Bright Health Acquisition Impact
Q: How will Bright Health affect margins and earnings?
A: The Bright acquisition comes with a $75 million PDR , which reduces Bright's MLR below our target range. Despite this, we expect $0.50 of dilution this year due to residual losses not covered by the PDR and carrying costs. We anticipate recuperating this and achieving $1.50 of accretion by the third full year of ownership. This will be driven by reducing Bright's MLR from 92% down to 88–89% and cutting the G&A ratio from 14% to 9–10%. We remain confident in this trajectory.

Medicare MLR and Margins
Q: What's the outlook for Medicare MLR and margins?
A: Our Medicare MLR is expected to be at the top end of our target range, 88%, in 2024. The Bright acquisition impacts this, but with the PDR, Bright's MLR is reduced below our target range. Our Medicare business comprises three parts: Bright, legacy DSNP ($2.4 billion revenue), and MMP ($2 billion revenue). The DSNP and MMP are performing well, and we anticipate offsets to trends, including minimal impact from V28 due to our high-acuity, poly-chronic population.

Marketplace Growth and Margins
Q: How are Marketplace margins and growth trending?
A: We grew Marketplace membership by 31% and revenue by 17%. We consciously invested some of our excess margin from 2023 (nearly 10% pretax) to price slightly below observed trend and foster growth. For 2024, we expect the MLR to be at the low end of our target range, 78%, ensuring high single-digit margins. We prioritize margin over volume, keeping our products small, silver, and stable. We aim for mid- to high single-digit margins of 5–7%, growing the business at a rate that allows us to achieve this.

Medicaid MLR and Redeterminations
Q: What's the expectation for Medicaid MLR amid redeterminations?
A: The redetermination process unfolded as predicted, with a noticeable but manageable acuity shift. Rate actions from our state partners fully compensated for core medical trend and the acuity shift, allowing us to project an MLR at the high end of our target range, 89%, for Medicaid. On our legacy book, trend roughly equals the rates we're receiving, so we expect a flat MLR compared to 2023. New business may add slight pressure due to first-year higher MLRs.

Florida Medicaid RFP
Q: What's the status of the Florida Medicaid RFP?
A: While we can't comment specifically, we're confident in our bid to expand in Florida. We currently operate in three regions and aim to grow our footprint in regions where there's $14 billion of Medicaid revenue we don't yet serve. We expect awards to be announced later this spring.

2025 MA Advance Notice Impact
Q: How will the 2025 MA rates affect the business?
A: The advance notice suggests a 0.5% rate increase for our book, which we believe is insufficient to cover trends. However, we typically see final rates improve from advance notices, and we're analyzing the potential impacts. Despite this, we're not anticipating any change in achieving the $1 accretion from Bright Health by the third year.

Underlying Utilization Trends
Q: How are cost growth trends affecting margins?
A: In Marketplace, we defend reasonable margins by putting price into the market and prioritizing margin over volume. We conceded some margin in pricing for 2024 to drive volume while still hitting our targets, as we were below our target MLR range in 2023.

Impact of 2-Midnight Rule and V28
Q: Are 2-midnight rule and V28 affecting costs?
A: The 2-midnight rule isn't new, and providers still must prove medical necessity, so we don't see a significant impact. Regarding V28, it may be a drag for some, but with our high-acuity, poly-chronic population, V28 is actually helpful, so we don't see the same negative dynamics.

Quarterly EPS Phasing
Q: How will EPS be phased throughout the year?
A: Normally, our earnings are 55% in the first half and 45% in the second half, but this year it'll be reversed. We're onboarding substantial new business, which comes in warmer at first, and we expect momentum on MLRs as we grow into the new footprint. Additionally, we anticipate growing membership in Marketplace throughout the year due to redetermination.

Exchange Membership Growth vs. Revenue
Q: Why is exchange membership up 31% but revenue up 17%?
A: The difference is due to state footprint changes, not metallic mix. We're more competitive in some states than others, shifting our mix. Our metallic mix remains unchanged.