What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-22 compared with 2024-10-17 · 155 added, 216 removed, 286 unchanged (56% 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 and nine months ended September 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.

Results of operations, cost of care trends, investment yields and other measures for the three months ended March 31, 2025 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2025, 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 nearly 46 million medical members through our affiliated health plans as of September 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 one of the largest health insurers in the United States in terms of medical membership, serving approximately 45.8 million medical members through our affiliated health plans as of March 31, 2025.

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

We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield (“BCBS”) licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (in the New York City metropolitan area and upstate New York), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) and Wisconsin.

In a majority of these service areas, we do business as Anthem Blue Cross and Anthem Blue Cross and Blue Shield.

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 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 and Carelon Behavioral 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 brands and capabilities, including our CarelonRx and Carelon Services businesses, under a single brand name.

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

Our portfolio consists of 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 Medicare, Medicaid, and commercial Health Benefit plans;

• Wellpoint — represents our Wellpoint branded Medicare, Medicaid and commercial Health Benefit plans and other non-BCBSA brands;

• Carelon — represents our healthcare related services and capabilities, including our CarelonRx and Carelon Services businesses.

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).

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.

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Business Trends

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 143 rating regions in 2023.

As described in “ Regulatory Trends and Uncertainties ” below, we expect growth over time 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.

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

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.

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 continued growth in our existing Public Exchange membership and have expanded into 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 Individual premium subsidies and insurer taxes and fees.

CarelonRx markets and offers pharmacy services to our affiliated health plan customers throughout the country and 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, as well as infusion services and injectable therapies.

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

(“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.

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:

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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” included in our 2024 Annual Report on Form 10-K.

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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 by June 30, 2023.

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

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

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

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.

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;

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

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 of the Medicare Part D benefit;

redesigning the Medicare Part D benefit;

requiring drug manufacturers to pay rebates if prices increase beyond inflation;

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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.

The Consolidated Appropriations Act of 2021 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 applicable to us had varying effective dates beginning in December 2021.

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.

In September 2024, the U.S.

Departments of Health and Human Services, Labor, and Treasury (the “Tri-Agencies”) issued final regulations related to mental health parity that will require health plans to make administrative and operational changes.

Additional guidance from the Tri-Agencies will be necessary to assess the full impact of these regulations on our operations and financial results.

The health plan price transparency regulations issued by the Tri-Agencies required us in 2022 to begin disclosing certain pricing information regarding negotiated rates and historical payment information with providers.

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

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.

Departments of Health and Human Services (“HHS”), Labor, and Treasury (collectively, 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 these final regulations.

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.

For additional discussion regarding regulatory trends and uncertainties, and risk factors that could cause actual results to differ materially from those contained in forward-looking statements, 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 2024 Annual Report on Form 10-K.

Other Significant Items

Business and Operational Matters

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.

Actions to be taken under the 2023-2024 Business Efficiency Program were substantially finalized as of September 30, 2024.

For additional information, see Note 4, “Business Optimization Initiatives” of the Notes to Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

In 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 enhance operating efficiency, refine the focus of our investments and optimize our physical footprint.

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, except as to cash outlays related to personnel-related costs associated with this program, which are expected to be paid through 2025.

For additional information, see Note 4, “Business Optimization Initiative,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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.

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

This is an increase over the original 2024 Star Rating of 34% in October 2023 based on subsequent recalculations by CMS.

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

The Company’s 2025 Star Ratings reflect 38% of our Medicare Advantage members are enrolled in plans rated at least 4.0 Stars or higher.

We expect a reduction to our 2026 operating revenue of approximately $183, net of offsets from contracting provisions.

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

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.

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 August 6, 2024, we made an equity investment that resulted in our minority interest ownership of 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 Inc.(“CMSI Assets”), a Carelon Health business, and two CD&R portfolio businesses, apree health and Millennium Physician Group.

Our initial investment was $2,580 and is accounted for as an equity method investment.

Our additional contribution of the CMSI Assets to Mosaic Health is subject to certain closing conditions and customary approvals and is expected to be made in the fourth quarter of 2024.

Further, in connection with our equity investment, each party has certain rights and obligations, including certain put, call, and purchase price true-up options, for which we recorded a net written option liability of $1,330 at September 30, 2024.

The CMSI Assets, along with certain other unrelated assets planned to be divested, are included in “Assets held for sale” and “Liabilities held for sale” in our consolidated balance sheet as of September 30, 2024.

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, 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 Inc (“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.

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.

On February 15, 2023, we completed our acquisition of BioPlus Parent, LLC and 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 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, including contingent purchase price adjustments.

(“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 three months ended June 30, 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 nine months ending September 30, 2024 were not material.

Pending Acquisitions

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”).

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 fourth quarter of 2024 and is subject to standard closing conditions and customary approvals.

On October 15, 2024, we entered into an agreement to acquire 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 populations receiving long-term services and support.

This acquisition aligns with Carelon Service's 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.

The acquisition is expected to close in the fourth quarter of 2024 or first quarter of 2025 and is subject to standard closing conditions and customary approvals.

The related net assets held for sale for the life and disability businesses divested and results of operations as of and for the three months ended March 31, 2024 were not material.

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.

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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.

Generally, the lawsuits in the BCBSA Litigation challenge elements of the licensing agreements between the BCBSA and the independently owned and operated Blue plans along with other arrangements in violation of the Sherman Antitrust Act and related state laws.

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

The BCBSA and Blue plans approved a settlement agreement and release with the subscriber plaintiffs (the “Subscriber Settlement Agreement”), and in compliance with the Subscriber Settlement Agreement, we paid $506 into an escrow account in September 2022, for an aggregate settlement payment by us of $596, which amount was 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 second Blue plan bid provision effective in September 2024.

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.

A number of follow-on cases involving entities that opted out of the putative Provider Settlement Agreement have been filed.

For additional information regarding the BCBSA Litigation, see Note 11, “Commitments and Contingencies – Litigation and Regulatory Proceedings – Blue Cross Blue Shield Antitrust Litigation ,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Selected Operating Performance

For the twelve months ended September 30, 2024, total medical membership declined by 3.3%.

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 September 30, 2024 was $44,719, an increase of $2,239, or 5.3%, from the three months ended September 30, 2023.

Operating revenue for the nine months ended September 30, 2024 was $130,215, an increase of $2,460, or 1.9%, from the nine months ended September 30, 2023.

These increases for both the three and nine months ended September 30, 2024 were primarily a result of premium rate increases in all lines of business in recognition of 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 September 30, 2024 was $1,008, a decrease of $292, or 22.5%, from the three months ended September 30, 2023.

The decrease for the three months ended September 30, 2024 was primarily due to a net decrease in operating gain in our reportable segments and a $39 decrease of the gain on sale of our life and disability businesses due to contingent purchase price adjustments, partially offset by increased net investment income and lower amortization of other intangible assets.

Net income for the nine months ended September 30, 2024 was $5,558, an increase of $398, or 7.7%, from the nine months ended September 30, 2023.

The increase for the nine months ended September 30, 2024 was primarily due to increased net investment income, gain on the sale of our life and disability businesses and lower amortization of other intangible assets, partially offset by higher income tax expense due to higher income before taxes.

Our fully-diluted shareholders’ earnings per share (“EPS”) was $4.36 for the three months ended September 30, 2024, which represented a 20.0% decrease from EPS of $5.45 for the three months ended September 30, 2023.

The decrease in EPS resulted primarily from decreased shareholders' net income, partially offset by the impact of fewer diluted shares outstanding.

Our EPS was $23.81 for the nine months ended September 30, 2024, which represented a 10.4% increase from EPS of $21.56 for the nine months ended September 30, 2023.

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

Operating cash flow for the nine months ended September 30, 2024 and 2023 was $5,102 and $11,032, 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 nine months ended September 30, 2024.

For the twelve months ended March 31, 2025, total medical membership declined by 0.5%.

This was primarily driven by attrition in Medicaid membership, including as a result of eligibility redeterminations and certain market exits, and decreases in our Commercial Fee-Based business.

These decreases were partially offset by increases in our Medicare Advantage and Individual ACA businesses.

Operating revenue for the three months ended March 31, 2025 was $48,765, an increase of $6,492, or 15.4%, from the three months ended March 31, 2024.

The increase was primarily a result of premium rate increases in our Health Benefits segment in recognition of medical cost trends, recent acquisitions, growth in Medicare Advantage and Individual ACA membership, and growth in CarelonRx product revenue, partially offset by membership attrition in our Medicaid business.

Net income for the three months ended March 31, 2025 was $2,184, a decrease of $65, or 2.9%, from the three months ended March 31, 2024.

The decrease was primarily due to a decreased operating gain within our Health Benefits segment, increased operating loss in our Corporate and Other segment and increased net losses on financial instruments.

These decreases were partially offset by increases in operating gain in our CarelonRx and Carelon Services businesses, increased net investment income and decreased income tax expense.

Our fully-diluted shareholders’ earnings per share (“EPS”) was $9.61 for the three months ended March 31, 2025, which represented a 0.2% increase from EPS of $9.59 for the three months ended March 31, 2024.

The increase in EPS resulted primarily as a result of fewer diluted shares outstanding.

Operating cash flow for the three months ended March 31, 2025 and 2024 was $1,017 and $1,978, respectively.

The decrease in net cash provided by operating activities was primarily due to timing related changes in working capital.

Membership and Other Metrics

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

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

The following table presents our medical membership by customer type as of March 31, 2025 and 2024.

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

The membership data and other metrics presented are unaudited and in certain instances include estimates of the number of members represented by each contract at the end of the period.

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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, including both members of our affiliated health plans as well as 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 who are members of our affiliated health plans as well as those who are 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 2024 Annual Report on Form 10-K.

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Medicaid 8,862 9,327 (465) (5.0) %

Federal Employees Health Benefits (“FEHB”) 1,656 1,640 16 1.0 %

Federal Employee Program ®

1,649 1,658 (9) (0.5) %

Total Medical Membership 45,833 46,049 (216) (0.5) %

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Carelon Services Consumers Served 99.5 102.9 (3.4) (3.3) %

1 BlueCard ® membership at September 30, 2023 has been restated lower by 19 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.

1 BlueCard ® membership at March 31, 2024 has been restated lower by 190 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.

Medical Membership

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.

The decrease in medical membership was primarily driven by attrition in Medicaid membership, including as a result of eligibility redeterminations and certain market exits, and decreases in our Commercial Fee-Based business.

These decreases were partially offset by increases in our Medicare Advantage and Individual ACA businesses.

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.

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.

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

Dental membership increased primarily due to favorable sales in our Employer Group business.

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

Vision membership increased due to higher sales in our Employer Group, Medicare Advantage, and Individual health plans.

Consolidated Results of Operations

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

Our consolidated summarized results of operations and other financial information for the three months ended March 31, 2025 and 2024 are as follows:

Three Months Ended

September 30 Nine Months Ended

September 30 Change

March 31 Change

Three Months Ended

Nine Months Ended

2023 2024 vs.

2025 2024 $ %

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Net losses on financial instruments (464) (161) (303) 188.2 %

(Loss) gain on sale of business

(39) — 201 — (39) NM 201 NM

Total revenues $ 48,891 $ 42,577 $ 6,314 14.8 %

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Net income $ 2,184 $ 2,249 $ (65) (2.9) %

Net loss (income) attributable to noncontrolling interests

8 (11) 4 (29) 19 NM 33 NM

Net income attributable to noncontrolling interests

Shareholders’ net income $ 2,183 $ 2,246 $ (63) (2.8) %

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

Premiums for the three months ended September 30, 2024 and 2023 were $36,809 and $35,259, respectively.

Premiums for the nine months ended September 30, 2024 and 2023 were $107,921 and $107,716, respectively.

Premiums for the three months ended March 31, 2025 and 2024 were $40,887 and $35,696, 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 September 30, 2024 Compared to the Three Months Ended September 30, 2023

Total operating revenue increased primarily as a result of premium rate increases in all lines of business in recognition of 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 investment income increased primarily due to higher income from fixed maturity securities.

During the three months ended September 30, 2024, we decreased the gain on sale of our life and disability businesses by $39 for contingent purchase price adjustments.

Benefit expense increased primarily due to increases in medical cost trend in our Health Business segment, which was driven primarily by Medicaid rates being inadequate to cover medical cost trends that are well in excess of historical averages due to a shift in the mix in our Medicaid membership base related to eligibility redeterminations.

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

Our benefit expense ratio increased primarily as a result of the shift in the mix of our Medicaid membership base related to eligibility redeterminations, partially offset by premium rate increases across all segments 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 decreased primarily due to disciplined cost management and lower business optimization charges during the three months ended September 30, 2024, partially offset by the accrual for the Provider Settlement Agreement associated with the BCBSA Litigation recorded in the three months ended September 30, 2024.

Our operating expense ratio decreased primarily due to disciplined cost management, lower business optimization charges during the three months ended September 30, 2024 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 declined primarily due to decreased amortization of other intangible assets during the three months ended September 30, 2024.

During the three months ended September 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.

This decrease was partially offset by an increase in interest expense during the three months ended September 30, 2024.

Our effective tax rate increased primarily due to an increase in reserves for uncertain tax positions.

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

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Total operating revenue increased primarily as a result of premium rate increases in all lines of business in recognition of 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 investment income increased primarily due to higher income from fixed maturity securities and alternative investments.

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

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

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

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 the accrual recorded in the three months ended September 30, 2024 for the Provider Settlement Agreement associated with the BCBSA Litigation, partially offset by disciplined cost management and lower business optimization charges during the nine months ended September 30, 2024.

Our operating expense ratio decreased primarily due to disciplined cost management, lower business optimization charges during the nine months ended September 30, 2024 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 declined primarily due to decreased amortization of other intangible assets during the nine months ended September 30,2024.

During the nine months ended September 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 effective tax rate increased primarily due to an increase in reserves for uncertain tax positions.

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

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Total operating revenue increased primarily as a result of premium rate increases in our Health Benefits segment in recognition of medical cost trends, recent acquisitions, growth in Medicare Advantage and Individual ACA membership, and growth in CarelonRx product revenue, partially offset by membership attrition in our Medicaid business.

Net investment income increased primarily due to higher income from alternative investments.

Net losses on financial instruments increased due to losses on other invested assets and equity securities.

Benefit expense increased primarily due to higher medical cost trends across all lines of business within our Health Benefits segment.

Our benefit expense ratio increased primarily as a result of Medicaid rates being inadequate to cover medical cost trends, partially offset by higher Medicaid premium increases to cover out of period premium taxes.

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

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

Operating expense increased primarily due to premium tax expenses, some of which were out of period.

Our operating expense ratio decreased primarily due to operating expense leverage associated with growth in operating revenue and ongoing cost management, partially offset by an out of period premium tax expense related to Medicaid.

Other expense increased primarily due to higher interest expense related to our issuances of senior secured notes during the latter half of 2024.

The increase was also due to higher amortization of other intangible assets related to the intangible assets acquired during the acquisitions we completed in the fourth quarter of 2024.

Our effective tax rate decreased primarily due to the favorable resolution of uncertain tax positions and the impact of certain investment credits.

Our shareholders’ net income as a percentage of total revenues decreased in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 as a result of all factors discussed above.

Reportable Segments Results of Operations

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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 and nine months ended September 30, 2024 and 2023:

Nine Months Ended

September 30 Change

The following table presents a summary of the reportable segment financial information for the three months ended March 31, 2025 and 2024:

Three Months Ended

September 30 Three Months Ended

Nine Months Ended

2023 2024 vs.

March 31 Three Months Ended

2025 2024 $ %

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Operating Margin

Health Benefits 4.2 % 5.0 % 5.4 % 5.5 % (80) bp (10) bp

CarelonRx 6.8 % 5.6 % 6.3 % 5.9 % 120 bp 40 bp

Carelon Services 4.0 % 5.5 % 5.2 % 5.5 % (150) bp (30) bp

Health Benefits 5.4 % 6.1 % (70) bp

CarelonRx 6.0 % 6.5 % (50) bp

Carelon Services 7.5 % 7.2 % 30 bp

Total operating margin

3.1 % 4.1 % 5.5 % 5.6 % (100) bp (10) bp

6.5 % 7.1 % (60) bp

bp = basis point;

one hundred basis points = 1%.

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

Health Benefits

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

Operating gain decreased primarily as a result of Medicaid rates being inadequate to cover medical cost trends that are well in excess of historical averages, driven by the shift in the mix of our Medicaid membership base related to eligibility redeterminations.

Operating revenue increased primarily due to the acquisition of Paragon in 2024 and higher prescription volume associated with growth in external pharmacy members.

The increase in operating gain was primarily driven by 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 medical management, behavioral health and post-acute care services.

The decrease in operating gain was primarily driven by increased medical cost trends in our post-acute business and the impact of Medicaid membership attrition.

Corporate & Other

Operating revenue decreased primarily due to lower affiliated revenues.

Operating loss increased primarily due to the accrual recorded during the three months ended September 30, 2024 for the Provider Settlement Agreement associated with the BCBSA Litigation, partially offset by disciplined cost management and lower business optimization charges during the three months ended September 30, 2024.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Health Benefits

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 the growth in product revenue, partially offset by expenses associated with the launch of additional services by CarelonRx.

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 and growth in our Medicare Advantage and Individual ACA membership.

Operating gain decreased primarily as a result of Medicaid rates being inadequate to cover medical cost trends, partially offset by premium rate increases in most lines of business and enhanced operating efficiencies.

Operating revenue increased primarily due to higher prescription volume associated with growth in pharmacy membership and revenue related to recent acquisitions.

The increase in operating gain was primarily driven by the 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 Medicaid membership attrition.

Operating revenue increased primarily due to the acquisition of CareBridge in December 2024 and the continued expansion of risk-based capabilities in our specialty care solutions and behavioral health services.

The increase in operating gain was primarily driven by improved performance in our post-acute care, specialty care solutions and behavior health services, as well as the acquisition of CareBridge.

Corporate & Other

Operating revenue increased primarily due to higher affiliated revenues.

Operating loss increased primarily due to an increase 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 September 30, 2024, our critical accounting policies and estimates have not changed from those described in our 2023 Annual Report on Form 10-K.

Our accounting policies related to these items are discussed in our 2024 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, 2024, 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, 2025, our critical accounting policies and estimates have not changed from those described in our 2024 Annual Report on Form 10-K.

We continually evaluate the accounting policies and estimates used to prepare the consolidated financial statements.

In general, our estimates are based on historical experience, evaluation of current trends, information from third-party professionals and various other assumptions that we believe to be reasonable under the known facts and circumstances.

Estimates can require a significant amount of judgment, and a different set of assumptions could result in material changes to our reported results.

Medical Claims Payable

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Our accounting policies related to medical claims payable are discussed in the references cited above.

As of September 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 nine months ended September 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 nine months ended September 30, 2024 and 2023, which are the trend and completion factors.

As of March 31, 2025, our critical accounting policies and estimates related to medical claims payable have not changed from those described in our 2024 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, 2025 and 2024, 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, 2025 and 2024, 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

Nine Months Ended

Three Months Ended

Assumed trend factors $ 164 $ 571

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Total $ 1,025 $ 1,205

The favorable development recognized in the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2023.

The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 85.4% and 84.6% for the nine months ended September 30, 2024 and 2023, respectively.

This ratio serves as an indicator of claims processing speed whereby speed for claims payments was slightly faster during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

The favorable development recognized in the three months ended March 31, 2025 resulted from favorable development in the completion factors resulting from the latter part of 2024 developing faster than expected as well as trend factors in late 2024 developing more favorably than originally expected.

The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 66.2% and 63.8% for the three months ended March 31, 2025 and 2024, respectively.

This ratio serves as an indicator of claims processing speed whereby speed for claims payments was slightly faster during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

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 nine months ended September 30, 2024, this metric was 11.3%, driven by both favorable completion factor development from 2023 and favorable trend factor development at the end of 2023.

For the nine months ended September 30, 2023, this metric was 9.6%, largely driven by favorable trend factor development at the end of 2022 as well as favorable completion factor development from 2022.

For the three months ended March 31, 2025, this metric was 7.1%, mainly driven by both favorable completion factor development from 2024 and favorable trend factor development at the end of 2024.

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.

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 nine months ended September 30, 2024, this metric was 1.3%, which was calculated using the redundancy of $1,610.

For the nine months ended September 30, 2023, the comparable metric was 1.2%, which was calculated using the redundancy of $1,342.

For the three months ended March 31, 2025, this metric was 0.8%, which was calculated using the redundancy of $1,025.

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

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 nine months ended September 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.

For information regarding new accounting pronouncements that were issued or became effective during the three months ended March 31, 2025, 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

Sources and Uses of Capital

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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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 2024 Annual Report on Form 10-K.

For additional information regarding our sources and uses of capital during the three and nine months ended September 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 Form 10-Q.

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

Nine Months Ended

For additional information regarding our sources and uses of capital during the three months ended March 31, 2025, 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 Form 10-Q.

A summary of our major sources and uses of cash and cash equivalents for the three months ended March 31, 2025 and 2024 is as follows:

Three Months Ended

2025 2024 Change

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Net cash provided by operating activities $ 1,017 $ 1,978 $ (961)

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

Issuances of short- and long-term debt, net of repayments — 1,350 (1,350)

Changes in securities lending payable 158 55 103

Proceeds from sales, maturities, calls and redemptions of investments, net of purchases 610 — 610

Proceeds from issuance of common stock under employee stock plans 23 97 (74)

Other sources of cash, net — 54 (54)

Changes in bank overdrafts 546 546

Total sources of cash 2,196 3,425 (1,229)

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Purchases of property and equipment (196) (279) 83

Repayments of short- and long-term debt, net of issuances (1,365) — (1,365)

Cash dividends (386) (379) (7)

Changes in securities lending collateral (160) (54) (106)

Changes in bank overdrafts — (586) 586

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Effect of foreign exchange rates on cash and cash equivalents 1 — 1

Net increase in cash and cash equivalents

Net decrease in cash and cash equivalents

$ (788) $ (300) $ (488)

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 as a result of eligibility redeterminations, and the timing of working capital changes, partially offset by higher net income for the nine months ended September 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, reduced amounts for repurchase and retirement of common stock, lower amounts for purchase of subsidiaries, net of cash acquired, increased proceeds from the sale of subsidiaries, net of cash sold, reduced purchases of investments, net of proceeds from sales, maturities, calls, and redemptions and changes in bank overdrafts.

We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $38,826 at September 30, 2024.

Since December 31, 2023, total cash, cash equivalents and investments in fixed maturity and equity securities increased by $1,581, primarily due to cash generated from operations, issuances of short-and long-term debt, net of repayments, and proceeds from the sale of subsidiaries, net of cash sold, cash dividends, purchases of subsidiaries, net of cash acquired and repurchase and retirement of common stock.

The decrease in net cash provided by operating activities was primarily due to timing related changes to working capital.

Other significant changes in sources or uses of cash year-over-year included an increase in repayments of short- and long-term debt, net of issuances, lower amounts for purchase of subsidiaries, net of cash acquired, increased proceeds from investments, net of purchases from sales, maturities, calls, and redemptions, changes in bank overdrafts and increased amounts for repurchase and retirement of common stock and purchases of property and equipment.

We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $34,712 at March 31, 2025.

Since December 31, 2024, total cash, cash equivalents and investments in fixed maturity and equity securities decreased by $1,004, primarily due to cash used for

repayments of short- and long-term debt, net of issuances, repurchase and retirement of common stock, cash dividends, and purchases of property and equipment.

This decrease was partially offset by cash generated from operations, decline in purchases of subsidiaries,net of cash acquired and changes in bank overdrafts.

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 September 30, 2024, we held $3,107 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 March 31, 2025, we held $1,419 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 38.2% and 38.9% as of September 30, 2024 and December 31, 2023, respectively.

Our consolidated debt-to-capital ratio was 41.3% and 43.0% as of March 31, 2025 and December 31, 2024, 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 September 30, 2024 or December 31, 2023.

As of September 30, 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 March 31, 2025 or December 31, 2024.

As of March 31, 2025, 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.

We had no commercial paper outstanding at either September 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.

We had no commercial paper outstanding at either March 31, 2025 or December 31, 2024.

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

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

We had $360 and $225 of outstanding short-term borrowings from the FHLBs as of September 30, 2024 and December 31, 2023, respectively.

We had $250 and $365 of outstanding short-term borrowings from the FHLBs as of March 31, 2025 and December 31, 2024, respectively.

We regularly review the appropriate use of capital, including acquisitions, common stock and debt security repurchases and dividends to shareholders.

The declaration and payment of any dividends or repurchases of our common stock or debt is at the discretion of our Board of Directors and depends upon our financial condition, results of operations, future liquidity needs, regulatory and capital requirements and other factors deemed relevant by our Board of Directors.

For additional information regarding our sources and uses of capital at September 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.

For additional information regarding our sources and uses of capital at March 31, 2025, 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 for Health Organizations Model Act (the “RBC Model Act”).

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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 and modernize our information systems;

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;

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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.;

the effects of any negative publicity related to the health benefits industry in general or us in particular;

risks associated with mergers, acquisitions, joint ventures and strategic alliances;

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a downgrade in our financial strength ratings;

the effects of any negative publicity related to the health benefits industry in general or us in particular;

events that may negatively affect our licenses with the Blue Cross and Blue Shield Association;

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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