What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-15 compared with 2022-02-16 · 250 added, 223 removed, 551 unchanged (46% of the section changed)

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(In Millions, Except Per Share Data or As Otherwise Stated Herein)

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), should be read in conjunction with our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

References to the terms “we,” “our,” “us,” “Anthem” or the “Company” used throughout this MD&A refer to Anthem, Inc., an Indiana corporation, and, unless the context otherwise requires, its direct and indirect subsidiaries.

On May 18, 2022, our shareholders approved a proposal to amend our amended and restated articles of incorporation to change our name from Anthem, Inc.

to Elevance Health, Inc.

This amendment and name change went into effect on June 27, 2022.

We began operating as Elevance Health, Inc.

and trading under our new ticker symbol “ELV” on June 28, 2022.

References to the terms “we,” “our,” “us,” “Elevance Health” or the “Company” used throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) refer to Elevance Health, Inc., an Indiana corporation, and, unless the context otherwise requires, its direct and indirect subsidiaries.

References to the “states” include the District of Columbia and Puerto Rico, unless the context otherwise requires.

This MD&A should be read in conjunction with our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

This section of this Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-over-year comparisons between 2022 and 2021.

A detailed discussion of 2020 items and year-over-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.

We are one of the largest health benefits companies in the United States in terms of medical membership, serving greater than 45 million medical members through our affiliated health plans as of December 31, 2021.

Elevance Health is a health company with the purpose of improving the health of humanity.

We are one of the largest health insurers in the United States in terms of medical membership, serving approximately 47.5 million medical members through our affiliated health plans as of December 31, 2022.

We are an independent licensee of the Blue Cross and Blue Shield Association (“BCBSA”), an association of independent health benefit plans.

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In addition, we conduct business through arrangements with other BCBS licensees as well as other strategic partners.

Through our subsidiaries, we also serve customers in numerous states across the country as AIM Specialty Health, Amerigroup, Aspire Health, Beacon, CareMore, Freedom Health, HealthLink, HealthSun, MMM, Optimum HealthCare, Simply Healthcare, and/or UniCare.

We offer pharmacy benefits management (“PBM”) services through our IngenioRx, Inc.

(“IngenioRx”) subsidiary.

We offer pharmacy benefits management (“PBM”) services through our CarelonRx, Inc.

(“CarelonRx”) subsidiary, which was known as IngenioRx, Inc.

prior to January 1, 2023.

We are licensed to conduct insurance operations in all 50 states, the District of Columbia and Puerto Rico through our subsidiaries.

We manage our operations by customer types through four reportable segments:

Commercial & Specialty Business, Government Business, IngenioRx and Other.

As part of our name change to Elevance Health, in June 2022, we announced that over the next several years we will organize our brand portfolio into the following core go-to-market brands:

• Anthem Blue Cross/Anthem Blue Cross and Blue Shield — represents our existing Anthem-branded and affiliated Blue Cross and/or Blue Shield licensed plans;

• Wellpoint — we intend to unite select non-BCBSA licensed Medicare, Medicaid and Commercial plans under the Wellpoint name;

• Carelon — this brand brings together our healthcare-related services and capabilities, including our formerly named Diversified Business Group and IngenioRx businesses, under a single brand name.

In 2022, we managed our operations by customer type through four reportable segments:

Commercial & Specialty Business, Government Business, CarelonRx (formerly known as IngenioRx) and Other.

As we continue our journey to evolve our business from a traditional health insurance company into a lifetime, trusted health partner, we are evaluating and making changes to how we manage our business.

This included a review of the products in each of our operating segments, which resulted in restructurings between some of our operating segments.

Therefore, our reportable segment presentation in 2023

and its composition will reflect how we began managing our operations and monitoring performance, aligning strategies and allocating resources on January 1, 2023.

As a result of these changes, beginning with our Quarterly Report on Form 10-Q for the first quarter of 2023, we will report our results in the following four reportable segments:

(i) Health Benefits, which will combine our existing Commercial & Specialty Business and Government Business segments;

(ii) our existing CarelonRx segment;

(iii) Carelon Services (our former Diversified Business Group), which will be carved out from our existing Other segment;

and (iv) Corporate and Other, which will include businesses that do not individually meet the quantitative thresholds for an operating segment, as well as corporate expenses not allocated to our other reportable segments.

We expect to reclassify previously reported information to conform to the new presentation.

Our results of operations discussed throughout this MD&A are determined in accordance with generally accepted accounting principles (“GAAP”).

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Premium revenue is generated from risk-based contracts where we indemnify our policyholders against costs for covered health and life insurance benefits.

Product revenue represents services performed by IngenioRx for unaffiliated PBM customers and includes ingredient costs (net of any rebates or discounts), including co-payments made by or on behalf of the customer, and

administrative fees.

Unaffiliated PBM customers include our fee-based groups that contract with IngenioRx for PBM services and external customers outside of the health plans we own.

Product revenue represents services performed by CarelonRx for unaffiliated PBM customers and includes ingredient costs (net of any rebates or discounts), including co-payments made by or on behalf of the customer, and administrative fees.

Unaffiliated PBM customers include our fee-based groups that contract with CarelonRx for PBM services and external customers outside of the health plans we own.

Administrative fees and other revenue come from fees from our fee-based customers for the processing of transactions or network discount savings realized, revenues from our Medicare processing business and revenues from other health-related businesses, including care management programs and miscellaneous other income.

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and (iii) clinical health policy, such as identification and use of best clinical practices to avoid harm, identifying clinical errors and safety concerns, and identifying potential adverse drug interactions.

Our cost of products sold represents the cost of pharmaceuticals dispensed by IngenioRx for our unaffiliated PBM customers (net of rebates or discounts), including any co-payments made by or on behalf of the customer, per-claim administrative fees for prescription fulfillment and certain direct costs related to sales and administration of customer contracts.

Our cost of products sold represents the cost of pharmaceuticals dispensed by CarelonRx for our unaffiliated PBM customers (net of rebates or discounts), including any co-payments made by or on behalf of the customer, per-claim administrative fees for prescription fulfillment and certain direct costs related to sales and administration of customer contracts.

Our selling, general and administrative expenses consist of fixed and variable costs.

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We intend to expand through a combination of organic growth, strategic acquisitions and efficient use of capital in both existing and new markets.

Our growth strategy is designed to enable us to take advantage of additional economies of scale, as

well as provide us access to new and evolving technologies and products.

Our growth strategy is designed to enable us to take advantage of additional economies of scale, as well as provide us access to new and evolving technologies and products.

In addition, we believe geographic and product diversity reduces our exposure to local or regional regulatory, economic and competitive pressures and provides us with increased opportunities for growth.

In 2019, we began using our subsidiary IngenioRx to market and offer PBM services, and we expect IngenioRx to continue to improve our ability to integrate pharmacy benefits within our medical and specialty platform.

In 2021, we continued growing our government-sponsored business through organic growth and the acquisition of MMM Holdings, LLC (“MMM”).

We use our subsidiary CarelonRx (formerly IngenioRx) to market and offer PBM services, and we expect CarelonRx to continue to improve our ability to integrate pharmacy benefits within our medical and specialty platform.

We continued growing our government-sponsored business through organic growth and the acquisitions of MMM Holdings, LLC (“MMM”) in 2021 and Integra MLTC, Inc.

(“Integra”) in 2022.

In all other markets, we intend to maintain our position by delivering excellent service, offering competitively priced products, providing access to high-quality provider networks and effectively capitalizing on the brand strength of the Blue Cross and Blue Shield names and marks.

For additional information about our business and reportable segments, see Part I, Item 1, “Business” and Note 20, “Segment Information” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

The COVID-19 pandemic continues to impact the global economy, cause market instability and uncertainty in the labor market and put pressure on the healthcare system, and it has impacted, and will likely continue to impact, our membership, our benefit expense and our member behavior, including how members access healthcare services.

We continue to assist our customers, providers, members and communities in addressing the effects of the COVID-19 pandemic, including by providing expanded benefit coverage for COVID-19 diagnostic tests, treatment and vaccine administration and taking steps to increase vaccinations by enabling, educating and encouraging vaccine acceptance among our members as well as in the communities in which we operate.

COVID-19 care, testing and vaccine administration, and the impact of new COVID-19 variants, have resulted in increased medical costs for us in 2021.

In 2021, our Medicaid membership continued to grow as a result of the temporary suspension of eligibility recertification in response to the COVID-19 pandemic, which we expect will remain suspended at least until the second quarter of 2022.

Our Commercial fee-based membership decreased in 2021 due to in-group attrition likely attributable to the COVID-19 pandemic.

See “Business Trends - Medical Cost Trends ” below for a discussion of the impact of COVID-19 on our healthcare costs.

The COVID-19 pandemic continues to evolve and the full extent of its impact will depend on future developments, which are highly uncertain and cannot be predicted at this time.

The COVID-19 pandemic continues to evolve, putting pressure on the healthcare system, and it has impacted, and may continue to impact, our membership, benefit expense and member behavior.

The full extent of the impact of the COVID-19 pandemic will depend on future developments, which remain uncertain and cannot be predicted at this time.

We will continue to monitor the COVID-19 pandemic as well as resulting legislative and regulatory changes to manage our response and assess and mitigate potential adverse impacts to our business.

For additional discussion regarding our risks related to the COVID-19 pandemic and our other risk factors, see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

For additional discussion regarding the impact of and our risks and trends related to the COVID-19 pandemic, see “Business Trends” and Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

Business Trends

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the “ACA”), has impacted our business model and strategy, and various legal challenges since its enactment have introduced increased uncertainty to our business.

In June 2021, the U.S.

Supreme Court issued its opinion and dismissed the latest legal challenge to the constitutionality of the ACA, leaving the law intact.

We expect that most of the ACA will continue to remain in place and continue to impact our business operations and results of operations, including pricing, minimum medical loss ratios and the geographies in which our products are available.

In 2021, we made the decision to modestly expand our participation in on-exchange products through state- or federally-facilitated market places (the “Public Exchange”) for 2022 after also expanding in 2021.

As a result, for 2022 we are offering Public Exchange products in 122 of the 143 rating regions in which we operate, in comparison to 103 of 143 rating regions in 2021.

Our strategy has been, and will continue to be, to only participate in rating regions where we have an appropriate level of confidence that these markets are on a path toward sustainability, including, but not limited to, factors such as expected financial performance, regulatory environment, and underlying market characteristics.

In 2022, we made the decision to modestly expand our participation in the Individual state- or federally-facilitated marketplaces (the “Public Exchange”) for 2023 after also expanding in 2022.

As a result, for 2023 we are offering Individual Public Exchange products in 138 of the 143 rating regions in which we operate, in comparison to 122 of 143 rating regions in 2022.

Our strategy has been, and will continue to be, to only participate in rating regions where we have an appropriate level

of confidence that these markets are on a path toward sustainability, including, but not limited to, factors such as expected financial performance, regulatory environment and underlying market characteristics.

Changes to our business environment are likely to continue as elected officials at the national and state levels continue to enact, and both elected officials and candidates for election continue to propose, significant modifications to existing laws and regulations, including changes to taxes and fees.

In addition, the continuing growth in our government-sponsored business exposes us to increased regulatory oversight.

Our IngenioRx subsidiary markets and offers PBM services to our affiliated health plan customers throughout the country, as well as to customers outside of the health plans we own.

Our CarelonRx subsidiary markets and offers PBM services to our affiliated health plan customers throughout the country, as well as to customers outside of the health plans we own.

Our comprehensive PBM services portfolio includes features such as formulary management, pharmacy networks, a prescription drug database, member services and mail order capabilities.

IngenioRx delegates certain PBM administrative functions, such as claims processing and prescription fulfillment, to CaremarkPCS Health, L.L.C., which is a subsidiary of CVS Health Corporation, pursuant to a five-year agreement.

With IngenioRx, we retain the responsibilities for clinical and formulary strategy and development, member and employer experiences, operations, sales, marketing, account management and retail network strategy.

CarelonRx delegates certain PBM administrative functions, such as claims processing and prescription fulfillment, to CaremarkPCS Health, L.L.C., which is a subsidiary of CVS Health Corporation, pursuant to a five-year agreement that is set to terminate on December 31, 2024.

With CarelonRx, we retain the responsibilities for clinical and formulary strategy and development, member and employer experiences, operations, sales, marketing, account management and retail network strategy.

Pricing Trends:

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We frequently make adjustments to respond to legislative and regulatory changes as well as pricing and other actions taken by existing competitors and new market entrants.

Product pricing in our Commercial & Specialty Business segment, including our Individual and small group lines of business, remains competitive.

Product pricing in our Commercial & Specialty Business segment remains competitive.

Revenues from the Medicare and Medicaid programs are dependent, in whole or in part, upon annual funding from the federal government and/or applicable state governments.

The ACA imposed an annual Health Insurance Provider Fee (“HIP Fee”) on health insurers that write certain types of health insurance on U.S.

The Patient Protection and Affordable Care Act (the “ACA”) imposed an annual Health Insurance Provider Fee (“HIP Fee”) on health insurers that write certain types of health insurance on U.S.

We priced our affected products to cover the impact of the HIP Fee when it was in effect.

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We work to mitigate these trends through various medical management programs such as care and condition management, program integrity and specialty pharmacy management and utilization management, as well as benefit design changes.

There are many drivers of medical cost trends that can cause variance from our estimates, such as changes in the level and mix of services utilized, regulatory changes, aging of the population, health status and other demographic characteristics of our members, epidemics, pandemics, advances in medical technology, new high cost prescription drugs, and healthcare provider or member fraud.

The COVID-19 pandemic initially caused a decrease in utilization of non-COVID-19 health services, which decreased our claim costs in 2020.

Over the course of the first half of 2021, our non-COVID-19 healthcare utilization experience gradually increased toward normalized levels, while COVID-19 related healthcare expenses declined and COVID-19 vaccination administration costs increased.

During the second half of 2021, the COVID-19 Delta variant caused a significant increase in COVID-19 related healthcare utilization as a result of increased testing, treatment, and hospitalization costs, which was partially offset by a reduction in non-COVID-19 healthcare utilization.

The reduction in non-COVID-19 healthcare utilization was particularly notable in the inpatient setting, as some regions limited elective surgeries to preserve limited resources to treat patients hospitalized with COVID-19.

Costs related to child vaccinations and adult boosters were also incurred during the fourth quarter of 2021.

The COVID-19 Omicron variant increased confirmed COVID-19 cases to significant levels at the end of 2021 and the beginning of 2022.

This is expected to further increase COVID-19 costs related to testing, treatment and hospitalization costs, but is expected to be partially offset by a reduction in non-COVID-19 healthcare utilization.

In 2022, we anticipate additional claim costs for new pharmaceutical treatments for COVID-19 and compliance with governmental regulations on COVID-19 testing reimbursement.

We expect claims costs related to COVID-19 testing, treatment and hospitalizations to continue throughout 2022 even after the latest wave of COVID-19 infections in the U.S.

The continued cost and volume of covered services related to the COVID-19 pandemic may have a material adverse effect on our future claim costs.

We continue to closely monitor the COVID-19 pandemic and its impacts on our business, financial condition, results of operations and medical cost trends.

At its onset, the COVID-19 pandemic caused a decrease in utilization of non-COVID-19 health services, which decreased our claim costs in 2020.

As the pandemic continued through 2021, our non-COVID-19 healthcare utilization experience gradually increased and largely normalized, and our COVID-19 related healthcare expenses increased as new variants (Delta and Omicron) emerged and vaccinations and boosters became available.

The Omicron variant increased confirmed COVID-19 cases to significant levels at the end of 2021 and the beginning of 2022.

The COVID-19 surge quickly declined during the first quarter of 2022, with COVID-19 inpatient hospitalizations, provider-based tests, visits and vaccinations all decreasing to lower levels by the end of the first half of 2022;

concurrently, non-COVID-19 healthcare utilization recovered from lower levels earlier in the year.

Omicron sub-variant viruses as well as costs associated with updated bivalent vaccinations drove modest increases in COVID-19 related healthcare expenses in the second half of 2022, but the expected paid claims impact for the second half of 2022 are significantly lower than the winter surge experienced in each of the prior two years.

The ongoing cost and volume of covered services related to the COVID-19 pandemic and a future shift of government supplied vaccinations and treatments to privatized, full cost price points may have an adverse effect on our future claim costs.

We continue to closely monitor the COVID-19 pandemic and its impacts on our medical cost trends.

For additional discussion regarding business trends, see Part I, Item 1, “Business” of this Annual Report on Form 10-K.

Regulatory Trends and Uncertainties

Federal and state governments have enacted, and may continue to enact, legislation and regulations in response to the COVID-19 pandemic that have had, and we expect will continue to have, a significant impact on health benefits, consumer

eligibility for public programs and our cash flows for all of our lines of business.

With the declaration of COVID-19 as a public health emergency (“PHE”), the federal and state governments enacted, and may continue to enact, legislation and regulations in response to the COVID-19 pandemic that have had, and we expect will continue to have, a significant impact on health benefits, consumer eligibility for public programs and our cash flows for all of our lines of business and which have introduced increased uncertainty around our cost structure.

These actions, which are or have been in effect for various durations, provide, among other things:

• mandates to waive cost-sharing for COVID-19 testing, treatment (including over-the-counter testing in accordance with state and federal requirements such as California SB 510 and the January 2022 federal requirements), vaccines and related services;

• reforms, including waiving Medicare originating site restrictions for qualified providers of telehealth services;

• financial support to healthcare providers, including expansion of the Medicare accelerated payment program to all providers receiving Medicare payments;

• mandated expansion of premium payment terms, including the time period for which claims can be denied for lack of payment;

• mandates related to prior authorizations and payment levels to providers, additional consumer enrollment windows and an increased ability to provide telehealth services.

The Consolidated Appropriations Act of 2021, which was enacted in December 2020 (the “Appropriations Act”), contains a number of provisions that may have a material effect upon our business, including procedures and coverage requirements related to surprise medical bills and new mandates for continuity of care for certain patients, price comparison tools, disclosure of broker compensation and reporting on pharmacy benefits and drug costs.

The health plan-related requirements of the Appropriations Act have varying effective dates beginning as early as December 2021, some of which have been extended since the enactment of the Appropriations Act.

The American Rescue Plan Act of 2021, (the “Rescue Plan”), which was enacted in March 2021, contains several health-related provisions that have impacted our business, including expansion of premium tax credits for our Public Exchange business and full subsidization of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) continuation coverage for those who were involuntarily terminated or had their work hours reduced.

The Rescue Plan’s premium tax provisions became effective in January 2021, while the COBRA premium subsidization extended from April through September 2021.

The ACA has evolved and various legal challenges since its enactment introduced increased uncertainty to our business.

We expect that most of the ACA will remain in place and continue to significantly impact our business operations and results of operations;

however, federal regulatory agencies continue to modify regulations and guidance related to the ACA and our businesses more broadly.

We also expect further and ongoing regulatory guidance on a number of issues related to Medicare, including evolving methodology for ratings and quality bonus payments.

The Center for Medicare and Medicaid Services (“CMS”) is also proposing changes to its program that audits data submitted under the risk adjustment programs in a way that would increase financial recoveries from plans.

We will continue to evaluate the impact of the ACA as any further developments or judicial rulings occur.

Beginning in July 2022, the Health Plan Transparency Rule will require us to disclose, on a monthly basis, detailed pricing information regarding negotiated rates for all covered items and services between the plan or issuer and in-network providers and historical payments to, and billed charges from, out-of-network providers.

Additionally, beginning in 2023, we will be required to make available to members personalized out-of-pocket cost information and the underlying negotiated rates for 500 covered healthcare items and services, including prescription drugs.

mandates to waive cost-sharing for COVID-19 testing, vaccines and related services;

financial support to healthcare providers;

and mandates related to prior authorizations, payment levels to providers, consumer enrollment windows and telehealth services.

The Biden administration renewed the PHE on January 11, 2023 and has indicated that they intend for the PHE to expire on May 11, 2023.

Under the Consolidated Appropriations Act of 2023 (the “2023 Appropriations Act”), Congress decoupled Medicaid eligibility recertification from the PHE.

As a result, states may begin removing ineligible beneficiaries from their Medicaid programs starting April 1, 2023.

When recertifications resume, we expect a decline in our Medicaid membership.

At the same time, we expect growth in our Commercial risk-based and fee-based plans and Medicare, including through the Public Exchanges, as members exiting Medicaid in our 14 Commercial states seek coverage elsewhere.

The Inflation Reduction Act of 2022, which was signed into law in August 2022, contains a variety of provisions that impact our business including an extension of the American Rescue Plan Act of 2021's enhanced Premium Tax Credits (“PTC”) through 2025;

imposing a new corporate alternative minimum tax;

providing a one percent excise tax on repurchases of stock made after December 31, 2022;

allowing the Centers for Medicare and Medicaid Services (“CMS”) to negotiate prices on a limited set of prescription drugs in Medicare Parts B and D beginning in 2026;

instituting caps on insulin cost sharing in Medicare Parts B and D;

redesigning of the Medicare Part D benefit;

adding a requirement that drug manufacturers pay rebates if prices increase beyond inflation;

and delaying the implementation of the Trump Administration Medicare drug rebate rule to 2032.

The extension of the enhanced PTC will likely allow for growth in Individual exchange market enrollment as Medicaid eligibility recertifications resume, supporting continuity of coverage for more people.

The Consolidated Appropriations Act of 2021 (the “2021 Appropriations Act”) has impacted and in the future may have a material effect upon our business, including procedures and coverage requirements related to surprise medical bills and new mandates for continuity of care for certain patients, price comparison tools, disclosure of broker compensation, mental health parity reporting and reporting on pharmacy benefits and drug costs.

The requirements of the 2021 Appropriations Act applicable to us have varying effective dates, some of which were effective in December 2021 and during 2022, and others of which have been extended into 2023 since the enactment of the 2021 Appropriations Act.

The health plan price transparency regulations issued in October 2020 by the U.S.

Departments of Health and Human Services, Labor and Treasury required us to begin disclosing in July 2022, on a monthly basis, detailed pricing information regarding negotiated rates for all covered items and services between the plan or issuer and in-network providers and historical payments to, and billed charges from, out-of-network providers.

Additionally, beginning in 2023, we are now required to make available to members personalized out-of-pocket cost information and the underlying negotiated rates for 500 covered healthcare items and services, including prescription drugs.

In 2024, this requirement will expand to all items and services.

The non-deductible HIP Fee was permanently eliminated beginning in 2021.

For the year ended December 31, 2020, we recognized $1,570 as selling, general and administrative expense related to the HIP Fee.

There was no corresponding expense for 2021 due to the elimination of the HIP Fee beginning in 2021.

Since its enactment in 2010, the ACA has introduced new risks, regulatory challenges and uncertainties, has impacted our business model and strategy and has required changes in the way our products are designed, underwritten, priced, distributed and administered.

We expect the ACA will continue to significantly impact our business and results of operations, including pricing, minimum medical loss ratios and the geographies in which our products are available.

We also expect further and ongoing regulatory guidance on a number of issues related to Medicare, including evolving methodology for ratings and quality bonus payments.

CMS also frequently proposes changes to its program that audits data submitted under the risk adjustment programs in ways that could increase financial recoveries from plans.

We will continue to evaluate the impact of the ACA as any further developments occur.

For additional discussion regarding regulatory trends and uncertainties, and risk factors that could cause actual results to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K, see Part I, Item 1, “Business — Regulation ” and Part I, Item 1A, “Risk Factors.”

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Business and Operational Matters

On November 10, 2021, we announced our entrance into an agreement with Personal Touch Holding Corporation to acquire Integra Managed Care (“Integra”).

As mentioned above, we began operating as Elevance Health on June 28, 2022.

This name change is intended to better reflect our business and our journey from a traditional health benefits organization to a lifetime, trusted health partner.

Elevance Health supports health at every stage, offering health plans and clinical, behavioral, pharmacy and complex-care solutions that promote whole health.

On January 23, 2023, we announced our entrance into an agreement to acquire Louisiana Health Service & Indemnity Company, d/b/a Blue Cross and Blue Shield of Louisiana, an independent licensee of the BCBSA that provides healthcare plans to the Individual, Group, Medicaid and Medicare markets, primarily in the State of Louisiana.

This acquisition aligns with our vision to be an innovative, valuable, and inclusive healthcare partner by providing care management programs that improve the lives of the people we serve.

The acquisition is expected to close by the end of the fourth quarter of 2023 and is subject to standard closing conditions and customary approvals.

On November 9, 2022, we announced our entrance into an agreement with CarepathRx Aggregator, LLC to acquire its specialty pharmacy division, which includes BioPlus Parent, LLC (“BioPlus”) and subsidiaries.

BioPlus is one of the largest independent specialty pharmacy organizations in the United States and seeks to connect payors and providers of specialty pharmaceuticals to meet the medication therapy needs of patients with complex medical conditions.

This acquisition aligns with our vision to be an innovative, valuable and inclusive healthcare partner by providing care management programs that improve the lives of the people we serve.

The acquisition closed on February 15, 2023, and initial purchase accounting has not been finalized.

On May 5, 2022, we completed our acquisition of Integra.

Integra is a managed long-term care plan that serves New York state Medicaid members, enabling adults with long-term care needs and disabilities to live safely and independently in their own homes.

The acquisition is expected to close by the end of the second quarter of 2022 and is subject to standard closing conditions and customary approvals.

On June 29, 2021, we completed our acquisition of MMM and its Medicare Advantage plan, Medicaid plan and other affiliated companies from InnovaCare Health, L.P.

On June 29, 2021, we completed our acquisition of MMM, including its Medicare Advantage plan, Medicaid plan and other affiliated companies.

MMM is a Puerto Rico-based integrated healthcare organization and seeks to provide its Medicare Advantage and Medicaid members with a whole health experience through its network of specialized clinics and wholly owned independent physician associations.

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On April 28, 2021, we completed our acquisition of myNEXUS, Inc.

(“myNEXUS”) from WindRose Health Investors.

myNEXUS is a comprehensive home-based nursing management company for payors and, at the time of acquisition, delivered integrated clinical support services for Medicare Advantage members across twenty states.

This acquisition aligns with our strategy to manage integrated, whole person multi-site care and support by providing national, large-scale expertise to manage nursing services in the home and facilitate transitions of care.

On February 28, 2020, we completed our acquisition of Beacon Health Options, Inc.

(“Beacon”), which was the largest independently held behavioral health organization in the country.

At the time of acquisition, Beacon served more than thirty-four million individuals across all fifty states.

This acquisition aligned with our strategy to diversify into health services and deliver both integrated solutions and care delivery models that personalize care for people with complex and chronic conditions.

For additional information, see Note 3, “Business Acquisitions,” of the Notes to Consolidated Financial Statements

included in Part II, Item 8 of this Form 10-K.

For additional information, see Note 3, “Business Acquisitions,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

In 2020, we introduced enterprise-wide initiatives to optimize our business and as a result, recorded a charge of $653 in selling, general and administrative expenses.

We believe these initiatives largely represent the next step forward in our progression towards becoming a more agile organization, including process automation and a reduction in our office space footprint.

In the fourth quarter of 2021, we identified additional office space reductions and related fixed asset impairments due to the continuing COVID-19 pandemic and recorded a charge of $202 in selling general and administrative expenses.

In the fourth quarters of 2022 and 2021, we identified additional office space reductions and related fixed asset impairments due to the continuing COVID-19 pandemic and recorded net charges of $39 and $202, respectively, in selling, general and administrative expenses.

For additional information, see Note 4, “Business Optimization Initiatives” and Note 18, “Leases,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Litigation Matters

In the consolidated multi-district proceeding in the United States District Court for the Northern District of Alabama (the “Court”) captioned In re Blue Cross Blue Shield Antitrust Litigation (“BCBSA Litigation”), the Blue Cross Blue Shield Association (the “BCBSA”), and Blue Cross and/or Blue Shield licensees, including us (the “Blue plans”) have approved a settlement agreement and release (the “Subscriber Settlement Agreement”) with the plaintiffs representing a putative nationwide class of health plan subscribers.

In the consolidated multi-district proceeding in the United States District Court for the Northern District of Alabama (the “Court”) captioned In re Blue Cross Blue Shield Antitrust Litigation (“BCBSA Litigation”), the BCBSA and Blue Cross and/or Blue Shield licensees, including us (the “Blue plans”) previously approved a settlement agreement and release with the

plaintiffs representing a putative nationwide class of health plan subscribers (the “Subscriber Settlement Agreement”), which agreement required the Court’s approval to become effective.

Generally, the lawsuits in the BCBSA Litigation challenge elements of the licensing agreements between the BCBSA and the independently owned and operated Blue plans.

The cases were brought by two putative nationwide classes of plaintiffs, health plan subscribers and providers, and the Subscriber Settlement Agreement applies only to the putative subscriber class.

No settlement agreement has been reached with the provider plaintiffs at this time, and the defendants continue to contest the consolidated cases brought by the provider plaintiffs.

If approved by the Court, the Subscriber Settlement Agreement will require the defendants to make a monetary settlement payment, our portion of which is estimated to be $594, and will include certain terms imposing non-monetary obligations on the defendants.

As of December 31, 2021, the liability balance accrued for our estimated remaining payment obligation was $507, net of payments made.

All terms of the Subscriber Settlement Agreement are subject to approval by the

Court before they become effective.

The cases were brought by two putative nationwide classes of plaintiffs, health plan subscribers and providers.

The Subscriber Settlement Agreement applies only to the subscriber class.

The defendants continue to contest the consolidated cases brought by the provider plaintiffs.

In August 2022, the Court issued a final order approving the Subscriber Settlement Agreement (the “Final Approval Order”).

In compliance with the Subscriber Settlement Agreement, the Company paid $506 into an escrow account in September 2022, for an aggregate and full settlement payment by the Company of $596, which was previously accrued in 2020.

Four notices of appeal of the Final Approval Order were filed by the September 2022 appeal deadline.

Those appeals are proceeding in the United States Court of Appeals for the Eleventh Circuit.

In the event all appellate rights are exhausted in a manner that affirms the Court’s Final Approval Order, the defendants’ payment and non-monetary obligations under the Subscriber Settlement Agreement will become effective and the funds held in escrow will be distributed in accordance with the Subscriber Settlement Agreement.

For additional information regarding the BCBSA Litigation, see Note 14, “Commitments and Contingencies – Litigation and Regulatory Proceedings – Blue Cross Blue Shield Antitrust Litigation ,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

In January 2019, we exercised our contractual right to terminate our PBM agreement (the “ESI PBM Agreement”) with Express Scripts, Inc.

(“Express Scripts”).

We completed the transition of our members from Express Scripts to IngenioRx by January 1, 2020.

Notwithstanding our termination of the ESI PBM Agreement, the litigation between us and Express Scripts regarding the ESI PBM Agreement continues.

For additional information regarding this lawsuit, see Note 14, “Commitments and Contingencies - Litigation and Regulatory Proceedings - Express Scripts, Inc.

Pharmacy Benefit Management Litigation, ” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Selected Operating Performance

During the year ended December 31, 2022, total medical membership increased by 2.2 million, or 4.8%.

The increase in medical membership was driven primarily by growth in our Government Business’ Medicaid membership, including organic growth resulting from the temporary suspension of eligibility recertification during the COVID-19 pandemic, growth resulting from our acquisition of MMM on June 29, 2021 and the launch of our HealthyBlue managed care alliance in North Carolina.

Our Medicare Advantage membership also increased due to organic growth and the acquisition of MMM on June 29, 2021.

Increases in Group risk-based membership resulting from sales exceeding lapses, increases in Individual membership due to our Public Exchange expansion in 2021 and BlueCard® increases also contributed to overall membership increases.

Declines in our Group fee-based membership relating to in-group attrition likely attributable to the COVID-19 pandemic partially offset the increases in our medical membership.

The increase in medical membership was driven primarily by organic growth in our Government Business segment primarily driven by the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic, as well as organic growth in our Commercial & Specialty Business segment, and in particular in our Group fee-based membership.

Operating revenue for the year ended December 31, 2022 was $155,660, an increase of $18,717, or 13.7%, from the year ended December 31, 2021.

The increase in operating revenue was primarily driven by higher premium revenue due mainly to membership growth in our Government Business segment, including the acquisition of MMM on June 29, 2021, and increased product revenue in our IngenioRx segment.

These increases were partially offset by the impact of lower premium revenue associated with the repeal of the HIP Fee for 2021.

Net income for the year ended December 31, 2021 was $6,095, an increase of $1,523, or 33.3%, from the year ended December 31, 2020.

The increase in net income was primarily due to increased operating gain in all of our business units, as well as increased investment income.

The increased operating gain in our business units was due to the absence of charges in 2021 for the BCBSA litigation accrual recognized in the third quarter of 2020 and reduced business optimization charges in 2021.

The increase in our investment income resulted from an increase in income derived from our alternative investments in comparison to 2020, partially offset by reduced dividends received on our equity investments.

The increase in operating revenue was primarily driven by higher premium revenue in our Medicaid business due to organic membership growth from the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic, the acquisition of Integra in the second quarter of 2022 and the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022.

Membership growth in our Medicare Advantage and Commercial & Specialty Business risk-based businesses, as well as premium rate increases to cover medical cost trends, also generated higher premium revenue.

Finally, the increase in operating revenue was further attributable to increased pharmacy product revenue in our CarelonRx segment, resulting from growth in membership and higher script volume.

Net income for the year ended December 31, 2022 was $6,019, a decrease of $76, or 1.2%, from the year ended December 31, 2021.

The decrease in net income was primarily due to realized losses on financial instruments in 2022, as compared to gains in 2021, and increased intangible amortization in 2022 related to recent acquisitions and the rebranding of our products, as we expect to retire certain trade names in the future.

These items were partially offset by operating gain increases in all of our business segments.

Our fully-diluted shareholders' earnings per share (“EPS”) for the year ended December 31, 2022 was $24.81, an increase of $0.08, or 0.3%, from the year ended December 31, 2021.

Our diluted shares for the year ended December 31, 2022 were 242.8, a decrease of 4.0, or 1.6%, compared to the year ended December 31, 2021.

The increase in EPS resulted from the increase in net income, as well as lower shares outstanding in 2021.

The increase in EPS resulted from lower average shares outstanding in 2022, partially offset by the decrease in net income.

Operating cash flow for the year ended December 31, 2022 was $8,399, or approximately 1.4 times net income.

Operating cash flow for the year ended December 31, 2021 was $8,364, or approximately 1.4 times net income.

The decrease in operating cash flow was primarily due to the impact of working capital changes year-over-year, including an increase in receivables and a decline in accounts payable and accrued expenses, partially offset by higher net income in 2021.

In the first quarter of 2021, we updated our medical membership reporting to better align with how we view our business.

Our medical membership now includes the following customer types:

The slight increase in operating cash flow was primarily due to higher net income in 2022, when adjusted for the impact of investment losses and gains, partially offset by the timing of working capital changes and the payment pursuant to the Subscriber Settlement Agreement made in September 2022.

Our medical membership includes the following customer types:

Individual, Group risk-based, Group fee-based, BlueCard ® , Medicare, Medicaid and our Federal Employees Health Benefits (“FEHB”) Program.

BCBS-branded business generally refers to members in our service areas licensed by the BCBSA.

Non-BCBS-branded business refers to members in our non-BCBS-branded Amerigroup, Freedom Health, HealthSun, MMM, Optimum HealthCare and Simply Healthcare plans, as well as HealthLink and UniCare members.

We refer to members in our service areas licensed by the BCBSA as our BCBS-branded, or Anthem BCBS, business.

Non-BCBS-branded business refers to members in our non-BCBS-branded, or Wellpoint plans, which include Amerigroup, Freedom Health, HealthSun, MMM, Optimum Healthcare and Simply Healthcare plans, as well as HealthLink and UniCare members.

In addition to the above medical membership, we also serve customers who purchase one or more of our other products or services that are often ancillary to our health business.

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In addition, Local Group includes Student Health members.

National Accounts generally consist of multi-state employer groups primarily headquartered in an Anthem service area with at least 5% of the eligible employees located outside of the headquarter state and with more than 5,000 eligible employees.

National Accounts generally consist of multi-state employer groups primarily headquartered in an Elevance Health service area with at least 5% of the eligible employees located outside of the headquarter state and with more than 5,000 eligible employees.

Some exceptions are allowed based on broker and consultant relationships.

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Group fee-based accounted for 42.4%, 42.7% and 45.5% of our medical members at December 31, 2022, 2021 and 2020, respectively.

• BlueCard ® host customers represent enrollees of Blue Cross and/or Blue Shield plans not owned by Anthem who receive healthcare services in our BCBSA licensed markets.

• BlueCard ® host customers represent enrollees of Blue Cross and/or Blue Shield plans not owned by Elevance Health who receive healthcare services in our BCBSA licensed markets.

BlueCard ® membership consists of estimated host members using the national BlueCard ® program.

Host members are generally members who reside in or travel to a state in which an Anthem subsidiary is the Blue Cross and/or Blue Shield licensee and who are covered under an employer-sponsored health plan issued by a non-Anthem controlled BCBSA licensee (the “home plan”).

Host members are generally members who reside in or travel to a state in which an Elevance Health subsidiary is the Blue Cross and/or Blue Shield licensee and who are covered under an employer-sponsored health plan issued by a non-Elevance Health controlled BCBSA licensee (the “home plan”).

We perform certain functions, including claims pricing and administration, for BlueCard ® members, for which we receive administrative fees from the BlueCard ® members’ home plans.

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Total Medicaid program business accounted for 24.3%, 23.4% and 20.6% of our medical members at December 31, 2022, 2021 and 2020, respectively.

• FEHB members consist of United States government employees and their dependents within our geographic markets through our participation in the national contract between the BCBSA and the U.S.

• FEHB members consist of United States government employees and their dependents who receive health benefits within our geographic markets through our participation in the national contract between the BCBSA and the U.S.

Office of Personnel Management.

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Medical Membership

Total medical membership increased primarily due to growth in our Government Business’ Medicaid membership, including organic growth resulting from the temporary suspension of eligibility recertification during the COVID-19 pandemic, growth resulting from our acquisition of MMM on June 29, 2021 and the launch of our HealthyBlue managed care alliance in North Carolina.

Our Medicare Advantage membership also increased due to organic growth and our acquisition of MMM on June 29, 2021.

Increases in Group risk-based membership resulting from sales exceeding lapses, increases in Individual membership due to our Public Exchange expansion in 2021 and BlueCard ® increases also contributed to overall membership increases.

Declines in our Group fee-based membership relating to in-group attrition likely attributable to the COVID-19 pandemic partially offset the increases in our medical membership.

Total medical membership increased in both our Government Business and Commercial & Specialty Business segments primarily due to organic growth.

Our Government Business segment’s organic growth was primarily driven by the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic.

In addition, Medicaid membership was positively impacted by the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022 and the acquisition of Integra in the second quarter of 2022.

Medicare Advantage organic growth due to sales exceeding lapses also contributed to the overall Government Business segment growth.

Our Commercial & Specialty Business segment growth included Group fee-based membership increases due to sales exceeding lapses and positive in-group changes.

BlueCard ® membership increased due to membership activity at other BCBSA plans whose members reside in or travel to our licensed areas.

Individual membership increased due to our Public Exchange expansion in 2022.

Other Membership

Our other membership can be impacted by changes in our medical membership, as our medical members often purchase our other products that are ancillary to our health business.

Life and disability membership decreased primarily due to the loss of a Group risk-based account and membership decreases in our Group fee-based business.

Dental membership increased

primarily due to higher sales in our Individual and Group risk-based accounts and penetration increases in our FEHB program.

Dental administration membership increased due to growth in our FEHB program.

Vision membership increased primarily as a result of growth in our Medicare Advantage business.

Life and disability membership increased primarily due to new sales of disability products, partially offset by declines in our life membership.

Dental membership increased primarily due to new sales in our Group risk-based accounts and penetration increases in our FEHB program, partially offset by the loss of a significant Group fee-based account.

Dental administration membership increased primarily due to increased sales to other BCBS plans associated with the FEHB program.

Vision membership increased primarily due to the launch of a new entry-level vision product in our Group markets.

Medicare Part D Standalone membership declined as we discontinued certain legacy products.

Consolidated Results of Operations

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1,485 1,378 877 107 7.8 % 501 57.1 %

Net gains on financial instruments 318 182 67 136 74.7 % 115 171.6 %

Net (losses) gains on financial instruments (550) 318 182 (868) (273.0) % 136 74.7 %

Total revenues 156,595 138,639 121,867 17,956 13.0 % 16,772 13.8 %

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Cost of products sold

10,895 8,953 1,992 1,942 21.7 % 6,961 NM

13,035 10,895 8,953 2,140 19.6 % 1,942 21.7 %

Selling, general and administrative expense

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5.0 % 5.7 % 5.1 % (70)bp 3

Net income as a percentage of total revenues

4.4 % 3.8 % 4.6 % 60bp 3

Shareholders’ net income as a percentage of total revenues 3.8 % 4.4 % 3.8 % (60)bp 3

Certain of the following definitions are also applicable to all other results of operations tables in this discussion:

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Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

Total operating revenue increased primarily as a result of higher premium revenue due mainly to membership growth in our Government Business segment, including related to the acquisition of MMM on June 29, 2021, and increased product revenue in our IngenioRx segment.

These increases were partially offset by the impact of lower premium revenue associated with the repeal of the HIP Fee for 2021.

Net investment income increased primarily due to increases in net income from our alternative investments, partially offset by decreased dividends received on our equity investments.

Net gains on financial instruments increased primarily due to increased realized gains on our alternative investments and increased net realized gains on our fixed maturity securities, partially offset by declines in the fair value of equity securities still held.

Benefit expense increased primarily due to cost increases resulting from membership growth in our Medicaid and Medicare businesses, including related to our acquisition of MMM on June 29, 2021, and increased COVID-19 healthcare costs for both our Commercial & Specialty Business and Government Business segments.

Our benefit expense ratio increased primarily due to the repeal of the HIP Fee for 2021 and increased COVID-19 and non-COVID-19 healthcare costs for both our Commercial & Specialty Business and Government Business segments.

Cost of products sold reflects the cost of pharmaceuticals dispensed by IngenioRx for our unaffiliated PBM customers.

Cost of products sold increased as the corresponding pharmacy product revenues increased due to growth in customers served by IngenioRx in 2021.

Selling, general and administrative expense decreased primarily due to the repeal of the HIP Fee for 2021, the absence of charges in 2021 for the BCBSA litigation accrual recognized in the third quarter of 2020 and reduced business optimization charges in 2021.

These items were partially offset by increased costs to support growth.

Our selling, general and administrative expense ratio decreased primarily due to increased operating revenue in 2021, the absence of charges in 2021 for the BCBSA litigation accrual recognized in the third quarter of 2020, reduced business optimization charges in 2021 and the repeal of the HIP Fee for 2021.

These items were partially offset by increased costs to support growth.

Our effective income tax rate decreased primarily due to the repeal of the HIP Fee for 2021, which was non-deductible for tax purposes.

Our net income as a percentage of total revenue increased in 2021 as compared to 2020 as a result of all the factors discussed above.

Total operating revenue increased primarily as a result of higher premium revenue in our Medicaid business due to organic membership growth from the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic, the acquisition of Integra in the second quarter of 2022 and the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022.

Membership growth in our Medicare Advantage and our Commercial & Specialty Business risk-based businesses, as well as premium rate increases to cover medical cost trends also generated higher premium revenue.

Finally, the increase in operating revenue was further attributable to increased pharmacy product revenue in our CarelonRx segment, resulting from growth in membership and higher script volume.

Net investment income increased primarily due to higher income from fixed maturity securities, partially offset by reduced investment income from alternative investments.

We had net losses on financial instruments in 2022, as compared to net gains in 2021, as a result of increased net losses on the sale of fixed maturity securities, reduced gains on the sale of equity securities and lower net gains on other invested assets.

These losses were partially offset by lower mark-to-market losses on equity securities still held.

Benefit expense increased primarily due to healthcare costs associated with organic membership growth in our Medicaid and Medicare businesses and the acquisition of MMM in the second quarter of 2021.

Membership growth and higher healthcare costs in our Commercial risk-based business, the acquisition of Integra in the second quarter of 2022 and the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022 also contributed to higher benefit expense.

Our benefit expense ratio decreased slightly primarily due to the realignment during 2022 of certain quality improvement costs, from benefit expenses to administrative expenses, due to regulatory clarification.

This decline was partially offset by the impact of continued membership increases in our Government Business segment, which has a higher benefit expense ratio than our Commercial & Specialty Business segment.

Cost of products sold reflects the cost of pharmaceuticals dispensed by CarelonRx for our unaffiliated PBM customers.

Cost of products sold increased as the corresponding pharmacy product revenues increased.

Selling, general and administrative expense increased primarily due to increased costs to support membership growth and from our acquisitions, partially offset by lower business optimization charges in 2022 as compared to 2021.

Our selling, general and administrative expense ratio decreased primarily due to operating revenue growth in 2022 and lower business optimization charges in 2022 as compared to 2021, partially offset by increased costs to support membership growth and the impact of the realignment of certain quality improvement costs described above.

Other expense increased primarily due to additional amortization of intangible assets related to recent acquisitions and the rebranding of our products.

The amortization period of certain intangible assets was shortened to align with anticipated dates the new branding will take place.

In addition, certain indefinite-lived intangible assets have been reclassified as definite-lived, and therefore, are now being amortized.

For additional information regarding intangible asset amortization, see Note 10, "Goodwill and Other Intangible Assets" of the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Annual Report on Form 10-K.

Our effective income tax rate decreased primarily due to the impact of geographic changes in our mix of earnings in 2022.

Our shareholders' net income as a percentage of total revenues decreased in 2022 as compared to 2021 as a result of all the factors discussed above.

Reportable Segments Results of Operations

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Government Business 96,810 82,919 71,572 13,891 16.8 % 11,347 15.9 %

IngenioRx 25,431 21,911 5,402 3,520 16.1 % 16,509 NM

CarelonRx 28,526 25,431 21,911 3,095 12.2 % 3,520 16.1 %

Other 13,294 10,250 6,057 3,044 29.7 % 4,193 69.2 %

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3,297 3,061 2,444 236 7.7 % 617 25.2 %

1,684 1,361 — 323 23.7 % 1,361 NM

1,868 1,684 1,361 184 10.9 % 323 23.7 %

354 (9) (126) 363 NM 117 NM

Operating Margin

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Government Business 3.4 % 3.7 % 3.4 % (30)bp 5

IngenioRx 6.6 % 6.2 % NM 40bp 5

CarelonRx 6.5 % 6.6 % 6.2 % (10)bp 5

NM Not meaningful.

1 Includes expenses of $106 for business optimization initiatives recognized in 2021;

$311 for business optimization initiatives and $524 for the BCBSA Litigation recognized in 2020.

2 Includes expenses of $47 for business optimization initiatives recognized in 2021;

$205 for business optimization initiatives and $24 for the BCBSA Litigation recognized in 2020.

3 Includes expenses of $2 for business optimization initiatives recognized in 2021;

$4 for business optimization initiatives recognized in 2020.

4 Includes expenses of $32 for business optimization initiatives recognized in 2021;

$133 for business optimization initiatives recognized in 2020.

1 Includes expenses of $20 for business optimization initiatives in 2022;

$106 for business optimization initiatives in 2021;

$311 for business optimization initiatives and $524 for the BCBSA Litigation in 2020.

2 Includes expenses of $16 for business optimization initiatives in 2022;

$47 for business optimization initiatives in 2021;

$205 for business optimization initiatives and $24 for the BCBSA Litigation in 2020.

3 Includes expenses of $2 for business optimization initiatives in 2021;

$4 for business optimization initiatives in 2020.

4 Includes expenses of $3 for business optimization initiatives in 2022;

$32 for business optimization initiatives in 2021;

$133 for business optimization initiatives in 2020.

5 bp = basis point;

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Commercial & Specialty Business

Operating revenue increased primarily due to premium rate increases in our Commercial risk-based businesses designed to cover medical cost trends, increased membership in our Commercial risk-based businesses, administrative fee increases in our Group fee-based businesses and the absence in 2021 of premium credits provided to members enrolled in select Group and Individual health plans in response to the COVID-19 pandemic in the second quarter of 2020.

These increases were partially offset by the impact of lower premium revenue associated with the repeal of the HIP Fee for 2021.

The increase in operating gain was primarily due to the absence of charges in 2021 for the BCBSA Litigation accrual recognized in the third quarter of 2020, reduced business optimization charges in 2021 and the non-recurring premium credits provided to members enrolled in select Group and Individual health plans in response to the COVID-19 pandemic in the second quarter of 2020.

These increases were partially offset by increased COVID-19 and non-COVID-19 healthcare costs in 2021.

Operating revenue increased primarily due to higher premiums in our Commercial risk-based business due to membership growth, premium rate increases in our Commercial risk-based business to cover medical cost trends and increased administrative fees in our Commercial fee-based business.

The increase in operating gain was primarily due to improved medical underwriting performance in our Commercial risk-based business and reduced business optimization charges in 2022 as compared to 2021.

These items were partially offset by increased costs to support membership growth.

Government Business

Operating revenue increased primarily due to higher premium revenue growth in our Medicaid business, driven by the temporary suspension of eligibility recertification, which we expect will remain suspended at least until the second quarter of 2022, and the acquisition of MMM on June 29, 2021.

Medicare membership growth in our Medicare business and the impact of the acquisition of MMM on June 29, 2021 also contributed to operating revenue growth.

These increases were partially offset by the impact of lower premium revenue associated with the repeal of the HIP Fee for 2021, increased experience-rated refunds in our Medicaid business and lower risk-based revenue in our Medicare business.

The increase in operating gain was primarily driven by membership increases in both our Medicaid and Medicare businesses, including due to the acquisition of MMM on June 29, 2021, and reduced business optimization charges in 2021.

These increases were partially offset by an increase in COVID-19 and non-COVID-19 healthcare costs, increased experience-rated refunds in our Medicaid business and lower risk-based revenue in our Medicare business.

Operating revenue and operating gain increased as a result of higher drug spend from IngenioRx customers, including spend related to increased Medicaid membership within our Government Business segment.

The increase in operating gain was primarily driven by growth in integrated medical and pharmacy members in 2021.

Operating revenue increased primarily due to higher administrative fees and other revenue for services performed by our Diversified Business Group for our Commercial & Specialty Business and Government Business segments, primarily due to the implementation of affiliated behavioral health capitation contracts.

In addition, unaffiliated revenues from Beacon, AIM and myNEXUS contributed to the overall increase.

The decrease in operating loss was driven by reduced business optimization charges in 2021 and a decline in unallocated corporate expenses in 2021.

Operating revenue increased primarily due to higher premium revenue in our Medicaid business, including due to organic membership growth from the continued temporary suspension of Medicaid eligibility recertification during the

COVID-19 pandemic, the acquisition of MMM at the end of the second quarter of 2021, the acquisition of Integra during the second quarter of 2022 and the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022.

Membership growth and premium rate increases to cover medical cost trends in our Medicare Advantage business also contributed to higher premium revenue.

The increase in operating gain was primarily driven by premium rate increases to cover medical cost trends in our Medicare business, organic membership growth in our Medicaid business from the continued suspension of eligibility recertifications during the COVID-19 pandemic and the acquisition of MMM in the second quarter of 2021.

These increases were partially offset by additional administrative spend to support the growth in our Government business.

Operating revenue increased as a result of growth in membership and higher script volume.

The increase in operating gain was primarily a result of higher script volume, driven by growth in integrated medical and pharmacy members in 2022 and favorable out-of-period adjustments to fee-based revenue in the second half of 2022.

Operating revenue increased primarily due to higher revenue for expanded services performed by Carelon Services for our Commercial & Specialty Business segment in 2022 and the acquisition of myNEXUS in the second quarter of 2021.

These increases were partially offset by the reduction of external revenue due to the loss of a behavioral health contract in 2022.

The increase in operating gain was driven by improved performance in Carelon Services, the acquisition of myNEXUS in the second quarter of 2021, and a decline in unallocated corporate expenses in 2022.

Critical Accounting Policies and Estimates

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and (2) claims reported to us and processed through our systems but not yet paid, which approximated 6%, or $860, of the total medical claims payable as of December 31, 2022.

The level of claims

payable processed through our systems but not yet paid may fluctuate from one period-end to the next, from approximately 1% to 5% of our total medical claims liability, due to timing of when claim payments are made.

The level of claims payable processed through our systems but not yet paid may fluctuate from one period-end to the next, from approximately 1% to 6% of our total medical claims liability, due to timing of when claim payments are made.

Liabilities for both claims incurred but not reported and reported but not yet processed through our systems are determined in the aggregate, employing actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice.

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To the extent appropriate, changes in such development are recorded as a change to current period benefit expense.

The impact from COVID-19 on healthcare utilization and medical claims submission patterns has increased estimation uncertainty on our incurred but not reported liability at December 31, 2021.

Slowdowns in claims submission patterns and increases in utilization levels for COVID-19 testing and treatment during 2021 are the primary factors that lead to the increased estimation uncertainty.

We had increased estimation uncertainty on our incurred but not reported liability at December 31, 2022 and December 31, 2021.

Slowdowns in claims submission patterns and increases in utilization levels for COVID-19 testing and treatment are the primary factors that lead to the increased estimation uncertainty.

We regularly review and set assumptions regarding cost trends and utilization when initially establishing claim liabilities.

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That determination is made when sufficient information is available to ascertain that the re-estimate of the liability is reasonable.

While there are many factors that are used as a part of the estimation of our medical claims payable liability, the two key assumptions having the most significant impact on our incurred but not paid claims liability as of December 31, 2021 were the completion and trend factors.

Although there are many factors that are used as a part of the estimation of our medical claims payable liability, the two key assumptions having the most significant impact on our incurred but not paid claims liability as of December 31, 2022 were the completion and trend factors.

As discussed above, these two key assumptions can be influenced by utilization levels, unit costs, mix of business, benefit plan designs, provider reimbursement levels, processing system conversions and changes, claim inventory levels, claim processing patterns, claim submission patterns and operational changes resulting from business combinations.

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As previously discussed, completion factors tend to be less reliable for the most recent months and therefore are not specifically utilized for months one and two.

In our analysis for the claim liabilities at December 31, 2021, the variability in months three to five was estimated to be between 40 and 90 basis points, while months six through twelve have much lower estimated variability ranging from 0 to 30 basis points.

In our analysis for the claim liabilities at December 31, 2022, the variability in months three to five was estimated to be between 40

and 90 basis points, while months six through twelve have much lower estimated variability ranging from 0 to 30 basis points.

The difference in completion factor assumptions results in variability of 2%, or approximately $266, in the December 31, 2022 incurred but not paid claims liability, depending on the completion factors chosen.

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Because historical trend factors are often not representative of current claim trends, the trend experience for the most recent six to nine months, plus knowledge of recent events likely affecting current trends, have been taken into consideration in establishing the incurred but not paid claims liability at December 31, 2022.

The COVID-19 pandemic continues to have a significant impact on 2021 dates of service.

Our expenses associated with COVID-19 accelerated in the fourth quarter of 2021, partially offset by the benefit from a lower volume of healthcare claims attributable to decreased utilization of non-COVID-19 health services.

The COVID-19 pandemic continues to have an impact on claim costs for recent dates of service, which could have an influence on our trend factors.

We will continue to monitor emerging experience in order to better understand the possible implications to our reserves.

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The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 87.3% for 2022, 87.8% for 2021 and 87.7% for 2020.

This ratio serves as an indicator of claims processing speed whereby 2021 claims were processed at a similar speed to 2020, but slower than in 2019.

This ratio serves as an indicator of claims processing speed whereby 2022 claims were processed at a slightly slower speed than 2021 and 2020.

We calculate the percentage of prior year redundancies in the current year as a percent of prior year net incurred claims payable less prior year redundancies in the current year in order to demonstrate the development of the prior year reserves.

For the year ended December 31, 2022, this metric was 7.0%, largely driven by favorable trend factor development at the end of 2021.

For the year ended December 31, 2021, this metric was 18.1%, reflecting the estimation uncertainty due to COVID-19 at the end of 2020, and was largely driven by favorable trend factor development at the end of 2020 as well as favorable completion factor development from 2020.

For the year ended December 31, 2020, this metric was 8.0%, largely driven by favorable trend factor development at the end of 2019 as well as favorable completion factor development from 2019.

For the year ended December 31, 2019, this metric was 7.4%, largely driven by favorable trend factor development at the end of 2018 as well as favorable completion factor development from 2018.

We calculate the percentage of prior year redundancies in the current year as a percent of prior year net incurred medical claims to indicate the percentage of redundancy included in the preceding year calculation of current year net incurred medical claims.

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The 2021 metric was impacted by the estimation uncertainty due to COVID-19.

The following table shows the variance between total net incurred medical claims as reported in Note 12, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for each of 2020 and 2019 and the incurred claims for such years had it been determined retrospectively (computed as the difference between “net incurred medical claims – current year” for the year shown and “net incurred medical claims – prior years redundancies” for the immediately following year):

the difference between “net incurred medical claims – current year” for the year shown and “net incurred medical claims – prior years redundancies” for the immediately following year):

Years Ended December 31

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We expect that substantially all of the development of the 2022 estimate of medical claims payable will be known during 2023.

The 2020 variance to total net incurred medical claims, as reported of 1.3% was greater than the 2019 percentage of 0.2%.

This was driven by the fact that the change in the prior year redundancy reported for 2020 as compared to 2019 was greater than the change in the prior year redundancy reported for 2019 as compared to 2018.

The 2021 variance to total net incurred medical claims, as reported of (0.8)% was less than the 2020 percentage of 1.3%.

This was primarily driven by the fact that the change in the prior year redundancy reported for 2021 as compared to 2020 was less than the change in the prior year redundancy reported for 2020 as compared to 2019.

We account for income taxes in accordance with the Financial Accounting Standards Board (“FASB”) guidance, which requires, among other things, the separate recognition of deferred tax assets and deferred tax liabilities.

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• the forecasted future taxable income, and therefore, likely future deduction of the deferred tax item;

• the implementation of tax planning strategies to recover those deferred tax assets;

• any significant other issues impacting the likely realization of the benefit of the temporary differences.

Although realization is not assured, we believe it is more likely than not that the deferred tax assets will be realized.

We, like other companies, frequently face challenges from tax authorities regarding the amount of taxes due.

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In the ordinary course of business, we are regularly audited by federal and other tax authorities, and from time to time, these audits result in proposed assessments.

We believe our tax positions comply with applicable tax law, and we intend to defend our positions vigorously through the federal, state and local appeals processes.

We believe we have adequately

provided for any reasonably foreseeable outcome related to these matters.

We believe our tax positions comply with applicable tax law, and we intend to defend our positions vigorously through the federal, state and local, and foreign appeals processes.

We believe we have

adequately provided for any reasonably foreseeable outcome related to these matters.

Accordingly, although their ultimate resolution may require additional tax payments, we do not anticipate any material impact on our results of operations or financial condition from these matters.

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Such factors considered include the extent to which a security’s market value has been less than its cost, the reasons for the decline in value (i.e., credit event compared to liquidity, general credit spread widening, currency exchange rate or interest rate factors), financial condition and near term prospects of the issuer, including the credit ratings and changes in the credit ratings of the issuer, recommendations of investment advisors, and forecasts of economic, market or industry trends.

Prior to 2020, our fixed maturity securities were evaluated for other-than-temporary impairment where credit-related impairments were presented within the other-than-temporary impairment losses recognized in our consolidated statements of income with an adjustment to the security’s amortized cost basis.

Effective January 1, 2020, if a fixed maturity security is in an unrealized loss position and we have the intent to sell the fixed maturity security, or it is more likely than not that we will have to sell the fixed maturity security before recovery of its amortized cost basis, we write down the fixed maturity security’s cost basis to fair value and record an impairment loss in our consolidated statements of income.

If a fixed maturity security is in an unrealized loss position and we have the intent to sell the fixed maturity security, or it is more likely than not that we will have to sell the fixed maturity security before recovery of its amortized cost basis, we write down the fixed maturity security’s cost basis to fair value and record an impairment loss in our consolidated statements of income.

For impaired fixed maturity securities that we do not intend to sell or if it is more likely than not that we will not have to sell such securities, but we expect that we will not fully recover the amortized cost basis, we recognize the credit component of the impairment as an allowance for credit loss in our consolidated balance sheets and record an impairment loss in our consolidated statements of income.

The non-credit component of the impairment is recognized in accumulated other comprehensive income.

Furthermore, unrealized losses entirely caused by non-credit-related factors related to fixed maturity securities for which we expect to fully recover the amortized cost basis continue to be recognized in accumulated other comprehensive income.

The non-credit component of the impairment is recognized in accumulated other comprehensive (loss) income.

The credit component of an impairment is determined primarily by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed maturity security.

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In addition to marketable investment securities, we held additional long-term investments of $5,685, or 5.5% of total consolidated assets, at December 31, 2022.

These long-term investments consisted primarily of certain other equity investments, the cash surrender value of corporate-owned life insurance policies, mortgage loans and real estate.

These long-term investments consisted primarily of certain other equity investments, the cash surrender value of corporate-owned life insurance policies and mortgage loans.

Due to their less liquid nature, these investments are classified as long-term.

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Our investment portfolio includes fixed maturity securities with a fair value of $26,704 at December 31, 2022.

The weighted-average credit rating of these securities was “A”

as of December 31, 2021.

The weighted-average credit rating of these securities was “A” as of December 31, 2022.

Included in this balance are investments in fixed maturity securities of states, municipalities and political subdivisions of $890 that are guaranteed by third parties.

With the exception of nineteen securities with a fair value of $27, these securities are all investment-grade and carry a weighted-average credit rating of “AA” as of December 31, 2021.

With the exception of 16 securities with a fair value of $9,

these securities are all investment-grade and carry a weighted-average credit rating of “AA” as of December 31, 2022.

The securities are guaranteed by a number of different guarantors, and we do not have any material exposure to any single guarantor, neither indirectly through the guarantees, nor directly through investment in the guarantor.

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However, if we lower our expected long-term return on plan assets, future contributions to the pension plan and pension expense would likely increase.

This assumed long-term rate of return on assets is applied to a calculated value of plan assets, which recognizes changes in the fair value of plan assets in a systematic manner over three years, producing the expected return on plan assets that is included in the determination of pension expense.

included in the determination of pension expense.

We apply a corridor approach to amortize unrecognized actuarial gains or losses.

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Our cash receipts result primarily from premiums, product revenue, administrative fees and other revenue, investment income, proceeds from the sale or maturity of our investment securities, proceeds from borrowings, and proceeds from the issuance of common stock under our employee stock plans.

Cash disbursements result mainly from claims payments,

administrative expenses, taxes, purchases of investment securities, interest expense, payments on borrowings, acquisitions, capital expenditures, repurchases of our debt securities and common stock and the payment of cash dividends.

Cash outflows fluctuate with the amount and timing of settlement of these transactions.

Cash disbursements result mainly from claims payments, administrative expenses, taxes, purchases of investment securities, interest expense, payments on borrowings, acquisitions, capital expenditures, repurchases of our debt securities and common stock and the payment of cash dividends.

Cash outflows

fluctuate with the amount and timing of settlement of these transactions.

Any future decline in our profitability would likely have an unfavorable impact on our liquidity.

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The availability of financing in the form of debt or equity is influenced by many factors, including our profitability, operating cash flows, debt levels, debt ratings, contractual restrictions, regulatory requirements and market conditions.

The securities and credit markets have in the past experienced higher than normal volatility, although current market conditions are more stable.

Interest rates on fixed income securities are expected to rise in 2022, which could increase our borrowing costs if we elect to issue debt.

The securities and credit markets have in the past experienced higher than normal volatility.

Interest rates on fixed debt income securities increased in 2022 and may continue to do so in 2023, which could increase our borrowing costs if we elect to issue debt.

During recent years, the federal government and various governmental agencies have taken a number of steps to strengthen the regulation of the financial services market.

In addition, governments around the world have developed their own plans to provide stability and security in the credit markets and to ensure adequate capital in certain financial institutions.

Further, in response to the COVID-19 pandemic, the federal government has established a number of programs to provide liquidity to the financial system that provides lending to states, municipalities, and eligible businesses.

A summary of our major sources and uses of cash and cash equivalents for the years ended December 31, 2022, 2021 and 2020 is as follows:

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Effect of foreign exchange rates on cash and cash equivalents (14) (10) 7 (4) (17)

Net (decrease) increase in cash and cash equivalents $ (861) $ 804 $ 1,003 $ (1,665) $ (199)

Net increase (decrease) in cash and cash equivalents $ 2,507 $ (861) $ 804 $ 3,368 $ (1,665)

Liquidity—Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

The decrease in cash provided by operating activities was primarily due to the impact of working capital changes year-over-year, including an increase in receivables and a decline in accounts payable and accrued expenses, partially offset by higher net income in 2021.

Other significant changes in sources and uses of cash year-over-year included an increase in net proceeds received from the issuance of commercial paper and short-term and long-term debt, net of repayments and reduced amounts for the repurchase and retirement of our common stock, partially offset by an increase in cash paid for the purchases of subsidiaries, net of cash acquired.

The slight increase in cash provided by operating activities was primarily due to higher net income in 2022, when adjusted for the impact of investment losses and gains, partially offset by the timing of working capital changes and the payment pursuant to the Subscriber Settlement Agreement made in September 2022.

Other significant changes in sources and uses of cash year-over-year included lower amounts used for purchases of subsidiaries, net of cash acquired and reduced cash used for purchases of investments, net of proceeds from sales, maturities, calls and redemptions.

These decreased uses of cash were partially offset by reduced net proceeds received from the issuance of commercial paper and short-term and long-term debt and increased use of cash for share repurchases.

Financial Condition

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Certain accounting practices prescribed by insurance regulatory authorities, or statutory accounting practices, differ from GAAP.

Changes that occur in statutory accounting practices, if any, could impact our subsidiaries’ future dividend capacity.

Changes that occur in statutory accounting practices, if any, or other regulatory requirements, could impact our subsidiaries’ future dividend capacity.

In addition, we have agreed to certain undertakings to regulatory authorities, including the requirement to maintain certain capital levels in certain of our subsidiaries.

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Our consolidated debt-to-capital ratio was 39.9% and 38.9% as of December 31, 2022 and 2021, respectively.

Our senior debt is rated “A” by S&P Global, “BBB” by Fitch Ratings, Inc., “Baa2” by Moody’s Investor Service, Inc.

Our senior debt is rated “A” by S&P Global Ratings, “BBB” by Fitch Ratings, Inc., “Baa2” by Moody’s Investor Service, Inc.

and “bbb+” by AM Best Company, Inc.

We intend to maintain our senior debt investment grade ratings.

If our credit ratings are downgraded, our business, financial condition and results of operations could be adversely impacted by limitations on future borrowings and a potential increase in our borrowing costs.

If our credit ratings are downgraded, our business, liquidity, financial condition and results of operations could be adversely impacted by limitations on future borrowings and a potential increase in our borrowing costs.

Capital Resources

We have a shelf registration statement on file with the SEC to register an unlimited amount of any combination of debt or equity securities in one or more offerings.

We have a shelf registration statement on file with the Securities and Exchange Commission to register an unlimited amount of any combination of debt or equity securities in one or more offerings.

Specific information regarding terms and securities being offered will be provided at the time of an offering.

Proceeds from future offerings are expected to be used for general corporate purposes,

including, but not limited to, the repayment of debt, investments in or extensions of credit to our subsidiaries and the financing of possible acquisitions or business expansions.

We have a senior revolving credit facility (the “5-Year Facility”) available in the amount of $2,500 with a group of lenders for general corporate purposes.

On June 3, 2021, we terminated our 364-day senior revolving credit facility, which was scheduled to mature in June 2021 (the “prior 364-Day Facility”), and entered into a new 364-day senior revolving credit facility (the “new 364-Day Facility” and together with the 5-Year Facility, the “Credit Facilities”) with a group of lenders for general corporate purposes.

The new 364-Day Facility provides for credit in the amount of $1,000 and matures in June 2022.

Our ability to borrow under these Credit Facilities is subject to compliance with certain covenants, including covenants requiring us to maintain a defined debt-to-capital ratio of not more than 60%, subject to increase in certain circumstances set forth in the applicable credit agreement.

We do not believe the restrictions contained in these covenants materially affect our financial or operating flexibility.

As of December 31, 2021, we were in compliance with all of our debt covenants.

There were no amounts outstanding under the 5-Year Facility or the new 364-Day Facility at December 31, 2021.

Proceeds from future offerings are expected to be used for

general corporate purposes, including, but not limited to, the repayment of debt, investments in or extensions of credit to our subsidiaries and the financing of possible acquisitions or business expansions.

We have a senior revolving credit facility (the “5-Year Facility”) with a group of lenders for general corporate purposes.

In April 2022, we amended and restated the credit agreement for the 5-Year Facility to, among other things, extend the maturity date of the 5-Year Facility from June 2024 to April 2027 and increase the amount of credit available under the 5-Year Facility from $2,500 to $4,000.

Also in April 2022, concurrently with the amendment and restatement of the 5-Year Facility, we terminated our 364-day senior revolving credit facility that provided for credit in the amount of $1,000, which was scheduled to mature in June 2022.

Our ability to borrow under the 5-Year Facility is subject to compliance with certain covenants, including covenants requiring us to maintain a defined debt-to-capital ratio of not more than 60%, subject to increase in certain circumstances set forth in the credit agreement for the 5-Year Facility.

We do not believe the restrictions contained in our 5-Year Facility covenants materially affect our financial or operating flexibility.

As of December 31, 2022, we were in compliance with all of our debt covenants under the 5-Year Facility.

There were no amounts outstanding under the 5-Year Facility at December 31, 2022.

Through certain subsidiaries, we have entered into multiple 364-day lines of credit (the “Subsidiary Credit Facilities”) with separate lenders for general corporate purposes.

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At December 31, 2022, we had no outstanding borrowings under the Subsidiary Credit Facilities.

We have a $3,500 commercial paper program, the proceeds of which may be used for general corporate purposes.

Should commercial paper issuance be unavailable, we have the ability to use a combination of cash on hand and/or our Credit Facilities, which provide for combined credit in the amount of $3,500, to redeem any outstanding commercial paper upon maturity.

While there is no assurance in the current economic environment, we believe the lenders participating in our credit facilities, if market conditions allow, would be willing to provide financing in accordance with their legal obligations.

We have an authorized commercial paper program of up to $4,000, the proceeds of which may be used for general corporate purposes.

In July 2022, we increased the amount available under the commercial paper program from $3,500 to $4,000.

Should commercial paper issuance become unavailable, we have the ability to use a combination of cash on hand and/or our 5-Year Facility, which provides for credit in the amount of $4,000, to redeem any outstanding commercial paper upon maturity.

At December 31, 2022, we had $0 outstanding under our commercial paper program.

While there is no assurance in the current economic environment, we believe the lenders participating in our 5-Year Facility and Subsidiary Credit Facilities, if market conditions allow, would be willing to provide financing in accordance with their legal obligations.

We are a member, through certain subsidiaries, of the Federal Home Loan Bank of Indianapolis, the Federal Home Loan Bank of Cincinnati, the Federal Home Loan Bank of Atlanta and the Federal Home Loan Bank of New York (collectively the “FHLBs”).

As a member, we have the ability to obtain short-term cash advances, subject to certain minimum collateral requirements.

At December 31, 2021, we had $275 outstanding short-term borrowings from the FHLBs.

At December 31, 2022, we had $265 of outstanding short-term borrowings from the FHLBs.

As discussed in “ Financial Condition ” above, many of our subsidiaries are subject to various government regulations that restrict the timing and amount of dividends and other distributions that may be paid.

Based upon these requirements, we currently estimate that approximately $3,000 of dividends will be paid to the parent company during 2022.

Based upon these requirements, we currently estimate that approximately $3,500 of dividends will be paid to us by our subsidiaries during 2023.

During 2022, we received $3,097 of dividends from our subsidiaries.

In addition to regulations regarding the timing and amount of dividends, our regulated subsidiaries’ states of domicile have statutory risk-based capital (“RBC”) requirements for health and other insurance companies and HMOs largely based on the National Association of Insurance Commissioners (“NAIC”) Risk-Based Capital (RBC) For Health Organizations Model Act (“RBC Model Act”).

In addition to regulations regarding the timing and amount of dividends, our regulated subsidiaries’ states of domicile have statutory risk-based capital (“RBC”) requirements for health and other insurance companies and health maintenance organizations largely based on the National Association of Insurance Commissioners (“NAIC”) Risk-Based Capital (RBC) For Health Organizations Model Act (“RBC Model Act”).

These RBC requirements are intended to measure capital adequacy, taking into account the risk characteristics of an insurer’s investments and products.

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As previously described, our cash disbursements result mainly from claims payments, administrative expenses, taxes, purchases of investment securities, interest expense, payments on borrowings, acquisitions, capital expenditures, repurchases of our debt securities and common stock and the payment of cash dividends.

We believe cash on hand, operating cash receipts, investments and amounts available under our commercial paper and Credit Facilities will be adequate to fund our expected cash disbursements over the next twelve months.

We believe cash on hand, operating cash receipts, investments and amounts available under our commercial paper program, our 5-Year Facility and our Subsidiary Credit Facilities and borrowings available from the FHLBs will be adequate to fund our expected cash disbursements over the next twelve months.

Long-Term Liquidity Requirements

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Under our Board of Directors’ authorization, we maintain a common stock repurchase program.

On January 26, 2021, our Audit Committee, pursuant to authorization granted by the Board of Directors, authorized a $5,000 increase to our common stock repurchase program.

As of December 31, 2022, we had Board authorization of $1,876 to repurchase our common stock.

We believe that funds from future operating cash flows, cash and investments and funds available under our senior revolving credit facilities and/or from public or private financing sources will be sufficient for future operations and commitments, and for capital acquisitions and other strategic transactions.

On January 24, 2023, our Audit Committee,

pursuant to authorization granted by the Board of Directors, authorized a $5,000 increase to our common stock repurchase program.

No duration has been placed on our common stock repurchase program, and we reserve the right to discontinue the program at any time.

We intend to utilize this authorization over a multi-year period, subject to market and industry conditions.

We believe that funds from future operating cash flows, cash and investments and funds available under our credit facilities and/or from public or private financing sources will be sufficient for future operations and commitments, and for capital acquisitions and other strategic transactions.

We do not have any off-balance sheet derivative instruments, guarantee transactions, agreements or other contractual arrangements or any indemnification agreements that will require funding in future periods.

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We do not hold any variable interest in an unconsolidated entity where such entity provides us with financing, liquidity, market risk or credit risk support.

See Note 2 “Subsidiary Transactions” of the Notes to Condensed Financial Statements included in Part III, Item 15 of this Annual Report on Form 10-K for additional detail on the Anthem, Inc.

See Note 2 “Subsidiary Transactions” of the Notes to Condensed Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K for additional detail on the Elevance Health, Inc.

parent guarantees of certain subsidiaries.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis