess, there's been a lot of focus, I think, on the smaller end of the market on what role acuity might be able to play. Seems like you have other kind of saying maybe more of those employers are looking at ASO type of relationships. Can you maybe just talk about kind of what you're seeing from that kind of smaller employer? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 5:20PM, ELV.N - Elevance Health Inc at Goldman Sachs Global Healthcare Conference Morgan Kendrick - Elevance Health Inc - Executive Vice President and President, Commercial and Specialty Health Benefits And I think that market is a really interesting market. And I like the market a lot and we're talking 200 to 500 lives would be more of what I would define as downmarket. And we're seeing across the -- whether they want to move into various new opportunities where we have various chambers and various organizations, where they want to stay fully insured, do they want to be fully insured -- self-funded with appropriate specific and aggregate stop-loss protections. Do they want to be -- and what we would call a balanced funded, which is basically kind of a minimum premium type, a hybrid in between. Acuities are interesting as well. I would tell you, we don't see a significant appetite for them. We have a few that we've deployed on behalf of an employer. We find many of the downmarket employers are still very quite paternalistic and they will remain that way. When it becomes cost prohibitive and unable to manage Elevance's claim, we think there's something there. But we think that dovetails precisely into the way we think about our ACA business because when you give money to the staff to go buy their benefits, they're buying on the exchanges and there'll be a TPA or a brokerage firm that will be working to coordinate this for them. But if we show up competitively on the ACA, that's where the membership will go. And that's what we've seen when we've seen competitors put acuities in markets where we're very competitive, we reap that benefit by having the most affordable solutions in the geographies.

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : Okay. I wanted to ask on the exchange business as well. Others in the space kind of talk about some strong enrollment on the exchanges on the back of redeterminations. Can you maybe just talk about what you're seeing from an SEP enrollment standpoint this year split out? Morgan Kendrick - Elevance Health Inc - Executive Vice President and President, Commercial and Specialty Health Benefits We've done quite well in that business, and we've taken a very measured approach to how do we price this business. We certainly aren't looking for membership of our margin and we're wanting to strike that right balance. And we've been able to do so far, that's our strategy again in 2025. When I look at the market growth in all of our geographies, which includes coming out of the Medicaid business, we're outpacing the market. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 5:20PM, ELV.N - Elevance Health Inc at Goldman Sachs Global Healthcare Conference So we're taking share in the markets that we are. And we know within our markets, we still have opportunities to improve our competitive position economically. So we think there's still runway just in that. And where our Medicaid business and our commercial business overlap, we've been somewhere in the 30% retention range. And we overlap in 11 of our 14 geographies.

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : And can you maybe just talk about margins for the business today and kind of where you want to see them long term? Morgan Kendrick - Elevance Health Inc - Executive Vice President and President, Commercial and Specialty Health Benefits Our margins, as they're performing -- our performance is quite healthy right now. We feel good about it. We look at the margins not only for the commercial business, but also in Pete's organization in the broader Elevance. So there are activities that Pete's organization does for ACA business pharmacy, the age, things of that nature that are across the organization. So right now, our forecast is we're going to continue the trajectory with -- that we are on with this business and certainly there's an opportunity to pivot if indeed ever necessary.

Question: Nathan Rich - Goldman Sachs Group, Inc. - Analyst : Great. We're just about out of time. So why don't we wrap up there. Thank you, everyone, for coming, and thanks team for joining us.