Contract Losses Offset
Q: Can core strength offset Virginia and Florida contract losses?
A: Management confirms that the core business's strength will offset earnings losses from Virginia and Florida contract losses. The company estimates a $0.80 earnings headwind from losing these contracts, which will be offset by $0.80 of accretion from new Texas contracts and CHIP reprocurement. " Projected improvements in Medicaid and Medicare MCRs by 90 basis points in the remaining quarters also contribute to offsetting any potential earnings drag. "

EPS Growth Outlook
Q: Is the 15%-18% EPS growth outlook for 2025 still expected?
A: Yes, management maintains its outlook for 15%-18% EPS growth by 2025, stating that the building blocks haven't changed. They continue to harvest earnings from the existing footprint, leverage operating efficiencies, and capitalize on embedded earnings. "

Revenue Targets Confidence
Q: Are you confident in achieving the $46 billion revenue target by 2026?
A: Management feels confident in reaching the $46 billion revenue target by 2026, supported by a $60 billion new contract pipeline, including opportunities in Kansas, Georgia, and Texas. They anticipate continued 13%-15% revenue growth, despite recent RFP disappointments. "

M&A Pipeline and Growth
Q: Has there been a slowdown in the Medicaid M&A pipeline?
A: No, management states that the M&A pipeline remains robust with advanced-stage discussions ongoing. They actively pursue both formal processes and bespoke discussions, expecting future deals to contribute to growth. "

Medicaid Redetermination Impact
Q: How are Medicaid redeterminations affecting membership?
A: The company expects to lose 600,000 members due to redeterminations but is experiencing a 30% reconnect rate. Special enrollment in marketplace plans has doubled from 12,000-15,000 to 30,000 per month, indicating members are moving from Medicaid to marketplace. "

Bright Acquisition Accretion
Q: Has the Bright acquisition changed your view on Medicare Advantage?
A: Management remains confident in achieving $1 of accretion from the Bright acquisition by year three. They improved the MCR from 95% to 87% and reduced G&A expenses from 13% to 8%, resulting in significant operational turnaround. "

Rate Adequacy and Acuity
Q: Do you need higher rate increases next year due to acuity?
A: No, management expects rates next year to be actuarially sound and commensurate with medical cost trends. They received acuity-related adjustments in 19 states, representing 95% of revenue, and believe current rates adequately reflect acuity shifts from redeterminations. "

Medicare Advantage Margins
Q: What are your margin targets for Medicare Advantage?
A: The company targets mid-single-digit pretax margins for its Medicare business, aiming for MCRs in the 87%-88% range. They focus on dual eligibles, providing opportunities to manage high-acuity, high-dollar members effectively. "

Marketplace Strategy
Q: What's your long-term strategy for marketplace growth?
A: Management plans cautious, steady growth in marketplace membership while maintaining high single-digit pretax margins. By investing 300-400 basis points of margin into growth, they achieved 30% membership and 20% premium revenue growth. "

ACA Subsidy Expiration Impact
Q: How will expiring ACA subsidies affect exchange membership?
A: The company doesn't expect significant impact if enhanced subsidies expire, as their membership largely consists of low-income, highly subsidized individuals. They anticipate minimal membership loss since they did not significantly benefit from the subsidy enhancements. "

Florida Appeal Status
Q: Any updates on the Florida contract appeal?
A: Management is not predicting the appeal's outcome but notes that historical precedent suggests extended discussions in Florida procurements. They consider this the beginning of the process and expect further developments. "

Prior Year Development Impact
Q: Was there favorable prior year development affecting earnings?
A: Yes, there was favorable prior year development, which is typical in the reserving process. The company replenished reserves, maintaining 49% days claims payable, and feels adequately reserved with nothing unusual impacting this quarter's earnings. "