Medicaid MLR Pressures and Risk Corridors
Q: How are you managing Medicaid MLR pressures?
A: We've seen higher medical costs in our Medicaid business, with our Medical Care Ratio averaging 90.2% in the first half and tracking toward 89.3% for the full year, slightly higher than our previous guidance of 89%. " To address this, we're using our risk corridors, which have historically provided about 200 basis points of cushion. " This year, we're utilizing about half of that cushion, and known rate adjustments in the second half will offset another 1% of the cost trend, keeping us well-insulated. "

Marketplace MLR and Growth Strategy
Q: How is your Marketplace MLR performing, and what's your growth plan?
A: Our Marketplace business is performing well, with a 72% MLR in the first half and an expected 78% in the second half. " We might end up favorable to our full-year target but could choose to invest margins to drive growth next year, as we did this year when we grew revenue from $1 billion to $1.2 billion. " Our goal is to maintain mid-single-digit margins while managing the business's inherent volatility.

Operating Cash Flow Expectations
Q: What are your expectations for operating cash flow in the second half?
A: We expect operating cash flow to normalize in the second half, running at about 1.1 to 1.3 times net income. " The first-half fluctuations were due to timing issues with risk corridor payments, CMS payments, and tax payments, but over time, cash flow will align closely with net income. "

Impact of Potential Expiration of Enhanced Subsidies
Q: How will expiring subsidies affect Marketplace enrollment?
A: If the enhanced subsidies expire at the end of 2025, we estimate that 10% to 20% of our Marketplace members might be priced out of silver products. " However, some may shift to our lower-priced bronze offerings, which could lessen the impact. "

2026 Premium Guidance and M&A Strategy
Q: Are you still on track with your 2026 premium guidance and M&A plans?
A: We're reaffirming our 2026 premium guidance, though the mix might lean more on M&A given the reprocurement cycle. " Previously, we projected $4.5 billion from M&A and $2.5 billion from strategic initiatives. " Our M&A pipeline is active, especially in Medicaid, and we expect transactions in the next 12 to 18 months. "

Prior Year Development Impact on MLRs
Q: How is prior year development affecting your MLRs?
A: We've seen a larger prior year development benefit this year due to our payment integrity efforts addressing past fraud, waste, and abuse. " Most of this benefit was in Medicaid and Medicare, but much of it was offset by prior year risk corridors, so it doesn't significantly impact our current margins. "

Confidence in Rate Adjustments
Q: How confident are you in receiving appropriate rate adjustments?
A: We have secured known rate increases for the second half, both on-cycle and off-cycle, which will help offset higher medical costs. " Our relationships with state regulators are constructive and data-driven, leading to reasonable rate actions, such as the high single-digit increase in Texas and mid-cycle adjustments in Kentucky. "

Medicaid Redeterminations Impact
Q: How have redeterminations affected your Medicaid membership?
A: We lost around 50,000 members due to redeterminations in Q1 and about 100,000 in Q2, totaling 650,000 cumulatively. " We anticipate reconnecting with 50,000 members by year's end. " This membership decline has contributed to some higher costs, but we're managing the impact. "

Utilization Before Coverage Loss
Q: Are members increasing utilization before losing coverage?
A: We haven't observed members overutilizing before losing coverage. " Since 70% of those losing eligibility do so for procedural reasons and may not realize they're losing coverage, they aren't likely to increase usage preemptively. " When they re-enroll, there's a brief uptick in utilization, but it normalizes quickly. "

ConnectiCare Acquisition Benefits
Q: What benefits does the ConnectiCare acquisition bring?
A: ConnectiCare performs adequately but below our target margins. " By improving Medical Care Ratios and streamlining G&A expenses, we aim to align it with our targets. " We acquired it at 25% of revenue, with half in hard capital, expecting it to be significantly accretive to earnings. "

First Half Operating Cash Flow
Q: Why was operating cash flow low in the first half?
A: Operating cash flow was lower due to paying down last year's risk corridor balances (over $0.5 billion), the timing of CMS payments (about $400 million), and tax payments (~$200 million). " These are timing issues, and we expect cash flow to normalize in the second half. "