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Elevance Health(ELV) - 2024 Q3 - Earnings Call Transcript
ELVElevance Health(ELV)2024-10-17 17:13
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Financial Data and Key Metrics Changes - For Q3 2024, adjusted diluted earnings per share were 8.37,belowexpectationsduetoelevatedmedicalcostsintheMedicaidbusiness[5][17]−GAAPdilutedearningspershareforthequarterwas8.37, below expectations due to elevated medical costs in the Medicaid business [5][17] - GAAP diluted earnings per share for the quarter was 4.36, with total operating revenue at 44.7billion,reflectingover544.7 billion, reflecting over 5% year-over-year growth [17][18] - The consolidated benefit expense ratio increased to 89.5%, up 270 basis points year-over-year, primarily due to worsening Medicaid cost trends [18][19] - Adjusted operating gains for the quarter were 2.4 billion, with year-to-date gains at 8.3billion,mainlyreflectingdeclinesintheMedicaidbusiness[19]BusinessLineDataandKeyMetricsChanges−Commercialmembershipgrewbynearly600,000year−over−year,drivenbystrongfee−basedandindividualACAhealthplangrowth[18]−Medicaidmembershipdecreasedbyapproximately85,000duetoaspecificfootprintchange[17][18]−CarelonServicesisontracktoexceedinitialrevenuegrowthtargets,withlow20spercentagegrowthexpected[13][14]MarketDataandKeyMetricsChanges−TheMedicaidmanagedcarebusinessisexperiencingelevatedcosttrends,currentlyrunningat3xto5xhistoricalaverages[19][51]−ThecompanyanticipatesthatMedicaidrateswillultimatelyreflecttheacuityofitsmembers,althoughthismaytaketimeduetostateprocesses[20][30]CompanyStrategyandDevelopmentDirection−Thecompanyhasreduceditsfull−yearoutlookforadjusteddilutedearningspersharetoapproximately8.3 billion, mainly reflecting declines in the Medicaid business [19] Business Line Data and Key Metrics Changes - Commercial membership grew by nearly 600,000 year-over-year, driven by strong fee-based and individual ACA health plan growth [18] - Medicaid membership decreased by approximately 85,000 due to a specific footprint change [17][18] - Carelon Services is on track to exceed initial revenue growth targets, with low 20s percentage growth expected [13][14] Market Data and Key Metrics Changes - The Medicaid managed care business is experiencing elevated cost trends, currently running at 3x to 5x historical averages [19][51] - The company anticipates that Medicaid rates will ultimately reflect the acuity of its members, although this may take time due to state processes [20][30] Company Strategy and Development Direction - The company has reduced its full-year outlook for adjusted diluted earnings per share to approximately 33, reflecting a prudent approach to current challenges [6][20] - The focus remains on long-term growth, with investments in operational efficiencies and partnerships with states to enhance Medicaid rates [7][16] - The company is expanding its individual and family ACA plans in three states, aiming to drive growth in Health Benefits and Carelon segments [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a challenging operating environment but remains confident in the long-term growth potential of the Medicaid managed care business [6][16] - The company expects continued momentum in its commercial business and stability in Medicaid as redeterminations return to normal [21][22] - Management emphasizes the importance of ongoing investments and operational efficiencies to navigate current challenges [15][22] Other Important Information - The company is integrating AI across various touchpoints to enhance member and provider experiences while reducing costs [15] - The acquisition of Kroger Specialty Pharmacy aligns with the company's strategy to control key levers in delivering whole health affordably [13][14] Q&A Session Summary Question: Concerns about accelerated earnings growth due to Medicaid issues - Management reassured that the earnings power of diverse businesses remains strong, with a long-term target of at least 12% growth in adjusted EPS [25][26] Question: Understanding the worsening Medicaid situation - Management noted accelerated cost trends in Medicaid and unfavorable prior period developments, attributing these to higher membership acuity [28][29] Question: Utilization trends in Medicaid - Management indicated ongoing elevated trends in behavioral health, with expectations of continued pressure on margins [38] Question: Medicaid profitability - Management confirmed that the Medicaid business is expected to be profitable this year, albeit below target margins [41][42] Question: Medicare Advantage competitive environment - Management expressed confidence in their positioning within the Medicare Advantage market, focusing on sustainable growth and stability [46][47] Question: Rate outlook for Medicaid - Management discussed ongoing negotiations with state partners, emphasizing the need for alignment between rates and member acuity [60][61]