Elevance Health, Inc. Wells Fargo 21st Annual Healthcare Conference

Firstly, a big thank you, Steve, to yourself and to Wells Fargo for having us. I think that's a great starting point for the conversation today. As reflected in the Form 8-K we filed this morning, we are reaffirming our 2026 adjusted EPS guidance of at least $27, as well as our full-year benefit expense ratio outlook. Year to date, our results have demonstrated improved execution across our broad and diversified portfolio, consistent with the framework that we outlined at the beginning of the year. That momentum continued through July and August. As such, third quarter adjusted EPS is currently tracking ahead of the outlook we provided on our second quarter earnings call, and that's supported by that favorable benefit expense performance, as well as strong operating execution across the enterprise.

We are encouraged by how results are developing through the first two months of the quarter, and that reinforces or further reinforces our confidence in our full-year outlook. Importantly, we still have one month remaining, and we'll provide obviously a more complete update when we report the third quarter in October. Looking ahead just to 2027, we remain committed to delivering at least 12% adjusted EPS growth off of our 2026 ending earnings baseline. That outcome is supported by multiple levers across both health benefits and Carelon, and it's not dependent upon the performance of any single line of business. Finally, just to add, we continue to invest with discipline. We're using AI to improve productivity and operating efficiency, and to deploy capital in ways that support durable earnings or durable enterprise earnings growth in 2027 and beyond.

Steve, that's a great question. As I noted, our overall experience through August has been favorable to our expectations, although the underlying drivers do vary by market. In Medicare Advantage, performance remains ahead of expectations, and this reflects the intentional product and geographic actions that we took for 2026, the quality of the membership that we've retained, and continued execution on our medical cost initiatives. Together, those factors support our path to an operating margin of at least 2% this year. In Medicaid, the benefit expense ratio has developed more favorably than anticipated, and that reflects the benefit of recent rate actions, and that is translating into margin performance slightly ahead of our full-year outlook. In individual ACA, claims experience is also tracking modestly better than expected, and the significant shift towards Bronze products has created more back-half weighted pattern of plan paid costs.

That cost emergence has developed more slowly than we anticipated. As such, we're being very thoughtful about how we incorporate this experience in our risk adjustment position overall. Overall, I would say really our individual ACA business is performing well, and it is modestly ahead of our expectations. Then last, in employer group, cost trend is developing in line with how we priced the business, and we continue to see a broadly elevated cost trend base, but very consistent with what we expected this year. Our focus really remains in helping employers manage affordability while delivering a better experience for their members. Taken together, as we look across the portfolio, we're very pleased with our performance so far in the third quarter.

We're pleased with the progress that we're seeing in Medicare Advantage. The favorable performance that we saw in the first half has continued so far into the third quarter. The performance here really reflects the intentional portfolio actions we took to strengthen our HMO and D-SNP footprint and improve our value proposition and underlying economics, as well as better underlying claims experience, and that's supported by continued execution against our cost of care initiatives. I think CareBridge here is a good example of how we are strengthening that execution. It allows us to engage more effectively with complex and dual eligible members in the home, allows us to coordinate care earlier, and allows us to reduce that avoidable utilization. Across multiple payer relationships, we are seeing CareBridge help demonstrate medical cost savings in that mid-teens percentage range.

We continue to have confidence in our margin outlook for the year and in the underlying actions we are taking to improve the economics of the business over the long term.

Steve, that is a very timely question. Our approach in both years is really grounded in the same objectives: deliver a strong value proposition for seniors and sustainable financial performance for the company. We are going to stay pretty high level until the plan details are public. Broadly speaking, our 2027 bids are designed to build on the progress that we made in 2026, while continuing to take a very measured view of the cost environment. As we developed the bids, we did use advanced analytics to understand which benefits matter the most to members and where we may have some flexibility. That has allowed us to preserve stability in areas like maximum out-of-pocket and our Everyday Options Allowance while making more targeted changes.

D-SNP does remain an important area of growth for us, particularly in fully integrated models where we bring together our Medicare, our Medicaid, and our Carelon capabilities to best serve members with more complex needs. We see incremental opportunity for margin improvement in 2027 and obviously further progress over time towards our 3%-5% operating margin target.

Yeah, as we also heard from some of our peers yesterday, we have received Plan Preview 2 from CMS. But similar to their comments, as a reminder, CMS does ask plans not to disclose those results until star ratings are officially released in October. So I am not going to get ahead of the process today. What I can say is that stars remains an important multi-year operating priority for us. To your point, the program continues to see changes in measures, in cut points, in methodologies. Our engagement with CMS really is centered on transparency and consistency as well as comparable treatment for similarly situated plans. Operationally, our focus is on the areas that we can control. So think here clinical quality, care management, provider data connectivity, and member engagement, really including those capabilities that help us reach higher needs members more effectively.