Elevance Health, Inc. (ELV) Earnings Call Transcript & Summary

It looks like we're the first one in the morning. So we'll -- I expect a few more people to join us. I know we've got a big crowd this year. So Lance Wilkes, the healthcare services analyst for Bernstein, and really excited to have everybody here. I'm going to let Gail introduce herself and we'll go through a fireside chat. We've got a pigeonhole that will be open. Just as background, Elevance is one of my top picks. One of the things like -- I'll share with the audience the one sentence that I've been using with Elevance very frequently to try to describe our investment thesis in the name has been -- this is a company with more members than United, 1/4 of the market cap, probably largely due to a perceived lack of a services business. And I would say the top priority that you seem to have instilled in the company is the creation of this services business and the unlocking of the margin potential there. So to us, that's why it's consistently our top like 5-, 10-year pick. So I think this ought to be a really interesting discussion. And before we get started, Gail, if you want to just introduce yourself and a little bit of the company, and I'll ask you some questions.

Gail Boudreaux, President and CEO of Elevance Health. Pleasure to be here with all of you. I became CEO in 2017. So I've been at the company a little over 6 years, and I've spent my whole career in the sector. So looking forward to the discussion today. And thanks again for joining us.

Yes. Well, and I wanted to kind of uniquely in my questions with you today, start off -- even though I think the vision and the future is so interesting. This is an interesting point where you've actually taken the company really far from where you came on board, I guess, about 6 years ago. So could you just talk a little bit about kind of what you've done to the company thus far kind of paint a picture for the audience. And then we can kind of shift into, okay, now what are your priorities going forward? But what was it you were trying to accomplish by this point? And what do you feel like you've accomplished?

Yes, sure. It's a great question. I think a great way to start the discussion about who we are and how we've changed because I think fundamentally, we're a very different company than we were 10 years ago and even 6 years ago. And I guess I'd like to think about it in a couple of ways. First, strategy, as you mentioned, talent culture and then a focus on operational excellence. And those are areas that, for myself, our leadership team are incredibly passionate about. And there are areas that we have focused a lot of attention on and quite frankly, have driven pretty significant growth. And just a couple of, I think, grounding points would be really helpful. If you compare us from 2017 to now, we have dramatically grown our health benefits business, 7.6 million consumers served additionally during this time. And to your point, we created a health services business over that time that was really just, I think, a concept and is now a [ $41 billion ] business. So as you think about that, that's sort of the framing of it. And in addition, at that time, when I joined in '17, we committed to a 12% to 15% adjusted compound EPS growth rate. And I'm really proud that we've been able to deliver 16.3% over that time. So I think that's the framing of the results. But for me, it all starts first with our purpose, which is improve the health of humanity. And then that translates into our strategy, which is to become a lifetime trusted health partner. And for us, that strategy means delivering whole health across the continuum of consumers regardless of age or health status or regardless of insurance coverage. And so as you think about those things and what they mean for us, that's meant building a much more diversified and resilient health benefits business, and you mentioned we're the largest in the States. And then accelerating Carelon, which is our health services business. First, to serve our own health plans. So we have greater certainty, quite frankly, on taking whole risk growth within our health plans. But secondarily, and I think this gets lost is also to build an external pipeline and predominantly serve the Blues who are our sister plans. So if you take a step down deeper, like, what does that mean? How does that strategy translate itself into operational execution? I'd say there's kind of 3 areas that we have focused on and been very consistent over our last several discussions on our strategy going forward. The first is optimize our core health insurance business. And we have 2 mature markets, for the most part, Medicaid and Commercial. We still think there's growth. We clearly see growth in improving the profitability of our services health fee-based business, and we've shown that progress. And we think there's really attractive economics in both. So that's about really optimizing our very deep market share and continuing to build on that. The second and third are really about acceleration and the acceleration of investing in high-growth opportunities, that's for Medicare Advantage. We have a big opportunity to scale that business and to scale it more similar to the presence we have in Commercial. And our strategy is to keep people Blue for life. They're very connected to our Blue brand. And if we can keep them Blue for life across Medicare Advantage, we're investing in that and growing. And then specialized populations is the other area that we see accelerating growth. And what do I mean by that? It's really taking advantage of our strong Medicaid footprint, LTSS specialized populations. But also we're interested in both Medicare, Medicaid or both in those populations. So we have a strong position in duals market, and that's an area that we continue to grow. And then the last one, which I think is one of the most exciting parts of our growth story is the scaling of Carelon. And so over this period, we've scaled it pretty dramatically from truly nothing in terms of contribution to the earnings or growth of the company to $41 billion. And that really is about, first and foremost, creating a whole health, taking a physical health, mental health and behavioral health and pharmacy and integrating those and taking risk. And first for our own plans, our own health plans, which again provides continuity for us and it's very synergistic because as our health plans grow, which we have, Carelon grows. And then as Carelon takes on more whole person risk, then we have more stability and can grow our health plans around affordability. So to me, it's a pretty straightforward strategy and very synergistic and on the outside, then we sell it externally because our proof points, particularly to our peer Blue plans, we operate very similar to them, and this is an opportunity, particularly in our government business, where we've done a lot of JVs and other things. So as I look at that, I think we've made a lot of progress on that strategy. But we have -- as we shared in our Investor Day, we have a higher growth rate coming out of these 5 years going forward. And let me just sort of round out the discussion, which I think are the 2 other areas that are really important. Talent is one. I'm really proud, one of the areas that I focused on over the last 6 years is to build a deep bench. And we have been able to really attract people both inside and outside of our industry to come. We're focused on diversity, we have an incredibly diverse leadership team and Board. And it really is focused on serving the populations that are important to us. And I think that helps us think about things from very different perspectives and understand where the opportunities are. And then culture. Culture is very purposeful. We had a very deep culture. So when I came to Elevance, Anthem at the time, our culture is very much rooted in the community and serving our populations. Where we pivoted that culture was to do that but more importantly, to also deliver performance and results and accelerate that and a commitment to meeting our -- all of the things that we've committed to and are -- and had achieved. So it's an acceleration, I think, of the speed at which we work. And I'll give you one last statistic, I think that's helpful is, we do an annual employee survey. And last year in that survey, 90% of our associates. We have 100,000-plus associates said that they completely understand our strategy, which is a really good thing. They know how to execute on it. But importantly, they feel we have a positive culture that allows them to achieve this strategy we've outlined. So as I think about the whole package, Well, I'm excited about our potential and our future is that the alignment of our talent, the alignment of our culture and then I think the growth opportunities inherent in the businesses we have, really provide us a really nice trajectory, and we can -- we have line of sight to what that trajectory is. So we're very confident in that. And the last thing I'll close with is what wraps around all of this, we've made a lot of investments in digital. So one of the areas when I talk about talent from external to the company, that's an accelerator. Those investments, we believe as we think about the right uses for those will really help be sort of a tailwind for us going forward because we're looking to scale those now. We've done a lot of work both on internal operations, digitizing, working with data in a bidirectional way with care providers. But lastly, looking at how we simplify the consumer experience, too.

That's great. And that's a tremendous amount too, what you've accomplished and over that time period. But before we get through the next sort of questions, which will dive deeper into the company, maybe for some of the folks who aren't as familiar with our system, the Blues and things like that. Can you just talk a little bit about the Blues and sort of where you're Blues, where you're not? And then also how large the total Blues opportunity is for you to...

Yes. So first of all, Elevance Health is the overarching holding company for Anthem Blue Cross, Blue Shield. So we have 14 Blue Cross and Blue Shield states that we're accountable for. We also have Wellpoint, which is what we call our green brand, but it's where we can sell predominantly Medicaid and Medicare under the non-Blue brand. So those are in states that we don't hold the Blue franchise. And then Carelon is our services business. We -- the Blues -- I think what's interesting about the Blues is generally the Blues are the dominant market share in Commercial in all of the states and have continued to grow pretty nicely, over 100 million lives served and growth year-over-year. The opportunity for us at Elevance, is, first and foremost, we generally don't compete against them in the commercial space. And they see as our goal is to be their partner in the services. The area that the Blues historically have not been as strong is in the government business. So our first entree with many Blues was to be a partner with them, particularly in the Medicaid business. As you know, Medicaid is a scaled business, one state Medicaid plan can be quite volatile. And we've invested heavily across the Medicaid platform. And so we usually enter, we have historically, I should say, entered as a JV partner with them to help them deliver Medicaid in their state, and we have a number of those relationships. That has transformed into working with them in Medicare and the dual eligible opportunity again because we've invested. The other area that we work with them and have and are -- think there's a lot of opportunities in the Carelon services area. We right now have a relationship under Carelon with most Blues, so non-Anthem Blues. And we have multiple products we sell with them. Our goal there is to also do what we're doing with our own health plans, just take more whole person risk with them as well and continue to build capabilities, both through organic build, but also through M&A, [ programmatic ] M&A. And you've seen us do that where we bought Aspire, for example, myNEXUS recently, and Beacon, which is a behavioral health company. So as I look at it, there's a lot of opportunity inside of the Blues and we continue to really package more whole health, whole risk opportunities with them. So we see a nice long pipeline there. And obviously, we're excited about hopefully closing on the end of this year, the Louisiana purchase, which will add our 15th Blue state. And I think that's a really interesting and good example of us starting in a Medicaid partnership expanding to dual eligibles. And then through a strategic review on their part, feeling that it was right then to have us acquire them and keep the Blue heritage and the community focus. So -- but it's a great pipeline, and we see it from an external opportunity as a big opportunity for us and continue to grow that business.

That's great. Could you talk a little bit about the top priorities for capability expansion in Carelon. So obviously, you just mentioned some of the areas like home health and behavioral that you've gotten into recently, obviously, just through the specialty pharmacy acquisition. As you look at furthering your capabilities there, what are the most important things and the biggest opportunities for you?

Yes, I'll go back to sort of where I started. It all starts with our ability, I think, to play in a bigger part of the health care pool. And so we look at the TAMs of each of the markets. And we want to be able to take risk around those. So whole person risk really the integration of physical, behavioral and pharmacy. And quite frankly, today, that's not an area that a lot of people are doing. And so we have always had a focus on first starting to do that inside, and you probably heard us talk quite a bit about myNEXUS, which is in one of our parallels, where we were able to scale that rapidly across our entire Medicare Advantage business in less than a year. So -- and that's, again, post-acute care, where we're able to take risk on post-acute care and Medicare Advantage, scale it to all of our plans inside of Elevance Health and also selling it now externally. So as I think about the opportunities, we're focused on a couple of things. Those things that are attractive in terms of taking whole person risk. And also, given our focus on accelerating specialized populations, things with more acute and chronic conditions because we feel that's an area where we have a lot of lives already. It's an area that we've invested in historically, and we see a big opportunity there. So you mentioned the home, myNEXUS is part of the transition from inpatient to outpatient in the home. And so we're very interested in that. We just did a deal in specialty pharmacy with BioPlus. Our goal is to scale that pretty significantly, and we're excited about the potential there. So again, it's for us owning those capabilities and our framework is about things that will help us reduce costs and provide value. We're not about adding to the health care cost infrastructure. We're about not, quite frankly, making it more efficient, taking cost out and delivering a better experience. And so that's how we think about it. But again, all focused on areas where we can combine capabilities across the spectrum to take more risk.

Yes. So let's then expand the discussion a little bit and focus in on value-based care. So you've -- obviously, you've got a strategy with respect to contracting on value-based care. In my view, you've sort of evolved your strategy as far as what you might do as far as ownership or different levels of participation. Can you just talk about what your current strategy is and your outlook for value-based care delivery?

Sure. So we've been on a journey in value-based care for a long time. And I think what's important for us is that value-based care has to cut across all of our lines of business. We're by far, the most diversified in the health benefits today. So we are looking to solve this for Medicare Advantage, Medicaid and Commercial and try to build standard protocols and approaches, doesn't mean that everything is the same, but it means our framework is the same. And as we shared a few months ago, our goal is ultimately to get to 80% of all of our spend in value-based care with about 40% in downside risk and downside risk is really where you see, I think, the biggest impact. But again, it's a continuum for care providers. They can't go to just take value-based risk right away. So you need to move them along the spectrum. They need to understand how to operate differently, how to share data. And so our strategy starts fundamentally with our health benefits business and value-based care. In terms of the second question of how do we think about provider ownership and enablement. And as you said, we continue to evolve that. We look at an MSA-by-MSA analysis and what makes sense. Because of our deep penetration and relationships, it is really a mix. It's not a single model. It's not own all providers. It's not clinics. It's an MSO provider enablement capability, which we're both building and looking to add capabilities to. We've also made some investments in third parties that helps accelerate some of that for us. It's some clinic models, which we do own today as a part of CareMore and again, more focused on the acute and chronic populations. And then it's wraparound services. And the wraparound services are really interesting to us, too, because in those value-based care arrangements or when we're doing an enablement, we can then wrap around Carelon services to that, whether it's behavioral health, myNEXUS, Aspire. And so we see an opportunity to participate in the value creation pool there. So for us, honestly, it's looking across all the benefits businesses, starting with value-based care and using whether it's some ownership in providers, investments in providers or enablement of those providers. How do we participate in the broader pool and manage our overall expenses for certainty in the health benefits business across all 3 lines of business. And I think that is different than what others are doing. They've picked either a line of business and they're trying to expand but we've started with looking at all 3 and then a very sort of structured approach market-by-market. And again, we can do that because of the density. I mean, 1 in 5 patients a provider sees in our markets generally is 1 from Elevance Health or Anthem.

Yes. Can you talk a little bit about -- when you're talking to the different market segments and so Medicare, Medicaid and employer and including self-insured employer. What's the appetite that you're seeing, for example, in the employer and self-insured employer to do things in the value-based care space? And then maybe for Medicaid, which is another area that's traditionally underpenetrated in value-based care. What do you see as the opportunity there? Is that an opportunity to differentiate yourself? Win more RFPs as an opportunity to just produce better costs? What's sort of the priority and the motivation in each of those businesses?

Yes. So obviously, everyone understands the Medicare Advantage opportunity, very tied to improving stars and all that. So I won't go into a lot of detail, but we think it cuts across. Because remember, most care providers are serving across all lines of business. So we have their members across and they want to have a consistent way to approach things. I would say from the employer, Commercial side, there's a lot of interest, and we already have partnerships and launched this a couple of years ago. We -- it's early days. And it is a little bit more difficult to get the model started and self-funded, but we're seeing a lot of interest from employers in particular. And a lot of that is structured around how the plan design is structured, potentially tiering of those networks for value-based care providers are at the forefront of the tiering. And so as we think about the environment we're heading into, affordability is paramount. It has been one of the key things. And so we're seeing a lot more interest certainly from large employers, but also as we build products inside of our small business where we again have a pretty dominant share in the Blue markets where we are. On Medicaid, we have done a lot of work on value-based care, particularly around health equity. So we've set initiatives around all of our contracts now include value-based [ Carelon nets ], but also health equity elements. And that's very important to the states. It's how you earn your health incentives at the state level. and they're very focused on it. And we're one of the only plans. Actually, I think we're the only plan who've got all of our own Medicaid plans' health equity accreditation last year and are on track for health equity plus accreditation. And again, it's an area that we've been working on for a long time. So it's not something we just turn to switch on. But I would say we're going to continue to see more and more around Medicaid. We have a nice footprint. But we think about when we go into market, all 3. So we're -- when we're talking to provider groups, we are looking to put a footprint across all 3. And generally, Medicare starts earlier, but Medicaid is right there because of the volume density and then we wrap around commercial as well. And as you think about Medicaid redeterminations, now where people are coming into the individual market, it makes sense to have a consistent platform where they can transition between benefit coverages. So again, I'll go back to our strategy, which regardless of where people are in their life stage or with insurance coverage, we want to have a platform that supports them.

Yes. And last one here on value-based care. As you think of building out and expanding these capabilities in value-based care, what's sort of the economic model to provide those and to partner with non-Elevance Blues in that space?

So as we build them out in terms of -- I just want to make sure...

Yes. So just as you're expanding your capabilities in value-based care within Carelon, what is the opportunity to resell those services in a market like North Carolina or something like that, where you're not the Blue, but maybe you've got a relationship. Now obviously, you're going to do things on an all-payer basis. But how does that Blues advantage you in some way?

No, that's a great point. I mean North Carolina is a really good example. So we are in a partnership with them on Medicaid. As part of that partnership, we pull through pharmacy. And then we also pull through other Carelon services around -- CareMore is in that market as well. So I think for us, it's an opportunity. Right now, we've pulled through -- we're not looking just to pull through like point solutions. Again, we are -- we start generally with a couple of solutions. But we're looking then to take more whole person risk on those solutions. So I see it as a big upside. And as you think about Carelon in particular, the relationships we have are around our historic AIM business, where we have fairly deep penetration and again, looking to do more with that in around areas of oncology, orthopedics. The second one, myNEXUS has been a big opportunity. Again, how do we integrate that with some of the enablement capabilities we're building as well and wrap around their value-based care. One of the things we have at the Blues in total is agreed to high-performance networks and a consistent structure. And that is actually one of the reasons we've grown in the commercial space over the last few years as we've got a real advantage in the high-performance network. And we -- that's probably the dominant area that we sell. And so as you think about those high-performance networks, which across the Blues, while each market is a little different, there's a consistent platform under which we all measure the outcomes and results and then build them to the specifications of having at least a 10% cost advantage in total. There are opportunities then to build capabilities around that. So as that as a chassis across all Blues, we see opportunities to add additional services to deliver more on the care management side, as well as the provider enablement side. And one of the areas that we have invested heavily is bidirectional data sharing through the EMRs. And we see that as a big opportunity to improve like sort of take friction out of the system with care providers and honestly improve data and analytics on how -- much sooner timeliness of data, elimination of some of the chart chase that occurs and go right into the EMR with the permission of the systems now that we've connected. And so we're looking to do that broadly with other Blues as well.

Great. And then you mentioned Louisiana Blue. Just interested in kind of your framework for deciding when it's more interesting to potentially acquire a Blue as opposed to a partnership model?

Yes. So our goal, first and foremost, is to be the partner of choice for all Blues, and pretty clear, simple strategy. And truthfully, if you've done 1 Blue acquisition, this is the first one that's been done in a very long time. You've done 1 Blue acquisition. Every Blue is very different. I think Louisiana was very interesting because it wasn't a plan in trouble. It was a strategic acquisition based on their Board's desire to have bigger and broader capabilities and understanding. They were a single state and while they were performing fine, they wanted to be able to have an even bigger impact on their community, and we're looking at sort of the evolution of the health care ecosystem. With that, if -- we're actually quite happy to be a partner with Blues and we'd love to do more acquisitions as they become available, but it takes time. It takes a building of trust and a relationship of providing services. So my view is, I think, partnership in the beginning, helping them understand, see the performance that we've had, particularly through embedding Carelon and whole risk has been helpful. And generally, the entries are in Medicaid and Medicare is where I think the biggest opportunity is to work with other Blues are right now. But again, I think we worked with Louisiana for a couple of years, embedded in our capabilities, and they had a real hands-on opportunity to see what could happen.

Great. I wanted to shift and talk a little bit about pharmacy for a second. Actually, a nice bridge might be Synergie Collective. And so one of the things when I'm talking with the group here and when I'm talking with investors, when they're interested in your overall strategy, one question that will come up is, "oh, are Blues really interested in partnering with Elevance as opposed to with the United." [indiscernible] now being an ex [ Signet and Aetna ] guy. It seems obvious to me, they would be. But I think that is a question that comes out there. And it's more based on, well, what are historic partnerships? So actually, I think Synergie is a really interesting example of the Blues coming together. I know you were really involved with that. Do you want to just talk a moment just about what Synergie is and why?

Yes. No, I think Synergie is a really interesting example of the Blues coming together. And you're right, a lot of people ask, will the Blues really work together. And I think the -- the answer is, look, all Blues are independent companies, right? Elevance, and then everybody else is independent. They have their own Board, their own structure. But we do share common strategic goals, build high-performance networks. We share information where we don't compete obviously across the Blue brand. We are committed to building the Blue brand. And I think we're looking for areas, honestly, to drive greater affordability, to drive greater impact. Blues are deeply invested in their communities and generally are the leading market share provider in commercial and are trying to grow more to make sure they continue to have an impact in government business. Synergie is actually a really interesting example. It came out of a strategic decision across all Blues every year, just like any company, the whole of us as part of our relationship with the association does the strategic plan, and one of those was pharmacy. And we started looking at specialty pharmacy on the medical side. And how could we leverage in a different way, the collective scale of all of us. And from that concept, Synergie was born with an opportunity for every single plan to make a decision to invest and join Synergie, and 100% of all Blues have joined, which I think is a real testament to alignment of what we wanted to achieve, which is deliver much more affordable, lowest net cost specialty pharmacy for our members. And then second, to leverage the real scale of the Blues so that we could do that for the people we serve. And Synergie, it's just started. It was nascent. It's in the process. It really won't have impact until beginning next year sometime when we get through that process. But I think, it allows us all to work together in a complementary way, and I think allows us to set objectives about continuing to drive affordable cost in the pharmacy space. So I do think it's a great example of all Blues working together and aligning around a common objective. And again, we see that in high-performing networks, another example where we've all come together and built those, and they've been very successful as well.

Yes. And obviously, BlueCard is...

And BlueCard, obviously, a baseline of how we work across state lines.

Let's shift over into the MCO, and first thing I'd love to hear is just kind of an update on progress from your 5:1 to 3:1 goal. And just overall, your objectives and opportunities with respect to self-insured profitability.

Yes. So we -- as many of you know who follow us, we laid out a pathway that we felt that we could improve the profitability of our self-insured membership by really selling more services into those, and we saw a pathway. So we announced sort of a strategy to move from 5:1 to 3:1 which is, I think, what people are very familiar with. And we're right on track with that. We feel very comfortable that we're going to achieve those goals. But I think as we've started to look at that, I think you need to think of it broadly because since we announced that goal, we've added a lot of capabilities. So we shared at our investor conference a couple of months ago that over the -- since we announced that from '18 on, we basically improved what we bring in from self-funded by 60% over that time frame and announced a goal of increasing that another 50%. So you want to think holistically. Now we have specialty pharma. We have obviously advanced the capabilities in our pharmacy business. So we feel really good about wrapping around more services, not only in our self-funded business, but giving opportunities for Carelon to sell into those businesses. So that's a big pipeline. We see a lot of opportunity there. But in terms of the original goal, we're right on track. We're going to hit that goal based on the timeline. We did a -- we did add a year to that from the original because of COVID. But right now, we're exactly on track with our goals.

Yes. And just one follow-up on that, kind of maybe directionally cross-sell penetration rates for different areas like PBM or behavioral or stop-loss. Are there some areas where you've kind of already accomplished as much as you think you can accomplish just contrast with other areas that might present the greater opportunity for you?

Yes. I am -- I think we got a big ceiling. I don't see a ceiling. I think as we add more capabilities, we added behavioral health, big opportunity in behavioral health. As you look at what's going on, particularly the integration of physical and behavioral, we have become a leader in crisis management now through Beacon working with the states and behind the scenes on the national 988 line. And that's an area employers, in particular, are extremely interested in. So we're building products to integrate behavioral more, and I think there's a big upside there. I think specialty pharma, big opportunity as we -- one of the reasons we invested in that and BioPlus, we see a lot of growth. They have 250,000 scripts now we can scale that pretty dramatically. We're investing this year and into next to make sure that we can scale it across our business and quite frankly, offer it more broadly to our peers in the Blues. So I don't see a ceiling. I think there's still a lot of room for us. I mean the traditional things of dental and stop-loss are those things -- those are consistent Specialty add-ons that we always do, but we have a lot more runway, and we have a lot of runway in pharmacy. We have historically and most recently, quite frankly, focused on the 15,000 to 10,000 life cases to add penetration. And we've been very -- more successful in that area. That's the area we targeted. But again, remember, the numbers I shared, we've been growing our Commercial business over the last few years, particularly our self-funded. And we see -- when you look at penetration numbers, you say, well, the penetration numbers are going up, but maybe not as high, but because we're growing the top line of it, too. So that's why I see a lot of runway. And I'm pretty excited about that opportunity. So I think that there's a lot of opportunity still for us across all these categories.

Great. And then we were talking about before. This year has not been kind from the stock market to managed care. And in my view, there's a couple of reasons for that, and I'm much more positive on the sector right now than I have been. But one of the things I think there was a big investor concern, especially in first quarter results was medical cost trends, utilization, reserving. So can you just talk a little bit about utilization, kind of where you see that? And then maybe a word or 2 about like reserving? And are those kind of progressing the way you'd expect?

Yes. So let me address trends straight up in medical costs. I mean we feel very comfortable that those are coming in line with our expectations. And as you saw in our first quarter, we're slightly ahead of that. So we feel very good that we understand where that's going, and it's aligned with the expectations we set. Importantly, we priced for what we felt that trend was going to be. That was an initiative for us as we shared with everyone around our goals. In terms of reserving, we've been very consistent. I mean I don't think -- as you look at us, we have a very consistent position on reserves. So again, nothing has really changed from that perspective. Overall, I feel -- we feel good about our MLR achieving that. We said that in the first quarter. And so I think a consistent answer with where we are and feel confident about that.

Great. And then kind of pivoting to one of the other big topics that's out there, which would be redetermination. Just interested -- obviously, we're just barely into redetermination. But just interested if you have any -- maybe an overarching view on what you think the impact will be and where you think those members or enrollees may land? And then if you're having any observations as far as what's actually happening for the few places that something is happening so far.

Yes, it's really early, and it's probably the most scrutinized thing anyone has ever done. I guess my early observations are, we feel very comfortable with the projections that we laid out for us, which was inside of Medicaid, 40% to 45% would stay. And it's -- honestly, it's just too early. There's big ranges out there. You've all seen the ranges. Our experience has been fine. It's 1 month into it really in our states. What I would say is we feel quite good about where Medicare -- Medicaid is going, I should say, because look, we -- on the Medicaid side, we have had a lot of time to plan for this. We don't see a cliff. The states have been very proactive with us. We've had a ton of reach out. We've built tools that not only help educate them about Medicaid, but also, I think, somewhat differentiating, allow them to figure out what other benefits they have like SNAP and other things to make sure that they're aligned. We're working with community-based partners. Again, the proof will be and ultimately, where we see it. But we do think that we've had a lot of cooperation of sharing data and reaching out to members. On the other side of that, which we've shared, they're about -- just in terms of setting the numbers, 2.8 million, we believe, is in our states, our Medicaid states is what we grew as a result of no redeterminations. On the other side of that, in our 14 Blue states. I think it's 8.5 or so million grew that our commercial individual exchange business now has an opportunity to enroll into our business. And again, early days there, but we feel really good about our price position, lowest cost silver, ability to attract those members in. And we expanded our footprint in the individual exchange and now cover virtually every county. So there's a nice catcher's mitt. And you hear us talk a lot about our catcher's mitt, but it is real. I mean we -- because of the diversity of Medicare, Medicaid commercial across our footprint, we have a very deep penetration, and now in the individual exchange can capture them. But again, I think we feel good about Medicaid, think it's a really good business. I think once we get through redeterminations, which I know are on everyone's minds, continuing to see a pipeline grow of specialty -- as more specialized populations come to the market for RFPs, and we think that, that's going to offer continued growth like the expansion in North Carolina that's coming. So I think that there's some really good things in Medicaid, but on redeterminations, really early, nothing we're seeing outside that would ask us to change our assumptions at this point, but feel good about them.

Got you. And then from a macro perspective, thinking about inflation. Obviously, your business is one that is always thinking about inflation and predicting costs and pass along costs as well as managing them. Could you talk a little bit about maybe what you're seeing as far as provider inflation and things like that? And then how you're factoring that into pricing?

Yes. So on the provider inflation side, just for the most part, I mean, as you know, we do 3-year hospital contracts. And we've been talking about this for some time. There's clearly more pressure in the system. But I would say we're meeting the expectations we set, and we feel that we've factored into pricing where we see any pressure. But overall, we've been very successful in 2 areas. One, sort of achieving the targets that we set. And two, our goal is to move these providers from unit cost increases to value-based care. And so that has been embedded in every discussion we're having. And again, these are 3-year contracts. And remember, our contracts already have some escalators in them. So we well know and can plan for those. But we have been successful adding more value-based care and putting more at risk. And the second thing is where I think that there is a really big opportunity, and I talked a little bit about sort of the investments we've made in digital, the investments we've made in bidirectional data sharing, trying to use the EMR is really trying to simplify the way we work with care providers. So we have taken a ton of what I'll call the manual inefficiency out of the system. And generally, when we're going and talking about a contract renegotiation, we're really looking to say, "look, we want to have bidirectional data sharing first and foremost. We want to embed value-based care. We want to take out costs from year-end in our end that are not chart chased and all these things that add administrative burden. We want to be able to do pre-authorizations more simply with you by sharing this data." And so we've made a lot of progress on that. And I think I shared a statistic in our first quarter earnings call about reducing the amount of back and forth by almost 60% of the inquiries is a big number. So we're tracking that closely because we feel we can add value, not just adding individual unit price increases, but taking costs out of the system for them that allows them to operate at the margins they need to while we're continuing to provide value. And again, it's about affordability. I mean our customers are intensely focused across not just commercial but everything around affordability and we're the stewards of that. So we feel that's a really important part of our job.

Great. So we've got some questions that are coming in, and so let me hit my next question, which is right here. And then we've got one that's got a bunch of votes. So we'll go ahead with that.

A multi.

Yes. But obviously, if you were wandering the halls here, I'm sure every session is talking about AI. I'll give my perspective. We do a lot on disruption in our disruptor conferences and stuff like that. And one of the things I've noted is, some of you who never really worked at Anthem or Wellpoint and Elevance but observed it over the years is you've really accelerated what you're doing in lots of areas in innovation. But I would say digital has been an area that I would view you guys as being the leader in, which in my experience is like a big deal. And so, can you just comment a little bit about what you're doing in digital? And then what you think the opportunity is broadly with AI can be for your business and maybe where you're going with that?

Yes. No, I think that's a great question. And it started with where I started, which was talent. I mean, we built a lot of talent in this area. And a lot of that did come from the outside. And a lot of people asked me why they came to a company like Anthem at the time now Elevance. And I say it's because we can make such a huge impact. We find that our data engineers and others who are coming to us know that because of this vast reservoir of information and kind of where health care is, quite frankly, there's a big opportunity to accelerate efficiency but impact. So as you think about what we did, we've built a ton of talent in a number of areas of our company. And we focused on a couple of areas. One, creating this digital front door, which you know is Sydney. And Sydney is truly that. It's our digital front door for consumers. And then we put capabilities inside of that. So we can simplify, first and foremost, the consumer experience because health care is incredibly complex. We can add virtual care to that platform, which we have. We've built product off of that. So I put that in one bucket, and that's something that I think is much more mature than it's ever been, and we've seen a big uptick in advocacy. And one of the reasons why we're able to go to a single source for our largest accounts, they really like this. We had 23 accounts, which I think we're the only, quite frankly, health benefits company that's been able to take people who are most sophisticated clients and consolidate them and we're their only carrier. Very few others have done that. And again, it's because of these capabilities and around consumer engagement. The second area where we've invested and I think have made a lot of progress is around connectivity with the health care. We have something called our Health OS, which is essentially bidirectional data sharing working with the EMR providers where we are embedding this in our contracts, and we're able to share data both from a clinical perspective, but records retrieval. It helps us with stars and quality and all those things and again simplifies the process. And I put all of these under the bucket of higher quality data, simplified process, easier access. And the same, we're also looking at how do we use digital and AI to improve efficiency. So things around -- in our chat, for example, where we're working on the customer side, more accuracy, helping us identify trends in data earlier. We've embedded that in our call centers are beginning to scale it. It's not all scaled yet. So we're careful about that. And we have something called the digital nurse assistant, which, again, these are just a couple of examples because I think there's a huge power in digitizing and then using AI appropriately. And again, I think it's really important in health care. We have, from the very early days, put together a responsible AI format. So all of -- nothing gets done in our company without going through a committee review on responsible AI because, again, the power of these tools is tremendous. But one area where we've used it is our digital nurse, our nurse reviewers have to accumulate tons of data when they're looking at a case that's under review. And we've used AI to accumulate all that data for them. So what would have taken 3 or 4 hours for a case takes minutes now because it's at their fingertips. So generally, we're looking to automate efficiency in our clinical and our administrative processes and streamline things. Again, I'd say, right now, a lot of what we've invested in, we've been putting in certain parts, we need to scale it. And that's really, to me, the tailwind and the opportunity. But we've built some really interesting capabilities. And I think have the talent inside of our enterprise to do that. So we're excited about that. And I think that's probably one of the most dramatic shifts inside of our talent base at Elevance.

That's interesting. So that question where we got a lot of votes on it already. It's actually -- this is a great question because it's really a portfolio manager kind of question. And it's, what's Elevance's competitive advantage relative to the other U.S. large-cap MCOs?

No, I think it's a couple. One, I think it starts with just having the deepest, most diversified health benefits business so -- something [ broke ] behind us, I don't know what that was -- a big crash. But I think our core opportunity is, look, we have this incredible benefits business that is incredibly resilient, which allows us to really understand and keep somebody in our portfolio for life to move from whatever insurance coverage or whatever stage of life. And what we're doing is wrapping around services to drive greater affordability, again, because of the density that we have in our markets, we're able to leverage scale in unique ways, and not just nationally but locally. And one thing about U.S. health care is every market is different, every MSA is different. And it's great to have national scale, but to have local density matters even more. And then -- so there's 2 things. I think it's -- we start with this really broad-based health benefits business, again, the largest of all of our peers. And then two, we're able then to grow -- accelerate growth through the building of our services, which, again, first and foremost, we have a very clear pathway to , as I said, it's synergistic in a virtuous circle of creating more value for the health benefits, while building growth in Carelon. And again, because we're part of the Blues system, truthfully, nobody has the scale and density combined. And so we have a built-in partnership network across all of the country. So I go back to our inherent strengths, start with density and scale. And then we have built a ton of capabilities around that. One of those is digital. The second is value-based care. And we can get the attention and move fast. We can move very quickly in our local markets at scale to make these things happen. So I think that gives us an advantage versus someone with 5% or 10% market share. We generally are the dominant share player.

Yes. So one of the last questions here. A business I didn't hit on yet was the MA business. And so the question is related to what's your strategy in MA to continue the growth? And what's your strategy to get to target margins in that business?

Yes. So I mean, we think MA, as I said at the beginning, MA is a great long-term business. And so we feel very comfortable about MA. And as we positioned ourselves for '24, we look for balance as we have always, of growth and margin expansion in that business. So we feel that there's a lot of room to grow. We laid out a plan within our Blue states of becoming a top market share player in that state. We're investing a lot of capabilities. Some of those, for example, in digital and AI, but value-based care there is a huge driver for us. So I am really encouraged about our Medicare Advantage business. I think it's, again, one of our long-term growth drivers, and I think it's going to be -- it is a good business for us now. And we are a leading player in the duals, which is also a huge focus for us and do quite well in the duals and continue to see growth in the duals. So we're looking -- again, we always approach it balanced of earnings and growth in that marketplace and feel like we've been very consistent across the board.

And maybe just one level deeper on the sources of growth for that business. Obviously, you've got not somewhat unique position of being able to tap group business, you've got agents. You've got a straight individual, you've got duals. How do you look at and prioritize those? What are the bigger sources of growth right now?

Yes. So agents are a huge opportunity. I mean they're Blue already. We want to age them in to become Blue. It's an area that we're focused on. So we look at agents, and the duals that have been -- we had a lot of good growth in duals. We have the capabilities in both the health benefits business, but also in Carelon, and we're continuing to expand on those. But I think individual MA is still a really nice opportunity for us. Again, as you think about our market share position in Commercial and even in Medicaid, an opportunity there to continue to grow individual MA. But I would say agents, duals really important for us right now.

Great. Well, thanks so much for taking the time. I think we're right up at the end of it. So I know everybody's got to get, including you, to your next sets of meetings. Thanks, everybody. We'll be hosting this room here for the next few hours. So hopefully, some of you will stay. But thanks a lot. Really appreciate it.

Thank you, very much. Really appreciate it, thanks for joining.