Centene Corporation (CNC) Earnings Call Transcript & Summary

Hey, good morning, everyone. Thanks so much for joining us. I'm Jennifer Gilligan, Senior Vice President of Finance and Investor Relations. Welcome to Centene's December 2023 Investor Day. We're broadcasting live from the New York Stock Exchange and are grateful to have the folks in the room as well as those joining us on the webcast. Please note that various remarks we make today regarding future expectations, plans and prospects constitute forward-looking statements under U.S. Securities Law, actual results may differ materially from those indicated by these statements as a result of various important factors and risks, including those discussed in the slide you see in front of you, as well as the risk factors contained in our most recent annual report and other SEC filings. Centene disclaims any obligation to update this forward-looking financial information in the future. Additionally, during this presentation, we'll be discussing certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP financial measures can be found in today's slide presentation, which is available on our website at centene.com. With that out of the way, we'd like to thank everyone for the clothing donations made here at the exchange this morning in support of Big Brothers Big Sisters, New York City chapter. We presented an opportunity for in-person attendees to bring a new coat for donation for children in the Tri-state area and boy, did folks deliver. We encourage everyone participating today to consider supporting their local chapter. Big Brothers Big Sisters of America, the country's leading youth mentorship nonprofit is one of Centene long-time partners and we are proud and so honored to stand with them today, check them out. Now a few practical points. Today's press release and slide presentation as well as management bios are available on the Investor Relations page of centene.com. For those joining virtually, materials are also available within the webcast player. Finally, please mark your calendar for our fourth quarter 2023 earnings call scheduled for Tuesday, February 6. Lastly, our program. Here is the game plan for our time together today. First, Centene's CEO, Sarah London, will kick us off by highlighting key elements of our strategy, as well as the competitive advantages that fuel Centene's ability to compete, win and successfully serve members across our core businesses. Ken Fasola, our President, will take us deeper into the business, reviewing the many growth opportunities inherently embedded within our core and the momentum we see in each market segment. Jon Dinesman, our Head of External Affairs, will update us on the political landscape as we head into an election year that we see as an opportunity regardless of the outcome. And finally, Drew Asher, Centene's CFO, will provide a financial update including details around our increased outlook for 2024. Throughout the meeting, we will touch on key strengths of this organization. In an effort to really bring these competitive advantages to life, we're excited to incorporate 2 panels into today's program with subject matter experts from across our organization. Quality is front and center in our business. To demonstrate this, a few of our top executives will talk about Centene's approach to value-based care, the interconnectivity with our enterprise partnership strategy and importantly, how we expect these levers will improve quality scores for all lines of business. The second panel will focus on the value of Centene's local approach and how this differentiates us in our markets. As always, we'll finish up with some Q&A. I will now pass the floor to our CEO, Sarah London, to kick us off with some strategy.

Good morning. It's a pleasure to be back here with all of you. Welcome to those who have joined us live at the New York Stock Exchange, and for those who have joined us on the webcast, thank you for making the time to tune in. As you have heard from Jen, we have a great lineup today. I'm particularly excited that you'll have a chance to hear directly from some of our health plan CEOs, who embody the local leadership excellence that has been a hallmark of Centene from the beginning. Our goal is that when you leave here today, you have a clear understanding of management's long-term vision for Centene, the progress we have made against the blueprint we unveiled at this time last year. And the competitive advantages we intend to leverage as we continue to build momentum through 2024 and into the long term. The takeaways should also be clear. First, Centene has built a unique and powerful platform in Medicaid, Medicare and Marketplace. It is strategically positioned to serve the fastest-growing segments in health care. Second, we have a set of competitive advantages that drive operating synergy and differentiation across that platform. What makes us the best in one business will make us the best in the others. Third, we have invested to strengthen this platform over the last 2 years, we intentionally position ourselves against significant market opportunities. And we are heading into 2024 with the right strategy, the right platform, the right team and a track record of strong execution. And finally, we remain confident that this platform is positioned to deliver 12% to 15% adjusted EPS growth over the long term. With that, let's dive in. Today, Centene is a leading provider of government-sponsored health care. We remain the largest managed Medicaid organization in the country with approximately 15 million Medicaid members in 30 states, ranging from beneficiaries within TANF or Temporary Assistance for Needy Families, think moms and kids, to highly complex populations participating in long-term support and services programs. We serve and support children in foster care across our programs in 21 states as well as aged, blind and disabled members in 26 states. We are uniquely experienced in delivering low-cost, high-quality outcomes for these communities. Centene is also the leading and the largest Marketplace insurer. Over the last decade, we are the only managed care organization to remain a consistent presence in the individual marketplace, and this is producing tangible returns for us in the form of outsized growth and market share gains. Finally, our Medicare franchise, which is a critical complement to this portfolio with both explicit and implicit ties to the lives we serve within our other businesses. With over 1 million Medicare Advantage members, we remain focused on delivering high-quality member experiences to the underserved but growing population of low income, diverse and medically complex seniors in this country. The combination of these businesses gives Centene a unique and powerful platform. We realize that execution is critical to unlocking the power of this platform and driving the trajectory of Centene's earnings growth. This is why we have spent the last 2 years as part of our value creation program, intentionally and aggressively focusing on our 3 core lines of business. It is also why we have invested to fortify the underlying platform, and to enhance the core capabilities that enable us to serve these fast-growing segments. To that end, let me recap just a few examples, of what we have executed in that time. We have hit all of our value creation milestones 2 years in a row. We have executed on 10 divestitures. We are on track for over $700 million of SG&A savings with a strong pipeline of opportunities to further streamline and standardize our operations as we shift to a long-term view. We have demonstrated pricing discipline in Marketplace, resulting in consecutive years of profitable growth. We have made an initial but important step in our multiyear commitment to improving Stars. We are on track for the largest ever PBM migration in the industry to ensure a better cost structure on behalf of our customers. And we are thoughtfully deploying capital to strengthen our balance sheet, deliver value back to shareholders and invest where we believe it will drive value to the business. In short, we have delivered on our promises and built tangible momentum as we turn the corner into 2024. The graphics on the slide may look different from last year, but our approach and focus is the same. We continue to drive towards a 12% to 15% adjusted EPS CAGR, our expectation for the long-term growth potential of Centene. Our confidence in this earnings trajectory is grounded in our belief that Centene's platform is beautifully positioned for growth. So let's break down in a little more detail where that growth is coming from. Government spending continues to be the key driver of health care spending at large, which means we are laser focused on the fastest-growing market segment and the best source of organic expansion. Beyond that, each of our business lines has significant embedded organic growth. Starting with Medicaid. Over the next decade, Medicaid spending is expected to grow to $1.2 trillion, representing a 5% CAGR from a 2022 base period, consistent with the mid-single-digit growth this market has experienced over the last decade. We are the leader in managed Medicaid, and the capabilities we have developed to address the needs of underserved low-income populations, position us well to grow in a market that still has significant expansion opportunities. Our plan is simple. First, Centene will continue to pioneer into new markets where Medicaid managed care has not yet been adopted as we did successfully this year in Oklahoma. Second, we see opportunity in those states that have adopted managed care, but where Centene does not yet serve the Medicaid program and believe that our market-leading track record will open these markets to us as we proved out in Delaware last year. The third and most significant growth opportunity in Medicaid comes from states adding new populations into a managed care model. Often, they're more complex and fragile populations. For Centene, we think of this as in-market growth. Our recent LTSS win in Arizona and our support of Medicaid expansion that went live December 1 in North Carolina, are both great examples. And for Centene, they are opportunities to leverage the strength of our existing business to expand our partnerships with these states. Ken and our panelists will go deeper on these and other examples. But needless to say, the opportunity for us to serve more Medicaid lives is substantial, representing $150 billion in Medicaid spend, and we believe Centene has the track record to continue to win in this market. Turning to Marketplace. Hopefully, it is becoming clear that Centene's Ambetter product line is another market-making success story, in addition to being a future growth driver. Over the last 2 years, we've demonstrated our ability to execute for growth and profitability in this business. The remarkable expansion we're seeing in this market is exciting, and we believe it is just getting started. ACA marketplace spend is expected to grow to $170 billion by 2030, representing an 8% CAGR. A significant shift of the small group market would represent upside to these assumptions, but more on that in a moment. As we've said before, Centene is an [indiscernible] in Marketplace. We've been in this market since the beginning and what made us successful then is what continues to make us the market leader today, namely product design and benefits that reflect a deep local understanding of our customers. A strategic distribution network that values our loyalty to this market and has made this market loyal to us, allowing us to leverage brand equity as we grow. And finally, a team that knows this market better than anyone and can navigate unprecedented market growth while thoughtfully positioning for the future. Here, too, the market opportunity is expanding. Dynamics like Medicaid redeterminations, an increasing population of gig economy workers and trends in the sub-50 small group market mean positive momentum for this product for years to come. And while these dynamics alone would be enough to make Marketplace an important earnings driver, we see opportunity beyond the existing framework. As the commercial insurance market continues to evolve, disruption of the small group market via individual coverage health reimbursement arrangements, or ICHRA's, present Centene with the potential to widen the aperture. Over the long term, we believe that consumers' desire for individual choice, customized products and flexibility. In addition to employers' desire for budget predictability will drive increasing momentum into the individual market. What does this mean for Centene? Put simply, it means that 45% of the health insurance market currently under an employer group model is a long-term disruption opportunity. Finally, let's talk about Medicare. Medicare spending is expected to grow at a 7% CAGR over the next decade, building to $2.1 trillion in 2033. At the same time, 45% of that spend is still in Medicare fee-for-service, which means Medicare Advantage has both a growth and a penetration opportunity during that same time. Underneath that growth is an important secondary dynamic. Seniors are living longer, and Americans are carrying less income and more health burden into retirement. At the start of this decade, more than 50% of Medicare Advantage members live below 200% of the federal poverty level, and 3 quarters were below 400%. In addition, these seniors more often face serious health equity issues, including food and security and a higher incidence of chronic conditions and disability. By refocusing our Medicare business to serve lower-income, diverse and complex seniors, we are building an anchor position in what we believe will be the fastest-growing subsegment of Medicare Advantage market and one that aligns perfectly with our local community integrated model and our Medicaid footprint. Further, as we rebuild our Stars program, we are specifically designing our product offerings to deliver high-quality programs, services and outcomes to this more complex population. And our focus remains on moving 85% of our members into contracts with 3.5 Stars or better by the time Star scores are announced in October of 2025. Ultimately, Medicare Advantage will be an important growth driver for Centene long term and is strategic relative to our overall platform as we position for long-term growth and market leadership. For good reason, we view Centene as a growth platform. There is clearly ample top line opportunity. So now let's talk about what sets Centene apart in these markets. It starts with the intersectionality of these 3 businesses. Our consistent focus on low-income complex populations creates valuable synergy, allowing us to invest once and realize benefit throughout the enterprise, sharing innovations across business lines and across geographies. As a result, we have built competitive advantages that span the platform, meaning what makes us best in one business will make us best in the others. Starting with the power of incumbency. Centene has always been a market maker. We were pioneers in managed Medicaid, locking arms with no fewer than 15 states in the last 2 decades to navigate the transition away from fee for service and into a managed model. In Marketplace, we were among the first to enter the ACA market in 2014 and the only plan over the last decade that never left. And in Medicare, our WellCare teams were early leaders in designing benefits that address the drivers of health for our dual-eligible members. You'll find this market-making DNA in our industry-leading business development team, in our tenured and sophisticated government affairs network, in our product strategy teams, and in every one of our local health plan leaders. Now that market making prowess has created a different kind of advantage as we look forward. The years we have spent forging new paths and developing high-quality solutions for our members has earned Centene an important seat at the table and a powerful voice to shape the conversation at the state and federal level. We are now in the enviable position of making markets as an incumbent. This puts Centene health plans in a unique position to lead on innovation. In Medicaid, our incumbent role allows us to understand how states want to evolve their programs. And we can bring forward new ideas and solutions in real time, making markets from the inside out. As our local health plan leaders will tell you, we don't wait for the next RFP. The RFP is every day. Every day, we are delivering impact for our programs and our members. So when the RFP does come, we are competing on the promises we kept, not just promises we made. As incumbents, we can also partner with our states beyond their traditional lane of managed care. One great example of this is the work we have done to address health care labor shortages in many of our communities. Many of our health plans have launched programs with local universities and community colleges to fund scholarships for home health aides, community health workers and doulas, to name a few. Through this work, we can support a broader agenda as our state partners look to transform the health and welfare of their communities overall. Finally, our incumbent status allows us to build long-lasting trusted relationships. We saw the value of this play out last year in the Marketplace. When the trust we have built as the incumbent player, meant that departments of insurance in multiple states moved hundreds of thousands of Marketplace members directly to Ambetter when their carriers abruptly left the market. This incumbent strength is what we intend to leverage to support ongoing small group migration and seed the field for defined contribution models. Another market we look forward to making over the coming decade. Centene has worked hard to earn the advantage of incumbency and it is an advantage we intend to fiercely protect and fully leverage. Next is our local approach, a competitive advantage we have not been shy about. Proximity to our members is the obvious benefit of our boots on the ground strategy, but it runs far deeper. Our colleagues live and work in the communities they serve, fostering market intelligence and operational agility in a way that is difficult to replicate. Our plan presidents are empowered. And as you will hear from Ken in a moment, responsiveness is highly valued by market stakeholders. Our CEOs are also leaders in their communities, and they build teams with deep local knowledge and expertise. They are on a first name basis with their governors, their Medicaid Director, their key local Ambetter and WellCare brokers, their major provider partners, and their fellow mission-driven community leaders. Let me give you an example of what this makes possible. Nate Landsbaum, our Florida Health Plan President, is here with us today. Under his team's direction in the immediate aftermath of Hurricane Ian's landfall, Sunshine Health converted our Fort Myers' community welcome room into a relief distribution site in partnership with state and federal agencies and community partners. Our real-time and meaningful response was made possible by our constant communication with the state and the key partnerships we cultivate in each market. With local leadership owning all 3 lines of business, we're able to translate local best practices from our Medicaid chassis into product development, distribution, network and pricing decisions we make for Marketplace and Medicare. We know what our customers will value because we live and work alongside them every day. As we've said before, the very best health care is local and local is what Centene does and will continue to do best. Finally, let's talk about how Centene's partnership strategy allows us to show up differently in the market and for our members. Our focus on government programs has taught us that our members often have needs that reach far beyond the typical realm of health insurance. And by now, we all know that most of the factors that influence health actually happen outside of the doctor's office. Access to food, housing, jobs, transportation and childcare, to name a few. And so we leverage that local approach, I just mentioned, to form powerful partnerships with organizations playing pivotal roles in each of our communities to ensure these needs, these factors that influence health are being met for our members. The result is a network of providers that goes far beyond the traditional definition. Our networks include food banks, transportation partners and local nonprofits that build skills and create access to jobs. These trusted partners are woven into the fabric of the community, and often best positioned to help ensure health outcomes. Ultimately, Centene's partnership mindset allows us to design solutions for our members that integrate the most relevant, the most local and the most innovative capabilities in an agile and capital-efficient way whether we're talking about clinical partners, value-based providers, technology capabilities. Leading through partnership means we stay focused on what we do best, and we leverage the strength of our platform to deliver cost-effective market-leading solutions at pace and at scale. Case in point, our new PBM relationship, bringing to market more than $40 billion of pharmacy spend allowed us to fundamentally change the cost structure underpinning the pharmacy benefit for our customers, and to ensure the level of program transparency and innovation we value. Sometimes it's easier to just show you how when brought together, these competitive advantages allow us to create a different kind of experience for our members. So let me share one example. [Presentation]

That story is a powerful example of how Centene's innovative local programs transform the health of our members. Before I wrap up, I want to touch on perhaps the most underappreciated and yet most powerful competitive advantage Centene has, our workforce. Our Cen-team comes to work every day with one goal, to transform the health of the communities we serve one person at a time. And together, this passionate, mission-driven workforce powers our success. I'm proud of this team and the progress we have made over the last 2 years. At the same time, we recognize that there is still work to do as we continue to fortify our infrastructure and processes, and we are energized to continue to demonstrate results as we roll into 2024. We remain committed to and confident in our ability to deliver value to all our stakeholders. Affordable, high-quality care for our members, low-cost outcomes for our state partners, health equity for our communities and consistent long-term earnings growth for our shareholders. With that, I'll turn it over to Ken to take you deeper into the opportunities we see ahead.

Thank you, Sarah, and thank you all for being with us today. I'd like to use the next few minutes to build on Sarah's comments, diving deeper into the powerful growth opportunities that we see for Medicaid, Marketplace and Medicare. Centene has spent over a decade building a business that emerged as the nation's pre-eminent Medicaid plan sponsor. Leading the transformation from fee-for-service to managed Medicaid, Centene launched innovative programs and capabilities anchored by strong government affairs leadership, enviable local regulatory relationships, and an operating model, which embedded Centene into the communities we serve. Leveraging this unique infrastructure, Centene went on to become the largest marketplace insurer, with the most consistent presence since its inception. This almost entirely organic expansion quickly resulted in meaningful size and scale as well as revenue diversification. In 2020, this growth was augmented by the acquisition of WellCare's sizable Medicare book of business. As we sit here today, you can see the breadth of our 2024 geographic footprint. Today, Centene must strike the right balance between our historically local operating model and the opportunity to efficiently streamline our operations and optimize our cost structure. Serving in this capacity for just over 12 months, I've been on a learning journey. I visited nearly all of our health plans, met with countless regulators, including many of the Medicaid departments that we serve as well as CMS many times. With Jon Dinesman and Sarah, I have met with 30 governors and last week, a governor elect. During those sessions, we heard loud and clear that Centene remains a trusted partner. They called out our support through the redetermination process as one great example. In addition to their continued emphasis on execution, they all spoke of a desire to innovate, while each Medicaid program is unique across the nation, there is a consistent focus on getting the basics right, enabling providers to offer quality health care and identifying innovative solutions that states view as important to their populations. Maintaining our position of strength as a trusted adviser is paramount. It's also essential that we continue to be viewed as locally run responsive to the unique needs of each community, while at the same time, leveraging the breadth of our organization to collaborate on solutions designated and designed to generate positive local impact. To build on our momentum, we're thrilled to have appointed seasoned Centene executive Wade Rakes as our Chief Growth Officer, you'll meet Wade shortly. And we're equally excited to have hired Susan Smith, who is here with us in the room today patiently awaiting to assume her new role on January 1. Susan brings with her nearly 2 decades of expertise and experience in the payer space and will serve as Centene's Chief Operating Officer at the start of the new year. Susan will oversee core business operations; population health; the enterprise transformation office, inclusive of our value creation efforts; provider experience and quality, which includes our Medicare Stars program. Operational advancements are a key component of our value proposition, and we are optimizing and modernizing our operations and infrastructure. Let me highlight 3 areas of focus for you today. First, provider experience. These efforts are being led by Kate Blackmon, who you will also hear from later this morning on one of our panels. Kate joined us earlier this year and brings with her meaningful experience managing clinics and improving clinical performance. She and many others across the organization are focused on provider interactions, including enhanced information sharing and value-based care models which lead to delivering a better experience for providers and members. By reducing provider abrasion and being easier to do business with, we're more effectively providing access to care for our members as well as moving physicians more successfully across the value-based care continuum of aligned payment models. Stars, it's well known and thoroughly documented that Medicare Advantage Stars ratings are an enterprise-wide priority. We're deliberately focused on driving improvement to both HEDIS and CAHPS to produce tangible gains in the Stars scores that will be released in October of 2024. One example of how we're investing for better results relates to member engagement. We've tripled the capacity of our member outreach services, enabling us to assist member engagement with their doctors by helping schedule their annual wellness visits earlier in the year. We've also overhauled our entire onboarding process to focus on quality from the very first member touch point for Medicare, Medicaid and the Marketplace. As we looked across our vast organization within state level, business line and corporate functions, we see continued opportunity to harmonize these workflows orchestrating more efficient administrative operations aids in simplifying our core processes, as well as emphasizes the importance of the implementation of best practices. The work underway is fortifying our core operations, advancing our value proposition and enabling our ability to produce sustainable growth for all of Centene's lines of business. Let me speak to each now. I'll start with Medicaid. Operational excellence ties directly to our competitive advantage. The power of incumbency is predicated on the quality of our service to our states and our members and strengthens our ability to attract and retain high-quality health care partners. Our reprocurement performance, which over the past 5 years has exceeded 90%, it's evidence of the power of incumbency. The reputation we enjoy in the markets we serve is largely tied to the relationships we built from city to city, county by county, state by state, creating a unique and powerful presence. It also supplies us with the expertise that will continue to drive growth now and into the future. Sarah set the stage earlier by describing the trajectory of Medicaid spending. Let me detail some of the ways we'll command our fair share of those dollars. There are 11 states that have not made the transition to managed Medicaid. We've demonstrated the value of a disciplined and well-organized ground game in these states. We maintain open lines of communication with key local thought leaders and centers of influence in those geographies that reinforce the advantages of moving to a managed Medicaid model. We facilitate dialogue among stakeholders within and across states to better understand the ways we can deploy our solutions to advanced initiatives that are important to their state. Our recent win in Oklahoma, which includes TANF business as well as sole source foster care is a prime example. Every governor we talk to mentioned behavioral health as a top 3 priority. Our Magellan Behavioral Health business was awarded the state's behavioral health contract in Idaho valued at roughly $270 million annually and as importantly, opened a channel of communication upon which we can and will build. Going forward, Magellan's deep sovereign skills in Medicaid will now benefit from the enviable business development capabilities at Centene. These approaches are also relevant for the 8 states or territories where managed care exists, but Centene does not currently serve. As Sarah mentioned, we were added to the Medicaid program in Delaware, which went live at the start of 2023 and now serves approximately 32,000 lives. We spent years on the ground there, building relationships with providers, regulators, local influencers as well as investing in community initiatives. Within our existing footprint, there's also tremendous growth opportunity with the addition of complex populations. Just earlier this month, our Arizona plan was selected to provide managed care for Arizonans eligible for the Arizona Long Term Care System, providing physical, behavioral and pharmacy benefits to nearly 26,000 elderly and/or physically disabled beneficiaries. In another example, Georgia's active RFP, successfully submitted earlier this month, includes the addition of the aged, blind, disabled population. The Georgia ABD opportunity is sized to be approximately $3 billion, resulting in a managed care program that will now represent nearly $9 billion in spend, which is an increase of more than 50%. North Carolina represents another geography with opportunity for in-market growth as the state considers a move to managed care for their foster care population. We have industry-leading foster care experience with an unparalleled track record, including more than 260,000 foster care members across 21 states. As we serve the TANF and expansion populations in North Carolina, we're developing more meaningful connections, creating a deeper understanding of their local community needs. It is the combination, the combined powers of incumbency and trusted adviser that enable us to demonstrate to our state partners the benefit of care coordination and dependable execution which improved the health outcomes for complex populations like LTSS. Our experience and execution are powerful tools for growing the addressable market and thus a compelling opportunity. State that's well served within TANF is more likely to consider a move to managed care for its high acuity, more complex populations. Our experience in Louisiana was successfully managing a lower-acuity population over several years, resulted in adding the aged, blind and disabled beneficiaries to the managed Medicaid program there. All told, more than half of our current Medicaid state footprint represents opportunities to serve additional populations. As such, we remain confident in our ability to generate an expected compound annual revenue growth rate of 6% to 7% within Medicaid over the long term. Let's move to the Marketplace. The Marketplace and the individual market more broadly represent a unique and exciting opportunity for Centene, one that we believe sets us apart from our peers in both experience, expertise and trajectory. Built on the Medicaid chassis, our focus on lower income Americans carries through to the Marketplace, and our offerings continue to benefit from a consistent presence on public exchanges since its inception. For 2024, we continue to mirror our Medicaid footprint, adding the state of Delaware and bringing us to a total of 29 markets as well as adding 81 new counties. This brings our coverage to over 85% of addressable Americans eligible for exchange products. With that said, the Marketplace is no longer a little brother or sister of Medicaid. Our recent success in Tennessee demonstrates how we can leverage our experience to open new markets outside of our Medicaid footprint, laying a foundation that will help us go from being in the Marketplace to being a marketplace. We're well into the open enrollment or OEP for 2024. And while you'll hear more about how things went after the first of the year, we're encouraged by our results to date. Thinking about the drivers of growth for the individual market broadly and the Marketplace specifically over the long term, there are 3 clear elements that we expect will contribute to continued growth: First, overall market momentum. Improved affordability and increased awareness of products through both time and marketing dollars invested by the current administration have helped the Marketplace reach a much broader market, beyond what most people would have envisioned just 3 or 4 years ago. An evolving consumer is second. As many Americans find themselves in coverage transition, Marketplace products are often a simpler option for individuals who previously may have sought coverage through commercial group plan sponsors. Standardized products, the element of choice and affordability, all have a role to play in driving more Americans towards individual coverage options in the Marketplace. This includes gig workers, contract labor, freelancers and a younger generation who appear less compelled to tie health coverage to an employer. And third, ICHRA. Marketplace also presents Centene with an opportunity to disrupt the employer-sponsored market with individual coverage health reimbursement arrangements or ICHRA. ICHRA plans allow employers of any size to offer their employees an option to purchase individual and family coverages using a defined amount of pretax dollars similar to 401(k) defined contribution retirement plans. ICHRA options enable employers to better predict and manage their health care costs while offering a choice of carriers and plan design options for employees and their families. ICHRAs creates the opportunity for part-time or seasonal workers to maintain continuous health coverage, these plans, enjoy the same tax-deductible status as traditional employer-sponsored insurance for both employers and employees. Centene's Marketplace business currently covers roughly 13,000 ICHRA lives. To further grow this business in a planful way, we entered into an alliance agreement with Take Command Health, the nation's most experienced and successful ICHRA administrator. We plan to enter the Indiana market in 2024 with a new ICHRA product targeting both small and large employers. Indiana small employers who elect to offer ICHRA to its employees benefit from a tax credit incentive of $400 per employee. Marketplace growth is also being impacted by a changing distribution dynamic. Our consistency in the exchange market has paid off with brokers and provider partners, allowing us to develop and sell products to an evolving customer base. Brokers live in the communities they serve, actively encouraging people to sign up for affordable coverage options. I've long believed that individual agents and brokers like to pick a product like college students pick a major. But we're seeing more of our traditional Medicare Advantage-focused brokers also driving membership into the exchange, providing synergies with our WellCare products as brokers diversify their books of business. As carriers abandon the small group market, a legion of brokers are looking more seriously at the individual market, and they're bringing their installed books of business with them. We're organizing to assist this transition, leveraging relationships and helping them preserve and protect the group-based income streams they've long enjoyed. Our network assets, broker relationships and deep understanding of the needs of individual consumers gives us a clear right to win in this market. We look forward to helping drive the market's expansion by developing products and networks to best support this transition. Finally, Medicare. Centene offers Medicare Advantage products in 36 states. In 2024, we'll be in 37 states with the addition of Delaware, with more states requiring full integration of Medicare and Medicaid for dual-eligible beneficiaries. We made a deliberate decision to shift our focus to the D-SNP population. Our success with complex populations provides us with a distinct advantage in helping to coordinate care for these types of patients. But due to the prevalence of chronic conditions, as well as socioeconomic stressors, which can have a profound impact on their ability to access the health care system. This cohort of beneficiaries tends to drive a lower Stars score. We've made progress against our journey to improve Stars performance with 87% of our members aligned to plans rated 3 Stars or higher for measurement year 2022. But much work remains, which is why we're making material investments aimed at these most vulnerable populations. We've centralized the governance of quality and Stars performance to enable a quick assessment and identification of local challenges and to mobilize the organization to pivot accordingly. Significant investments were also made to accelerate and improve how data is captured, reported and shared with providers to improve our quality results. And as I mentioned earlier, we have a dedicated team of resources engaging with members earlier and often to help schedule appointments, refill prescriptions and better understand their benefits and how to use them. We're also improving the breadth of our networks, expanding access to high-demand specialists. Value-based care arrangements with provider partners, who are willing to assume financial risk, is another successful lever in our ability to provide quality health care for these complex and chronically ill patients. Our value-based care penetration percentage is in the mid-40% range within Medicare, providing us with the continued room for expansion of these arrangements. We've diversified our distribution and marketing channels, strengthened internal assets and are leveraging insight to reduce acquisition costs with the goal of increasing lifetime customer value. For example, we expanded our direct mail channel because our experience demonstrates that dual eligible individuals respond better to direct mail than other marketing channels. We also added a dedicated outbound call unit to drive cross-sell efforts and improved our self-service eligibility verification process, including duals eligibility embedded within our broker quoting platform. As for the performance or our performance this AEP, sales and disenrollments are tracking in line with our expectations. Our duals mix is up year-over-year with that population experiencing favorable disenrollments as well. Again, demonstrating our ability to attract and retain this population. I'll close where I started with my remarks this time last year. Our industry has 4 big hills: Medicaid, Medicare, the Marketplace and commercial. We sit on top of 2 of those 4 hills, Medicaid and the Marketplace. Our ascent up the Medicaid-Medicare hill is focused on lower income dual-eligible beneficiaries and our penetration backs our conviction. The market overall is moving our way, including increasingly both small and large group employers. We're fortifying our businesses, rightsizing our cost structure, reimagining our products and services to strengthen this amazing platform for growth. We will fiercely defend our market share and are confident our best days lie ahead. It's now my pleasure to introduce Jon Dinesman, Centene's Head of External Affairs. Thank you.

Thank you, Ken, and good morning. It is always great to be back in front of all of you and in this incredible setting. Over the years, you've heard me talk about our approach to advocacy and how we try to break through the noise of the loudest megaphones in the health care debate and instead focus on what we see on the ground. So today, I want to talk about our observations. Namely, I'd like to address the power of incumbency and the stability it has provided in the health care space. Despite some loud megaphones, the political environment for health care delivery is relatively steady. We aren't seeing systemic changes get enacted or gain significant traction. And we're also seeing the power of incumbency and really the power of both gubernatorial and plan experience creates stability in the RFP process. These dynamics allowed for some significant growth in Medicaid and Marketplace. In the past decade, Medicaid grew from 65 million covered lives in 2014 to more than 80 million today. And when you look at the Marketplace, Marketplace covered double the number of lives in its tenth year of existence than it did during its first year, having grown from 8 million covered lives at its launch in 2014 to more than 16 million Americans today. And those Americans now also benefit from a robust and competitive market. The bottom line is that while the ACA continues to be a source of political noise during election years, it remains fortified as the law of the land. It is truly entrenched in the way a growing number of Americans access health care coverage. We have also seen more receptivity from Republicans looking to strengthen the ACA as evidenced by the Republicans in the House pass in language, codifying health reimbursement arrangements through ICHRA. Additionally, if you look at the political history of major health care benefit programs, once you give it, you cannot take it away. Not only is it politically complex to eliminate programs people rely on but it is also politically unlikely for there to be major proactive reform as one of the parties would have to control both the House and Senate as well as the White House. We see this as highly improbable. Our nation is divided politically, and our federal representation will continue to reflect that. The dynamic of rural versus urban communities has created some change in politics at the state and local level. It is no longer as simple as red states or blue states. Rural Oregon is predominantly Republican, while Urban Houston is predominantly Democratic. This has led to increased bipartisan support for Medicaid and Marketplace. When Medicaid expansion is included as a ballot initiative, it passes and that includes in conservative states like Missouri, Nebraska and Utah. Medicaid expansion just recently went into effect in North Carolina, where it passed earlier in the year under a Democratic governor and a legislature in which both chambers held a Republican super majority. We have also seen many states expand postpartum coverage to 12 months, including states like Texas, and Mississippi. Also contributing to the stability is how the power of incumbency has impacted state government. Over the last decade only 8 incumbent governors have lost reelection. And since 2000, almost 90% of all incumbent governors have won reelection. What that means is that states that allow a governor to run for 2 or more terms almost all have or will have a governor in office for at least 8 years. This leads to stability within administrations and agencies which also provides a tremendous advantage for incumbent plans in Medicaid managed care states. In states where there is both an incumbent governor and an incumbent plan, we tend to see really positive results as there's already a strong partnership and understanding of the value we bring to the constituents. We see that reflected in our Medicaid win rate where we are very proud of the fact that we have won 18 out of 20 reprocurements or 90% over the last 5 years, and 34 out of 41 reprocurements over a 10-year period. In addition, governors can focus on policy over reelection, which has led to greater opportunities for product expansion, Medicaid expansion as well as foster care in North Carolina are examples of this. And in Georgia, where Governor Kemp is in his second term, through continuous advocacy, we now have a timeline for inclusion of several high-acuity populations in managed care, starting with ABD and SSI at the beginning of the new contract in July 2025 and LTSS 2 years after that. As we turn the page on 2023, we are not expecting a large end-of-the-year federal health care package as we've seen in previous years. So we can look to 2024 when we see the following 4 health care priorities take center stage: First, the advanced premium tax credits for qualifying marketplace enrollees. Next year, we hope to see solidifying support and demonstrate the tremendous impact these credits have had in helping connect lower-income people with affordable quality coverage. 2024 open enrollment is off to a strong start, and CMS is reporting almost 1 million sign-ups from people new to the Marketplace. This success makes a strong case for expansion before they expire -- for extension before they expire at the end of 2025, given that around 90% of enrollees rely on the tax credits for affordability. Now we do not expect an extension to pass in 2024 as the federal government tends to usually wait until expiration dates are imminent before major action. To that end, eAPTCs expire at the same time as the Trump Tax Cuts, creating an opportunity for both parties to work together on an end-of-year package in 2025. Second, we expect a lot of conversation around the value of managed care. The value of managed care goes far beyond budget savings and predictability for the states. We will continue to educate our federal, state and local elected officials on the transformative care and quality we bring to the health care delivery system as the leader in Medicaid and Marketplace and how we are critical to the sustainability of these programs. Third, when Sarah, Ken, and I, meet with governors in the markets we serve as well as prospective markets, the first question they ask is, what can we do to help address each state's behavioral health challenges. Our ability to leverage Magellan and their expertise as one of the preeminent behavioral health partners in the nation means we have a health solutions partner to meet any state's needs in this space, whether through either an integrated health care delivery model or carve-out. And fourth, we expect a continued and increasing focus on the population dually eligible for both Medicare and Medicaid. We are proud to deliver high-quality care to more than 1 million dually eligible beneficiaries across 32 states. Our strong partnerships continue to allow for us to develop, implement and operationalize models of care for duals that are tailored to the needs of both states and the members we serve. We believe no company is better aligned with the interest of state and federal partners in this space. As we continue to see growing bipartisan support from legislators and regulators around actions that we'll further improve for duals, we are confident in our ability to remain a key stakeholder in these discussions. By combining our existing Medicaid footprint with our depth and experience in providing care to duals across the current spectrum of integrated care, Centene is well positioned to continue leading in this space for 2024 and beyond. What all this ladders up to is a political and policy environment favorable to growth. And to reiterate the main drivers: Number one, politics has shifted from red states and blue states to rural and urban. This has led to greater bipartisan support for Medicaid and Marketplace. We see that in the number of states that have expanded Medicaid and Marketplace enrollment, doubling in size over the last 10 years with Florida, Georgia and Texas leading the way. Number two, state leadership remains stable where there is a strong likelihood that administrations will remain in place for at least 8 years. The power of incumbency not only exists for gubernatorial elections, but Medicaid managed care reprocurements as well. And number three, opportunities for product expansion remain robust, especially when it comes to high-acuity populations. We see this continuing across all states, but especially in states where governors are in their second term. Thank you. And we will now take a moment to set up for our first panel moderated by Ken Fasola, Centene's President.

Okay. I'm ready to go. We're going to talk about provider partnerships and empowerment. Before we get started, you've all had the opportunity to meet me. Let me give my fellow panelists an opportunity to introduce themselves. We'll start with you, Kate.

Sure. Thank you, Ken. Good morning. My name is Kate Blackmon. I'm the Senior Vice President of Provider Experience. Prior to Centene, which I just joined in February, I've had the pleasure of spending the last 15 years in a managed care clinic setting. First in occupational medicine, but most recently for the last 12 years at one of the largest value-based clinics owned by a payer.

Colin?

I'm Colin Toney. I'm Executive Vice President of Network and Partnerships, and I'm in my sixth year with the company. I joined Centene in 2018 after a career in banking to do M&A and did M&A for the company until earlier this year when I moved into this role.

Alice?

Good morning. Alice Chen, I'm the Chief Health Officer, joined Centene in January, so nearing my 1-year anniversary. My career has included delivery system leadership, health policy program innovation squarely focused on what I think of as the 3 Ms, Medicaid, Medicare and Marketplace, which not coincidentally, is whom Centene serves. Prior to coming here, I was the CMO for Covered California, the nation's largest marketplace exchange, and I'm very happy to be here.

Great. Thank you, Alice.

Okay. Let's start with ownership versus partnership, a subject of a lot of discussion around the industry. Kate, you've seen a number of models evolve through the years. Can you share your view with respect to Centene's partnership model? What are some of the key elements of partnership that would help investors understand the value of -- that we bring to these relationships.

Absolutely. You guys have heard a lot today about our multiple lines of business. And I believe that Centene is uniquely differentiated than other managed care models. We were born out of the Medicaid world, and we've grown and excel taking care of the underserved community. In our experience that -- we believe the benefit of partnership far outweighs that of owning brick-and-mortar for several reasons. But specifically, we don't believe you have to own the facility to have access to the benefits and the services and all the magic that happens inside the clinics. Sustaining those clinic models is dependent on revenue from multiple payers. That gives Centene the optionality to choose the very best provider by market for the line of business we need without having to manage the overhead and the downside risk of the funding fluctuation we see happening in the market today. Number two, we manage over 14 million Medicaid members under the age of 65 today, typically seen in a facility that would never be an owned model primarily due to lower clinic margins in comparison to a Medicare Advantage clinic margin. But our power and our strategy of partnership allows us to work with managed service organizations, or MSOs, who can consolidate our managed -- our Medicaid membership into a manageable value-based structure. Number three, as the largest Medicaid provider, we partner with Federally Qualified Health Centers, or FQHCs, where 12% of our membership is taken care of today, sometimes in a care desert and oftentimes with clinical, pharmacy, behavioral health, all under one roof, and you can't own an FQHC, but we partner with them. And they're the backbone of health care today, responsible for 19 million Medicaid, Medicare and uninsured people across the United States. And number four, loyalty isn't what it used to be, and health care is really no exception. People look for the best care at the lowest cost plan and sometimes switch providers to be able to save a few dollars a month. That said, owning a facility doesn't necessarily mean that we would retain that membership should they find a savings at another location. For these reasons, among others, we believe the strategy of partnership is the right direction and are confident that it's the right option for Centene. This shows through in the services and the capabilities that our local and national partners share with our members across the nation today.

Great. Thanks, Kate. Colin, let's speak a little more directly about value-based care. As Kate mentioned, Centene grew up with a Medicaid focus. And as we think about how to better partner and how better partnerships foster improved economics. Can you talk about the unique positioning that value-based care contracting has within Medicaid? And maybe describe some of the advancements we've been making on value-based contracting more broadly.

Sure. Thanks, Ken. Value-based care is important, and it's important in Medicaid, and we are ahead of the industry in terms of value-based care adoption in Medicaid. So let me unpack that a little bit. Firstly, it's important. And similar to Medicare, which we talk about more value-based care models in Medicaid incentivize providers to improve clinical outcomes, to keep our members healthy, ultimately to drive better financial results. That's true across both of those products, and Marketplace, too, for that matter. When it comes to Medicaid, our members have specific needs, and so our value-based contracts reflect those as well. So our Medicaid value-based contracts are more focused on things like behavioral health, social drivers of health, and ultimately, just seeing -- making sure the member sees a provider and gets engaged. So we incentivize providers to do those things in our Medicaid value-based care deals. That stuff decreases the likelihood that those members will end up in the ER. So we think all of that stuff means that Medicaid value-based care is critical. We have been at this for a while, and we're also large in Medicaid. So we actually have a variety of these contracts deployed already, and that allows us to meet providers where they are in their value-based care journey, and it also allows us to meet our state customers and meet their needs, which sometimes are unique across the states when it comes to value-based care. So let me give you some numbers. With all that in mind, our percentage of total members in Medicaid who are in value-based care contracts is in the mid-40s. Over half of those members are in deals that involve downside risk for providers. That overall number is actually similar to the Medicare number you heard Ken mentioned earlier, though in Medicare, a greater proportion is in downside risk deals as well. Those Medicaid statistics, the total percentage in value-based deals and the subset of those who are in downside risk deals as well, are very strong and are ahead of the industry.

Great. Thanks. Let's -- super helpful. So let's talk about how we approach value-based contracting with providers directly, especially in Medicaid, but we do our own contracting. How do we partner with other companies to tap into the impressive innovation that's happening across the health care ecosystem in value-based care.

Well, we believe the PCP is the core of value-based care. So we incentivize the PCP through our contracts to handle all aspects of a member's care. However, there are certain conditions and groups of members, where the PCP is not best suited to drive improvement in that member's care. In those situations, we're always looking for innovative partners to help us, companies that are doing impressive things in health care. And because we are large, and we have our size and scale, we actually have the opportunity to pick a variety of partners and deploy them across the country and see which ones work best for us in a challenger model. Because of our size and scale, we're actually a really attractive partner for these companies. So we hear from them a lot. When they're strategically relevant for us, we even consider investing in these companies. So let me give you a few examples of these non-PCP companies where we are exploring deals similar to this to help our members. When we go look for these, we have clinical priorities, which are set by Dr. Chen and other clinicians at the company, and those clinical priorities drive our partnership goals and the partners we choose. So here are a couple of examples, both in the realm of behavioral health, which you heard Jon talk to earlier. One company that we partner with is called Wayspring. And it's a company that focuses on substance use disorder, including opioids. And we partner with Wayspring. We launched that partnership in Kentucky, which is one of the states that was hardest hit by the opioid epidemic. And Wayspring actively engages with our members on the ground, with boots on the ground, and get them what they need to recover and to stay healthy, things ranging from peer support, clinical care, food, housing, transportation, and what they need to recover and stay healthy. That's one example of one of these non-PCP deals. Another example, which -- this one is more on the path to value-based care. Also in the realm of behavioral health is a company that we're working with to try to solve the mental health challenges that our kids are facing. And we have a huge number of members who are under the age of 18, and this is a nationally recognized issue. Access to care and especially mental care for those members can be tough. And for kids whose parents are on Medicaid, it can be extremely tough. And some of that is a result of transportation challenges. Some of it is a result of parents working, and there are lots of other reasons why it's difficult to get to care. So we partnered with a company called Hazel Health, which brings telehealth into schools, where kids already are for 200 days, about, per year. And those telehealth services include mental health, and they're focused on mental health. And by bringing that service into the school, it allows us to meet the member where they are and our youngest members where they are and provide mental health care services in the school, and also identify other opportunities where we need to connect those members and maybe their families, into the broader health care ecosystem outside of the school. So those are 2 examples, which are both strategically relevant, and we actually invested in both of those companies, and we've deployed them strategically in our markets where they're most needed. And they've both allowed us to meet our members where they are.

Great. Thank you, Colin. And Alice, physician engagement ties closely to quality, which remains a top priority at Centene. Can you speak to some of the ways that we're driving quality improvement through provider relationships and how these quality initiatives can generate better business performance.

Thanks, Ken. I'd love to speak a bit about what we're doing in quality. So big picture, quality is becoming a business imperative, not just in Medicare, where the financial stakes are clear tied to Stars performance, but also in Medicaid and increasingly in Marketplace. And to that end, we are making very intentional foundational investments in quality that accrue to all 3 lines of business. . So you talked a lot already about our Medicare Stars work. So people may not be as aware that across our 30 markets, we have about $1 billion tied to performance on specific quality measures in Medicaid. And in Marketplace, we have 2 states, California and Arkansas, where there are significant financial consequences tied to our quality performance. We recognize that quality happens in the provider's office so talking about provider engagement, how do we partner, and in the community. And our job as a health plan is to reach out to those members, engage them, get them into care and then support our provider partners with the data and capabilities they need to improve the care, close care gaps, improve our quality scores. Specifically on the member side, you mentioned we've tripled the capacity of our teams that do member outreach. We recognize that given who we serve, our members may not know what their benefits are. They may have difficulty navigating the health care system. We reach out to them to say, "Here are your benefits, here's why it's important to go to your PCP because we believe the PCP is the foundation of a high-quality system. Get in there, get your colonoscopy, get your mammogram, get your vaccinations." And then if they need help, we actually coordinate that appointment for them. For those who are even higher risk with chronic conditions like blood pressure -- high blood pressure and diabetes. We have special pharmacy team that make sure that they're getting their prescriptions filled. And so reaching out to them to say, "We noticed that you haven't filed your prescription, what do you need? Do you need something from the pharmacy, do you need something for your PCP?" And then on the provider side, we've made significant investments in our provider engagement teams that go out to the provider's office to show them the data and say, "Here, where the care gaps are, here are the opportunities." And then work with them to close those gaps. You heard Sarah talk about, and Ken you talked about who we serve, low-income, vulnerable Americans. Given who we serve, we know that in order to move the dial on these traditional quality measures we need to address the realities of our members' lives. So whether that's food and security, housing instability, problems with transportation, what we call drivers of health, we have to wrap around them in order to get to that health care piece. And so Colin, you mentioned partners like Wayspring and Hazel. We work with those and many other partners, not just in behavioral health, but for our other clinical priorities like maternal child health, chronic conditions, obviously, blood pressure -- high blood pressure, hypertension, diabetes come up over and over again, and you see those reflected in the Stars measures, in the Medicaid measures, and the Marketplace measures. That's why we're focused on those kind of chronic diseases. And making sure that these partnerships not only improve access and control costs but also drive the quality. So bottom line, quality is a top priority for us. We are laser-focused on Stars and at the same time, making very intentional decisions about how to make synergistic foundational investments that really drive to all 3 Ms.

Thank you, Alice. Thank you, Kate, and thank you, Colin. Partnerships are a competitive advantage for Centene, give us a phenomenal opportunity to demonstrate how we leverage our size, scale and experience and enable us to grow efficiently with a focus on our member aligned incentives and obviously anchored around trust. From Kate, we learned that our strategic partnerships give us optionality and foster improved economics and drive better outcomes. From Colin, you heard how value-based contracting is making our partnership stronger and how they work across geographies, business lines and create a great investment opportunity, which also allows us to leverage our size and scale. And from Dr. Chen, you've heard how important quality is underpinning everything we do here. That focus is driving improved outcomes, and hopefully, you're getting a sense for how these investments are improving outcomes and our business performance more broadly. We're going to take a 15-minute break, and then we're going to return with our second panel. You'll meet some of our most seasoned market leaders, and we'll talk about our local market focus. Thank you. [Break]

All right, everyone in the room. We are going to get back to [indiscernible]. Thanks.

Well, good morning, and welcome back. Thanks so much for joining us. Our panel today is going to focus on our local approach and how that generates significant competitive advantage for us in the market. With us today, we have plan presidents representing nearly 30% of our revenue across section of all 3 core lines of business and our markets. I'm Wade Rakes. As Ken mentioned, I'm Centene's new Chief Growth Officer. I joined the company in 2010 in business development. And I've worked on the ground in over 20 states on behalf of Centene with policymakers, providers and community partners, expanding our markets from 6 to over 30. For the last 3.5 years, I've been our Plan President and CEO in Georgia, seeing how this distinctive local operating model drives competitive advantage. I'm joined today by 3 of my colleagues, who will each introduce themselves, starting with Martha.

I am Martha Smith. I'm the Plan President for Arizona Complete Health, our Arizona Health Plan. I've actually been with the organization through the Health Net transaction for 27 years, so a veteran of this Medicaid space. And I've held many different roles along the way in the network management space and in Medicare as well.

Nathan Landsbaum, CEO of Sunshine Health, our Florida subsidiary, I've been with Centene a little over 18 years. I started in mergers and acquisitions and corporate development, moved out to the health plans about 13 years ago, served in various leadership roles in Florida and Missouri, was CEO of the Missouri plan. And then just about 2 years ago, came back to Florida to assume the CEO role here.

And I'm Brian Ternan. I'm the CEO for Health Net, which is our California health plan. I've been with Centene for a little over 4 years. Prior to that, I was with 2 other large national carriers for about 24 years combined, mostly in the commercial space -- commercial group space.

Thanks so much. So Brian, can you talk about what uniquely local means in California?

Yes. I'd start with this, that in California, the state is our ultimate customer, but decisions about contract awards are made at the county level. And so for that reason, it's critical that we are really deep in the local markets that we serve, and we embed ourselves within those markets at the local level. So we do that with a particular focus on operations locally to make sure that we are partnered very closely with community-based organizations, with the providers, FQHCs, et cetera, in those local markets so that we really understand what's happening there, and we're really considered a part of that community. And one way we do that very deliberately is our hiring strategy. So we go after talent that has hands-on relevant, what we call, lived experience in those communities that we're serving. And we try to find people that reflect that and actually have on-the-ground experience. So an example I'd give you is, we have a director of LTSS, who's a former nursing facility manager. So this gentleman has a deep knowledge of how the programs that come down from the state and through the health plans, how they're actually executed on the front lines in these facilities and is extremely valuable in that way. We also have one of the executives on my team that leads our Medicaid business on the front lines. She's very open about the fact that her family when she was growing up, we're in the Medi-Cal program, and she's got that lived experience, and it gives her tremendous credibility when she's in the market talking about what we're doing and how we're doing it.

Nathan, can you talk about how local operates in Florida?

Yes. I have a few examples. So in Florida, where we -- just like California, we're really woven into the communities that we serve. That includes having over 3,000 employees located throughout the state from various backgrounds, and they are all dedicated to Sunshine Health members and providers. So if you're interacting with a member and a provider in Florida, you're living in Florida. In addition, we've established partnerships with over 600 community and charitable organizations that address a wide variety of needs of our members from food and housing security to substance abuse and workforce development. It's these partnerships that really strengthen the connection that we have within the communities and builds that essential trust we have with our members. And then lastly, I want to talk about our community resource centers, which we refer to as welcome rooms. So these are storefront offices that are located throughout the state in diverse areas, underserved areas where our members are highly concentrated. Not only do they serve our members, but they also serve as gathering spaces for community organizations, educational and training hubs. And as Sarah mentioned in her comments earlier, they also serve the broader community in times of crisis, like the time our Fort Myers' welcome room served as a distribution hub and temporary offices for state and federal agencies after Hurricane Ian.

Thanks so much, Nathan. Martha, can you add?

Sure. So much like in Florida and California. And frankly, all of our Centene markets, our team members, and we are very embedded in the local communities that we serve. We very intentionally hire from those communities so that we can ensure that we create a strong connection with the population that we support. Again, not unlike some of the comments that Brian and Nathan made, we are very engaged with local nonprofit and charitable organizations that are very focused on health equity, social drivers of health, like housing, food and security and rural health support and transportation needs. These are the issues that really affect the overall health condition of our members. The other thing that we do in our local communities that -- is we have a very robust volunteer program. And we -- for example, we stood up the mass vacs centers for -- during the pandemic for mass vaccinations and supported all of that volunteerism. And then we also do a number of things like mobile health screenings, so taking mammography services to underserved communities, rural communities that would otherwise not have access to care or have difficulty getting to those types of services. And then last example I'll give is, a partnership that we developed with a large health system in Southern Arizona, where we created a telehealth solution combined with home-based care solutions to support members, again, who had really difficult time with transportation from rural communities, and they were simply unable to get to places for their care. So that partnership was really made possible because we're so embedded in those communities on a local level.

And all I'd add from Georgia is that this engagement really fosters trust and visibility for us in our communities. We do over 350 events across the state because Georgia is not just Atlanta, it's 159 counties. In addition, we listen to the communities that these folks come from. And every single Centene plan has its own local Board of Directors comprised of community leaders. And Georgia, I chair our Board, and I'll continue that in my new role, but we also have the head of the Primary Care Association, the FQHCs, which Kate mentioned. We have 3 physicians. We have the former Commissioner of the Department of Community Health. We have a former State Appropriations Chair from the Georgia General Assembly. We also have a pro football and college hall of famer from South Georgia, who is a major advocate when it comes to rural health and underserved communities. Now Martha, this work on the ground also leads to investments that drive the competitive advantage of the local approach. Can you talk about what you've been doing in Arizona in that respect?

Yes. Thanks, Wade. I'm actually excited to share these stories. So we've been in the Arizona market in the Medicaid space for over 20 years. And over that 20-year time frame, we've really had the opportunity to not only expand our membership, but the programs that we participated in with AHCCCS, which is the Medicaid agency in Arizona. So I'll call out 2 recent big wins. The first is our recent term care contract win that you've heard, I think, Sarah and Ken both mentioned. We're really excited about this one. We spent multiple years in preparation for this. We spent time with stakeholders, with providers and community leaders and members themselves to make sure that we not only submitted a winning RFP, but that we were prepared to take on this really vulnerable and fragile population. We unseated 2 incumbents, took first place in the RFP and won the privilege of running this program on a statewide basis. Our statewide presence in our Medicare D-SNP program was a critical factor, I think, in that win as well. And that contract actually starts October of 2024. The second example I'll call out is an additional win with respect to behavioral health. So we have a really long and rich history of being the regional behavioral health authority in Southern Arizona. And that's the program that supports members with a severe mental illness. And so when that reprocurement came up recently, we were not only able to reprocure Southern Arizona, but we also won the Northern Arizona region, so expanding our services. We were the very first MCO to win 2 regions within the state for that line of business. We leveraged our unique services in Arizona, like our crisis services to support any members in crisis, supportive of our justice-involved members. And then we also manage a really unique grant programs that the AHCCCS program has designed to support those populations in the Arizona market. So I would just say that those kinds of long-term investments, Wade, that we just talked about is really what allowed us the opportunity to win that expansion in that market.

Great wins, Martha. Nathan?

Yes. So the local approach really creates and builds a lot of trust within the state, and I have a few examples of that. So the first example is that the government agencies invite us to participate in policymaking committee. So just recently, a member of our senior leadership team was invited to participate in a subcommittee of the Mental Health Commission, which is chaired by our own Secretary of the Department of Children & Family Services. Next is the -- our commitment to the community builds a lot of goodwill across the state. We are constantly getting wonderful feedback from government agencies and elected officials, the provider community and advocacy groups, and it's these voices that are essential when it comes to standing up innovative programs, influencing health care and good public policy and then ultimately reprocuring these government contracts. And then lastly, I want to point to the success we've had in our foster care program. So in Florida, we've been in the foster care space for over 10 years. And in other states, we have similar success. And it's -- this success that gives us the track record and experience when it comes to pursuing similar contracts in other states. And examples of that are recent wins of the foster care program in Missouri and Oklahoma.

Thanks so much, Nathan. And Brian?

Yes. So when I think about how our deeply-local strategy creates an advantage for us, I guess I'd point to 2 things. The first one would be it inspires advocacy. So I think you touched on this a little, Nathan, is that when we're that involved in the local communities, and we have an opportunity to expand in that geography or into a new line of business or into a different geography. We have these built-in advocates that will speak on our behalf on how we've delivered in their community, and they'll speak for us publicly about that. So I think the advocacy it creates is wonderful, and we do this because it's the right thing to do, and we serve our members better, and we're better partners in those communities. But one of the byproducts of that is that advocacy. And then the second one I'd point to, I think you touched on this, Wade, a little bit, is trust. So what happens is the state hears about, well, who's executing locally, who's actually engaged in doing this and getting their hands dirty and they hear about the work we're doing, and then they seek us out, and they seek us out to help them partner to drive results for the Medi-Cal program. A couple of examples I'd give. We have a gentleman who's got a lot of expertise and the state reached out for his assistance on strategy and policy specific to developmentally disabled group facilities. And the question they're wrestling with is, how do we design as health plans and state programs that actually work at that local facility level that they can actually execute on. And so his expertise is really valued there. And the other example I'd give is the executive on my team, I talked about earlier, whose family was on the Medi-Cal program when she was a child, she's been asked to be on the implementation committee for CalAIM. She's regularly sought out by the state for her expertise on health equity and quality and other community-based programs. So I think we see very tangible results from our strategy of being very deeply local.

Thanks so much, Brian. And I'll say Georgia, the Head of the Primary Care Association has been on our Board since 2006. And with them, we've been able to launch a new program to expand school-based health care across the State of Georgia. We're the largest provider of health care for children in the Medicaid program in the state. And only 114 of Georgia's 2,200 school buildings have a school-based health center on their campus. Partnering with the FQHCs is giving them flexible startup funding, it's going to add services to 7 schools by this time next year and serve 6,000 more children across the state of Georgia. We announced this program in Savannah a few weeks ago, and I found myself in a community meeting. And the first thing, one of the big community advocates said was, "Peach State is the only entity working to actively advance health care access for children in the state of Georgia." Now, Nathan, that's one example of innovation at Centene. I'd love to hear things that you're doing in Florida.

Yes. So just a couple here and a wide range of them. So as our members move around increasingly and become a little bit more difficult for us to engage, we've had to evolve our communication and outreach efforts. And so, in addition to utilizing digital tools, that local approach allows us to extend our reach further and further into the communities that we serve. And this builds that essential trust when it comes to engaging our members. So they know that we're here to help, and that we play a role that's just more than your traditional connection between a member and a provider. In addition, we've done some very innovative and proactive programs with respect to workforce development and filling those staffing shortages that we all hear about. So we partnered with numerous community colleges and community organizations and home health agencies to train members of the community to serve members of the community and a program similar to that is our PDO program, our participant-directed option, which you saw a video on earlier, which actually trains and compensates a family member to care for that family member in the community. It's been incredibly popular and successful in our state.

Thanks so much. And on the other end in Georgia, addressing and strengthening the physician pipeline is a core priority for our organization. And 4 years ago, we partnered with the Medical College of Georgia, the only public medical school in the state to create the MCG 3+ program. And that program is an accelerated path that sees graduation for participants for 3 years instead of the traditional 4 years of medical education. And when they commit to practicing in a rural or underserved area of Georgia, for 6 years after graduation, we cover the cost of their medical education. When they enter the practice -- the current 20 Peach State scholars we have at the Medical College of Georgia will expand our capacity in critical areas, including primary care, maternal health, in psychiatry to nearly 100,000 Georgians when they enter practice. This program was so well received our initial funding was matched by Governor Brian Kemp, the Georgia General Assembly, and earmarked from Senator Raphael Warnock, as well as private funds. So Peach State we're seeing not only as serving the community, but solving an issue that is at the forefront of everything we're doing around health in the state of Georgia. So as we get into closing, one thing that everyone on this panel wanted to share that we could have been joined by any of our colleagues from the entire footprint of Centene health plans who are doing this work day in and day out in 31 markets. This uniquely local approach enables us to tailor our programs that our states and communities are asking for. And these partnerships enable us to have comprehensive support. That's at the city level. That's at the county level. And that ensures that when, as Sarah mentioned, the RFP comes around, we're ready to go. And Martha's success in Arizona shows that. We've been in that market for 20 years, and we continue to expand our business. We also saw that success on the ground in Oklahoma and as well in New Hampshire, where we scored first as well. So this innovative member engagement and workforce development approach also drives the outcomes that lead to better outcomes in health for our members. So thank you so much for giving us an opportunity to talk about the distinctive local approach that drives growth for Centene. And now it's my pleasure to bring up our Chief Financial Officer, Drew Asher.

Thank you, Wade. Let me join Sarah and Ken and welcome you to this management team's second Investor Day here at the New York Stock Exchange, a historic and free venue for listed companies. It's hard to believe we've only had the keys to this company for 7 quarters. Let me start with the 2023 financial update and how the momentum from the past 2 years is going to carry us into 2024 and beyond. As you've heard today and throughout 2023, this has been a very good year of execution. At the ultimate measurement point, we are growing adjusted EPS at least 14% in 2023. That's on the heels of growing adjusted EPS 12% in 2022. So our first 2 years are squarely in the zone of our long-term growth algorithm. Hopefully, that gives you a taste of what to expect once we clear 2024 and look to the long term. But for now, let's stick to 2022 and 2023. After promising, we would institute one of my favorite rules, no hobbies, we executed on 10 divestitures. And with the proceeds from 8 of those that have already closed, we reduced share count and debt levels, and we were able to keep the overall slate of divestitures slightly accretive to adjusted EPS. That's no small feat given that most of those deals were originally accretive on the way in. Inclusive of transaction net proceeds and generation of operating cash, we deployed $4.6 billion to share repurchase in the past 2 years. We also reduced debt to adjusted EBITDA to 2.8x as of September 30, compared to 3.5x in late 2021, and we got a Fitch upgrade to investment grade in 2022. Our trailing 4 quarter adjusted return on equity is mid-teens, and we've been investing in the future along the way. promises made and promises kept. Two years into the value creation plan, this is now just the way we do business. The cost management principles, the focus on quality and health care affordability, and disciplined capital deployment are part of this management team's fiber. In the past couple of years, we substantially reduced our real estate footprint, we rightsized our workforce to the size of our business, we rationalized discretionary spending, and we professionalized our procurement and vendor management function. All while we increased investment in areas that relate to serving the low-income complex populations. The benefits of these actions are embedded in our current run rate. Prospectively, though, you can see that some of the opportunities that are either in process or that we intend to execute upon in 2024. These include standardization of transactional activities, telephony improvements, and further integration of medical and behavioral health. We have a high degree of confidence in the assumed savings from these activities that are embedded in 2024 guidance, and we're not done. Embedded in our long-term growth algorithm are multiyear initiatives that roll into 2025 and beyond. And as Sarah conveyed earlier, what we used to call value creation plan is now just part of how we do business today and how we will do business going forward. To wrap up 2023, we are reaffirming what we laid out on the Q3 call in late October. We expect to achieve at least $6.60 in adjusted EPS and approximately $138.5 billion of premium and service revenue. That compares to original 2023 guidance midpoints of adjusted EPS at $6.32 and $130.5 billion of premium and service revenue. The 3 times we raised both revenue and EPS guidance during 2023, gives us momentum as we exit 2023 and take on 2024. Turning to 2024. Let's start with the top line, premium and service revenue. While total revenue is expected to be about $10 billion higher due to pass-through premiums and premium tax, premium and service revenue is the revenue upon which we can generate earnings. And you'll recall that our metrics are based upon premium and service revenue consistent with prior years. So that's the top line number we focus on. As we have covered many times over the past year, we've been expecting 2 large 2024 headwinds. The full year impact of Medicaid redeterminations about a $7.5 billion revenue reduction and strategically shrinking certain Medicare Advantage products, or PBPs, pursuant to our long-term view of tilting towards the duals and complex populations. Consistent with what we previously told you, we expect this to be about a $4 billion reduction in MA premium in 2024. But we found ways to drive growth to partially offset these 2 known headwinds. In Medicaid, we won Oklahoma, which should be over $1 billion of run rate revenue once it commences targeted for April of 2024. We worked with the state of North Carolina on its Medicaid expansion, which launched 11 days ago. Also, you've heard that a couple of times today, on December 1, we were named as 1 of 2 winners on the Arizona long-term care population, a new complex population win for us effective 10/1/24. If the construct stays as announced, that's about a $900 million annual revenue stream largely benefiting 2025. We've also been advocating for appropriate rates due to the shifting populations of redeterminations. All of this has enabled us to add a net $2.1 billion, as you can see in the bridge, despite shrinking in L.A. County and parts of Northern California from the negotiated California 1/1/24 renewal. Let me give you a macro perspective on how we've been able to grow Medicaid over the past few years, even when neutralizing for pandemic growth and the subsequent redeterminations. Our run rate of Medicaid premium revenue in 2020, post the WellCare closing but pre-pandemic, was approximately $66 billion annualized. And as you can see on this slide, we expect to be at a midpoint of $80.5 billion in 2024, good net growth despite redeterminations. 2024's $80.5 billion corresponds to a forecasted low point of approximately 13.2 million Medicaid members as of Q1 2024. In the appendix, we've included a bridge from Q3 of 2023 actual Medicaid membership to the year-end 2024 forecast the major drivers being redeterminations, California membership reductions as expected, net of the Oklahoma win, North Carolina expansion, and a return to growth in a post redetermination environment. Beyond Medicaid, Marketplace is both a fantastic franchise and a long-term growth opportunity, as you heard earlier from Sarah and Ken. I'm enthusiastic about the individual capabilities we have built, and the opportunity to disrupt the employer group market, a world that we understand as many of us spend our careers and part of our careers in group insurance. Our goal with Marketplace in 2024 is to preserve the incredible growth we achieved in 2023. As of Q3, over 75% membership growth since year-end 2022. Let me say that again. We have grown Marketplace membership, 75% since year-end 2022, and we're not done. Even if membership is only slightly up in 2024, we expect to grow revenue approximately $4 billion, given the steep growth throughout 2023 and the resulting member months benefit, coupled with price increases. That $4 billion is the basis for our current 2024 plan, with potential upside depending on the outcome of the open enrollment period that goes through January 15, so stay tuned. In our PDP business, we are well positioned in 2024 and expect to increase revenue by $1.5 billion. Even more valuable than the earnings opportunity on that revenue is the pharmacy spend and the captive audience for potential conversions to Medicare Advantage down the road. On a consolidated basis, we expect a midpoint of $133.5 billion of premium and service revenue in 2024, which is quite a bit higher than what we previewed for you a few quarters ago. The HBR targets by segment should be no surprise. We've been consistent in our messaging for the past few quarters on 3 fronts. First, Medicaid. We are targeting a 90.1% Medicaid HBR in 2024, which includes about 30 basis points of temporary dislocation between rates and acuity. We would target to get back into the high 89s as rates and acuity settle out in a post redetermination environment beyond 2024. Second, commercial. We expect margin expansion in 2024 from pricing actions and continued execution in clinical and operating initiatives. Part of this manifests itself in an improved HBR from 2023, but we also get SG&A leverage, including year 2 of broker commissions. Third, Medicare. An increase of about 300 to 400 basis points from 2023, reflecting the reduction in Stars revenue in Medicare Advantage and the resulting bid process focused on targeted product and membership preservation. 2024 also includes the unwinding of the premium deficiency reserve that we expect to record in December of 2023. You can see the overall HBR guidance is up 20 basis points at the top and bottom ends compared to 2023 guidance, largely driven by Medicaid. Our adjusted SG&A ratio is expected to be down 20 basis points in 2024. This is a result of value creation activities completed in 2023 and those we expect to execute in 2024. This was partially offset by the mix shift of lower Medicaid revenue due to redeterminations. Medicaid has the lowest SG&A of our product set. Meanwhile, we're growing Marketplace which has an SG&A ratio over 2x that of Medicaid largely due to selling costs and exchange user fees. Divestitures have also had an impact on the SG&A ratio over the past couple of years. We are pleased to be down 20 basis points in adjusted SG&A, given our changing mix of business, but we certainly aren't done with SG&A opportunities as we look beyond 2024. Hitting some of the other assumptions embedded in our 2024 guidance. We expect a composite Medicaid rate in the 2% to 2.5% zone reflecting both acuity adjustments and the reality of where we are in certain risk corridors and paybacks as we exit 2023. This is higher than the past couple of years. Mathematically, we know the rates for over 60% of our 2024 Medicaid premium revenue. Our target Medicare HBR range, I covered a minute ago, includes the 2024 amortization of a range of the premium deficiency reserve that we expect to record in December of 2023, as previously discussed. We expect investment and other income of just over $1.4 billion. This assumes a few 25 basis-point fed rate decreases in 2024. We are pleased to reduce our capital expenditures to approximately $640 million in 2024. This is down from about $1 billion in 2022, and $800 million in 2023 that we expect. We plan to continue to manage our debt to adjusted EBITDA metric to 3x or less. But our primary method of capital deployment in 2024 is expected to be share repurchase. As you saw this morning, we announced a $4 billion more of share repurchase authority on top of our existing authority of $1.2 billion. This should adequately carry us through the next 18 to 24 months. For 2024 modeling purposes, we have assumed $3 billion to $3.5 billion of buyback, including international divestiture proceeds with the lion's share of 2024 share repurchase in Q4 given the timing of cash flow and dividends from our subsidiaries. While I'd rather not be trading in the 70s, in our view, share buyback is an attractive use of capital at 11x 2024, maybe 11.5x since this morning. So what does all of this add up to? 2024 adjusted EPS of greater than $6.70 with about 60% of the earnings in the first half of the year and 40% in the back half. Given the strength of execution in 2023, we are comfortable lifting our previous guidance by a dime, even though we haven't reported any 2024 results yet, as we sit here in December of 2023. But here is why we really think the attractive -- where we think the attractive opportunity lies. In our long-term growth algorithm that we initiated at Investor Day 2022, and it still holds true today as we look to the long term. Beyond the initial focus and fortify era for Centene, a time period when divestitures and redetermination impacts are behind us. And when we return to the steady growth by seizing the opportunities in the growth areas of managed care government programs. When top line is combined with bottom line and capital deployment, we believe we can grow adjusted EPS on a CAGR basis, 12% to 15%. How will we do that? By growing revenue, 7% to 8% plus getting 1% to 2% margin expansion and deploying capital for an additional 4% to 5%. Drilling down on the earnings growth algorithm, how do we grow revenues 7% to 8%? Let's start with Medicaid. To reiterate what Sarah, ken and Jon covered, Medicaid growth will be driven by: One, opportunities for managed care in states without Medicaid managed care; two, states with some form of managed care that Centene doesn't currently serve; and three, complex populations that we believe will make their way into managed care in our current footprint. Essentially seizing the penetration opportunity, given that approximately 40% of Medicaid dollars are not currently in managed care. Similar to what we laid out last year, added to that growth, would be an assumed low single-digit annual rate increase, slight overall market growth and market share growth in a post-redetermination environment. Subtracted from that would be a practical view of the potential market share reductions in a few of our states. All in, we believe that this should yield a long-term 6% to 7% and revenue CAGR in Medicaid. In our algorithm, Marketplace is slated to grow at a mid- to high single-digit revenue CAGR based upon trend rate increases and our Marketplace chassis being a great solution for the uninsured and underinsured as well as some continued migration from small group to the individual market. Though as you heard earlier, there is an emerging disruption opportunity through ICHRA for the large group market or an accelerated group migration that could further goose the total addressable market and therefore, the growth rate of Marketplace. The Medicare Advantage individual market is structurally a growth market with only 51% penetration and with Medicare Advantage being a much more attractive value proposition for seniors than fee-for-service. While growth rates in Medicare Advantage may vary around the mean from year-to-year depending on factors such as risk models or rates, we expect the industry to grow at least mid-single digits over the long term. Once we get our Stars revenue to a reasonable level, when coupled with annual rate increases, we expect to be able to grow the Medicare revenue stream at a high single digit to 10% CAGR. This also includes a little bit more geographic territory to cover over the long haul. But stability and improving margin will be more of a focus than growth over the next few years in Medicare Advantage. On the topic of margin expansion, while it's obvious we have healthy margin expansion opportunities in the short to midterm for Medicare Advantage as well as ongoing value creation activities, we believe that 1% to 2% is achievable in the long run. This can be accomplished by growing higher-margin businesses at a faster rate than Medicaid, getting leverage on growth, and disciplined focused on efficiencies. Our #1 capital deployment priority just like today will be to fund the organic growth we just covered. This typically manifests itself in supporting new premium revenue with risk-based capital. But that won't use all of our free cash. We will target a 4% to 5% adjusted EPS CAGR through share repurchase, prudent debt management, and creating debt capacity for future M&A. While we will be thoughtful on M&A in the short term, given our slate of operational initiatives, we believe M&A will be part of the 4% to 5% of capital deployment in the long term. This team firmly believes Centene is a fantastic opportunity. Why do you think we bought back over 10% of the company so far? And many of us have been through successful turnarounds. Centene has a fantastic set of businesses and an awesome mission. But what I love about Centene from a shareholder perspective, is that it's a combination, margin expansion and growth opportunity. Those aren't easy to find, especially around 11x. We all know that government programs is the place to be in managed care, and Centene is very well positioned in government programs, the growth part of managed care. The government programs pie is growing, and there are meaningful penetration opportunities to convert populations and members from fee-for-service into managed care, especially in Medicare and Medicaid. We also have an awesome chassis called Marketplace that has attractive near-term opportunities for the uninsured and underinsured but could be used in the long run as a disruptor to the commercial group market. That's a 150-million member market. There are continued opportunities to improve margins, not just by fixing Stars in Medicare over the next few years but by being more efficient and effective across all of our business lines and growth will also aid in SG&A leverage. People in the industry notice momentum, and we have it. When you bring together our mission, our government program business and scale that we have and the opportunity to really make a difference in the lives of our members and by driving shareholder value. This is the place to be. Sarah, Ken, and I, have interviewed dozens and dozens of talented executives over the past year, and it's great to be in a place where other people want to be. Kicking a** with this team is just plain fun. So pick your choice. Send us your resume or buy our stock, and you can be part of this opportunity also. Thank you. Let me now turn it back over to Sarah.

We brought our Chief People Officer with us just in case, you also have your resume with you. But thank you for joining us this morning. As we wrap up, let me review once again the key takeaways. Centene's unique and powerful platform is strategically aligned to the fastest-growing segments in health care. Our competitive advantages drive operating synergy and differentiation across that platform, making us the best at serving low-income complex Americans across markets and across the country. We have invested to strengthen this platform, brought together a strong team focused on delivering value and build momentum through disciplined execution. And finally, we remain confident this platform is positioned to deliver 12% to 15% adjusted EPS growth over the long term. As we close out 2023 and step into 2024, we remain focused on Medicaid, Marketplace and Medicare. We aim to be the best in these markets, delivering affordable, high-quality health outcomes and driving system innovation. With this focus, we believe that we will not only grow. We will transform the lives and the health of our members and their communities, and we will deliver value to those of you who have invested in us to do this work. With that, we'll turn it over to Q&A, and I'll invite Jen and my colleagues up to the stage.

Hey, you've been a gracious audience. Now you get to participate. Time for Q&A. We'll start with A.J. Rice.

That was one of the more interesting closings to a CFO's presentation I've heard. So I have to think about that one. But you guys have talked throughout the day about disrupting the small group and the larger employer market. And I just would love to hear a little more about how you think that's going to happen? Is it through brokers or companies expressing interest in this idea of putting their employees on the exchanges? Or are you working with brokers? Is this something where you've got to go out and do the -- it's a fairly fragmented market. So I'm just sort of figuring -- trying to think how would that happen over time.

Yes. So let me talk a little bit about what's already happening and then Ken can talk a little bit about how we think about sort of the next waves and in particular, the Take Command partnership that he mentioned in his remarks. So if you look at the growth that we've seen in the marketplace and what we believe we're seeing currently in open enrollment, part of that uninsured group that we've reached are folks like gig workers, millennials, where the dollars that CMS has put into awareness, $100 million in marketing. And then the extension of the subsidies has created affordability. The other group that, that has been reaching are actually small group. So think sub-20, small group, low-wage employees. So construction workers, barbershops, [ aspetitions ], convenience store workers, hospitality workers. So those folks were already seeing because there's no penalty and those employers are not providing health insurance because they want to deploy those dollars elsewhere. So what we're already seeing is 5, 10, 15, 20 small group has essentially migrated into the marketplace. It's part of what's driving the growth is currently there. So our hypothesis is really about the idea that, that trend is going to continue and move up into the 50 to 75 to 150 small business group. And Ken, why don't you talk a little bit about how the broker engagement in the marketplace today is translating into that disruption?

Yes, AJ, you mentioned fragmentation. And having spent a lot of time in this market over the years, just build on where Sarah was going and then jump into the distribution piece of this. Historically, if you look at the U.S. census, I think the average small business owner employs 4.3 employees in this country for years in a group -- in the small group market, our average case size was 7%. If you talk to our peers and the big case companies who haven't been in the market and have stayed, they would tell you probably -- and I've talked to large brokers across the system that the average case sizes are moving up to closer to 11 and 12. A lot of them abandoned the under 5 market when they went to guarantee issue. So a lot of that stuff already had been migrating in, right? And you add that dynamic to the fact that the commercial market is not growing. So for one producer to write -- from one producer to grow, another one has to lose business. This is true for large consultants as well. So that -- we have strong belief that we can capitalize on that disruption by creating and in franchising or embracing a legion of brokers, as I said in my remarks, who have made their living selling to small businesses, but who resisted the individual market because they didn't like the idea of having to write one person at a time. That plays through to larger cases. We are seeing momentum in states like Ohio, where a consultant -- where the individual market lines up more with a competitive group market, and you see large consultants using ICHRA to carve out classes of employees to start. And again, all we need is a handful of disruptors, whether they're consultants or brokers in markets to take cases to get the attention of those who would otherwise have inertia and fight fiercely to protect their businesses. It is a different distribution system than the individuals that we've been embracing for years. I talked about some of what we're seeing with brokers moving from managed Medicaid or moving from -- I'm sorry, from Medicare into the individual market, I think you're going to see that same dynamic with small groups who, again, will bring their business and their focus. And we're investing the Take Command partnership that we announced is the byproduct of a comprehensive RFP process and evaluation of several vendors. And we have the opportunity to create a challenger model there as well because there's a lot of investment in that space to help fuel and facilitate this movement. So with obviously, a lot of energy around it and anxious to see where that goes.

Great. A.J., if you could pass the microphone to Josh, next to you.

I'd probably start with Drew's coffee maker. But I will really ask about the importance of the enhanced subsidies. I know, Jon, you spoke a little bit about it. But what happens if they do expire, right? I know that's not the base case, but how do we think about sizing the market of individuals that are in the market because of the enhanced subsidies and those between 300% and 400% of FPL? Then my second question is, we made it 2.5 hours without a mention of the risk model changes in MA, so kudos to that. But what actions have you taken with providers since bids were due. And I'm curious if there's any updated views if anything has changed in your mind?

Yes. So let's start with the enhanced APTCs. As Jon pointed out, these are set to expire in '25, they align with the expiration of the Trump tax cuts. That's important because that's a mechanism to bring both sides to the table for a conversation. The other thing that Jon mentioned that I think is important to take away is the high probability of divided government. And therefore, the idea that if there is reform, it's probably incremental around the edges as opposed to systemic. And so our view actually is that the growth that the marketplace is seeing is far and away the best moat. By the time we get to 2025, we could be talking about somewhere north of around 20 million members that you'd be taking coverage away for that -- from, that's not a great thing to do regardless of what side of the aisle you sit on. The other thing is, is if you look at this chassis and what the extension of the subsidies has done, our view is that, that created a sentinel effect in the industry that went far beyond the pure dollar value of the spend and it really signaled the entrenchment and the stability of the marketplace as an infrastructure that, frankly, both sides of the aisle can and should be, in our opinion, building policy on top of. It's part of what created the tailwinds for the growth that we're seeing, the belief that these uninsured members could come in and actually have a stable policy experience over a number of years. And so if you talk to both sides of the aisle, there is actually overlap around this policy and the idea that it can be an alternative to Medicaid expansion, that it's a really great opportunity for individual choice for people participating. And frankly, for the Republicans, it's really well aligned with a lot of the principles of their health care policies. So together with the Democratic support and what we think is really interesting policy for the Republicans, we would actually hope that this becomes a mainframe as we go forward as opposed to something that we're looking at in terms of overall overturn or repeal and replace. We think that, that conversation, frankly, is dead. Relative to your second question, do you want to talk a little bit about the risk model year 2 changes and how we factor that into bids, but then also what we did with our value-based providers in terms of our profile and keeping them engaged.

Yes. So obviously, our 2024 bids are -- have Phase 1 of the new risk model phased in punitive to -- and we're educating as many people who are listening, along with our peers, it's punitive to partial duals, the most and then duals as well. So while we're planning for the following 2 years, which is sort of around the 1.3% plus or minus headwind we would expect on the payer side, that applies to the industry. We're also working with our providers. It's nice not owning the earnings stream of the provider at this point and worrying about that, but definitely want to make sure we're sort of selecting the right panel of providers with our diversified opportunity of partnerships that you heard earlier and trying to work where we can with those providers to channel the business.

I want to go back just to your first point because there is another thing, and I'm going to ask Jon to keep me honest on this. But I think if you think about how the subsidies were enhanced, they were enhanced without a cap. And so one of the things that's important in the dialogue is the idea that you could actually drop that cap to something that actually pretty nicely overlaps with our business and doesn't hurt overall population, but would be a concession relative to how perhaps the Republican see things.

Yes, I could agree with you more, Sarah. So that will definitely be part of that discussion is will they put that cap at 400% or somewhere around there. A couple of other things that I think are important to remember, Josh, is, number one, this -- we've already now extended it once. So this isn't the first time. So that's a benefit. The other thing I just can't emphasize enough, we have seen a shift in terms of the politics out there. We really do need to look at these states not as much as red states/blue states, but rural versus urban. We've seen tremendous uptake in those rural areas. So when you see the tremendous success of the marketplace in states such as Florida, Texas, Georgia, those are constituents. They're obviously voters. We're seeing a significant increase in terms of those that now utilize marketplace coverage, all those things make this much more bipartisan as we move forward into discussions.

Great. Our next question will come from Steve Baxter at Wells Fargo.

On the Medicaid rates, I appreciate the comment on 60% visibility for 2024. At this point, do you have fill visibility to January 1 rates? Or are there any you still waiting to come in? And I guess on the acuity adjustments you're seeing, I guess, just an update on how those are tracking versus the underlying cost. And I guess big picture, you have -- seems like a very good sense of rates at this point, basically what you can know, costs. It seems like you're getting developing picture of retermination. What are the key swing factors for Medicaid MLR in 2024 that could either drive you above or below the guidance?

Yes. So let me maybe hit sort of high point updates because I think that was probably the one topic we didn't actually cover in our remarks. So continue, obviously, all the good partnership with our states, continue to be on track from a membership standpoint and an acuity standpoint. We are still seeing roughly mid-20s percent in the [ rejoiner ] rates -- yes -- in those mature months and then obviously the dynamic, this is a big quarter, as we said before. So we expect to be at 1.9 members through our target 2.3 to 2.4 by the end of this quarter. So it's a big membership quarter and a big member months compounding quarter. And so obviously, have increased visibility now into those 1 run rates. And if you want to sort of break down where we are.

Yes. Yes, as of last night because we actually got one last night. We've got visibility -- we've gotten acuity adjustments in all but 3 of our states for 2024. In addition to those 3 states, there's one additional one where they still owe us retro, visibility on retro acuity adjustments to 07/01 or in the case of what we talked about last quarter, 04/01. So there's still -- we're still owed money and visibility for the rest of 2023, but all but 3 for 2024. And then the normal course, outside of acuity, there's a couple of other states that we are waiting on visibility and a commitment for rate updates outside of acuity, once again, retro to 07/01/23. So tough to predict whether we'll get those in the next few weeks or whether those will come into '24. But as you think about the long run, we feel pretty good about the visibility of 2024 and having all but 3 states with that good visibility that we wanted.

And I think also an indication of just continued constructive dialogue with the state in terms of understanding what historic '23 experience was and the need to sort of address that and then looking forward into 2024.

Justin Lake from Wolfe Research.

So first, just wanted to ask about Medicare Advantage going into 2025, right? So I appreciate all the color on '24. But specifically, as you think about membership repositioning now that you've kind of gone through the 2024 repositioning, how should we think about membership growth in 2025. Drew, you also have to jump over the PDR rate coming kind of back. How should we think about that from an earnings perspective? Can you grow earnings in 2025 in Medicare Advantage? And then lastly, you put up the 12% to 15% long-term growth. Do we think 2025 kind of falls within that at this kind of vantage point?

Yes. So on Medicare, so 2025, there's a number of things we don't know, right? We don't know the '25 rates. We'll get some visibility in February, and then we'll get the final rates in April of '24. So that's a pretty big item. We also need to see the shakeout of how we enter 2024 through AEP. AEP is going on track so far, including the mix of business, so that's good. So far, the plan is working out, but we've still got disenroll coming in and you have the OEP period also. So for 2025 -- so for 2025, we've got to jump over the PDR, as you've indicated, we've got clinical initiatives that we've slated to execute on in '24 and continue into '25. As we mature sort of the health care affordability execution process relative to Medicare. We still have work to do on SG&A. We've got to get SG&A down at least another couple of hundred basis points that we may not be able to do that all in 1 year, but that's also a lever as we think about '25 and beyond. So we'll have to see how those other things play out. But what we do know and we all have visibility on are the STAR results we got in October of '23, which relate to the 2025 policy year as all of you guys know. And while we're pleased with the advancement in 3 stars and sort of the forward advancement in a large percentage of our contracts as we know, 3 doesn't get you in the extra economics, but you have to get to 3 before 3.5. So we don't have a stars lever in '25 with our goal of what we received in October of '25, that will be at 85% in 3.5 stars. That will be for '27 revenue. So we still got work to do in Medicare Advantage, but we will have shrunk it to, I think, a business that we can then stabilize, try to get margin recovery and then ultimately get back to growth as we think about a few years down the road.

I would just say we're still committed to our 12% to 15% long-term algorithm.

It's a CAGR, and it's long term.

Great. Next question will come from Lance Wilkes of Bernstein.

Can you talk a little bit about your use of capital and M&A priorities as you're looking forward? And in particular, obviously, buybacks you really stressed for next year. But as you're looking over the next couple of years, what are the types of things that might divert you away from buybacks? And then maybe just a follow-up on SG&A. When you're thinking about what needs to -- or what can still be centralized and what sort of -- what's the magnitude of opportunities that might exist in the company. If you could just give some color on that as well.

Yes. So for M&A, as we've talked about, while we were executing on 10 divestitures, we didn't lose sight of the important surveillance mechanism that the M&A engine is for our business. Our focus continues to be on acquisitions that are aligned with those 3 core lines of business. So think about geographies that we might not already be in, programs we might already be in, general profile of those, just given what's out there in the industry look more like tuck-ins and bolt-ons on balance. And so our goal is to be able to position to look at any of those and then we obviously need to make sure that the math makes sense that they are accretive relative to a long-term view of where we want to keep each one of those lines of business. But we also, in the near term, need to be pragmatic about what the operational burden of integration looks like. So that's just part of the calculus. I think we've been pretty transparent about that. So health plans primarily in the near term, as we get out into the medium term, I would say, capabilities. You've heard a lot today about where we think the individual market is going, what do we think are the capabilities that are going to be important to own to support that. That's still an evolving thesis, but I think that would be something that we would open the aperture to as we get to the medium term. And that, again, is sort of weighing the core focus on share buyback relative to what those acquisitions could do in terms of driving value in the long term. Relative to SG&A, I think I would actually say the opportunities that we're looking at as we turn the corner from '24 are less about centralization necessarily and more about the sort of benefit of the standardization work that we've done. And so if you think about taking a distributed model and standardizing it, then that allows you to think about applying data and technology and then automating. And so you saw Andrew's slides, the idea of embedding more AI in the back-end processing of what we're doing, all of that is predicated on having good data, standardized processes. Otherwise, you're just taking c*** and putting it at the speed of light. So as we look out to 2025 and beyond, I think there are real opportunities to get even more streamlined in how we operate and even more connected across those lines of business. Those would be sort of the general themes of what I would say you look for in SG&A.

Great. Next question from Calvin Sternick at JPM.

You talked about the 8% CAGR on the marketplace spend. And I think your long-term target is in the high single-digit range revenue. So just wondering if you could talk a little bit about the membership and market share assumptions that are underlying your long-term targets. And then more broadly, when we think about individual, that business has been volatile year-to-year for a variety of reasons. But going forward, as you get past COVID, are you thinking that business could become a bit more stable?

Yes, is a short answer to that. And I think if you look again at the growth that the market has seen in the last 3 years, that sentinel effect that the subsidies has created, the fact that we're reaching the uninsured population and we're seeing the trends that we talked about in the small group disruption, the trend that Jon talked about in terms of this being the major option for rural communities, all of that creates stickiness plus the fact that the broker community, as Ken talked about, has realized now that this not unlike Medicare Advantage is a product that is sold, not just sort of more passively bought on healthcare.gov. So all of those create market forces that surround growth and stability. And I think, obviously, we're still very much in the middle of OEP. But I think as we come through the other side of this, it will be really interesting to see the degree to which those trends continue and accelerate. And then maybe [ you want to ] talk a little bit about some of the underlying assumptions.

Yes. The defined addressable mark is really today's individual business, which has a little bit of small group migration but not a big wave, and it doesn't really have any of the ICHRA opportunity that we're trying to make the market and frame that as well. So yes, there would be upside to that case if we're successful, penetrating into the large group market through ICHRA and then if there's an acceleration of small group migration.

Great. We'll stick with that [ role and going right ] to Kevin Fischbeck, Bank of America.

Great. I wanted to ask about redeterminations and how you're thinking about the margin implications of pressures for '24. And then how we should think about that going forward? I think you said that in Medicaid, you're a little over 90%, you want to be a little below 90%. So does that mean we should be expecting 20, 30 basis points of margin improvement in Medicaid in '25? Or is there anything at this distance that says no, it takes longer to achieve that? And then on the exchanges, it sounded like that there was some improvement year-over-year from getting a full year of that membership, but now you probably get more membership into year in '24 too. Is that a pressure on MLR we should be thinking about that might become another tailwind in '25? So just trying to think about how those 2 things play out over time.

So 2 independent things. Marketplace, since the annual enrollment period, the open enrollment period goes through January 15. We're going to let that play out and make sure we have good visibility into not just the sales, but also the retention aspect. So as you could tell, maybe by our body language, we're pretty optimistic about being able to do better than what we've embedded in our current forecast of 2024. And then to your point, that could provide some additional incremental earnings, but not at the full rate of margin in year 1 as we experienced in '23, which is a lift coming into '24. So we'll have to see how that dynamic plays out as we -- we've got a few more touch points as we enter the new year and have more visibility in the open enrollment period for Marketplace. On Medicaid, you read that right. We think there's in the zone of a 30 basis point margin expansion opportunity off of the 2024 base. Will it perfectly be in the calendar year of '25? Don't know. I mean, we've still got probably a couple of billion more of the annualization of redeterminations that go from January and May of '24 into '25. But then also, we'll have the opportunity to better synchronize with our state partners, any dislocation between rates and acuity. So tough to predict is that calendar year, but somewhere in that '25-'26 -- so, and yes, we would expect to be able to get back into the 89s, like both Centene and WellCare independently. You heard what I rattled off on the first quarter call. Centene averaged about 89.6% and WellCare averaged 89.5% over the 5 years leading up to the onset of the pandemic. So we would expect to get back at least into the high 89s at some future point. So that's a lever to think about for '25-'26.

Great. Next question from George Hill, Deutsche Bank.

First, Drew, I want to say I got the Mr. Mom reference, some of Michael Keaton's best work. Two things quickly. Number one, I guess, can you talk a little bit about how you're thinking Part D to MA switches in '24 and '25 given the disruptions that's expected to Part D because of IRA. And part 2 -- question 2 is, you guys spent a good bit of time talking about what sounds like value-based care models in Medicaid, would just kind of like to hear you talk about like how much of an opportunity can that be as it relates to containing MLR and Medicaid and how far advanced for those risk models compared to what you see in MA?

Yes. So on the second point, Colin mentioned this, where our risk model -- or value-based penetration in Medicaid is in that 40% range, a little bit tilted more towards upside than upside and downside. But that's certainly industry-leading. And that's a result of having really focused on value-based strategy coming into and during the pandemic, which was an interesting opportunity to illustrate kind of viscerally for providers what it means when you are at risk and have suppressed utilization, not for good reasons, but it was valuable relative to socializing and sort of helping those providers build that muscle. I don't know, Alice, do you want to talk a little bit about the models that we're seeing and why those work in the Medicaid providers we've chosen and then we can come back to Drew for the PDP part.

And it tags back to some of the comments that Kate was making FQHCs, for example, and other safety net providers are absolutely committed to this population, but they may not have the capabilities or the financial cushion to start investing in value-based care. So some of the strategies we've been using is bringing in partners that work with both us and the providers to enhance their capabilities, whether it's around data, registries, population management, team-based care, all the things we know that basically bend the cost curve and improve quality simultaneously.

And do you want to hit PDP [indiscernible].

Yes. PDP, we're excited because you're right, one of the great strategic purposes or assets within the PDP business is the ability to convert them over time to Medicare Advantage. And we're really pleased. Our current guidance that we just put up is based on growing nicely that PDP stand-alone business. It's not big in revenue. It's about $1.5 billion in revenue, but we should be over 6 million members, which gives us a fertile sort of playground to sort of reach out to those members and see if we can match products with them, not just in OEP, which could impact '24, but beyond that, as those members get a WellCare and Centene experience. So we're in a position -- it's fortuitous that we time that with the advancement of our cost structure with our new PBM partner so that we are able to seize that opportunity, which is really more of an investment in the future, leveraging that pharmacy spend, which, as you guys know, I love to do, and then also having that captive population to target.

Great. Our next question will come from Sarah James, Cantor.

So you've talked about a lot of moving pieces in 2024. I was hoping that you could help us thread the needle on cadence given all the rate changes, contract changes and some of the savings initiatives you have going on. And then just back on the rate topic. So it looks like you guys are about like 100 to 150 basis points above where you were in the last couple of years on average. How much of that is risk adjusters versus mix shift? And is there any bump considered in there from the states that are requiring coverage of GLP-1s, is that accurately accounted for?

Yes. So let me hit GLP-1s first. There's only a couple of states that in Medicaid allow those for an indication of weight loss. And we shared that data with our state partners, and it's their decision, we'll administer but the rates have to sort of reflect that. The cadence of earnings during 2024, 60% first year, we're targeting 40% or first half of the year, back half of the year. There's not a lot of variation. There's a little bit -- as we sit here and look at quarter-by-quarter, but for the first 3 quarters and then just like this year, the fourth quarter in all years has the sort of heaviest spend and the lowest earnings profile. But as we get more visibility post-AEP, we'll think about updating that before we actually report Q1.

Great. Question from Nathan Rich of Goldman Sachs.

For '24, there are several large RFP awards that are anticipated next year. How would you maybe frame the potential outcomes from those, Drew, I think you alluded to some practical market share reductions. Could you just maybe put some parameters around that? And then based on the commercial HBR, it seems like you'll be at probably towards the high end of your target margin range for marketplace. Have you changed how you're thinking about the long-term margins for that business?

So let me just start by saying that I think the Health Plan Presidents who are here would revolve against the idea that we weren't trying to win every possible life we can serve in each one of those RFPs, and that's obviously the mentality that we take going into that process. And I think if you look at -- we've alluded to this throughout the morning, but if you look back at the track record in the last 24 months, we've had 18 wins that doesn't include New Hampshire, 2 new states, 7 new programs. And so our world-class business development team in partnership with Wade's team and Nathan's team and Mark Sanders' team in Texas, I think, are feeling good about what they've put forward in those states combined, it's about 18%. But Wade, why don't you talk a little bit about how you guys lined up to the RFP that you just submitted?

Sure. Happy to talk about it. We've had a long-standing relationship in the State of Georgia. We actually brought the state in the managed care back in the 2005, procurement have been continuously operating there. So we have a lot of excitement about the expanded opportunities in ABD and LTSS, in the year ahead, but this is a process that's been ongoing for a very long time and builds on the partnership we've had with the state now for 17 years in Medicaid. And I know Nathan may want to speak more to Florida.

Well, as Sarah said in her comments, I mean, RFPs, we can -- so I mean, we compete for RFPs every day. And so it's not just when the RFP has dropped. So we're -- we work every day. I'm very proud of the team that what we've done over the last few years and ultimately the response that we put forward, and we really look forward to telling our story when it comes time for that over the next couple of months in Tallahassee. So -- and as you said, we're going after every single one of it.

But as you pointed out, so that's the operators, the finance guy, a little bit more pragmatic. Let's make sure we -- if we're going to lay out a long-term growth algorithm, we do have some give and take in there for market share give back. We don't expect to give back any, but the long-term growth algorithm does reflect some give and take in there as we've been thoughtful about that. And then on your commercial question, no change in the view of what we think the sustainable range for margin is in our marketplace business.

Great. Last question from -- in the room will come from Gary Taylor, Cowen.

Last but not least, I hope, happy holidays. I wanted to go back to M&A for a second. I think when we're thinking about '24, what's implied is kind of a mid- to low teens reduction in enrollment, but you thought you'd have much less than that in D-SNP or certainly less than that in D-SNP. Given that AEP is over, can you fine-tune that for us a little bit, like what you're expecting for D-SNP versus individual? And then the second part of that would just be -- I know you've talked a fair amount about repositioning the SNP product. Can you just give us 2 or 3 points on what exactly that means we can see some of the benefit changes, but I want to make sure I understand what you're talking about when you say repositioning that product?

Yes. So we're -- just through AEP, that's still settling out, and we still have OEP. But as Ken and Drew and others pointed to, we feel good about the team's execution through AEP and a big focus was really on increasing that duals mix from what was in the low 30s and really taking a step up from that. That's what we're seeing so far. But again, we need to kind of see how the next couple of months play out to see where exactly that lands. And then relative to benefit redesign, you can broadly touch on this, but I think part of it was actually just streamlining some of the benefits that we felt like were going to be valuable to that duals population to make it easier for them to use, for example, some of those benefits that are sitting on the spendables card that are really designed around drivers of health that we know are critically important and valuable to those members. But I don't know if there's anything else you would add?

Yes. We simplified, to your point, the spendables card, so it's actually more user-friendly and simpler for the member to execute on and to use. We invested in many of our D-SNP PDPs. We sort of tilted away from some of the Part B giveback PPO business. I mean, we made PBP by PVP decisions, county by county. So that's sort of a generalization. But we did it thoughtfully and the team did a really good job thinking about what business do we think is going to be valuable for this company in the long run. Back to your mechanical question or the mechanical part of your question, the guidance that you saw, the math is easy on revenue. It's going from $20 billion to $16 billion. So it's 20%. The membership underneath that is mid-teens plus reduction. So that's how the math works on the $20 billion, including the falloff of some of the STARS revenue.

And Sarah, I might add, just we also -- I mentioned this in my remarks, but I said we strengthened internal assets. We've invested in W2 and field-based resources, call center and marketing support focused directly at the deals.

Well, we have Scott Fidel, who joined us on the web today. And so one last question is about marketplace. And as you think about, and hopefully, Scott, I get this right. But as you think about Marketplace, we've obviously laid out a number of opportunities for the Marketplace. When we think about that in conjunction with the long-term growth algorithm, what's included in the current view for Marketplace long-term growth and what would be outside of that long-term growth algorithm?

Yes. So I think Ken laid this out pretty nicely in his slide. And if you think about the stuff that was on this side of the slide, which is really that small group migration that I talked about earlier that we've already been seeing for the last couple of years. So gig workers, millennials, low-wage, small business employees, that's included in that 12% to 15% because that's part of the growth that we've seen in the last couple of years and that we projected forward. The ICHRA conversation is really what takes us to a different playing field. And again, that's early. We wanted to give you all some flavor because we talked a little bit about it here last year. And the data points that we've seen evolve out of the market over the last 12 months tell us that this is increasingly a thing on multiple vectors, but that is above and beyond that 12% to 15%.

And Sarah, I think you had a bullet on your slide around supplemental benefits, which is something we talked about last year at this time because of the pace of growth and wanting to ensure that we delivered on our quality and enrollment commitments, I keep a weather eye for us with respect to -- I said it in my script that we want to move from being in the Marketplace to becoming a Marketplace, and that includes leveraging the incredible power of loyalty, elasticity in demand and the ability to sell other products and services into that growing population.

Great. Well, we want to thank the room and all the folks participating on the web and for all the questions in the room, and thanks to the team for all the insightful answers. We do want to point out that we do have Aaron from Big Brothers Big Sisters with us today in the room. And so if you have any questions for him, you can check out their table to get some more information about how to more actively participate with Big Brothers Big Sisters of America. And if there are any follow-up questions, you know where to find us. Thanks so much, and happy holidays.

Thanks, everybody.