4 unchanged sentences
References to the “states” include the District of Columbia and Puerto Rico, unless the context otherwise requires.
−Removed: Results of operations, cost of care trends, investment yields and other measures for the three months ended March 31, 2023 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2023, or any other period.
+Added: Results of operations, cost of care trends, investment yields and other measures for the three and six months ended June 30, 2023 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2023, or any other period.
Elevance Health is a health company with the purpose of improving the health of humanity.
−Removed: We are one of the largest health insurers in the United States in terms of medical membership, serving greater than 48 million medical members through our affiliated health plans as of March 31, 2023.
+Added: We are one of the largest health insurers in the United States in terms of medical membership, serving approximately 48 million medical members through our affiliated health plans as of June 30, 2023.
We are an independent licensee of the Blue Cross and Blue Shield Association (“BCBSA”), an association of independent health benefit plans, and serve members as the Blue Cross or Blue Cross and Blue Shield licensee in 14 states.
3 unchanged sentences
• Anthem Blue Cross/Anthem Blue Cross and Blue Shield — represents our existing Anthem-branded and affiliated Blue Cross and/or Blue Shield licensed plans;
−Removed: • Wellpoint — we intend to unite select non-BCBSA licensed Medicare, Medicaid and commercial plans under the Wellpoint name;
+Added: • Wellpoint — we are uniting select non-BCBSA licensed Medicare, Medicaid and commercial plans under the Wellpoint name;
• Carelon — this brand brings together our healthcare-related brands and capabilities, including our CarelonRx and Carelon Services businesses, under a single brand name.
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We strive to price our health benefit products consistent with anticipated underlying medical cost trends.
−Removed: We continue to closely monitor the COVID-19 pandemic (including new COVID-19 variants, which may be more contagious or severe, or less responsive to treatment or vaccines) and the impacts it may have on our pricing.
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.
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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, provider contracting inflation, labor costs and healthcare provider or member fraud.
−Removed: Drivers of medical cost trend in the first quarter of 2023 include decreases in COVID-19 healthcare related expenses compared to prior year experience.
−Removed: The Omicron variant increased COVID-19 healthcare related expenses in the beginning of 2022, then quickly declined during the first quarter of 2022.
−Removed: COVID-19 claim costs for the first quarter of 2023 were lower than the prior year.
−Removed: 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.
−Removed: 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” included in our 2022 Annual Report on Form 10-K.
Regulatory Trends and Uncertainties
−Removed: With the declaration of COVID-19 as a public health emergency (“PHE”) in January 2020, 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.
−Removed: These actions, which are or have been in effect for various durations, provide, among other things:
−Removed: mandates to waive cost-sharing for COVID-19 testing, vaccines and related services;
−Removed: financial support to healthcare providers;
−Removed: and mandates related to prior authorizations, payment levels to providers, consumer enrollment windows and telehealth services.
−Removed: 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.
−Removed: Under the Consolidated Appropriations Act of 2023 (the “2023 Appropriations Act”), Congress decoupled Medicaid eligibility recertification from the PHE.
−Removed: As a result, states were permitted to begin removing ineligible beneficiaries from their Medicaid programs starting April 1, 2023.
−Removed: As recertifications resume, we expect a decline in our Medicaid membership.
−Removed: 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.
+Added: Under the Consolidated Appropriations Act of 2023 (the “2023 Appropriations Act”), Congress decoupled Medicaid eligibility redeterminations from the Public Health Emergency initially declared in January 2020 relating to COVID-19 (the “PHE”).
+Added: As a result, states were permitted to begin removing ineligible beneficiaries from their Medicaid programs starting April 1, 2023, and the majority of our Medicaid markets began doing so as of June 30, 2023.
+Added: As redeterminations have resumed, we have experienced a decline in our Medicaid membership.
+Added: Over time, we expect growth in our commercial plans, including through the Public Exchanges, as members who do not qualify for redetermination exit the Medicaid program in our 14 commercial states and seek coverage elsewhere.
+Added: On May 11, 2023, the PHE ended in accordance with the Biden Administration’s January 30, 2023 announcement.
+Added: Some states such as California have extended their COVID-19 related policies beyond the PHE.
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;
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providing a one percent excise tax on repurchases of stock made after December 31, 2022;
−Removed: allowing CMS to negotiate prices on a limited set of prescription drugs in Medicare Parts B and D beginning in 2026;
+Added: allowing 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;
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and delaying the implementation of the Trump Administration Medicare drug rebate rule until 2032.
−Removed: 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.
+Added: The extension of the enhanced PTC has allowed for growth in Individual exchange market enrollment as Medicaid eligibility redeterminations have resumed, supporting continuity of coverage for more people.
The Consolidated Appropriations Act of 2021 (the “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 Appropriations Act applicable to us have varying effective dates, some of which were effective in December 2021 and others that have been extended into 2023 since the enactment of the Appropriations Act.
−Removed: The health plan price transparency regulations issued in October 2020 by the U.S.
−Removed: 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.
+Added: The health plan price transparency regulations issued by the U.S.
+Added: Departments of Health and Human Services, Labor and Treasury required us in 2022 to begin disclosing 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.
−Removed: Since its enactment in 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, 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.
−Removed: 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.
+Added: The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the “ACA”), continues to 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.
−Removed: We will continue to evaluate the impact of the ACA as any further developments occur.
−Removed: For additional discussion regarding regulatory trends and uncertainties and risk factors, see Part I, Item 1, “Business – Regulation”, Part I, Item 1A, “Risk Factors”, and the “Regulatory Trends and Uncertainties” section of Part II, Item 7,
−Removed: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2022 Annual Report on Form 10-K.
+Added: For additional discussion regarding regulatory trends and uncertainties and risk factors, see Part I, Item 1, “Business – Regulation”, Part I, Item 1A, “Risk Factors”, and the “Regulatory Trends and Uncertainties” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2022 Annual Report on Form 10-K.
Other Significant Items
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BioPlus, which operates as part of CarelonRx, seeks to connect payors and providers of specialty pharmaceuticals to meet the medication therapy needs of patients with complex medical conditions.
−Removed: 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.
+Added: This acquisition
+Added: 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.
On May 5, 2022, we completed our acquisition of Integra Managed Care (“Integra”).
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Four notices of appeal of the Final Approval Order were filed prior to the September 2022 appeal deadline.
−Removed: Those appeals are proceeding in the United States Court of Appeals for the Eleventh Circuit.
+Added: Those appeals are proceeding in the United States Court of Appeals for the Eleventh Circuit, which has scheduled oral argument on the appeals for September 2023.
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.
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Selected Operating Performance
−Removed: For the twelve months ended March 31, 2023, total medical membership increased by 1.3 million, or 2.9%.
−Removed: Our membership increase was primarily driven by growth in our Medicaid business, increased sales to our commercial fee-based employers and growth in both our Medicare Advantage and Individual Public Exchange products, partially offset by attrition in our Group risk-based business.
−Removed: Operating revenue for the three months ended March 31, 2023 was $41,898, an increase of $4,012, or 10.6%, from the three months ended March 31, 2022.
−Removed: Operating revenue increased primarily as a result of higher premiums due to membership growth in our Medicaid business, membership growth in our Medicare Advantage business, premium rate increases in our Health Benefits business to more accurately reflect current cost of care and growth in CarelonRx pharmacy product revenue driven by growth in integrated medical and standalone pharmacy customers.
−Removed: Net income for the three months ended March 31, 2023 was $2,004, an increase of $225, or 12.6%, from the three months ended March 31, 2022.
−Removed: The increase in net income was primarily due to operating gain increases in our business segments, increases in net investment income and lower net losses on financial instruments.
−Removed: These increases were partially offset by increased amortization of other intangible assets, higher income taxes and increased interest expense.
−Removed: Our fully-diluted shareholders’ earnings per share (“EPS”) was $8.30 for the three months ended March 31, 2023, which represented a 13.4% increase from EPS of $7.32 for the three months ended March 31, 2022.
−Removed: The increase in EPS for the three months ended March 31, 2023 resulted primarily from increased net income.
−Removed: Operating cash flow for the three months ended March 31, 2023 and 2022 was $6,469 and $2,541, respectively.
−Removed: The increase was primarily due to early receipt of April 2023’s premium payments from CMS, timing of working capital changes and higher net income for the three months ended March 31, 2023.
+Added: For the twelve months ended June 30, 2023, total medical membership increased by 0.9 million, or 2.0%.
+Added: Our membership increase was primarily driven by growth in our Medicaid business, increased BlueCard sales and growth in both our Individual Public Exchange and Medicare Advantage products, partially offset by attrition in our Employer Group risk-based business.
+Added: Operating revenue for the three months ended June 30, 2023 was $43,377, an increase of $4,895, or 12.7%, from the three months ended June 30, 2022.
+Added: Operating revenue for the six months ended June 30, 2023 was $85,275, an increase of $8,907, or 11.7%, from the six months ended June 30, 2022.
+Added: This increase in operating revenue for both periods was primarily driven by higher premium revenues due to premium rate increases in our Health Benefits business to more accurately reflect cost of care and membership growth in our Medicaid and Medicare Advantage businesses.
+Added: The increase in operating revenue was further attributable to growth in CarelonRx pharmacy product revenue driven by growth in external pharmacy members and the acquisition of BioPlus in the first quarter of 2023.
+Added: Net income for the three months ended June 30, 2023 was $1,856, an increase of $222, or 13.6%, from the three months ended June 30, 2022.
+Added: Net income for the six months ended June 30, 2023 was $3,860, an increase of $447, or 13.1%, from the six months ended June 30, 2022.
+Added: The increase in net income for both periods was primarily due to operating gain increases in our Health Benefits, CarelonRx and Carelon Services business segments, lower net losses on financial instruments and higher net investment income.
+Added: These increases were partially offset by higher income taxes, additional amortization of other intangible assets and increased interest expense.
+Added: Our fully-diluted shareholders’ earnings per share (“EPS”) was $7.79 for the three months ended June 30, 2023, which represented a 15.8% increase from EPS of $6.73 for the three months ended June 30, 2022.
+Added: Our fully-diluted EPS was $16.10 for the six months ended June 30, 2023, which represented a 14.6% increase from fully-diluted EPS of $14.05 for the six months ended June 30, 2022.
+Added: The increase in EPS for both periods resulted primarily from higher net income.
+Added: Operating cash flow for the six months ended June 30, 2023 and 2022 was $8,419 and $4,993, respectively.
+Added: The increase was primarily due to the timing of CMS payments received in the current year and higher net income for the six months ended June 30, 2023, partially offset by the timing of working capital changes.
Membership and Other Metrics
−Removed: The following table presents our medical membership by customer type as of March 31, 2023 and 2022.
+Added: The following table presents our medical membership by customer type as of June 30, 2023 and 2022.
Also included below are other membership by product and other metrics.
The membership data and other metrics presented are unaudited and in certain instances include estimates of the number of members represented by each contract at the end of the period.
−Removed: CarelonRx Quarterly Adjusted Scripts metric represents adjusted script volume based on the number of days a prescription covers.
+Added: The CarelonRx Quarterly Adjusted Scripts metric represents adjusted script volume based on the number of days a prescription covers.
On an adjusted basis, one 90-day script counts the same as three 30-day scripts.
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Medical Membership
−Removed: Medical membership increased primarily due to growth in our Medicaid business, increased sales to our commercial fee-based employers and growth in both our Medicare Advantage and Individual Public Exchange products, partially offset by attrition in our Employer Group risk-based business.
+Added: Medical membership increased primarily due to growth in our Medicaid business, increased BlueCard sales and growth in both our Individual Public Exchange and Medicare Advantage products, partially offset by attrition in our Employer Group risk-based business.
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.
−Removed: Life and disability membership increased primarily due to new sales of disability products.
−Removed: Dental membership increased primarily due to new sales in our Employer Group risk-based accounts and increases in our FEHB program.
−Removed: Dental administration membership increased primarily due to favorable in-
−Removed: group change with other BCBSA plans associated with the FEHB program.
+Added: Life and disability membership decreased primarily due to lapses associated with our Employer Group risk-based accounts.
+Added: Dental membership increased primarily due to greater penetration in our Employer Group risk-based accounts and increases in our FEHB program.
+Added: Dental administration membership increased primarily due to favorable in-group-change with other BCBSA plans associated with the FEHB program.
Vision membership increased due to sales exceeding lapses in our Employer Group risk-based accounts and increases associated with Medicare Advantage plans.
Other Metrics
−Removed: CarelonRx quarterly adjusted scripts increased due to growth in our integrated medical and standalone pharmacy customers.
+Added: CarelonRx quarterly adjusted scripts increased due to growth in our standalone pharmacy customers.
Consolidated Results of Operations
−Removed: Our consolidated summarized results of operations and other financial information for the three months ended March 31, 2023 and 2022 are as follows:
+Added: Our consolidated summarized results of operations and other financial information for the three and six months ended June 30, 2023 and 2022 are as follows:
Three Months Ended
−Removed: 2023 2022 Change % Change
+Added: June 30 Six Months Ended
+Added: June 30 Change
+Added: Three Months Ended
+Added: June 30 Six Months Ended
+Added: 2022 2023 vs.
+Added: 2023 2022 2023 2022 $ % $ %
+Added: (Restated) (Restated)
Total operating revenue $ 43,377 $ 38,482 $ 85,275 $ 76,368 $ 4,895 12.7 % $ 8,907 11.7 %
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Net income $ 1,856 $ 1,634 $ 3,860 $ 3,413 $ 222 13.6 % $ 447 13.1 %
−Removed: Net (income) loss attributable to noncontrolling interests (15) 10 (25) NM
+Added: Net (income) loss attributable to noncontrolling interests (3) 3 (18) 13 (6) NM (31) NM
Shareholders’ net income $ 1,853 $ 1,637 $ 3,842 $ 3,426 $ 216 13.2 % $ 416 12.1 %
12 unchanged sentences
2 Benefit expense ratio represents benefit expense as a percentage of premium revenue.
−Removed: Premiums for the three months ended March 31, 2023 and 2022 were $35,868 and $32,785, respectively.
+Added: Premiums for the three months ended June 30, 2023 and 2022 were $36,589 and $33,076, respectively.
+Added: Premiums for the six months ended June 30, 2023 and 2022 were $72,457 and $65,861, respectively.
3 bp = basis point;
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4 Operating expense ratio represents operating expense as a percentage of total operating revenue.
−Removed: Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022
−Removed: Total operating revenue increased primarily as a result of higher premiums due to membership growth in our Medicaid business, membership growth in our Medicare Advantage business and premium rate adjustments in our Health Benefits business to more accurately reflect current cost of care.
−Removed: The increase in operating revenue was further attributable to growth in CarelonRx pharmacy product revenue driven by growth in members served and script volume.
+Added: Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022
+Added: Total operating revenue increased primarily as a result of higher premium revenues due to premium rate increases in our Health Benefits business to more accurately reflect cost of care and membership growth in our Medicaid and Medicare Advantage businesses.
+Added: The increase in operating revenue was further attributable to growth in CarelonRx pharmacy product revenue driven by growth in external pharmacy members and the acquisition of BioPlus in the first quarter of 2023.
Net investment income increased primarily due to higher income from fixed maturity securities, partially offset by reduced investment income from alternative investments.
Net losses on financial instruments decreased primarily due to lower mark-to-market losses on equity securities still held at the period end date and reduced net losses on the sale of fixed maturity securities, partially offset by lower net gains on other invested assets.
−Removed: Benefit expense increased primarily due to healthcare costs associated with membership growth in our Medicaid and Medicare businesses.
−Removed: Our benefit expense ratio decreased, driven by our commercial risk-based health plans, inclusive of the realignment of certain quality improvement costs from benefit expense to operating expense following regulatory clarification in 2022.
+Added: Benefit expense increased primarily due to medical cost trends as well as healthcare costs associated with membership growth.
+Added: Our benefit expense ratio decreased, driven by premium rate increases to more accurately reflect cost of care.
Cost of products sold reflects the cost of pharmaceuticals dispensed by CarelonRx for our unaffiliated customers.
Cost of products sold increased as the corresponding pharmacy product revenues increased.
−Removed: Operating expense increased primarily due to increased costs to support membership growth.
−Removed: Our operating expense ratio remained unchanged from the first quarter of 2022.
−Removed: Our operating expense ratio increased due to the realignment of certain quality improvement expenses discussed above.
−Removed: This increase was offset by a decline in our operating expense ratio driven by expense leverage associated with strong growth in our operating revenue.
+Added: Operating expense increased primarily due to increased costs to support growth.
+Added: Our operating expense ratio remained unchanged primarily due to continued expense leverage associated with our growth in operating revenue, offset by increased spend to support growth.
Other expense increased primarily due to additional amortization of other intangible assets as well as increased interest expense.
Our effective income tax rate increased in 2023 primarily due to the tax impact of expected geographic changes in our mix of 2023 earnings and reduced investment tax credits.
+Added: Our shareholders’ net income as a percentage of total revenues remained constant in 2023 as compared to 2022 as a result of all factors discussed above.
+Added: Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022
+Added: Total operating revenue increased primarily as a result of higher premium revenues due to premium rate increases in our Health Benefits business to more accurately reflect cost of care and membership growth in our Medicaid and Medicare Advantage businesses.
+Added: The increase in operating revenue was further attributable to growth in CarelonRx pharmacy product revenue driven by growth in external pharmacy members and the acquisition of BioPlus in the first quarter of 2023.
+Added: Net investment income increased primarily due to higher income from fixed maturity securities, partially offset by reduced investment income from alternative investments.
+Added: Net losses on financial instruments decreased primarily due to lower mark-to-market losses on equity securities still held at the period end date and reduced net losses on the sale of fixed maturity securities, partially offset by lower net gains on other invested assets.
+Added: Benefit expense increased primarily due to medical cost trends as well as healthcare costs associated with membership growth.
+Added: Our benefit expense ratio decreased, driven by premium rate increases to more accurately reflect cost of care.
+Added: Cost of products sold reflects the cost of pharmaceuticals dispensed by CarelonRx for our unaffiliated customers.
+Added: Cost of products sold increased as the corresponding pharmacy product revenues increased.
+Added: Operating expense increased primarily due to increased costs to support growth.
+Added: Our operating expense ratio remained unchanged primarily due to continued expense leverage associated with our growth in operating revenue, offset by increased spend to support growth.
+Added: Other expense increased primarily due to additional amortization of other intangible assets as well as increased interest expense.
+Added: Our effective income tax rate increased in 2023 primarily due to the tax impact of expected geographic changes in our mix of 2023 earnings and reduced investment tax credits.
Our shareholders’ net income as a percentage of total revenues increased in 2023 as compared to 2022 as a result of all factors discussed above.
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Operating gain is calculated as total operating revenue less benefit expense, cost of products sold and operating expense.
−Removed: It does not include net investment income, net (losses) gains on financial instruments, interest expense, amortization of other intangible assets or income taxes, as these items are managed in our corporate shared service environment and are not the responsibility of operating segment management.
+Added: It does not include net investment income, net losses on financial instruments, interest expense, amortization of other intangible assets or income taxes, as these items are managed in our corporate shared service environment and are not the responsibility of operating segment management.
Operating margin is calculated as operating gain divided by operating revenue.
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The results of our operations are now reported in the following four reportable segments:
−Removed: Health Benefits (aggregates our previously reported Commercial & Specialty Business and Government Business segments), CarelonRx, Carelon Services (previously included in our Other segment) and Corporate & Other (our businesses
−Removed: that do not individually meet the quantitative thresholds for an operating segment, as well as corporate expenses not allocated to our other reportable segments).
+Added: Health Benefits (aggregates our previously reported Commercial & Specialty Business and Government Business segments), CarelonRx, Carelon Services (previously included in our Other segment) and Corporate & Other (our 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).
In 2022, we managed and presented our operations through the following four reportable segments:
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For additional information, see Note 14, “Segment Information,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
−Removed: The following table presents a summary of the reportable segment financial information for the three months ended March 31, 2023 and 2022:
+Added: The following table presents a summary of the reportable segment financial information for the three and six months ended June 30, 2023 and 2022:
+Added: Six Months Ended
+Added: June 30 Change
Three Months Ended
−Removed: 2023 2022 Change % Change
+Added: June 30 Three Months Ended
+Added: June 30 Six Months Ended
+Added: 2022 2023 vs.
+Added: 2023 2022 2023 2022 $ % $ %
Operating Revenue
5 unchanged sentences
Total operating revenue $ 43,377 $ 38,482 $ 85,275 $ 76,368 $ 4,895 12.7 % $ 8,907 11.7 %
−Removed: Operating Gain (Loss) (Restated)
+Added: Operating Gain (Loss) (Restated) (Restated)
Health Benefits $ 2,148 $ 1,781 $ 4,307 $ 3,632 $ 367 20.6 % $ 675 18.6 %
1 unchanged sentence
Carelon Services 136 113 345 313 23 20.4 % 32 10.2 %
−Removed: Corporate & Other (49) (22) (27) NM
+Added: Corporate & Other (152) (27) (201) (49) (125) 463 % (152) 310 %
Operating Margin
−Removed: Health Benefits 5.8 % 5.4 % 40 bp
−Removed: CarelonRx 6.4 % 6.0 % 40 bp
−Removed: Carelon Services 6.3 % 6.8 % (50) bp
−Removed: NM Not meaningful.
+Added: Health Benefits 5.7 % 5.2 % 5.7 % 5.3 % 50 bp 40 bp
+Added: CarelonRx 5.9 % 6.8 % 6.1 % 6.4 % (100) bp (30) bp
+Added: Carelon Services 4.0 % 3.8 % 5.1 % 5.3 % 20 bp (20) bp
bp = basis point;
one hundred basis points = 1%.
−Removed: Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022
+Added: Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022
Health Benefits
−Removed: Operating revenue increased primarily due to higher premiums from membership growth in our Medicaid business, membership growth in our Medicare Advantage business and premium rate increases to more accurately reflect our post-pandemic cost structure.
−Removed: Operating gain increased primarily due to premium rate adjustments to more accurately reflect our post-pandemic cost structure and membership growth in our Medicaid business.
−Removed: Operating revenue and operating gain increased primarily as a result of growth in CarelonRx pharmacy product revenue driven by growth in integrated medical and standalone pharmacy customers.
+Added: Operating revenue increased primarily due to higher premium revenues due to premium rate increases to more accurately reflect cost of care and membership growth in our Medicaid and Medicare Advantage businesses.
+Added: Operating gain increased primarily due to higher premium revenues due to premium rate increases to more accurately reflect cost of care and membership growth in our Medicaid business, partially offset by a charge associated with a court ruling impacting health plans in a certain state related to prior years’ COVID-19 costs.
+Added: Operating revenue and operating gain increased primarily as a result of growth in external pharmacy members and the acquisition of BioPlus in the first quarter of 2023, partially offset by the impact of a favorable out-of-period adjustment in the second quarter of 2022 that did not recur in the second quarter of 2023.
Carelon Services
Operating revenue increased primarily due to higher revenue for post-acute care services performed for our Medicare business and behavioral health services performed for our Medicaid business.
−Removed: The increase in operating gain was primarily driven by improved performance in our care delivery risk business and the expansion of our post-acute care services, partially offset by higher medical cost trends in our behavioral health business.
+Added: The increase in operating gain was primarily driven by improved performance in our medical management businesses and the expansion of our post-acute care services, partially offset by medical cost trends.
Corporate & Other
+Added: Operating revenue decreased primarily due to an unfavorable out-of-period adjustment in our international operations.
+Added: Operating loss increased primarily due to an increase in unallocated corporate expenses.
+Added: Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022
+Added: Health Benefits
+Added: Operating revenue increased primarily due to premium rate increases to more accurately reflect cost of care and membership growth in our Medicaid and Medicare Advantage businesses.
+Added: Operating gain increased primarily due to premium rate increases to more accurately reflect cost of care and membership growth in our Medicaid businesses, partially offset by a charge associated with a court ruling impacting health plans in a certain state related to prior years’ COVID-19 costs.
+Added: Operating revenue and operating gain increased primarily as a result of growth in external pharmacy members and the acquisition of BioPlus in the first quarter of 2023, partially offset by the impact of a favorable out-of-period adjustment in the second quarter of 2022 that did not recur in the second quarter of 2023.
+Added: Carelon Services
+Added: Operating revenue increased primarily due to higher revenue for post-acute care services performed for our Medicare business and behavioral health services performed for our Medicaid business.
+Added: The increase in operating gain was primarily driven by the expansion of our post-acute care services and improved performance in our medical management businesses, partially offset by medical cost trends.
+Added: Corporate & Other
Operating revenue decreased primarily due to lower affiliated revenues in our international operations.
4 unchanged sentences
We consider our most important accounting policies that require significant estimates and management judgment to be those policies with respect to liabilities for medical claims payable, income taxes, goodwill and other intangible assets, investments and retirement benefits.
−Removed: Our accounting policies related to these items are discussed in our 2022 Annual Report on Form 10-K in Note 2, “Basis of Presentation and Significant Accounting Policies,” to our audited consolidated financial statements as of and for the year ended December 31, 2022, as well as in the “Critical Accounting Policies and Estimates” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of March 31, 2023, our critical accounting policies and estimates have not changed from those described in our 2022 Annual Report on Form 10-K.
+Added: Our accounting policies related to these items are discussed in our 2022 Annual Report on Form 10-K in Note 2, “Basis of Presentation and Significant Accounting Policies,” to our audited consolidated financial statements as of and for the year ended December 31, 2022, as well as in the “Critical Accounting Policies and Estimates” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of June 30, 2023, our critical accounting policies and estimates have not changed from those described in our 2022 Annual Report on Form 10-K.
Medical Claims Payable
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Our accounting policies related to medical claims payable are discussed in the references cited above.
−Removed: As of March 31, 2023, our critical accounting policies and estimates related to medical claims payable have not changed from those described in our 2022 Annual Report on Form 10-K.
−Removed: For a reconciliation of the beginning and ending balance for medical claims payable for the three months ended March 31, 2023 and 2022, see Note 8, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
−Removed: The following table provides a summary of the two key assumptions having the most significant impact on our incurred but not paid liability estimates for the three months ended March 31, 2023 and 2022, which are the trend and completion factors.
+Added: As of June 30, 2023, our critical accounting policies and estimates related to medical claims payable have not changed from those described in our 2022 Annual Report on Form 10-K.
+Added: For a reconciliation of the beginning and ending balance for medical claims payable for the six months ended June 30, 2023 and 2022, see Note 8, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
+Added: The following table provides a summary of the two key assumptions having the most significant impact on our incurred but not paid liability estimates for the six months ended June 30, 2023 and 2022, which are the trend and completion factors.
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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Changes in Key Assumptions
−Removed: Three Months Ended
+Added: Six Months Ended
Assumed trend factors $ 709 $ 967
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Total $ 1,112 $ 972
−Removed: The favorable development recognized in the three months ended March 31, 2023 and 2022 resulted primarily from trend factors in late 2022 and late 2021, respectively, developing more favorably than originally expected.
−Removed: Favorable development in the completion factors resulting from the latter part of 2022 developing faster than expected also contributed to the favorable development for the three months ended March 31, 2023.
−Removed: The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 64.9% and 61.0% for the three months ended March 31, 2023 and 2022, respectively.
−Removed: This ratio serves as an indicator of claims processing speed whereby speed for claims payments was slightly higher during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.
+Added: The favorable development recognized in the six months ended June 30, 2023 and 2022 resulted primarily from trend factors in late 2022 and late 2021, respectively, developing more favorably than originally expected.
+Added: Favorable development in the completion factors resulting from the latter part of 2022 developing faster than expected also contributed to the favorable development for the six months ended June 30, 2023.
+Added: The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 78.7% and 76.9% for the six months ended June 30, 2023 and 2022, respectively.
+Added: This ratio serves as an indicator of claims processing speed whereby speed for claims payments was slightly higher during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.
We calculate the percentage of prior year redundancies in the current period as a percent of prior year net medical claims payable less prior year redundancies in the current period in order to demonstrate the development of prior year reserves.
−Removed: For the three months ended March 31, 2023, this metric was 7.5%, largely driven by favorable trend factor development at the
−Removed: end of 2022 as well as favorable completion factor development factor from 2021.
−Removed: For the three months ended March 31, 2022, this metric was 7.6%, largely driven by favorable trend factor development at the end of 2021.
+Added: For the six months ended June 30, 2023, this metric was 7.8%, largely driven by favorable trend factor development at the end of 2022 as well as favorable completion factor development from 2022.
+Added: For the six months ended June 30, 2022, this metric was 7.9%, largely driven by favorable trend factor development at the end of 2021.
We calculate the percentage of prior year redundancies in the current period 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.
We believe this calculation supports the reasonableness of our prior year estimate of incurred medical claims and the consistency in our methodology.
−Removed: For the three months ended March 31, 2023, this metric was 0.9%, which was calculated using the redundancy of $1,068.
−Removed: For the three months ended March 31, 2022, the comparable metric was 0.9%, which was calculated using the redundancy of $933.
+Added: For the six months ended June 30, 2023, this metric was 1.0%, which was calculated using the redundancy of $1,112.
+Added: For the six months ended June 30, 2022, the comparable metric was also 1.0%, which was calculated using the redundancy of $972.
We believe these metrics demonstrate an appropriate level of reserve conservatism.
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Our cash receipts result primarily from premiums, product revenue, service fees, 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.
−Removed: Cash disbursements result mainly from claims payments, operating 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.
+Added: Cash disbursements result mainly from claims payments, operating expenses, taxes,
+Added: 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.
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For a more detailed overview of our liquidity and capital resources management, see the “ Introduction ” section included in the “Liquidity and Capital Resources” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2022 Annual Report on Form 10-K.
−Removed: For additional information regarding our sources and uses of capital during the three months ended March 31, 2023, see Note 5, “Derivative Financial Instruments,” Note 9, “Debt,” and Note 11, “Capital Stock – Use of Capital – Dividends and Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
−Removed: A summary of our major sources and uses of cash and cash equivalents for the three months ended March 31, 2023 and 2022 is as follows:
−Removed: Three Months Ended
+Added: For additional information regarding our sources and uses of capital during the three and six months ended June 30, 2023, see Note 5, “Derivative Financial Instruments,” Note 9, “Debt,” and Note 11, “Capital Stock – Use of Capital – Dividends and Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
+Added: A summary of our major sources and uses of cash and cash equivalents for the six months ended June 30, 2023 and 2022 is as follows:
+Added: Six Months Ended
2023 2022 Change
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Net cash provided by operating activities $ 8,419 $ 4,993 $ 3,426
−Removed: Issuances of commercial paper and short- and long-term debt, net of repayments 991 211 780
+Added: Issuances of short- and long-term debt, net of repayments 666 507 159
+Added: Changes in securities lending payable 145 — 145
Proceeds from issuance of common stock under employee stock plans 81 116 (35)
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Cash dividends (701) (618) (83)
+Added: Changes in securities lending payable (145) — (145)
Other uses of cash, net (640) — (640)
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Net increase in cash and cash equivalents $ 2,604 $ 1,576 $ 1,028
−Removed: The increase in net cash provided by operating activities was primarily due to the early receipt of April 2023’s premium payments from CMS, timing of working capital changes and higher net income for the three months ended March 31, 2023.
−Removed: Other significant changes in sources or uses of cash year-over-year included higher amounts for purchases of subsidiaries, net of cash acquired and purchase of investments, net of proceeds from sales, maturities, calls and redemptions.
−Removed: These additional uses of cash were partially offset by increased issuances of commercial paper and short- and long-term debt, net of repayments.
−Removed: We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $38,953 at March 31, 2023.
−Removed: Since December 31, 2022, total cash, cash equivalents and investments in fixed maturity and equity securities increased by $3,909, primarily due to cash generated from operations and an increase in market value of our fixed maturity securities.
+Added: The increase in net cash provided by operating activities was primarily due to the timing of CMS payments received in the current year and higher net income for the six months ended June 30, 2023, partially offset by the timing of working capital changes.
+Added: Other significant changes in sources or uses of cash year-over-year included a decline in bank overdrafts outstanding (included in Other uses and sources of cash, net), higher amounts for purchases of subsidiaries, net of cash acquired and an increase in the purchase of property and equipment.
+Added: These additional uses of cash were partially offset by increased issuances of short- and long-term debt, net of repayments, and reduced purchases of investments, net of proceeds from sales, maturities, calls and redemptions.
+Added: We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $39,059 at June 30, 2023.
+Added: Since December 31, 2022, total cash, cash equivalents and investments in fixed maturity and equity securities increased by $4,015, primarily due to cash generated from operations and an increase in the market value of our fixed maturity securities.
These increases were partially offset by cash used for the purchase of subsidiaries, cash used for common stock repurchases, dividends paid to shareholders and the purchase of property and equipment.
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In addition, we have agreed to certain undertakings to regulatory authorities, including the requirement to maintain certain capital levels in certain of our subsidiaries.
−Removed: At March 31, 2023, we held $1,062 of cash, cash equivalents and investments at the parent company, which are available for general corporate use, including investment in our businesses, acquisitions, potential future common stock repurchases and dividends to shareholders, repurchases of debt securities and debt and interest payments.
+Added: At June 30, 2023, we held $1,043 of cash, cash equivalents and investments at the parent company, which are available for general corporate use, including investment in our businesses, acquisitions, potential future common stock repurchases and dividends to shareholders, repurchases of debt securities and debt and interest payments.
Periodically, we access capital markets and issue debt (“Notes”) for long-term borrowing purposes, for example, to refinance debt, to finance acquisitions or for share repurchases.
−Removed: Certain of these Notes may have a call feature that allows us
−Removed: to redeem the Notes at any time at our option and/or a put feature that allows a Note holder to redeem the Notes upon the occurrence of both a change in control event and a downgrade of the Notes below an investment grade rating.
+Added: Certain of these Notes may have a call feature that allows us to redeem the Notes at any time at our option and/or a put feature that allows a Note holder to redeem the Notes upon the occurrence of both a change in control event and a downgrade of the Notes below an investment grade rating.
For more information on our debt, including redemptions and issuances, see Note 9, “Debt,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
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Our debt-to-capital ratio may not be comparable to similarly titled measures reported by other companies.
−Removed: Our consolidated debt-to-capital ratio was 40.5% and 39.9% as of March 31, 2023 and December 31, 2022, respectively.
+Added: Our consolidated debt-to-capital ratio was 39.6% and 39.9% as of June 30, 2023 and December 31, 2022, respectively.
Our senior debt is rated “A” by S&P Global Ratings, “BBB” by Fitch Ratings, Inc., “Baa2” by Moody’s Investor Service, Inc.
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We do not believe the restrictions contained in our 5-Year Facility covenants materially affect our financial or operating flexibility.
−Removed: We had no amounts outstanding as of March 31, 2023 or December 31, 2022.
−Removed: As of March 31, 2023, we were in compliance with all of the debt covenants under the 5-Year Facility.
−Removed: Through certain subsidiaries, we have entered into multiple 364-day lines of credit (the “Subsidiary Credit Facilities”) with separate lenders for general corporate purposes.
−Removed: The Subsidiary Credit Facilities provide combined credit up to $200.
−Removed: Our ability to borrow under the Subsidiary Credit Facilities is subject to compliance with certain covenants.
−Removed: At March 31, 2023 and December 31, 2022, we had no outstanding borrowings under the Subsidiary Credit Facilities.
+Added: We had no amounts outstanding under the 5-Year Facility as of June 30, 2023 or December 31, 2022.
+Added: As of June 30, 2023, we were in compliance with all of the debt covenants under the 5-Year Facility.
+Added: Through certain subsidiaries, we had previously entered into multiple 364-day lines of credit (the “Subsidiary Credit Facilities”) with separate lenders for general corporate purposes.
+Added: The Subsidiary Credit Facilities provided combined credit up to $200.
+Added: As of June 30, 2023, the Subsidiary Credit Facilities have been terminated.
We have an authorized commercial paper program of up to $4,000, the proceeds of which may be used for general corporate purposes.
Should commercial paper issuance become unavailable, we have the ability to use a combination of cash on hand and/or our 5-Year Facility to redeem any outstanding commercial paper upon maturity.
−Removed: At March 31, 2023 and December 31, 2022, we had $325 and $0, respectively, outstanding under our commercial paper program.
−Removed: 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.
+Added: At June 30, 2023 and December 31, 2022, we had $90 and $0, respectively, outstanding under our commercial paper program.
+Added: Beginning June 30, 2023, we have reclassified our commercial paper balances from long-term debt to short-term debt as our intent is to not replace short-term commercial paper outstanding at expiration with additional short-term commercial paper for an uninterrupted period extending for more than one year.
+Added: While there is no assurance in the current economic environment, we believe the lenders participating in our 5-Year Facility, 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.
−Removed: We had $265 of outstanding short-term borrowings from the FHLBs at each of March 31, 2023 and December 31, 2022.
+Added: We had $175 and $265 of outstanding short-term borrowings from the FHLBs at June 30, 2023 and December 31, 2022, respectively.
We regularly review the appropriate use of capital, including acquisitions, common stock and debt security repurchases and dividends to shareholders.
The declaration and payment of any dividends or repurchases of our common stock or debt is at the discretion of our Board of Directors and depends upon our financial condition, results of operations, future liquidity needs, regulatory and capital requirements and other factors deemed relevant by our Board of Directors.
−Removed: For additional information regarding our sources and uses of capital at March 31, 2023, see Note 4, “Investments,” Note 5, “Derivative Financial Instruments,” Note 9, “Debt,” and Note 11, “Capital Stock – Use of Capital – Dividends and Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
+Added: For additional information regarding our sources and uses of capital at June 30, 2023, see Note 4, “Investments,” Note 5, “Derivative Financial Instruments,” Note 9, “Debt,” and Note 11, “Capital Stock – Use of Capital – Dividends and Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
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 (the “RBC Model Act”).
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Future Sources and Uses of Liquidity
−Removed: We believe that cash on hand, future operating cash receipts, investments and funds 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.
+Added: We believe that cash on hand, future operating cash receipts, investments and funds available under our commercial paper program, our 5-Year Facility and borrowings available from the FHLBs will be adequate to fund our expected cash disbursements over the next twelve months.
There have been no material changes to our long-term liquidity requirements as disclosed in our 2022 Annual Report on Form 10-K.
For additional updates regarding our estimated long-term liquidity requirements, see Note 5, “Derivative Financial Instruments,” Note 9, “Debt,” and the “ Other Contingencies ” and “ Contractual Obligations and Commitments ” sections of Note 10 “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
−Removed: We believe that funds from future operating cash flows, cash and investments and funds available under our 5-Year Facility and/or from public or private financing sources will be sufficient for future operations and commitments, and for capital acquisitions and other strategic transactions.
+Added: We believe that funds from future operating cash flows, cash and investments and funds available
+Added: under our 5-Year Facility and/or from public or private financing sources will be sufficient for future operations and commitments, and for capital acquisitions and other strategic transactions.
FORWARD-LOOKING STATEMENTS
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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.