Lucas

Lucas asked about the rationale behind the conservative reserving approach for new contracts, specifically questioning the 103% MER compared to an initial understanding of 0% MER, and how retrospective fee adjustments factor into this given expected membership changes.

Answer

CFO Mario Ramos explained that new contracts typically involve a different, more conservative level of reserves due to new data flow and implementation, which follows GAAP. He noted that the initial reserves are more conservative, and there's an explicit margin added for IBNR build-up, impacting initial profitability.