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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-21 · 190 added, 179 removed, 508 unchanged (42% of the section changed)

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

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

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

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

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

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

This MD&A generally discusses 2024 and 2023 items and year-over-year comparisons between 2024 and 2023.

A detailed discussion of 2021 items and year-over-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 included in Exhibit 99.1 to our Quarterly Report on Form 10-Q for the three months ended September 30, 2023.

A detailed discussion of 2022 items and year-over-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 included in our Annual Report on Form 10-K for the year ended December 31, 2023.

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

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We also conduct business through arrangements with other BCBS licensees, as well as other strategic partners.

In addition, we serve members in numerous states as Amerigroup, Freedom Health, HealthSun, MMM, Optimum Healthcare, Simply Healthcare and/or Wellpoint.

In addition, we serve members in numerous states as Wellpoint, Carelon, MMM and/or Simply Healthcare.

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.

As we announced in 2022, we are organizing our brand portfolio into the following core go-to-market brands:

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

• Wellpoint — we are uniting select non-BCBSA licensed Medicare, Medicaid and commercial plans under the Wellpoint name;

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

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

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

• Wellpoint — unites select non-BCBSA licensed Medicare, Medicaid and commercial plans under the Wellpoint name;

• Carelon — this brand brings together our healthcare related services and capabilities, including our 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.

Given this evolution, we reviewed and modified how we manage our business, monitor our performance and allocate resources, and made changes to our reportable segments beginning in the first quarter of 2023.

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

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).

During the fourth quarter of 2023, we moved our Carelon Global Solutions international businesses 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.

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

Health Benefits, CarelonRx, Carelon Services 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).

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

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This information is not intended to be considered in isolation or as a substitute for income before income tax expense, net income or fully-diluted shareholders’ earnings per share (“EPS”) prepared in accordance with GAAP.

For additional details on operating gain, see our “Reportable Segments Results of Operations” discussion included in this MD&A.

For additional details on operating gain, see our “Reportable Segments Results

of Operations” discussion included in this MD&A.

For a reconciliation of reportable segment operating revenue to the amounts of total revenue included in the consolidated statements of income and a reconciliation of reportable segment operating gain to income before income tax expense, see Note 20, “Segment Information,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Our operating revenue consists of premiums, product revenue, and service fees.

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

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

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

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Unit costs include the cost of outpatient medical procedures per visit, inpatient hospital care per admission, physician fees per office visit and prescription drug prices.

Utilization rates represent the volume of consumption of health services and typically vary with the age and health status of our members and their social and lifestyle choices, along with clinical protocols and medical practice patterns in each of our markets.

Utilization rates represent the volume of consumption of health services and prescription drugs, and typically vary with the age and health status of our members and their social and lifestyle choices, along with clinical protocols and medical practice patterns in each of our markets.

A portion of benefit expense recognized in each reporting period consists of actuarial estimates of claims incurred but not yet paid by us.

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Other factors can impact our administrative cost structure, including systems efficiencies, inflation and changes in productivity.

Our results of operations depend in large part on our ability to accurately predict and effectively manage healthcare costs through effective contracting with providers of care to our members, product pricing, medical management and health and wellness programs, innovative product design and our ability to maintain or achieve improvement in our Centers for Medicare and Medicaid Services Star ratings.

Several economic factors related to healthcare costs, such as regulatory mandates of coverage as well as direct-to-consumer advertising by providers and pharmaceutical companies, have a direct impact on the volume of care consumed by our members.

The potential effect of escalating healthcare costs, any changes in our ability to negotiate competitive rates with our providers and any regulatory or market-driven restrictions on our ability to obtain adequate premium rates to offset overall inflation in healthcare costs, including increases in unit costs and utilization resulting from the aging of the population and other demographics, the impact of epidemics and pandemics, as well as advances in medical technology and pharmaceuticals, may impose further risks to our ability to profitably underwrite our business and may have a material adverse impact on our results of operations.

Our results of operations depend in large part on our ability to accurately predict and effectively manage healthcare costs through effective contracting with providers of care to our members, product pricing, medical management and health and wellness programs, including service coordination and case management for addressing complex and specialized healthcare needs, innovative product design and our ability to maintain or achieve improvement in our Centers for Medicare and Medicaid Services Star Ratings.

Several economic factors related to healthcare costs, such as regulatory mandates of

coverage as well as direct-to-consumer advertising by providers and pharmaceutical companies, have a direct impact on the volume of care consumed by our members.

The potential effect of escalating healthcare costs, any changes in our ability to negotiate competitive rates with our providers and any regulatory or market-driven restrictions on our ability to obtain adequate premium rates to offset overall inflation in healthcare costs, including increases in unit costs and utilization rates resulting from the aging of the population and other demographics, the impact of epidemics and pandemics, as well as advances in medical technology and pharmaceuticals, may impose further risks to our ability to profitably underwrite our business and may have a material adverse impact on our results of operations.

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

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We have continued growing our government-sponsored business through organic growth and acquisitions.

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

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

Business Trends

In 2023, we made the decision to expand our participation in the Individual state- or federally-facilitated marketplaces (the “Public Exchange”) for 2024.

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 the 143 rating regions in 2023.

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

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

We continue to participate in the Individual state- or federally-facilitated marketplaces (“the Public Exchange”) in nearly all of our Anthem Blue Cross and Anthem Blue Cross and Blue Shield service areas.

We anticipate growth in our Public Exchange memberships as former Medicaid members, no longer eligible for Medicaid coverage, continue to seek alternative coverage options.

Additionally, we are entering select service areas in Florida, Maryland, and Texas in 2025, using our Simply Healthcare and Wellpoint brands, and we are actively evaluating expansion opportunities in additional marketplaces beyond 2025.

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

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 CVS, pursuant to the CVS Agreement that is set to terminate on December 31, 2025.

CarelonRx also operates a specialty pharmacy and beginning in 2024, will assume responsibility for pharmacy mail order front-end intake and member services.

CarelonRx delegates certain core pharmacy services to CaremarkPCS Health, L.L.C., which is a subsidiary of CVS Health Corporation (“CVS”), pursuant to an agreement (the “CVS Agreement”) with the current contractual term extending through December 31, 2027.

We can elect to have CVS continue to provide services to us for a three-year extension period on the same terms and conditions as in the current CVS Agreement in the event of a termination or non-renewal by either party.

Pricing Trends:

We strive to price our health benefit products consistent with anticipated underlying medical cost trends.

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.

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.

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

Product pricing remains competitive.

If the approvals of any annual premium rate changes by contracted government agencies are delayed, we are required to defer the recognition of any premium rate increases to the period in which the premium rates become final.

The impact of this deferral can be significant in the period in which the increased premium rates are first recognized depending on the magnitude of the premium rate increase, the number of members to which it applies and the length of the delay between the

effective date of the rate increase and the final contract date.

Premium rate decreases are recognized in the period the change in premium rate becomes effective and the change in the rate is known, which may be prior to the period in which the contract amendment affecting the rate is finalized.

Medical Cost Trends:

Our medical cost trends are primarily driven by increases in the utilization of services across all provider types and the unit cost increases of these services.

Our medical cost trends are primarily driven by changes in the utilization of services across all provider types and the unit cost of these services.

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

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

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, new indications of existing prescription drugs, provider contracting inflation, labor costs and healthcare provider or member fraud.

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

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 (the “PHE”).

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

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.

On May 11, 2023, the PHE ended in accordance with the Biden Administration’s January 30, 2023 announcement.

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;

Although most states have completed this process, Centers for Medicare and Medicaid Services (“CMS”) has provided that states have until December 31, 2025 to complete these eligibility redeterminations.

Since redeterminations have resumed, we have continued to experience a decline in our Medicaid membership.

We expect growth over time in our commercial plans, including through the Public Exchanges in states where we offer commercial plans, as members who have lost Medicaid coverage seek alternative coverage elsewhere.

The Inflation Reduction Act of 2022 contains a variety of provisions that have impacted, and continue to impact our business including by 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 made after December 31, 2022;

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

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

redesigning of the Medicare Part D benefit;

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

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

The extension of the enhanced PTC 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 which were extended into 2023 since the enactment of the 2021 Appropriations Act.

providing a one percent excise tax on repurchases of stock;

allowing CMS to negotiate prices on a limited set of prescription drugs in Medicare effective in 2026;

instituting caps on insulin cost sharing in Medicare;

redesigning the Medicare Part D benefit;

requiring drug manufacturers to 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.

If Congress does not act to extend the enhanced PTC, they will expire at the end of 2025, which could have a material adverse effect on our business and results of operations.

The Consolidated Appropriations Act of 2021 (the “2021 Appropriations Act”) has impacted our business, including by imposing 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, provider directory maintenance and continuity of care for certain patients.

The requirements applicable to us under the 2021 Appropriations Act had varying effective dates, beginning in December 2021.

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.

Departments of Health and Human Services, Labor, and Treasury (“the Tri-Agencies”) pursuant to the 2021 Appropriations Act required us to begin disclosing certain pricing information regarding negotiated rates and historical payment information with providers in 2022.

Additionally, as directed by law, we make available to members personalized out-of-pocket cost information and underlying negotiated rates.

In September 2024, the Tri-Agencies issued final regulations related to mental health parity that will require health plans to make administrative and operational changes to comply with these final regulations.

While some provisions became effective on January 1, 2025, additional guidance from the Tri-Agencies will be necessary to assess the full impact of these regulations on our operations and financial results.

Litigation has been filed challenging the final regulation and is pending court action.

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.

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During the third quarter of 2023, based on a strategic review of our operations, assets and investments, management implemented the “2023-2024 Business Efficiency Program” to refine the focus of our investments, and optimize our physical footprint.

The 2023-2024 Business Efficiency Program includes the write-off of certain information technology assets and contract exit costs, a reduction in staff including the relocation of certain job functions, and the impairment of assets associated with the closure or partial closure of data centers and offices.

The 2023-2024 Business Efficiency Program is expected to be substantially complete by the end of the third quarter of 2024.

The 2023-2024 Business Efficiency Program included the write-off of certain information technology assets and contract exit costs, a reduction in staff including the relocation of certain job functions, and the impairment of assets associated with the closure or partial closure of data centers and offices.

The 2023-2024 Business Efficiency Program was finalized as of December 31, 2024.

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

Pursuant to CMS’s Medicare Advantage Star ratings system, CMS annually awards between 1.0 and 5.0 Stars to Medicare Advantage plans based on performance in several categories.

Pursuant to CMS’ Medicare Advantage Star Ratings system, CMS annually awards between 1.0 and 5.0 Stars to Medicare Advantage plans based on performance in several categories.

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

CMS released our 2024 Star ratings in October 2023, which will be used to determine our Medicare Advantage plans’ Star quality bonus payments beginning in 2025.

Based on our membership at September 1, 2023, 34% of our Medicare Advantage members were in plans with 2024 Star ratings of at least 4.0 Stars, compared to 64% of our Medicare Advantage members being in plans with 2023 Star ratings of at least 4.0 Stars based on our membership at September 1, 2022.

This change in our 2024 Star ratings is expected to impact our Star quality bonus payments and plan level rebates beginning in 2025.

We expect a reduction to our 2025 operating revenue of approximately $500, net of offsets from contracting provisions due to this change in Star ratings.

Further, we expect to partially mitigate the financial impact to our 2025 operating gain and net income through various strategies such as contract diversification, operating expense efficiencies, capital deployment alternatives and network enhancements.

On January 4, 2024, we announced our entrance into an agreement to acquire Paragon Healthcare, Inc., a company providing infusion services and injectable therapies through its omnichannel model of ambulatory infusion centers, home infusion pharmacies, and other specialty pharmacy services.

Our 2024 Star Ratings, which are used for payment year 2025, reflect that 53% of our Medicare Advantage members were enrolled in plans rated at least 4.0 Stars or higher.

This is an increase, based on subsequent recalculations by CMS, over the original 2024 Star Ratings from October 2023, which reflected that 34% of our Medicare Advantage members were enrolled in plans rated at least 4.0 Stars or higher.

CMS released our 2025 Star Ratings in October 2024, which will be used to determine our Medicare Advantage bonus payments in 2026.

Our 2025 Star Ratings reflect that 38% of our Medicare Advantage members were enrolled in plans rated at least 4.0 Stars or higher.

We expect this change will result in a reduction to our 2026 operating revenue of approximately $183 million, net of offsets from contracting provisions.

Further, we expect to mitigate the financial impact to our 2026 operating gain and net income per share resulting from this change through various strategies such as contract diversification, operating expense efficiencies, capital deployment alternatives and network enhancements.

Business Acquisitions and Divestitures

Investments in Joint Ventures and Completed Acquisitions

On December 31, 2024, we completed our acquisition of 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 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.

On December 10, 2024, we completed our acquisition of RSV QOZB LTSS, Inc.

and certain affiliated entities (d/b/a CareBridge), a value-based healthcare company that manages home and community-based services for Medicaid and dual-eligible Medicaid/Medicare members receiving long-term services and support.

This acquisition aligns with Carelon Services’ care at home strategy, and 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 August 6, 2024, as discussed in Note 5 “Investments,” we made an equity investment of $2,580 that resulted in our minority interest ownership of approximately 35% of Augusta Topco Holdings, L.P.

(“Mosaic Health”), a joint venture with Clayton, Dubilier & Rice (“CD&R”) that is designed to accelerate innovation in care delivery across multiple regions in the United States by bringing together certain care delivery and enablement assets of Carelon Management Services, LLC (“CMSI Assets”), a Carelon Health business, and two CD&R portfolio businesses, apree health and Millennium Physician Group.

Our additional contribution of the CMSI Assets to Mosaic Health was completed on January 1, 2025, for which we received an additional $300 of equity (approximately 5% ownership) in Mosaic Health.

The CMSI Assets are included under the captions “Assets held for sale” and “Liabilities held for sale” in our consolidated balance sheets as of December 31, 2024.

On March 11, 2024, we completed our acquisition of Paragon Healthcare, Inc.

and its subsidiaries (“Paragon”).

Paragon, which operates as part of CarelonRx, provides infusion services and injectable therapies through its omnichannel model of ambulatory infusion centers, home infusion pharmacies, and other specialty pharmacy services.

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

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

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.

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

On March 28, 2023, we announced our entrance into an agreement to sell our life and disability businesses to StanCorp Financial Group, Inc.

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

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

The divestiture is expected to close in the first half of 2024 and is subject to standard closing conditions and customary approvals.

On February 15, 2023, we completed our acquisition of BioPlus Parent, LLC and subsidiaries (“BioPlus”) from CarepathRx Aggregator, LLC.

On February 15, 2023, we completed our acquisition of BioPlus Parent, LLC and its subsidiaries (“BioPlus”) from CarepathRx Aggregator, LLC.

Prior to the acquisition, BioPlus was one of the largest independent specialty pharmacy organizations in the United States.

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.

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

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, or BCBSLA, 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 as we bring our innovative whole-health solutions to BCBSLA’s members.

The acquisition is subject to closing conditions and approvals.

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.

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, which resulted in a gain on sale of business of $201 in the year ended December 31, 2024.

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

The related net assets held for sale for the life and disability businesses divested as of December 31, 2023, and the results of operations for such businesses for the year ended December 31, 2024 were not material.

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

Litigation Matters

In the consolidated multi-district proceeding in the United States District Court for the Northern District of Alabama (the “Court”) captioned In re Blue Cross Blue Shield Antitrust Litigation (“BCBSA Litigation”), the 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.

We are a defendant in multiple lawsuits that were initially filed in 2012 against the BCBSA and Blue Cross and/or Blue Shield licensees (the “Blue plans”) across the country.

Cases filed in 28 states were consolidated into a single, multi-district proceeding captioned In re Blue Cross Blue Shield Antitrust Litigation (“BCBSA Litigation”), that is pending before the U.S.

District Court for the Northern District of Alabama (the “Court”).

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

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

The Subscriber Settlement Agreement applies only to the subscriber class.

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

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

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

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

Those appeals were heard by a panel of the United States Court of Appeals for the Eleventh Circuit (the “Eleventh Circuit”) in September 2023.

In October 2023, the Eleventh Circuit affirmed the Final Approval Order.

Petitions for rehearing filed by certain appellants in November 2023 and December 2023 remain pending.

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.

The BCBSA and Blue plans approved a settlement agreement and release with the subscriber plaintiffs (the “Subscriber Settlement Agreement”), and the ultimate amount paid by the Company under the Subscriber Settlement Agreement was $604, which was primarily accrued in 2020.

The Subscriber Settlement Agreement and the defendants’ payment and non-monetary obligations under the Subscriber Settlement Agreement became effective in June 2024 with the request for the second Blue plan bid provision effective in September 2024.

The funds held in escrow will be distributed in accordance with the Subscriber Settlement Agreement.

The BCBSA and the Blue plans have approved a settlement agreement and release (the “Provider Settlement Agreement”) with the provider plaintiffs, and in October 2024, the provider plaintiffs filed a motion for preliminary approval with the Court.

The Court granted preliminary approval of the Provider Settlement Agreement on December 4, 2024.

If approved by the Court, the Provider Settlement Agreement will require the defendants to make a monetary settlement payment, our portion of which is estimated to be $666, and will contain certain non-monetary terms including (i) expansion of certain opportunities to contract with providers in contiguous service areas, (ii) certain prompt pay commitments, and (iii)

various technological enhancements to the BlueCard program.

We recognized our estimated payment obligation under the Provider Settlement Agreement of $666 in September 2024.

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

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During the year ended December 31, 2024, total medical membership decreased by 1.1 million, or 2.3%.

The decrease in medical membership was driven primarily by attrition in Medicaid due to the resumption of eligibility redeterminations and declines in our Employer Group risk-based business, partially offset by growth in BlueCard, Individual Public Exchange health plans and Medicare Advantage membership.

The decrease in medical membership was driven primarily by attrition in Medicaid membership, including as a result of eligibility redeterminations and certain market exits, and decreases in our Employer Group risk-based and Medicare Supplement businesses.

These decreases were partially offset by increases in our Employer Group fee-based, Individual and FEP ® businesses.

Operating revenue for the year ended December 31, 2024, was $175,204, an increase of $4,995, or 2.9%, from the year ended December 31, 2023.

The increase in operating revenue was primarily driven by higher premium revenues in our Health Benefits business resulting from premium rate increases to more accurately reflect the cost of care.

The increase was further attributable to growth in our CarelonRx pharmacy product revenue driven by growth in external pharmacy members and the acquisition of BioPlus in the first quarter of 2023.

Net income for the year ended December 31, 2023 was $5,991, an increase of $103, or 1.7%, from the year ended December 31, 2022.

The increase in net income was primarily due to higher premium revenues in our Health Benefits business resulting from premium rate increases to more accurately reflect the cost of care.

The increase was further attributable to growth in our CarelonRx pharmacy product revenue driven by growth in external pharmacy members and the acquisition of BioPlus in the first quarter of 2023.

These increases were partially offset by the business optimization charges recorded in the third quarter of 2023.

Our fully-diluted shareholders’ earnings per share (“EPS”) for the year ended December 31, 2023 was $25.22, an increase of $0.94, or 3.9%, from the year ended December 31, 2022.

The increase in operating revenue was primarily driven by premium rate increases in all of our lines of business in recognition of medical cost trends, growth in CarelonRx product revenue and recent acquisitions.

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

Net income for the year ended December 31, 2024, was $5,971, a decrease of $20, or 0.3%, from the year ended December 31, 2023.

The decrease in net income was primarily due to a net decrease in our operating gain in our reportable segments and higher income tax expense, partially offset by increased net investment income, gain on the sale of our life and disability businesses and lower amortization of other intangible assets.

Our fully-diluted shareholders’ EPS for the year ended December 31, 2024, was $25.68, an increase of $0.46, or 1.8%, from the year ended December 31, 2023.

Our diluted shares for the year ended December 31, 2024 were 232.9, a decrease of 4.5, or 1.9%, compared to the year ended December 31, 2023.

The increase in EPS resulted from fewer diluted shares outstanding, as well as increased shareholders’ net income.

The increase in EPS resulted from fewer diluted shares outstanding.

Operating cash flow for the year ended December 31, 2024, was $5,808, or approximately 1.0 times net income.

Operating cash flow for the year ended December 31, 2023 was $8,061, or approximately 1.3 times net income.

The decrease in operating cash flow was primarily due to the timing of working capital changes, partially offset by higher net income in 2023, when excluding the non-cash impact of the business optimization charges recorded in the third quarter of 2023, as well as the non-recurrence of the Subscriber Settlement Agreement payment made in September 2022.

The decrease in operating cash flow was primarily due to the impact of the membership decline in our Medicaid business and working capital changes.

Membership and Other Metrics

Our medical membership includes the following customer types:

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

Individual, Employer Group risk-based, Employer Group fee-based, BlueCard ® , Medicare, Medicaid and our FEP ® .

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

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

Non-BCBS-branded business refers to members in our non-BCBS-branded plans, which include Wellpoint, MMM and Simply Healthcare plans.

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

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Employer Group risk-based accounts include Local Group customers and National Accounts.

Local Group consists of those employer customers with less than 5% of eligible employees located outside of the headquarter state, as well as customers with more than 5% of eligible employees located outside of the headquarter state with up to 5,000 eligible employees.

Local Group consists of those employer customers with less than 5% of eligible employees located outside of the headquarter state, as

well as customers with more than 5% of eligible employees located outside of the headquarter state with up to 5,000 eligible employees.

In addition, Local Group includes Student Health members.

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Total Medicaid program business accounted for 19.5%, 22.4% and 24.3% of our medical members at December 31, 2024, 2023 and 2022, respectively.

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

Office of Personnel Management.

FEHB business accounted for 3.5%, 3.4% and 3.6% of our medical members at December 31, 2023, 2022 and 2021, respectively.

• FEP ® members consist of United States government employees and their dependents who receive health benefits within our geographic markets.

FEP ® business accounted for 3.6%, 3.5% and 3.4% of our medical members at December 31, 2024, 2023 and 2022, respectively.

The following table presents our medical membership by customer type as of December 31, 2024, 2023 and 2022.

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Medicaid 8,917 10,503 11,571 (1,586) (15.1) % (1,068) (9.2) %

Federal Employees Health Benefits 1,642 1,623 1,625 19 1.2 % (2) (0.1) %

Federal Employee Program ®

1,661 1,642 1,623 19 1.2 % 19 1.2 %

Total Medical Membership 45,734 46,829 47,624 (1,095) (2.3) % (795) (1.7) %

Other Membership (in thousands) 2

Life and Disability Members 4,629 4,834 4,782 (205) (4.2) % 52 1.1 %

Dental Members 7,282 6,820 6,692 462 6.8 % 128 1.9 %

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101.1 103.3 105.0 (2.2) (2.1) % (1.7) (1.6) %

1 BlueCard ® membership at December 31, 2023 and 2022 has been restated lower by 132 and higher by 93, respectively, to align to our current reporting, which is the BCBSA reporting methodology.

2 We are no longer presenting our Life and Disability membership following the sale of that business on April 1, 2024.

December 31, 2024 Compared to December 31, 2023

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Total medical membership declined during the twelve months ended December 31, 2024.

This was driven primarily by attrition in Medicaid due to the resumption of eligibility redeterminations and declines in our Employer Group risk-based business, partially offset by growth in BlueCard, Individual Public Exchange health plans and Medicare Advantage membership.

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

These decreases were partially offset by increases in our Employer Group fee-based, Individual and FEP ® businesses.

Other Membership

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

Life and disability membership decreased primarily due to lapses associated with our Employer Group risk-based accounts.

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

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 Individual and Medicare Advantage businesses.

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.

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

Dental Administration membership increased primarily due to favorable in-group change with our other BCBSA plans associated with the FEP ® .

Vision membership increased due to increased sales in our Employer Group fee-based and Individual businesses and increased sales associated with our Medicare Advantage plans.

Consolidated Results of Operations

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Net investment income 2,051 1,825 1,485 226 12.4 % 340 22.9 %

Net (losses) gains on financial instruments (694) (550) 318 (144) 26.2 % (868) (273.0) %

Net losses on financial instruments

(445) (694) (550) 249 (35.9) % (144) 26.2 %

Gain on sales of business

201 — — 201 100.0 % — — %

Total revenues 177,011 171,340 156,595 5,671 3.3 % 14,745 9.4 %

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Net income 5,971 5,991 5,888 (20) (0.3) % 103 1.7 %

Net (gain) loss attributable to noncontrolling interests

Net loss (gain) attributable to noncontrolling interests

9 (4) 6 13 NM (10) NM

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NM Not meaningful.

1 Includes interest expense, amortization of other intangible assets and loss on extinguishment of debt.

1 Includes interest expense and amortization of other intangible assets.

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

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Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Total operating revenue increased primarily as a result of higher premium revenues in our Health Benefits business resulting from premium rate increases to more accurately reflect the cost of care.

The increase was further attributable to growth in our 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 income from alternative investments and lower dividends on equity securities.

Net losses on financial instruments increased due to increased losses on other invested assets, partially offset by higher gains on marketable equity securities.

Benefit expense increased primarily due to medical cost trends.

Our benefit expense ratio decreased slightly, primarily driven by premium rate increases in our Health Benefit segment to more accurately reflect the cost of care.

Total operating revenue increased primarily as a result of premium rate increases in all of our lines of business in recognition of medical cost trends, growth in CarelonRx product revenue and recent acquisitions.

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

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

Net losses on financial instruments decreased due to increased gains on fixed maturity securities, partially offset by losses on strategic investments and equity securities.

During the twelve months ended December 31, 2024, we experienced a gain on sale of business due to the sale of our life and disability business.

Benefit expense increased primarily due to increases in medical cost trends in our Health Business segment due to Medicaid membership eligibility redeterminations.

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

Our benefit expense ratio increased, primarily driven by higher Medicaid membership cost trends due to Medicaid rates being inadequate to cover medical cost trends that were well in excess of historical averages, primarily due to the Medicaid membership redeterminations.

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

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

Operating expense increased primarily due to the business optimization charges recorded in the third quarter of 2023, including internally developed software impairment and severance costs, as well as expenses incurred for anticipated future growth.

Our operating expense ratio increased primarily due to the business optimization charges recorded in 2023, partially offset by the favorable impact of operating revenue growth.

Other expense increased primarily due to increased interest expense and increased amortization of other intangible assets.

Interest expense increased as we issued additional debt at higher interest rates.

The amortization of intangible assets increased due to recent acquisitions as well as the rebranding of our products.

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

Our effective income tax rate decreased from 22.5% to 22.3%, primarily due to the impact of geographic changes in our mix of earnings in 2023.

Our shareholders’ net income as a percentage of total revenues decreased in 2023 as compared to 2022 as a result of all the factors discussed above.

Cost of products sold increased as a result of higher script utilization.

Operating expense decreased primarily due to disciplined cost management, enhanced efficiency and lower business optimization charges, partially offset by the accrual for the Provider Settlement Agreement associated with the BCBSA Litigation.

Our operating expense ratio decreased primarily due to disciplined cost management, enhanced efficiency, lower business optimization charges and the favorable impact of operating revenue growth, partially offset by the accrual for the Provider Settlement Agreement associated with the BCBSA Litigation.

Other expense decreased primarily due to decreased amortization of intangible assets during the twelve months ended December 31, 2024.

During the twelve months ended December 31, 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 effective income tax rate increased from 22.3% to 24.5%, primarily due to the impact of geographic changes in the mix of our 2024 earnings.

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

Reportable Segments Results of Operations

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Carelon Services 4.0 % 4.8 % 4.2 % (80) bp

1 Includes expenses of $36 for business optimization initiatives in 2022 and $153 for business optimization initiatives in 2021.

2 Includes expenses of $1 for business optimization initiatives in 2021.

3 Includes expenses of $5 for business optimization initiatives in 2022 and $33 for business optimization initiatives in 2021.

4 Includes expense of $753 for business optimization initiatives in 2023 and (credit) of $(2) for business optimization initiatives in 2022.

5 bp = basis point;

one hundred basis points = 1%.

The following table summarizes Health Benefits operating revenues by Commercial, Medicare, Medicaid and FEHB lines of business for the years ended December 31, 2023, 2022 and 2021:

The following table summarizes Health Benefits operating revenues by Commercial, Medicare, Medicaid and FEP ® lines of business for the years ended December 31, 2024, 2023 and 2022:

Years Ended December 31 Change

2022 2022 vs.

2024 2023 2022 $ % $ %

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Medicaid 51,937 56,601 52,886 (4,664) (8.2) % 3,715 7.0 %

Federal Employee Program ®

14,727 13,637 12,320 1,090 8.0 % 1,317 10.7 %

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Health Benefits

Operating revenue and operating gain increased primarily as a result of higher premium revenues due to premium rate increases to more accurately reflect the cost of care.

Operating revenue increased primarily as a result of higher prescription volumes associated with growth in external pharmacy members served and the acquisition of BioPlus in the first quarter of 2023.

The increase in operating gain was primarily a result of higher prescription volumes associated with growth in external pharmacy members served and the acquisition of BioPlus in the first quarter of 2023, partially offset by lower service fees and expenses incurred for anticipated future growth.

Operating revenue increased primarily as a result of higher premium yields driven by premium rate increases in all of our lines of business in recognition of medical cost trends, partially offset by membership attrition in our Medicaid business.

The decrease in operating gain was primarily a result of Medicaid rates being inadequate to cover medical cost trends that were well in excess of historical averages due to Medicaid membership eligibility redeterminations, partially offset by improved premium yields in our other Health Benefits businesses.

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

The increase in operating gain was primarily a result of the growth in 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 post-acute care services performed for our Medicare business and behavioral health services performed for our Medicaid business.

The increase in operating gain was primarily driven by the continued expansion of our post-acute care services and improved performance in our medical management business, partially offset by medical cost trends.

Operating revenue increased primarily due to the continued expansion of our medical benefit management, behavioral health and post-acute care services, as well as acquisitions completed in 2024.

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

Corporate & Other

The increase in operating loss was primarily due to the business optimization charges recorded in the third quarter of 2023, as well as an increase in unallocated corporate expenses.

The increase in operating loss was primarily due to the accrual recorded for the Provider Settlement Agreement associated with the BCBSA Litigation, partially offset by disciplined cost management and lower business optimization charges.

Critical Accounting Policies and Estimates

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The most subjective accounting estimate in our consolidated financial statements is our liability for medical claims payable.

At December 31, 2023, this liability was $16,111 and represented 23.2% of our total consolidated liabilities.

At December 31, 2024, this liability was $15,746 and represented 20.9% of our total liabilities.

We record this liability and the corresponding benefit expense for incurred but not paid claims, including the estimated costs of processing such claims.

Incurred but not paid claims include (1) an estimate for claims that are incurred but not reported, as well as claims reported to us but not yet processed through our systems, which approximated 93.9%, or $15,123, of our total medical claims liability as of December 31, 2023;

Incurred but not paid claims include (1) an estimate for claims that are incurred but not reported;

as well as (2) claims reported to us but not yet processed through our systems, which approximated 97.5%, or $15,347, of our total medical claims liability as of December 31, 2024;

and (3) claims reported to us and processed through our systems but not yet paid, which approximated 2.5%, or $399 of the total medical claims payable as of December 31, 2024.

The level of claims payable processed through our systems but not yet paid may fluctuate from one period-end to the next, from approximately 2% to 6% of our total medical claims liability, due to timing of when claim payments are made.

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

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

Our reserving practice for claim liabilities is to consistently recognize the appropriate amount of reserve within a level of confidence required by Actuarial Standards of Practice.

We determine the amount of the liability for incurred but not paid claims by following a detailed actuarial process that uses both historical claim payment patterns as well as emerging medical cost trends to project our best estimate of claim liabilities.

Under this process, historical paid claims data is formatted into “claim triangles,” which compare claim incurred dates to the dates of claim payments.

This information

is analyzed to create “completion factors” that represent the average percentage of total incurred claims that have been paid through a given date after being incurred.

We determine the amount of the liability for incurred but not yet reported or processed claims by following a detailed actuarial process that uses both historical claim payment patterns as well as emerging medical cost trends to project our best estimate of claim liabilities.

Under this process, historical paid claims data is formatted into “claim triangles,” which compare claim incurred dates to the dates of claim

This information is analyzed to create “completion factors” that represent the average percentage of total incurred claims that have been paid through a given date after being incurred.

Completion factors are applied to claims paid through the period-end date to estimate the ultimate claim expense incurred for the period.

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

For the year ended December 31, 2023, this metric was 11.4%, largely driven by favorable trend factor development at the end of 2022 as well as favorable completion factor development from 2022.

For the year ended December 31, 2024, this metric was 12.3%, largely driven by favorable completion factor development from 2023 as well as favorable trend factor development at the end of 2023.

For the year ended December 31, 2023, this metric was 11.4% and was largely driven by favorable trend factor development at the end of 2022 as well as favorable completion factor development from 2022.

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

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

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

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This metric was 1.4% for 2023 and 0.9% for 2022.

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

The following table shows the variance between total net incurred medical claims as reported in Note 12, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for each of 2023 and 2022 and the incurred claims for such years had it been determined retrospectively (computed as the difference between “net incurred medical claims – current year” for the year shown and “net incurred medical claims – prior years redundancies” for the immediately following year):

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Variance to total net incurred medical claims, as reported 0.1 % 0.6 %

Given that our business is primarily short tailed (which means that medical claims are generally paid within twelve months of the member receiving service from the provider), the variance to total net incurred medical claims, as reported above, is used to assess the reasonableness of our estimate of ultimate incurred medical claims for a given calendar year with

the benefit of one year of experience.

We expect that substantially all of the development of the 2024 estimate of medical claims payable will be known during 2025.

The 2022 variance to total net incurred medical claims, as reported of 0.6% was more than the 2021 percentage of (0.8)%.

This was primarily driven by the fact that the change in prior year redundancy reported for 2022 as compared to 2021 increased, whereas the change in the prior year redundancy reported for 2021 as compared to 2020 decreased.

The 2023 variance to total net incurred medical claims, as reported, of 0.1% was less than the 2022 percentage of 0.6%.

This was primarily driven by the fact that the change in prior year redundancy reported for 2023 as compared to 2022 was less than the change in the prior year redundancy reported for 2022 as compared to 2021.

Goodwill and Other Intangible Assets

Our consolidated goodwill and other intangible assets at December 31, 2023 were $35,590, and represented 32.7% of our total consolidated assets and 90.5% of our consolidated shareholders’ equity at December 31, 2023.

Our total goodwill and other intangible assets at December 31, 2024 were $40,371, and represented 34.5% of our total assets and 97.5% of our total equity at December 31, 2024.

We follow FASB guidance for business combinations and goodwill and other intangible assets, which specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill.

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We classify fixed maturity securities in our investment portfolio as “available-for-sale” and report those securities at fair value.

Certain fixed maturity securities are available to support current operations and, accordingly, we classify such investments as current assets without regard to their contractual maturity.

Most fixed maturity securities are available to support current

operations and, accordingly, we classify such investments as current assets without regard to their contractual maturity.

Investments used to satisfy contractual, regulatory or other requirements are classified as long-term, without regard to contractual maturity.

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In addition to marketable investment securities, we held additional long-term investments of $9,749, or 8.3% of total consolidated assets, at December 31, 2024.

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

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

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

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The weighted-average credit rating of these securities was “A” as of December 31, 2024.

Included in this balance are investments in fixed maturity securities of states, municipalities and political subdivisions and asset-backed assets of $993 and $0, respectively, that are guaranteed by third parties.

exception of 17 securities with a fair value of $9, these securities are all investment-grade and carry a weighted-average credit rating of “AA” as of December 31, 2023.

Included in this balance are investments in fixed maturity securities of states, municipalities and political subdivisions of $835 that are guaranteed by third parties.

With the exception of 14 securities with a fair value of $8, these securities are all investment-grade and carry a weighted-average credit rating of “AA” as of December 31, 2024.

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

Further, due to the high underlying credit rating of the issuers, the weighted-average credit rating of the fixed maturity securities without a guarantee, for which such information is available, was “A” as of December 31, 2023.

Further, the weighted-average credit rating of the fixed maturity securities without a guarantee, for which such information is available, was “A” as of December 31, 2024.

Fair values of fixed maturity and equity securities are based on quoted market prices, where available.

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Liquidity and Capital Resources

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.

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 business divestitures, proceeds from borrowings and proceeds from the issuance of common stock under our employee stock plans.

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.

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

We manage our cash, investments and capital structure so we are able to meet the short-term and long-term obligations of our business while maintaining financial flexibility and liquidity.

We manage our cash, investments and capital structure so that we are able to meet the short-term and long-term obligations of our business while maintaining financial flexibility and liquidity.

We forecast, analyze and monitor our cash flows to enable investment and financing within the overall constraints of our financial strategy.

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Net cash provided by operating activities $ 5,808 $ 8,061 $ 8,399 $ (2,253) $ (338)

Proceeds from sales, maturities, calls and redemptions of investments, net of purchases

586 — — 586 —

Issuances of short- and long-term debt, net of repayments

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Effect of foreign exchange rates on cash and cash equivalents (6) (1) (14) (5) 13

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

$ 1,828 $ (861) $ 2,507 $ 2,689 $ (3,368)

Liquidity—Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

The decline in cash provided by operating activities was primarily due to the timing of working capital changes, partially offset by higher net income in 2023, when excluding the non-cash impact of the business optimization charges recorded in the third quarter of 2023, as well as the non-recurrence of the Subscriber Settlement Agreement payment made in September 2022.

Other significant changes in sources and uses of cash year-over-year included a) lower sources of cash from other sources of cash, net, issuances of short- and long-term debt, net of repayments and issuances of common stock under

employee stock plans and b) increased uses of cash from purchases of subsidiaries, net of cash acquired, purchases of investments, net of proceeds from sales, maturities, calls and redemptions, the repurchase and retirement of common stock, cash dividends, the purchase of property and equipment and other uses of cash, net.

The decline in cash provided by operating activities was primarily due to the impact of the membership decline in our Medicaid business and working capital changes.

Other significant changes in sources and uses of cash year-over-year included (a) additional sources of cash from issuances of short- and long-term debt, net of repayments, proceeds from sales, maturities, calls and redemptions of investments, net of purchases, and issuances of common stock under employee stock plans and (b) increased uses of cash from purchases of subsidiaries, net of cash acquired, the repurchase and retirement of common stock, the purchase of property and equipment, cash dividends, and other uses of cash, net.

Financial Condition

We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $35,716 at December 31, 2024.

Since December 31, 2022, total cash, cash equivalents and investments in fixed maturity and equity securities increased by $2,201, primarily due to cash generated from operations.

This increase was partially offset by cash used for common stock repurchases, acquisitions, purchases of property and equipment and cash dividends paid to shareholders.

Since December 31, 2023, total cash, cash equivalents and investments in fixed maturity and equity securities decreased by $1,529, primarily due to cash used for common stock repurchases, purchases of subsidiaries net of cash acquired, purchases of property and equipment and cash dividends paid to shareholders.

This decrease was partially offset by cash generated from operations, issuances of short-and-long term debt, net of repayment, proceeds from sales, maturities, calls, and redemptions, and issuances of common stock.

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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We calculate our consolidated debt-to-capital ratio, a non-GAAP measure, from the amounts presented on our audited consolidated balance sheets included in Part II, Item 8 of this Annual Report on Form 10-K.

Our debt-to-capital ratio is calculated as total debt divided by total debt plus total shareholders’ equity.

Our debt-to-capital ratio is calculated as total debt divided by total debt plus total equity.

Total debt is the sum of short-term borrowings, current portion of long-term debt and long-term debt, less current portion.

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Our consolidated debt-to-capital ratio was 43.0% and 38.9% as of December 31, 2024 and 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.

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

and “bbb+” by AM Best Company, Inc.

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The 5-Year Facility provides credit of up to $4,000 and matures in April 2027.

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

As of December 31, 2024, our debt-to-capital ratio, as defined and calculated under the 5-Year Facility, was 43.0%.

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

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

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

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At December 31, 2024, we had $0 outstanding under our commercial paper program.

Beginning in 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.

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.

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.

5 unchanged sentences

During 2024, we received $6,322 of dividends from our subsidiaries.

In addition to regulations regarding the timing and amount of dividends, our regulated subsidiaries’ states of domicile have statutory risk-based capital (“RBC”) requirements for health and other insurance companies and 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”).

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 (the “NAIC”) Risk-Based Capital (RBC) for Health Organizations Model Act (the “RBC Model Act”).

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

11 unchanged sentences

• Debt and interest expense:

Future debt and estimated interest payments were $40,491, with $2,661 due within the next twelve months.

Future debt and estimated interest payments are $52,073, with $2,855 due within the next twelve months.

For additional information, see Note 13, “Debt,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

26 unchanged sentences

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

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

Other than disclosed in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, we do not have any off-balance sheet derivative instruments, guarantee transactions, agreements or other contractual arrangements or any indemnification agreements that will require funding in future periods.

We have not transferred assets to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

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

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

credit risk support.

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

1 unchanged sentence

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

What changed 10-K

Item 7. Management’s Discussion and Analysis