Elevance Health Inc Q3 2024 Earnings Call Transcript

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

Question: AJ Rice - UBS Investment Bank - Analyst : Hi, everybody. Thanks for the question. So in the slide deck, you're reiterating your expectation of 12% earnings growth from '22 to '27, which off that '22 base would suggest you get something like $51 in '27. But you're also saying off the new base this year, you'll grow 5% next year, which would give you something like $34.65, something in a high $34s. I guess the question is and it sounds like all of the short term issues are around Medicaid, is the getting the right rate going to be sufficient to get you the kind of accelerated earnings growth in '26 and '27 that would get you back on track to hit that multiyear 12% CAGR target or should we rebase that given what we're looking at 2024 and 2025?

Question: Stephen Baxter - Wells Fargo Securities LLC - Analyst : Hi, thanks for the question. Just wanted to come back to the Medicaid discussion. Obviously, the magnitude of the revision that's implied there is alarming, particularly given that we're at the end of the membership impacts from re-determinations, just trying to understand better how things got so much worse, so quickly. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:30PM, ELV.N - Q3 2024 Elevance Health Inc Earnings Call I guess how much of this is actually new to the third quarter versus not having a good reading on where things were last quarter? And to the extent there are new developments in the third quarter, can you better help us understand? You know, perhaps what some of those are? Thank you.

Question: Benjamin Hendrix - RBC Capital Markets - Analyst : Okay, thank you very much. Just wanted to kind of drill in a little bit more on the pacing of the catch up and of rates to acuity that you may expect over the coming year. You probably don't have perfect visibility into it. But are there any pockets, I think Mark mentioned a big bolus of members that kind of came off recently, it just are there any pockets of areas where you see a large bolus of members come off acuity increase and then have a state renegotiation that could be kind of a catalyst for creating some accelerated recovery or how do you think about pacing of the recovery throughout next year? Thanks.

Question: Ann Hynes - Mizuho Securities USA LLC - Analyst : Great. Thank you. Can you just give us a little bit more detail on the utilization trends? Like what is increasing more than your expectations? Is it inpatient outpatient pharmacy? Any color you could provide would be helpful. Thanks.

Question: Andrew Mok - Barclays Capital, Inc. - Analyst : Hi, this is Tiffany on for Andrew. It looks like the 200 basis points of 3Q Enterprise MLR miss like translates to about 500 basis points of Medicaid pressure in the quarter. One, is that the right ballpark to think about and two, like just given the apparent like hundreds of basis points of incremental pressure is the Medicaid book profitable today?

Question: Erin Wright - Morgan Stanley & Co - Analyst : And I wanted to ask on Medicare advantage, just based on the analysis of sort of the MA landscape now and the latest kind of benefit design details is there is the competitive environment playing out as you would expect in terms of being fairly rational with the focus on kind of profit versus growth? Is it playing out according to plan there? And in driving some of that assumption in terms of your at or above market growth in M&A next year. Thanks.

Question: Justin Lake - Wolfe Research, LLC - Analyst : Thanks. Good morning. I wanted to follow up on your comments around Medicaid trend accelerating through the quarter and being 3 times to 5 times typical to your point. I don't think anyone on this call has ever heard of trend being discussed in terms of multiples of typical. And given it got worse through the quarter, just curious if you could give us some color on what's going on through the quarter. Is it that you're seeing people come back on the rolls that are sicker, given the redeterminations themselves should have been, you know, give or take, run out at this point. And then, you know, given that it looks like the exit rate in the quarter is the lowest margin, the highest cost sounds like. Can you tell us where you were ending the quarter and where you expect to be for the fourth quarter versus that 3% to 4% margin target that we all think about. Thanks.

Question: Lisa Gill - JPMorgan Chase & Co - Analyst : Thanks very much and good morning. Gail, one of your peers talked about accelerating Rx trends, and specialty. You know, we've seen changes to IRA around catastrophic coverage, the one you haven't called out anything around Rx as far as cost trend goes. Are you seeing that? How did you price for that going into 2025? And then just on the flip side, CarelonRx had very strong results, is that a key driver of what we're seeing, especially on the specialty side and growth in specialty.

Question: Lance Wilkes - Bernstein & Co. LLC - Analyst : Quick follow up on the rate outlook for Medicaid, if you could just give some color on what you observed as far as rate increases, maybe historically or in the first half of the year and then what you're seeing in the second half of the year and what your outlook is based on how far you are along in early '25. And then the broader question was just, are you, are you anticipating making any strategic moves as a result of these pressures that again are time bounded? And as part of that, does this make any change in how you might insource all of the functions of your PBM? Thanks.

Question: Joshua Raskin - Nephron Research LLC - Analyst : Hi, thanks sorry to stay on the topic, but I'm still struggling with why the acuity rate mismatch is accelerating now or why this cost trend is accelerating now. My understanding is that most of the redeterminations, you know, have been done, right? This started over a year ago. So felt like there was less redetermination activity in the most recent quarter than previously. And I think, last quarter, there was this conversation around higher utilization for members that were about to lose coverage. And so you would have expected that to slow. So I guess I'm still confused as to what's causing this big acceleration in this trend. Why is that happening so late in the process?

Question: Michael Halloran - Robert W. Baird & Co., Inc. - Analyst : So, just to add on the Medicaid topic. So based on your '24 guide, if I'm not mistaken, implied, 4Q impact actually seems to be larger than your third quarter MLR Pressure. So it sounds like this is the case. But is this basically assuming the acuity rate mismatch worsens in the next quarter even though you have all your September/October rate increases. And at this point, I guess in mid-October, do you think you now have enough data and visibility into your own acuity mix that you can pass along to these states in time for Jan one renewals or just, you know, I presume draft rates are pretty already there. So could they open that back up and adjust or is it too late? Thank you

Question: Ryan Langston - TD Cowen - Analyst : Hi, good morning. It sounds like you expect growth on the exchange side into 2025. So I guess in that context, how should we think about the margin profile for maybe just the exchanges in the overall commercial business? I think you can --

Question: Scott Fidel - Stephens Inc. - Analyst : Hi. Thanks. Just interested if you could maybe dimension for us and discuss some of the downstream impacts from the Medicaid environment to the Carelon health businesses. Do know that there's quite a bit of leverage or exposure in those businesses to Medicaid. So curious , on how those businesses are performing and how you're positioning them around some of these dynamics we're seeing a Medicaid. Thanks.

Question: Whitman Mayo - Leerink Partners LLC - Analyst : Hey. Thanks. I just wanted to go back and follow up. I think it was Justin's question, not sure I actually heard the answer. Are the rejoiners coming back negatively impacting cost trend, like are they increasingly gaining access through the point of care through presumptive eligibility in the hospital or something like what does the actual care activity look like on the joiner population?

Question: Sarah James - Cantor Fitzgerald & Co. - Analyst : Thank you. Mark, when you said Medicaid is profitable in '24, is that across all states? Or is it a mix of some profitable and some not. And then can you just help us understand the actuarial soundness protection? Is that a two-year or a three-year period? If we look at '24 and '25 as below target margins. But I think '23 was a good year for you guys on Medicaid. Does that still give you a position to pursue retroactive rate increases on top of the midyear rate updates you're targeting?

Question: David Windley - Jefferies LLC - Analyst : Hi. Good morning. Thank you for taking my questions. I wanted to try to understand, respectively, the comments about kind of the cadence of rate recovery or achievement in Medicaid and then the confidence in MA bids for Medicare and with the question being in your mid-single-digit EPS growth for next year, do you expect margins in caid and care, respectively, to be up, flat or down?

Question: Joanna Gajuk - BofA Securities, Inc - Analyst : Hi. Good morning. Thanks so much for taking the question. So just last question, I guess, on this Medicaid commentary, and I guess the margin commentary you just made in terms of margins being stable to be in next year. Is that I guess, confirmation that you assume that by the end of '25, the Medicaid rate mismatch will be fully restored? Is that the way to read by the end of the year, it's going to be restored?

Question: George Hill - Deutsche Bank AG - Analyst : Hey. Good morning, guys. And just kind of a couple of quick follow-ups here on the Medicaid again. I guess number one, -- , could you provide more color on what drove the PYD in the quarter? And then, I guess from a state concentration perspective is kind of -- is the discrepancy between rates and acuity broad-based? Or is -- are there state concentrations here that we should be concerned about, like that could speed the resolution of the issue?