What we have not seen, and maybe the most important element is that at the beginning of the year, when we discussed that we think that we’re going to going to retain about 40% to 45% of all Medicaid members who received coverage during the PHE, we still believe that is a very good estimate. And by the time the dust settles in the third quarter of 2024, we feel good about that estimate. It’s just going to be a little bumpier or rockier along the way because of the gaps in coverage and because of the administrative churn. And on the commercial side, we’re actually seeing really excellent growth in the individual ACA. Once redeterminations began in a particular state, the level of applications on the ACA products were up three times the amount that they were prior to that.
And so that really does point to the fact that we do have the catcher’s mitt in action. The employer-sponsored side that’s actually going maybe a little bit less than we had anticipated. So individual ACA is going a little bit faster, employers sponsored a little bit slower. But all in, we really do believe that by the time we get through this entire process, which won’t be completed until sometime in the third quarter of 2024, that the estimates we provided at beginning of the year will prove to be pretty good estimates. So hopefully, that helps. Thank you. Next question, please.
Operator: Next, we’ll go to the line of Stephen Baxter from Wells Fargo. Please go ahead.
Stephen Baxter: Hi, thanks. Wanted to follow-up on the Medicaid redeterminations question there. So I appreciate all that commentary you just made. Would it be fair to say that at this point in part driven by the fact that you’ve got seemingly good and actuarially sound rate updates from your states that you haven’t really seen all that much normalization of your margins in 2023. I believe you came into the year thinking that you performed in 2022 above your long-term targeted range, and there might be some pressure. I would love to just get an update on how that’s performed in 2023 and how you’re thinking or potentially considering that in your comments on 2024? Thank you.
John Gallina: Yes, sure. Thank you very much for that question. And actually, I think Kyle did ask about Acuity as well. So hopefully, I’ll address both of those here with this answer. Medicaid continues to be doing very well very much in line with our expectations and in line with what we saw coming. The one thing that I will reinforce is that in the rating formulas in the future or currently now is an acuity factor that’s supposed to take changes in acuity into consideration. That factor was not in place in 2019. So comparisons to 2019 really aren’t all that relevant at this point in time for that purpose. What we’ve seen thus far though is very little change in the overall acuity of the book. We are taking a very close look at that.
And as I stated in my prepared comments, we’re going to be monitoring that extremely closely and working with our states. So I’m very happy to report that all of the renewals that we’ve had with the discussions we’ve had with the states thus far, we have been provided actuarially sound rates. And we believe with actuarially sound rates, we can continue to deliver on Medicaid consistent with how we have in the past, providing a lot of benefits to beneficiaries and providing returns to the shareholders. So, thank you.
Gail Boudreaux: Yes. Thanks, John. And I think as — just to put a, sort of, summary on that, we feel we’ve got great visibility into the rest of this year. And the discussions around 2024 have been incredibly productive with about 50% of our premiums with good visibility there. So we think that those conversations are going well, and things are tracking according to expectations. So thanks for the question and next question please.
Operator: Next we’ll go to line of Ben Hendrix from RBC Capital Markets. Please go ahead.
Ben Hendrix: Thank you very much. I just also want to reiterate congratulations to John and thank you for all the help. Just wanted to circle up with a quick follow-up on MA. Appreciate all the questions on my health advocate and efforts there. I just wanted to know if there’s any early thoughts on how much of the headwind you can mitigate with contract diversification/ And then kind what the time line is for getting all those approvals at the state level to carry that forward. Thank you.
Gail Boudreaux: Yes. Thanks for the question, Ben. As we think about that, as I said, we’ve got a number of levers at our disposal. And so I would focus on that. But in terms of contract diversification, about a third of the members affected were in group contracts. So we’ll look at moving those potentially to a 4-Star contract. But again, I just want to reiterate, it’s just one lever in our toolbox, and so we’re not just looking at that, but we’re looking across all of the things to have a mitigation for 2025. So thanks again for the question. And again, a lot happening in our enterprise around the efforts there to make sure that we remediate and stay very focused. This is an enterprise priority for us. Next question please.
Operator: Next, we’ll go to line of Kevin Fischbeck from Bank of America. Please go ahead.
Kevin Fischbeck: Great. Thanks. And I was add to my congratulations to John as well. I guess far as the cost cutting — this cost cutting was quite large. And I guess I just want to get a little more color because exactly kind of what was driving this? It sounds like this was all before your new stars was going to be off for 2025, because it sounds like it was more a 2024 issue. I think in the comments, you said something on the line so that’s going to help you deliver lower cost to customers but also addresses some of the uncertainty in 2024. So, I just want a little more color on that, how much of this is going to improve benefits in MA versus, I think you made technology investments. Just a little more rationale for the move why it’s so big? And then, if you’re doing it this move now, how do you think about your ability to find significant savings to offset Stars in 2025? Thanks.
Gail Boudreaux: Yes. Thanks for the question, Kevin. I think let me put this in a little perspective because it’s important to note, we’re always evaluating our cost structure. And as we headed into 2024, we took very proactive and decisive action in the third quarter. We wanted a couple of things; one, increase our financial and operational flexibility and also ensure that we’re positioned to deliver on our commitments to stakeholders. So, if you look at the charge in total, I mean, it really is kind of focused in three areas of cost management. And I think it’s prudent to continue to always look at your cost structure, something we’ve been doing is, obviously, as we’ve been looking to manage that. And let me go through the three pieces because I think it’s important.
First, as you know, and we’ve talked about quite a bit on these calls, we’ve been investing over the past several years in modernizing our infrastructure, particularly around digital capabilities and migrating a lot of our applications to the cloud, consolidating our systems and our data and now most recently, use cases on using AI to drive greater efficiencies. The pace of technological innovation has changed and it continues to accelerate. And again, as I said, we’re committed to deploying those responsibly quickly in our company. So what you’re seeing in that first bucket is the write-down of some of those legacy processes that have now been replaced with our support — that support our long-term goals with digital and AI and other things.
