Medicaid Cost Trends and Margin Impact
Q: Why are Medicaid costs accelerating so much now?
A: We experienced accelerated cost trends in Medicaid throughout the third quarter, with trends running around 3x to 5x the historical average depending on the state. " This is driven by higher overall membership acuity due to redetermination cycles now being substantially complete. " While rate increases have been higher than historical averages, they remain insufficient to fully cover the claims trends we're seeing. "

Medicaid Rate and Acuity Mismatch
Q: When will Medicaid rates catch up with higher acuity?
A: We expect the mismatch between rates and acuity to narrow as state rate updates increasingly reflect the underlying member acuity. " However, given the states' processes rely on data that can lag by 1 to 2 years, it's going to take time before this is fully reflected in their rate schedules, possibly persisting through 2025. " "

2025 Margin Outlook and Profitability
Q: How will the Medicaid pressures affect 2025 margins?
A: We anticipate that Medicaid margins in 2025 will remain below our long-term target due to the timing disconnect between rates and acuity. " Nevertheless, we believe this is time-bound, and over the long term, we are confident in achieving our margin targets as rates catch up with acuity. "

Medicare Advantage Competitiveness and Margins
Q: Is the Medicare Advantage environment playing out as expected?
A: Yes, we feel well-positioned in Medicare Advantage, having taken strategic actions last year to create a sustainable foundation for growth. " We expect to grow in line or slightly better than the market and are confident in our product positioning for 2025, with margins expected to improve compared to 2024. "

Impact on Carelon Health Businesses
Q: How are Medicaid dynamics affecting Carelon Health?
A: While we're pleased with Carelon Services' growth exceeding 30% year-over-year, the behavioral health trends in Medicaid are impacting our margin profile in the short term. " We're also seeing effects from the acceleration of risk arrangements, but we feel very good about the long term. "

Pharmacy Trends and CarelonRx
Q: Are you seeing accelerating Rx trends in specialty pharmacy?
A: We've seen an increase in Medicare Advantage Part D specialty drug utilization, but trends in unit costs have been in line with our assumptions. " CarelonRx has strong results, and we're very pleased with our strategy and growth, making good progress in specialty pharmacy and infusion. "

Commercial Business and ACA Exchanges
Q: How is the margin profile for Exchanges and Commercial business?
A: We feel really good about our Commercial business overall, including Individual ACA. " We're positioned well in the geographies we serve, expecting to improve our market share by about 2 points moving forward, and we anticipate the business will meet our economic expectations. "

Medicaid Profitability and State Rates
Q: Is the Medicaid book profitable today?
A: Yes, the Medicaid business is expected to be profitable this year, albeit below our target margin range. " We continue to work diligently with our state partners to ensure rates align with member acuity, but this process will take time. "

Utilization Trends
Q: What is increasing more than your expectations?
A: In Medicaid, we are seeing ongoing pockets of elevated trend, most notably in behavioral health. " In Medicare, trends were slightly elevated due to incremental pressure from the Two-Midnight Rule and a late summer surge in COVID cases. "