Stephen Baxter: Yes, hi, thanks for the question. I just wanted to come back to the acuity discussion. I think you mentioned it was running in line with your expectations at this point. I guess, how do you think about the higher level of procedural disenrollments, having impacted that? I guess like how much does that make it challenging for you to feel like you have good visibility there at this point? And then I think you mentioned that the reconnect population you expected, the MLRs there will be in line with sort of like the rest of the stayers. I guess, do you have data at this point to support that? Or can you look back and see what utilizations look like over the past couple of years for those people. So I’m just wondering if that’s based on data at this point or it’s still kind of a working period? Thank you.
Mark Keim: So on the reconnects themselves, we’re seeing them come back in closer to the stayers average, the portfolio average. Now I appreciate your question about historical benchmarks of data, but the problem is over the last two to three years, we didn’t really have such a phenomena. But I am feeling pretty good about the MLR of these reconnects, both seamless and with the gap.
Joe Zubretsky: The other – maybe the last point to make on this point is a really important one. Durational acuity and lever stayers and joiners is not a new phenomenon to tracking a book of business. It’s just that in this environment, it’s more important to track it and to be able to forecast it. People come in to Medicaid because they need services, they can end higher than the portfolio average. And by the time they leave, they’re using fewer services and leaving out lower than the portfolio average. That’s the way the business works. And we have produced through all of that, on average, 88% – between 88% and 89%, 88.5% on average MCR. That’s the way the business works. The issue here is because of the redetermination pause during the PHE, there’s twice as many people leaving than joining.
So this has always been a phenomenon. We’ve had tracking mechanisms for durational acuity. We understand the levers, stayers and joiners analysis really well. But it is very early in the process. And I come back to the point we made earlier. It is ill-advised to mathematically extrapolate any of these data points, certain states front-loaded the process. And as you suggested, with the procedural termination rate being so high, the reconnect rate is higher than anybody expected and likely growing.
Operator: Next question comes from Scott Fidel from Stephens. Please go ahead.
Scott Fidel: Hi, thanks. Would appreciate if you can just give us sort of, I guess, your sense on your comfort levels right now with the current performance and then the bid positioning of the Bright Medicare asset that you’re going to be acquiring. And maybe just sort of talk about how you’re thinking about sort of factoring that into your 2024 outlook and maybe some of the downside protections that exist if that performance does come in, let’s say, a bit meaningfully below optimal levels. Thanks.
Joe Zubretsky: So Scott, we’re very pleased with the strategic complement to our Medicare business, taking it from a $4 billion business to nearly a $6 billion business in a very important state for us, obviously, in California, where we’re doubling the size of our Medicaid business. So from a strategic rationale perspective, we’re very excited about it. In our embedded earnings is a run rate accretion level of $1 of earnings per share, ultimately, given the way the CMS pricing cycle works, it is going to take us a little longer than normal to get there, but we’re confident in doing so. I’ll stop short on commenting about their financial performance. They’re a public company. This is a material to their operations.
So I would allow them to report on how they’re doing. But we do have visibility into how they’re performing. And when we said that one of the variables going into next year is how will it perform in the first year. We don’t yet know because we don’t know where it will be performing when we close on it. I’ll stop short of commenting on their performance because that would be inappropriate. Obviously, they’ll report earnings soon, and you can get a view as to how the Medicare business is doing.
Operator: Our next question next question comes from A.J. Rice from UBS. Please go ahead.
A.J. Rice: Just maybe to ask about the exchanges a bit more. It sounds like you’ve got some conservatism, at least you believe you have in the fourth quarter baked in. I know you’ve been running a pretty low MCR year-to-date and exchanges. Are you allowing for significant uptick? Sometimes we see that utilization. Obviously, as people hit their deductible limits, et cetera, and exchanges. Can you give us any sense of what you’ve baked in? And I think the comment was made and as you look ahead to 2024, you’re not expecting a lot of premium growth, it seems like you’ve repriced the business pretty well. Why not take a little more active approach to growing that product line next year, given it sounds like you’re hitting your margin targets pretty easily this year in that product? Or maybe I’m missing something.
Joe Zubretsky: So yes, you aren’t missing anything. Thanks for the question. Let me frame it in terms of you asked two questions, one about the MCR and one about membership growth. On the MCR, when we gave guidance at the end of the second quarter, we built in roughly an 85% back half MCR. And obviously, we outperformed that in the third quarter. We continue to bake in something in the mid-80s for the fourth quarter, which would put us at 76% for the full year, which is 200 basis points below the low end of the range. This business is going to produce 8.5% to 9% pretax margins for the year. Small, silver and stable work given the potential for inherent volatility in the risk pool, I think we have this right. Now to your point, Mark mentioned it in his prepared remarks and some, but he mentioned it, that we do plan to grow the marketplace business next year.
We plan to grow it measuredly and modestly. The early read on our pricing competitiveness. I’ll just give you one stat that’s really important. In our Silver product, which is our flagship product, we are now number one or number two priced in 30% of our counties versus 20% this year. It will grow next year. We plan to do it measurably and modestly, all with the view are producing at least mid-single-digit pretax margins, which this year will be very high single-digit pretax margins. Anything to add Mark?
Mark Keim: A.J., the only thing I’d add is Joe has been adamant about small, stable and silver in this product. And so when we set rates last June, we set them on our discipline on our margin expectations. It looks like the risk pool next year is stabilizing with some of the more strangely players dropping out, which means the risk pool for the rest of us has stabilized as a result on pricing we committed to last June, we’re seeing a much better competitive position. Joe mentioned 20% of our county is now growing to 30%, where we’re number one or number two, which means I’m expecting to get more volume than I thought before at margins that conform with our discipline. So we’re feeling good about that outlook.
A.J. Rice: Okay, thanks.
Operator: The next question comes from George Hill from Deutsche Bank. Please go ahead.
