Mark Kaye: Yes. If I think about Medicaid rates and acuity, the conversations with the states are ongoing. We’ll continue to work with them and their consultants really to ensure that all adjustments are reasonable and reflect the risk associated with ongoing re-determinations in 2024. Our outlook for 2024 does assume a normalization of Medicaid margins. We already have line of sight into about 70% of Medicaid premiums for 2024. And we are comfortable with the actuarial soundness of the underlying rates, especially understanding the acuity for leaders versus stayers.
Gail Boudreaux: Yes. And thanks, Scott. And I think you also asked about the acuity in the individual exchange marketplace. So I wanted to just put a fine point on that. Our risk profile of the members we’re picking up certainly in 2023, obviously, early in 2024 very much aligns with the expectation of what we’ve historically had. So, we feel it’s actually rolling out, to our expectations. Thank you for the question. Next question, please?
Operator: Next, we’ll go to the line of Ben Hendrix from RBC Capital Markets. Please go ahead.
Ben Hendrix: Thank you very much. I just wanted to follow-up on the Carelon margin question. On Carelon services, slightly down margins in the guidance. Just wanted to see if that – the degree to which that is associated with new risk-based arrangements, or membership, or to the perhaps to the new behavioral benefits and kind of what are the prospects for that, kind of ramping up beyond 2024? Thanks.
Peter Haytaian: Yes. No, thanks, Ben, for the question. First of all, we’re very pleased with the operating performance of Carelon. You saw that play through in 2023. I think we committed to 25 to 50 basis points of improvement. You saw 70 basis points of improvement year-over-year. So that it’s performing really well. You answered the question already, as it relates to 2024, quite frankly. We are, as Gail talked about, and as I talked about earlier, launching some very significant at-risk product offerings, both oncology, seriously incrementally ill population as well as others, and that comes with a lower margin in the earlier years, but then improves over time. So that is precisely what was creating, the pressure on the margin in ’24.
Gail Boudreaux: Yes. And just to sort of put a finer point on it, we do remain confident in our long-term guidance that we gave in mid to upper single-digit operating margin. So as Pete said, we think the business we’re bringing on, is really good. We’re committed to bringing in more risk business. But in the early years, that does have a little bit lower profile. But overall, we feel very good about the long-term. Next question, please?
Operator: Next, we’ll go to the line of Justin Lake from Wolfe Research. Please go ahead.
Justin Lake: Thanks. Good morning. Most of my questions have been answered, but a couple of numbers here. First, you reported $200 million plus of positive prior year development in the quarter, materially more than I think the company has ever seen in Q4. Just curious, given the MLR was generally in line. Can you tell us whether there were any pressure areas that work to offset the benefit of the PYD in the quarter? And then with the benefits repositioning of Medicare Advantage, which we’ve clearly done, do you expect to be within your 3% to 5% target margin here for Medicare Advantage in 2024? Thanks.
Mark Kaye: Justin, thank you very much for the questions this morning. We are confident that our year-end reserves are prudent and have been set consistent with historical practice. In the quarter, you’re correct that we saw positive prior year development on a gross basis, and that was indeed favorable. It’s worth pointing out here that that was largely offset through premium rebates, and colors as well as the reestablishment of reserves for the current year. An alternative way to think about this is that our full year days in claims payable decreased just 0.2 days year-over-year. And that’s noteworthy in the context of the fact that we have observed cycle times to have actually decreased more than three days since the end of December 2022.
And that should give you a feel for our comfort level around reserves. On your second question, just relative to the long-term target margin ranges, commercial is on track to achieve our long-term goals. Let’s say, Medicaid is normalizing, but continues to perform well. And then Medicare Advantage for now is below our long-term target margin range.
Gail Boudreaux: Thank you. Next question, please?
Operator: Next, we’ll go to the line of Gary Taylor from TD Cowen. Please go ahead.
Gary Taylor: Hi. Good morning. I just wanted to follow-up on enrollment. I kind of thought the story for 2023 was that with the intentional commercial repricing, which has been pretty successful this year, you lost some commercial risk enrollment because of that? And I’m just trying to figure out on the 1 million plus decline in risk enrollment for 2024, how much of that is commercial risk versus the expected Medicaid redeterminations?
Mark Kaye: We’re all pleased with the performance of our commercial business in the fourth quarter in 2023. We did make meaningful progress towards our margin recovery goals in the year. I’d say January renewals have gone well. We certainly experienced to date higher retention than we did at the same period last year. Repricing actions, as you would expect, do continue to impact membership growth, but this is expected. And so, we’re really continuing to expect approximately flat membership growth overall in our group risk business this year, while continuing to improve margins in line with our stated goals.
