What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-17 compared with 2024-04-18 · 174 added, 130 removed, 320 unchanged (49% of the section changed)

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

Results of operations, cost of care trends, investment yields and other measures for the three months ended March 31, 2024 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2024, or any other period.

Results of operations, cost of care trends, investment yields and other measures for the three and six months ended June 30, 2024 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2024, or any other period.

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 over 46 million medical members through our affiliated health plans as of March 31, 2024.

We are one of the largest health insurers in the United States in terms of medical membership, serving nearly 46 million medical members through our affiliated health plans as of June 30, 2024.

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.

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

Through various subsidiaries, we also offer pharmacy services through our CarelonRx business, and other healthcare related services as Carelon Insights, Carelon Health, Carelon Behavioral Health and CareMore.

Through various subsidiaries, we also offer pharmacy services through our CarelonRx business, and other healthcare related services as Carelon Insights, Carelon Health and Carelon Behavioral Health.

We have organized our brand portfolio into the following core go-to-market brands:

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• Carelon — this brand brings together our healthcare-related brands and capabilities, including our CarelonRx and Carelon Services businesses, under a single brand name.

Our branding strategy reflects the evolution of our business from a traditional health insurance company to a lifetime, trusted health partner.

We report our results of operations in the following four reportable segments:

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During the fourth quarter of 2023, we moved our Carelon Global Solutions international business from the Corporate & Other reportable segment to the Carelon Services reportable segment.

All prior period reportable segment information has been reclassified for comparability to conform to the current presentation.For additional information, see Note 15, “Segment Information,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

All prior period reportable segment information has been reclassified for comparability to conform to the current presentation.

For additional information, see Note 15, “Segment Information,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For additional information about our organization, see Part I, Item 1, “Business” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2023 Annual Report on Form 10-K.

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For 2024, we are offering Individual Public Exchange products in 141 of the 143 rating regions in which we operate, in comparison to 138 of 143 rating regions in 2023.

As described in “ Regulatory Trends and

Uncertainties ” below, we expect growth in our Public Exchange membership as Medicaid members who are no longer eligible for Medicaid coverage continue to exit the Medicaid program and seek coverage elsewhere.

As described in “ Regulatory Trends and Uncertainties ” below, we expect growth in our Public Exchange membership as Medicaid members who are no longer

eligible for Medicaid coverage continue to exit the Medicaid program and seek coverage elsewhere.

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.

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

Our comprehensive pharmacy services portfolio includes all core pharmacy services, such as home delivery and specialty pharmacies, claims adjudication, formulary management, pharmacy networks, rebate administration, a prescription drug database and member services.

CarelonRx delegates certain core pharmacy services to CaremarkPCS Health, L.L.C.

(“CVS”), which is a subsidiary of CVS Health Corporation, pursuant to a five year agreement that is set to terminate on December 31, 2025.

CarelonRx also operates a specialty pharmacy.

Beginning in the first quarter of 2024, CarelonRx is assuming responsibility for pharmacy mail order front-end intake and member services from CVS.

(“CVS”), which is a subsidiary of CVS Health Corporation, pursuant to an agreement that is set to terminate on December 31, 2025.

In the first quarter of 2024, CarelonRx began assuming responsibility from CVS for pharmacy mail order front-end intake.

Pricing Trends:

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Regulatory Trends and Uncertainties

Under the Consolidated Appropriations Act of 2023, Congress decoupled Medicaid eligibility redeterminations from the Public Health Emergency initially declared in January 2020 relating to COVID-19.

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.

This process is anticipated to take up to 14 months to complete, although most states are expected to complete the redetermination process by June 30, 2024.

As redeterminations have resumed, we have experienced a decline in our Medicaid membership.

Over time, we expect growth in our commercial plans, including through the Public Exchanges, as members who are no longer eligible for Medicaid coverage 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;

The Consolidated Appropriations Act of 2023 decoupled Medicaid eligibility redeterminations from the Public Health Emergency initially declared in January 2020 relating to COVID-19.

Most states are expected to complete a majority of their redeterminations by July 31, 2024.

Since redeterminations resumed, we have experienced a decline in our Medicaid membership.

Over time, we expect growth in our commercial plans, including through the Public Exchanges, as members who have lost Medicaid coverage in our 14 commercial states seek coverage elsewhere.

The Inflation Reduction Act of 2022 contains a variety of provisions that have impacted our business including extending 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;

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;

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

instituting caps on insulin cost sharing in Medicare;

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 until 2032.

The extension of the enhanced PTC has allowed for growth in Individual Public Exchange enrollment as Medicaid eligibility redeterminations have resumed, 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 had varying effective dates, some of which were effective in December 2021 and during 2022, and others that were extended into 2023 and 2024 since the enactment of the 2021 Appropriations Act.

requiring drug manufacturers pay rebates if prices increase beyond inflation;

and delaying the implementation of the Trump Administration Medicare drug rebate rule until at least 2032.

The extension of the enhanced PTC has allowed for growth in Individual Public Exchange enrollment and has supported continuity of coverage since Medicaid eligibility redeterminations resumed in 2023.

The Consolidated Appropriations Act of 2021 (the “2021 Appropriations Act”) has impacted our business, including additional disclosure and reporting requirements related to broker compensation, mental health parity, pharmacy benefits and drug costs, as well as procedures and coverage requirements related to surprise medical bills and continuity of care for certain patients.

The requirements of the 2021 Appropriations Act applicable to us had varying effective dates beginning in December 2021 and extending into 2024.

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

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 were 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.

Effective January 1, 2024, this requirement has expanded to include all items and services.

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.

Departments of Health and Human Services, Labor and Treasury required us in 2022 to begin disclosing certain pricing information regarding negotiated rates and historical payment information with providers.

Additionally, beginning in 2023, we were required to make available to members personalized out-of-pocket cost information and underlying negotiated rates for 500 covered healthcare items and services, which expanded to include all items and services in January 2024.

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended, continues to impact our business and results of operations, including pricing, minimum medical loss ratios and the geographies in which our products are available.

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 2023 Annual Report on Form 10-K.

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Plans must have a Star Rating of 4.0 or higher to qualify for bonus payments.

In March 2024, CMS informed us that it had updated our 2024 Star ratings from their October 2023 announcement.

As a result, we now estimate approximately 49% of our Medicare Advantage members to be enrolled in plans rated at least 4.0-Star for 2024 Star ratings (payment year 2025), based on our January 2024 enrollment, compared to 64% of our Medicare Advantage members being in plans rated at least 4.0-Star for 2023 Star ratings (payment year 2024), based on September 2022 enrollment.

This change in 2024 Star ratings from 2023 Star ratings is expected to reduce our 2025 operating revenue by approximately $310 million, and we expect to partially mitigate this financial impact through various strategies such as operating expense efficiencies, capital deployment alternatives and network enhancements.

In June 2024, CMS announced that it recalculated the 2024 Star Ratings (payment year 2025) across the industry in light of recent court decisions regarding the application of new calculation methodologies first introduced to the 2024 Star Ratings.

As a result of these recalculations, our overall enterprise enrollment-weighted average Star Rating will increase from 3.5 Stars to 4.0 Stars.

We now estimate approximately 56% of our Medicare Advantage members to be enrolled in plans rated at least 4.0 Stars or higher, or are too new to be rated, for 2024 Star Ratings, which will be rewarded at the 4.0 Stars level consistent with our enterprise enrollment-weighted average Star Rating (payment year 2025).

This reflects an increase over our original estimate of 34% in October 2023.

Acquisitions and Divestitures

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On April 1, 2024, we completed the sale of our life and disability businesses to StanCorp Financial Group, Inc.

(“The Standard”), a provider of financial protection products and services for employers and individuals.

(“The Standard”), a provider of financial protection products and services for employers and individuals, which resulted in a gain on sale of business of $240.

Upon closing, we and The Standard entered into a product distribution partnership.

Pending Acquisitions

The related net assets held for sale for the life and disability businesses to be divested as of December 31, 2023 and results of operations for the three and six months ending June 30, 2024 were not material.

Pending Acquisitions and Divestitures

On December 31, 2023, we entered into an agreement to acquire Centers Plan for Healthy Living LLC and Centers for Specialty Care Group IPA, LLC (“Centers”).

Centers is a managed long-term care plan that serves New York state Medicaid and dually-eligible Medicaid/Medicare members, enabling adults with long-term care needs and disabilities to live safely and independently in their own home.

This acquisition aligns with our strategic plan to grow the Health Benefits segment and leverage industry-leading expertise while serving Medicaid and dually eligible populations.

Centers is a managed long-term care plan that serves New York state Medicaid and dual-eligible Medicaid/Medicare members, enabling adults with long-term care needs and disabilities to live safely and independently in their own home.

This acquisition aligns with our strategic plan to grow the Health Benefits segment and leverage industry-leading expertise while serving Medicaid and dual-eligible populations.

The acquisition is expected to close in the third quarter of 2024 and is subject to standard closing conditions and customary approvals.

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, Employer 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 subject to closing conditions and approvals.

Pending Equity Investment

On April 12, 2024, we entered into an agreement to partner with Clayton, Dubilier & Rice (“CD&R”) to accelerate innovation in care delivery across multiple regions in the United States by bringing together through a new company, (“ NewCo”), certain care delivery and enablement assets of Carelon Management Services Inc., a Carelon Health business (“CMSI Assets”), and two CD&R portfolio businesses, apree health and Millennium Physician Group.

Our investment in NewCo will be through a combination of cash, an existing equity investment in apree health, and the contribution of CMSI

We will account for our initial minority ownership interest in NewCo as an equity method investment.

On April 12, 2024, we entered into an agreement to partner with Clayton, Dubilier & Rice (“CD&R”) to accelerate innovation in care delivery across multiple regions in the United States by bringing together through a new company, Augusta Topco Holdings, LLP (“Augusta”), certain care delivery and enablement assets of Carelon Management Services Inc., a Carelon Health business (“CMSI Assets”), and two CD&R portfolio businesses, apree health and Millennium Physician Group.

Our investment in Augusta will be through a combination of cash, an existing equity investment in apree health, and the contribution of CMSI Assets.

We will account for our initial minority ownership interest in Augusta as an equity method investment.

Further, in connection with our equity investment, each party will have certain rights and obligations, including certain put, call, and purchase price true-up options, for which the estimated value will be determinable at the time of the incremental investments.

The contribution of CMSI Assets and businesses to be contributed by CD&R to NewCo are subject to standard closing conditions and customary approvals.

For additional information, see Note 3, “Business Acquisitions and Divestitures,” and Note 5, “Investments” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Our and CD&R's investments and contributions to Augusta are subject to standard closing conditions and customary approvals.

The CMSI Assets, along with certain other assets planned to be divested, are included in assets held for sale and liabilities held for sale as of June 30, 2024.

In conjunction with the classification as assets held for sale, a $44 impairment of goodwill was recorded during the quarter ended June 30, 2024.

For additional information, see Note 3, “Business Acquisitions and Divestitures” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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 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.

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.

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Petitions for rehearing were denied in January 2024, and the Eleventh Circuit issued a mandate terminating its jurisdiction in February 2024.

In March 2024, Home Depot, one of the appellants, filed a petition for certiorari to the United States Supreme Court.

On the respondents request, the United States Supreme Court granted an extension until May 2024.

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.

In March 2024 and April 2024, two of the appellants each filed petitions for certiorari to the United States Supreme Court (the “Supreme Court”), and the defendants and subscriber plaintiffs filed briefs in opposition in May 2024.

In June 2024, the Supreme Court declined to grant certiorari, exhausting all appellate rights.

The Subscriber Settlement Agreement became effective on June 24, 2024, and the defendants’ payment and non-monetary obligations under the Subscriber Settlement Agreement became 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 our 2023 Annual Report on Form 10-K.

Selected Operating Performance

For the twelve months ended March 31, 2024, total medical membership declined by 3.9%.

This was primarily driven by Medicaid membership attrition and lapses exceeding sales in our Employer Group risk-based and Medicare businesses.

These decreases were partially offset by increases in our Employer Group fee-based, Individual, BlueCard and Federal Employees Health Benefits (“FEHB”) businesses, resulting from sales exceeding lapses.

Operating revenue for the three months ended March 31, 2024 was $42,273, an increase of $375, or 0.9%, from the three months ended March 31, 2023.

This increase was primarily a result of premium rate increases in all lines of business to more accurately reflect medical cost trends.

Increased product revenue from our CarelonRx business, including a full quarter of revenue from BioPlus in 2024, also contributed to the overall increase.

For the twelve months ended June 30, 2024, total medical membership declined by 4.6%.

This was primarily driven by Medicaid membership attrition, including as a result of eligibility redeterminations and certain market exits, and lapses exceeding sales in our Employer Group risk-based and Medicare businesses.

These decreases were partially offset by increases in our Employer Group fee-based, Individual and Federal Employee Health Benefits (“FEHB”) businesses, resulting from sales exceeding lapses.

Operating revenue for the three months ended June 30, 2024 was $43,223, a decrease of $154, or 0.4%, from the three months ended June 30, 2023.

This decrease was primarily a result of declines in premiums driven by Medicaid membership attrition.

These declines were partially offset by premium rate increases in all lines of business to reflect medical cost trends and increased product revenue from our CarelonRx business, due to growth in external members served and the acquisition of Paragon, which closed in the first quarter of 2024.

Operating revenue for the six months ended June 30, 2024 was $85,496, an increase of $221, or 0.3%, from the six months ended June 30, 2023.

This increase was primarily a result of premium rate increases in all lines of business to reflect medical cost trends.

Increased product revenue from our CarelonRx business also contributed to the overall increase.

These increases were partially offset by overall declines in premiums driven by Medicaid membership attrition.

Net income for the three months ended March 31, 2024 was $2,249, an increase of $245, or 12.2%, from the three months ended March 31, 2023.

This increase was primarily due to improved operating gain performance in our Health Benefits, Carelon Services and CarelonRx businesses, lower amortization of other intangible assets and increased net investment income.

These increases were partially offset by increased net losses on financial instruments, increased income tax expense due to higher income before taxes and an increased operating loss in our Corporate and Other segment.

Our fully-diluted shareholders’ earnings per share (“EPS”) was $9.59 for the three months ended March 31, 2024, which represented a 15.5% increase from EPS of $8.30 for the three months ended March 31, 2023.

This increase in EPS for the

three months ending March 31, 2024 resulted primarily from increased shareholders' net income, as well as fewer diluted shares outstanding.

Operating cash flow for the three months ended March 31, 2024 and 2023 was $1,978 and $6,469, respectively.

The decrease in net cash provided by operating activities was primarily due to the timing of CMS payments received in the prior year quarter, with the April 2023 premium payments being received in the first quarter of 2023.

Net income for the three months ended June 30, 2024 was $2,301, an increase of $445, or 24.0%, from the three months ended June 30, 2023.

Net income for the six months ended June 30, 2024 was $4,550, an increase of $690, or 17.9%, from the six months ended June 30, 2023.

These increases for both the three and six months ended June 30, 2024 were primarily due to improved operating gain performance in all of our reportable segments, gain on the sale of our life and disability business, increased net investment income and lower amortization of other intangible assets.

These increases were partially offset by higher income tax expense due to higher income before taxes.

Our fully-diluted shareholders’ earnings per share (“EPS”) was $9.85 for the three months ended June 30, 2024, which represented a 26.4% increase from EPS of $7.79 for the three months ended June 30, 2023.

Our EPS was $19.44 for the six months ended June 30, 2024, which represented a 20.7% increase from EPS of $16.10 for the six months ended June 30, 2023.

The increase in EPS for both periods resulted primarily from increased shareholders' net income, as well as fewer diluted shares outstanding.

Operating cash flow for the six months ended June 30, 2024 and 2023 was $2,425 and $8,419, respectively.

The decrease in net cash provided by operating activities was primarily due to the timing of CMS payments received in the prior year, the

impact of the membership decline in our Medicaid business, and the timing of working capital changes, partially offset by higher net income for the six months ended June 30, 2024.

Membership and Other Metrics

The following table presents our medical membership by customer type as of March 31, 2024 and 2023.

The following table presents our medical membership by customer type as of June 30, 2024 and 2023.

Also included below are other membership by product and other metrics.

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On an adjusted basis, one 90-day script counts the same as three 30-day scripts.

The Carelon Services Consumers Served metric represents the number of consumers receiving one or more healthcare-related services from Carelon Services who are members of our affiliated health plans as well as those who are members of non-affiliated health plans.

The Carelon Services Consumers Served metric represents the number of consumers receiving one or more healthcare-related services from Carelon Services, including both members of our affiliated health plans as well as members of non-affiliated health plans.

For a more detailed description of our medical membership, see the “Membership” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K.

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Other Membership (in thousands) 2

Life and Disability Members 4,469 4,771 (302) (6.3) %

Dental Members 7,008 6,728 280 4.2 %

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Carelon Services Consumers Served 102.3 103.6 (1.3) (1.3) %

1 BlueCard ® membership at June 30, 2023 has been restated lower by 17 to align to our current reporting, which is the Blue Cross Blue Shield Association reporting methodology.

2 We are no longer presenting our Life and Disability membership following the sale of that business in the three months ended June 30, 2024.

Medical Membership

The decrease in medical membership was primarily driven by Medicaid membership attrition, including eligibility redeterminations and certain market exits, and lapses exceeding sales in our Employer Group risk-based and Medicare

These decreases were partially offset by increases in our Employer Group fee-based, Individual, BlueCard and FEHB businesses, resulting from sales exceeding lapses.

The decrease in medical membership was primarily driven by Medicaid membership attrition, including as a result of eligibility redeterminations and certain market exits, and lapses exceeding sales in our Employer Group risk-based and

Medicare businesses.

These decreases were partially offset by increases in our Employer Group fee-based, Individual and FEHB businesses, resulting from sales exceeding lapses.

Other Membership

Our other membership has the potential to 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 lapses associated with our Employer Group risk-based business.

Dental membership increased primarily due to favorable sales in our Individual, Employer Group fee-based and FEHB businesses, partially offset by lapses in our Employer Group risk-based business.

Dental membership increased primarily due to favorable sales in our Individual, Employer Group fee-based and FEHB businesses.

Dental administration membership increased primarily due to favorable in-group change with other BCBSA plans associated with the FEHB program.

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Consolidated Results of Operations

Our consolidated summarized results of operations and other financial information for the three months ended March 31, 2024 and 2023 are as follows:

Our consolidated summarized results of operations and other financial information for the three and six months ended June 30, 2024 and 2023 are as follows:

Three Months Ended

June 30 Six Months Ended

June 30 Change

Three Months Ended

June 30 Six Months Ended

2023 2024 vs.

2024 2023 2024 2023 $ % $ %

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Net losses on financial instruments (85) (121) (246) (234) 36 (29.8) % (12) 5.1 %

Gain on sale of business 240 — 240 — 240 NM 240 NM

Total revenues 43,886 43,672 86,463 85,844 214 0.5 % 619 0.7 %

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Net income attributable to noncontrolling interests

(3) (15) 12 NM

(1) (3) (4) (18) 2 NM 14 NM

Shareholders’ net income $ 2,300 $ 1,853 $ 4,546 $ 3,842 $ 447 24.1 % $ 704 18.3 %

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2 Benefit expense ratio represents benefit expense as a percentage of premium revenue.

Premiums for the three months ended March 31, 2024 and 2023 were $35,696 and $35,868, respectively.

Premiums for the three months ended June 30, 2024 and 2023 were $35,416 and $36,589, respectively.

Premiums for the six months ended June 30, 2024 and 2023 were $71,112 and $72,457, respectively.

3 bp = basis point;

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4 Operating expense ratio represents operating expense as a percentage of total operating revenue.

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

Total operating revenue decreased primarily as a result of declines in premiums driven by Medicaid membership attrition.

These declines were partially offset by premium rate increases in all lines of business to reflect medical cost trends and increased product revenue from our CarelonRx business.

Net investment income increased primarily due to higher income from alternative investments and fixed maturity securities.

Net losses on financial instruments decreased primarily due reduced losses on other investments.

During the three months ended June 30, 2024, we experienced a gain on sale of business due to the sale of our life and disability business.

Benefit expense decreased primarily due to Medicaid membership attrition, partially offset by increases due to medical cost trends in our other Health Benefits businesses.

Our benefit expense ratio decreased primarily driven by premium rate increases in our Health Benefits segment to reflect medical cost trends.

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 revenues increased.

Operating expense increased primarily due to increased spend to support targeted investments and integration costs related to recent acquisitions.

Our operating expense ratio increased primarily due to the increase in operating expenses described above.

Other expense declined primarily due to decreased amortization of other intangible assets.

During the three months ended June 30, 2023, we had increased amortization of other intangible assets as the amortization period of certain assets was shortened to align with the dates our new branding took place.

Our shareholders’ net income as a percentage of total revenues increased in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 as a result of all factors discussed above.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

Total operating revenue increased primarily as a result of premium rate increases in all lines of business to reflect medical cost trends.

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These increases were partially offset by overall declines in premiums driven by Medicaid membership attrition.

Net investment income increased primarily due to higher income from fixed maturity securities.

Net losses on financial instruments increased primarily due to increased losses on equity securities and fixed maturity securities.

Net investment income increased primarily due to higher income from fixed maturity securities and alternative investments.

Net losses on financial instruments increased slightly primarily due to increased losses on equity securities and fixed maturity securities, partially offset by reduced losses on other investments.

During the six months ended June 30, 2024, we experienced a gain on sale of business due to the sale of our life and disability business.

Benefit expense decreased primarily due to Medicaid membership attrition, partially offset by increases due to medical cost trends in our other Health Benefits businesses.

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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.

Operating expense increased primarily due to increased spend to support growth and integration costs related to recent acquisitions.

Our operating expense ratio increased slightly primarily due to the increase in operating expenses, partially offset by the favorable impact of operating revenue growth.

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

Operating expense increased primarily due to increased spend to support targeted investments and integration costs related to recent acquisitions.

Our operating expense ratio increased primarily due to the increase in operating expenses described above, partially offset by the favorable impact of operating revenue growth.

Other expense declined primarily due to decreased amortization of other intangible assets.

In the first quarter of 2023, we had increased amortization of other intangible assets as the amortization period of certain intangible assets was shortened to align with the dates our new branding took place.

Our shareholders’ net income as a percentage of total revenues increased in 2024 as compared to 2023 as a result of all factors discussed above.

During the six months ended June 30, 2023, we had increased amortization of other intangible assets as the amortization period of certain assets was shortened to align with the dates our new branding took place.

Our shareholders’ net income as a percentage of total revenues increased in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 as a result of all factors discussed above.

Reportable Segments Results of Operations

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Operating gain is calculated as total operating revenue less benefit expense, cost of products sold and operating expense.

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.

It does not include net investment income, net losses on financial instruments, gain on sale of business, 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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During the fourth quarter of 2023, we moved our Carelon Global Solutions international business from the Corporate & Other reportable segment to the Carelon Services reportable segment.

All prior period reportable segment information has been reclassified for comparability to

conform to the current presentation.For additional information, see Note 15, “Segment Information,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The following table presents a summary of the reportable segment financial information for the three months ended March 31, 2024 and 2023:

All prior period reportable segment information has been reclassified for comparability to conform to the current presentation.

For additional information, see Note 15, “Segment Information,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The following table presents a summary of the reportable segment financial information for the three and six months ended June 30, 2024 and 2023:

Six Months Ended

June 30 Change

Three Months Ended

March 31 Change

June 30 Three Months Ended

June 30 Six Months Ended

2023 2024 vs.

2024 2023 2024 2023 $ % $ %

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Operating Margin

Health Benefits 6.1 % 5.8 % 30 bp

CarelonRx 6.5 % 6.4 % 10 bp

Carelon Services 7.2 % 6.6 % 60 bp

Health Benefits 5.8 % 5.6 % 6.0 % 5.7 % 20 bp 30 bp

CarelonRx 5.7 % 5.9 % 6.1 % 6.1 % (20) bp 0 bp

Carelon Services 4.6 % 4.4 % 5.8 % 5.5 % 20 bp 30 bp

Total operating margin

7.1 % 6.8 % 30 bp

6.4 % 6.1 % 6.8 % 6.4 % 30 bp 40 bp

bp = basis point;

one hundred basis points = 1%.

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

Health Benefits

Operating revenue decreased slightly, primarily as a result of lower premiums driven by Medicaid membership attrition, including eligibility redeterminations and certain market exits, mostly offset by premium rate increases in all lines of business to reflect medical cost trend.

Operating revenue decreased primarily as a result of lower premiums driven by Medicaid membership attrition, partially offset by premium rate increases in all lines of business to reflect medical cost trends.

Operating gain increased primarily as a result of premium yields, including due to disciplined commercial underwriting and the release of a reserve established against prior period service fee revenue, offset by the impact of Medicaid membership attrition.

Operating revenue increased primarily due to higher prescription volume associated with growth in external pharmacy members and the acquisition of Paragon in 2024, partially offset by the impact of Medicaid membership attrition.

The increase in operating gain was primarily driven by growth of product revenue, partially offset by expenses associated with the launch of additional services by CarelonRx.

Carelon Services

Operating revenue increased primarily due to the continued expansion of our medical management, behavioral health and post-acute care services.

The increase in operating gain was primarily driven by improved performance in our behavioral health and medical management businesses, partially offset by increased medical cost trends in our post-acute business and the impact of the Medicaid membership attrition.

Corporate & Other

Operating revenue increased primarily due to higher affiliated revenues.

Operating loss decreased primarily due to a decrease in unallocated corporate expenses.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

Health Benefits

Operating gain increased primarily as a result of premium yields, including due to disciplined commercial underwriting, partially offset by the impact of Medicaid membership attrition.

Operating revenue increased primarily due to a full three months of revenue from BioPlus in 2024 and higher prescription volume associated with growth in external pharmacy members, partially offset by the impact of the Medicaid membership attrition.

The increase in operating gain was primarily driven by growth of product revenue, partially offset by expenses associated with the launch of additional services by CarelonRx.

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Operating revenue increased primarily due to the continued expansion of our medical management, behavioral health and post-acute care services.

The increase in operating gain was primarily driven by improved performance in our behavioral health and medical management businesses, partially offset by the impact of the Medicaid membership attrition.

Corporate & Other

Operating revenue increased primarily due to higher affiliated revenues.

Operating loss increased primarily due to an increase in unallocated corporate expenses.

Operating loss decreased primarily due to a decrease in unallocated corporate expenses.

Critical Accounting Policies and Estimates

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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, goodwill and other intangible assets and investments.

Our accounting policies related to these items are discussed in our 2023 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, 2023, 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, 2024, our critical accounting policies and estimates have not changed from those described in our 2023 Annual Report on Form 10-K.

Operations.” As of June 30, 2024, our critical accounting policies and estimates have not changed from those described in our 2023 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.

As of March 31, 2024, our critical accounting policies and estimates related to medical claims payable have not changed from those described in our 2023 Annual Report on Form 10-K.

For a reconciliation of the beginning and ending balance for medical claims payable for the three months ended March 31, 2024 and 2023, see Note 9, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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, 2024 and 2023, which are the trend and completion factors.

As of June 30, 2024, our critical accounting policies and estimates related to medical claims payable have not changed from those described in our 2023 Annual Report on Form 10-K.

For a reconciliation of the beginning and ending balance for medical claims payable for the six months ended June 30, 2024 and 2023, see Note 9, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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, 2024 and 2023, 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

Three Months Ended

Six Months Ended

Assumed trend factors $ 621 $ 709

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Total $ 1,473 $ 1,112

The favorable development recognized in the three months ended March 31, 2024 resulted from favorable development in the completion factors resulting from the latter part of 2023 developing faster than expected as well as trend factors in late 2023 developing more favorably than originally expected.

The favorable development recognized in the three months ended March 31, 2023 resulted primarily from trend factors in late 2022 developing more favorably than expected.

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.

The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 63.8% and 64.9% for the three months ended March 31, 2024 and 2023, respectively.

This ratio serves as an indicator of claims processing speed whereby speed for claims payments was slightly lower during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

The favorable development recognized in the six months ended June 30, 2024 resulted from favorable development in the completion factors resulting from the latter part of 2023 developing faster than expected as well as trend factors in late 2023 developing more favorably than originally expected.

The favorable development recognized in the six months ended June 30, 2023 resulted primarily from trend factors in late 2022 developing more favorably than expected.

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.

The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 79.8% and 78.7% for the six months ended June 30, 2024 and 2023, respectively.

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, 2024 as compared to the six months ended June 30, 2023.

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.

For the three months ended March 31, 2024, this metric was 8.2%, driven by both favorable completion factor development from 2023 and favorable trend factor development at the end of 2023.

For the three months ended March 31, 2023, this metric was 7.5%, largely driven by favorable trend factor development at the end of 2022 as well as favorable completion factor development from 2022.

For the six months ended June 30, 2024, this metric was 10.2%, driven by both favorable completion factor development from 2023 and favorable trend factor development at the end of 2023.

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.

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.

For the three months ended March 31, 2024, this metric was 1.0%, which was calculated using the redundancy of $1,205.

For the three months ended March 31, 2023, the comparable metric was 0.9%, which was calculated using the redundancy of $1,068.

For the six months ended June 30, 2024, this metric was 1.2%, which was calculated using the redundancy of $1,473.

For the six months ended June 30, 2023, the comparable metric was 1.0%, which was calculated using the redundancy of $1,112.

We believe these metrics demonstrate an appropriate and consistent level of reserve conservatism.

New Accounting Pronouncements

For information regarding new accounting pronouncements that were issued or became effective during the three months ended March 31, 2024 that had, or are expected to have, a material impact on our financial position, results of operations or financial statement disclosures, see the “ Recently Adopted Accounting Guidance ” and “Recent Accounting Guidance Not Yet Adopted” sections of Note 2, “Basis of Presentation and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For information regarding new accounting pronouncements that were issued or became effective during the three months ended June 30, 2024, see the “ Recently Adopted Accounting Guidance ” and “Recent Accounting Guidance Not Yet Adopted” sections of Note 2, “Basis of Presentation and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

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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 2023 Annual Report on Form 10-K.

For additional information regarding our sources and uses of capital during the three months ended March 31, 2024, see Note 6, “Derivative Financial Instruments,” Note 10, “Debt,” and Note 12, “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.

A summary of our major sources and uses of cash and cash equivalents for the three months ended March 31, 2024 and 2023 is as follows:

Three Months Ended

For additional information regarding our sources and uses of capital during the three and six months ended June 30, 2024, see Note 6, “Derivative Financial Instruments,” Note 10, “Debt,” and Note 12, “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.

A summary of our major sources and uses of cash and cash equivalents for the six months ended June 30, 2024 and 2023 is as follows:

Six Months Ended

2024 2023 Change

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Net cash provided by operating activities $ 2,425 $ 8,419 $ (5,994)

Proceeds from the sale of subsidiaries, net of cash sold 399 — 399

Issuances of short- and long-term debt, net of repayments 2,580 666 1,914

Changes in securities lending payable 320 145 175

Proceeds from issuance of common stock under employee stock plans 157 81 76

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Cash dividends (757) (701) (56)

Changes in securities lending collateral (321) (145) (176)

Changes in bank overdrafts (479) (500) 21

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Net (decrease) increase in cash and cash equivalents $ (8) $ 2,604 $ (2,612)

$ (300) $ 2,755 $ (3,055)

Other significant changes in sources or uses of cash year-over-year included reduced purchases of investments, net of proceeds from sales, maturities, calls and redemptions, lower amounts for purchases of subsidiaries, net of cash acquired, and an increase in the issuance of short- and long term debt, net of repayments.

These were partially offset by a decline in bank overdrafts outstanding.

We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $37,147 at March 31, 2024.

Since December 31, 2023, total cash, cash equivalents and investments in fixed maturity and equity securities decreased by $98, primarily due to the purchase of subsidiaries, bank overdrafts outstanding, the repurchase and retirement of common stock, cash dividends, and the purchase of property and equipment, partially offset by net cash provided by operating activities and the issuance of short- and long-term debt, net of repayments.

The decrease in net cash provided by operating activities was primarily due to the timing of CMS payments received in the prior year, the impact of the membership decline in our Medicaid business, and the timing of working capital changes, partially offset by higher net income for the six months ended June 30, 2024.

Other significant changes in sources or uses of cash year-over-year included an increase in the issuance of short- and long-term debt, net of repayments, lower amounts for purchases of subsidiaries, net of cash acquired, proceeds from the sale of subsidiaries, net of cash sold, reduced amounts for repurchase and retirement of common stock and reduced purchases of investments, net of proceeds from sales, maturities, calls and redemptions.

We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $36,840 at June 30, 2024.

Since December 31, 2023, total cash, cash equivalents and investments in fixed maturity and equity securities decreased by $405, primarily due to the purchase of subsidiaries, the repurchase and retirement of common stock, cash dividends, the purchase of property and equipment and changes in bank overdrafts outstanding, partially offset by the issuance of short- and long-term debt, net of repayments, net cash provided by operating activities and proceeds from the sale of subsidiaries, net of cash sold.

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 to their respective parent companies.

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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.

At March 31, 2024, we held $988 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.

At June 30, 2024, we held $2,649 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.

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Our debt-to-capital ratio may not be comparable to similarly titled measures reported by other companies.

Our consolidated debt-to-capital ratio was 39.4% and 38.9% as of March 31, 2024 and December 31, 2023, respectively.

Our consolidated debt-to-capital ratio was 39.6% and 38.9% as of June 30, 2024 and December 31, 2023, 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.

We had no amounts outstanding under the 5-Year Facility as of March 31, 2024 or December 31, 2023.

As of March 31, 2024, we were in compliance with all of the debt covenants under the 5-Year Facility.

We had no amounts outstanding under the 5-Year Facility as of June 30, 2024 or December 31, 2023.

As of June 30, 2024, we were in compliance with all of the debt covenants under the 5-Year Facility.

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.

At March 31, 2024 and December 31, 2023, we had $1,350 and $0, respectively, outstanding under our commercial paper program.

We had no commercial paper outstanding at either June 30, 2024 or December 31, 2023.

Beginning June 30, 2023, we have reclassified our commercial paper balances, if any, 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.

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

We had $225 of outstanding short-term borrowings from the FHLBs at each of March 31, 2024 and December 31, 2023.

We had $225 of outstanding short-term borrowings from the FHLBs at each of June 30, 2024 and December 31, 2023.

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.

For additional information regarding our sources and uses of capital at March 31, 2024, see Note 5, “Investments,” Note 6, “Derivative Financial Instruments,” Note 10, “Debt,” and Note 12, “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 Quarterly Report on Form 10-Q.

For additional information regarding our sources and uses of capital at June 30, 2024, see Note 5, “Investments,” Note 6, “Derivative Financial Instruments,” Note 10, “Debt,” and Note 12, “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 Quarterly Report on 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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the impact of new or changes in existing federal, state and international laws or regulations, including laws and regulations impacting healthcare, insurance, pharmacy services and other diversified products and services, or their enforcement or application;

the impact of cyber-attacks or other privacy or data security incidents or breaches or our failure to comply with any privacy, data or security laws or regulations, including any investigations, claims or litigation related thereto;

information technology disruptions;

the impact of cyber-attacks or other privacy or data security incidents or our failure to comply with any privacy, data or security laws or regulations, including any investigations, claims or litigation related thereto;

failure to effectively maintain and modernize our information systems or failure of our information systems or technology, including artificial intelligence, to operate as intended;

failure to effectively maintain the availability and integrity of our data;

changes in economic and market conditions, as well as regulations that may negatively affect our liquidity and investment portfolios;

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our ability to contract with providers on cost-effective and competitive terms;

failure to effectively maintain and modernize our information systems;

risks associated with providing healthcare, pharmacy and other diversified products and services, including medical malpractice or professional liability claims and non-compliance by any party with the pharmacy services agreement between us and CaremarkPCS Health, L.L.C.;

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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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis