Felicia Norwood: Good morning, Dave, and thank you for the question. Frankly, right now we’re at a point where our Medicaid business is actually tracking very much in line with our expectations. As you referenced, we believe that about 90% of our members have had their eligibility redetermined. So as we go through the next few months, you certainly see this tapering down as we really wrap up the unwinding process as we get through June. One of the things I want to make sure you understand, the downward trend in membership in the first quarter resulted not just from re-determinations, but footprint changes as well. So it’s really the cumulative impact of those two things in terms of the first quarter. When we think about the work that we will continue to do is we will continue to outreach to Medicaid members.
Many members who have lost their membership at this point did that as a result of really procedural reasons. So the team will continue to be very aggressive around continuing the outreach that’s been going on. And we’re really proud of the work that we continue to do to really reach out to over 4.5 million people, as Gail referenced in the opening comments, to make sure that individuals who are truly eligible for Medicaid have access to Medicaid and, if not, are able to transition to an exchange product and continue coverage. In terms of where we are today with respect to, the acuity and mix of that membership, the acuity is in line with what we expected. And I will also say that at this point we have visibility into 75% of our Medicaid rates and premiums for 2024.
The vast majority of those are in line with our expectations and they’re actuarially sound. As you know, we have ongoing conversations with our state partners as we go throughout this process and we expect those rates to continue to be actuarially sound. So we’re going to continue to work with our state partners. We’re going to continue the advocacy with our members in terms of making sure they have access to care and coverage. And we’re going to make sure that we go through this process with a lot of discipline and rigor, understand the mix of our membership and the levers versus [payors] (ph) as we go through this process. Thank you for the question.
Gail Boudreaux: Next question, please.
Operator: Next, we’ll go to the line of Lisa Gill from JPMorgan. Please go ahead.
Lisa Gill: Hi, good morning and thank you. I was wondering if maybe you could talk about utilization trends by line of business and what you saw in the quarter versus your expectation.
Mark Kaye: Lisa, thanks very much for the question. So utilization in the first quarter in our health benefits businesses was in line with our expectation and that was reflected in our reported benefit expense ratio of approximately 85.6%. In the commercial business, specifically inpatient and outpatient authorization levels year to date were aligned with our expectations and our internal year-to-go trend remains unchanged. On Medicare, as expected, we saw utilization related to both the two midnight rule for inpatient stays as well as pockets of outpatient authorizations around, for example, at radiology and cardiovascular procedures. And importantly, these trends were broadly planned for as part of our underlying cost trend assumptions.
Medicaid, as you heard Felicia talk about a moment ago, did experience increased but state-specific utilization attributed to the redetermination, mix impacts, and we remain very comfortable with what we’re seeing there given those ongoing constructive dialogues with the impacted states. And so overall, we remain confident that both our MA bids for 2024 and our commercial pricing really reflect the appropriate projections for utilization and medical cost trends.
Gail Boudreaux: Next question, please.
Operator: Next, we’ll go to the line of Kevin Fischbeck from Bank of America. Please go ahead.
Kevin Fischbeck: Great. Thanks. Just wondering if, it’s not a huge increase in guidance, but would love to kind of hear what was driving the increase in guidance. Is it something on the health plan side? Is it on the Carelon side? And I guess just thoughts about how you thought about providing increases in guidance. It sounds like you believe that visibility is relatively high in claims, but obviously there’s some concern there. So I don’t know if there’s any conservatism or thought about pace of raises versus what you’re actually seeing in the core business today. Thanks.
Mark Kaye: We were pleased to report our adjusted deleted EPS this quarter, which came in slightly better than our seasonal expectation. And that was led by solid performance in both our health benefits and Carelon divisions, where operating margin increased by 30 basis points and 20 basis points respectively, highlighting what we see as disciplined execution of our initiatives during a dynamic time for the industry. Of specific notes, and you referenced this in your question, was the favorable performance in the first quarter benefit expense ratio and that was driven by commercial margins that continue to recover from pandemic era lows. We’re very pleased with the Q1 results. It’s still early in the year and given our business is subject to some variability around medical cost trends, we’re intentionally remaining thoughtful and prudent in our outlook and that led us to increase our guide for adjusted EPS by $0.10 to be greater than $37.20.
Gail Boudreaux: Next question, please.
Operator: Next, we’ll go to the line of Whit Mayo from Leerink Partners. Please go ahead.
Whit Mayo: Hey, thanks. Just wanted to hear any comments on the external revenue growth with Carelon Services. Did that grow faster than the overall segment? You did, I think, reference some strong external growth. So curious what might be gaining traction in the market. And then just a quick question on guidance. Mark, you’ve averaged maybe 55% to 56% of earnings in the first half. Any reason that would be different this year? Thanks.
Gail Boudreaux: Great. Why don’t I have Pete address sort of the Carelon questions and then Mark will talk about the earnings percentages. Pete?
Peter Haytaian: Yeah, thanks for the question. As it relates to Carelon external growth, we continue to see a really nice momentum in our build. I mean, for 2024, from an overall sales perspective, we’ve already this time of the year, exceeded what we did in all 2023. And you heard Gail mention in her prepared remarks several new wins, which we’re really excited about, really growth across the portfolio with some notable wins in behavioral health. She mentioned winning a statewide account in Medicaid for Maryland, which we’re really excited about, and then some new innovative solutions with large employers as well as wins in the state of California. And on the behavioral health side, also some select wins in the crisis space, so areas that we’ve been really focused on.
