What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-10-21 compared with 2026-07-15 · 125 added, 118 removed, 384 unchanged (39% of the section changed)

4 unchanged sentences

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 six months ended June 30, 2026 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2026, or any other period.

Results of operations, cost of care trends, investment yields and other measures for the three and nine months ended September 30, 2026 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2026, 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 approximately 44.9 million medical members through our affiliated health plans as of June 30, 2026.

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

17 unchanged sentences

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, including increased utilization of specialty pharmaceuticals, new indications of existing prescription drugs, provider contracting inflation, labor costs and healthcare fraud, waste and abuse.

Membership shifts from Medicaid into our Individual ACA (as defined below) business following the redetermination process that began in April 2023, together with lower membership effectuation rates, particularly in geographies with high concentrations of highly subsidized members, have driven a market-wide increase in morbidity, resulting in elevated medical cost trends.

1 unchanged sentence

In response, we are working on program improvements in partnership with the states, strengthening care and provider network management, optimizing our clinical strategy to improve effectiveness and enhancing payment integrity to manage costs.

We expect the impact of these initiatives to build over time as implementation progresses and the initiatives mature.

Pricing Trends:

12 unchanged sentences

Going forward, we expect the Public Exchange to be influenced by policy and regulatory changes, particularly around federal subsidies, compliance requirements, and market stability.

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., 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.

CarelonRx markets and offers pharmacy services to our affiliated health plans nationwide and to unaffiliated customers.

The pharmacy services market continues to evolve toward greater cost transparency and predictability.

We support multiple contract structures, including rebate pass-through and fee-based arrangements, and are expanding offerings focused on net client cost.

Rising drug spending and affordability pressures are also driving demand for coordinated medical and pharmacy management.

These trends present opportunities to expand existing client relationships through our clinical programs, specialty pharmacy, and home-delivery capabilities.

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 (“CVS Agreement”).

CarelonRx has entered into a new five-year agreement with CVS that continues the CVS relationship under updated terms beginning January 1, 2027 through December 31, 2031, subject to certain early termination rights.

In the event of a termination by CarelonRx or non-renewal by either party, CarelonRx can elect to have CVS provide transition services for a period of at least 18-months.

For additional discussion regarding business trends, see Part I, Item 1, “Business” included in our 2025 Annual Report on Form 10-K.

17 unchanged sentences

Department of Health and Human Services, Labor, and the Treasury (collectively, the “Tri-Agencies”) issued final regulations updating the federal Independent Dispute Resolution (“IDR”) process used to determine compensation to be paid by health plans to out-of-network providers in certain scenarios under the No Surprises Act.

The regulations are primarily procedural in nature and address the operations and administration of the IDR process.

Additional regulatory guidance or rulemakings are possible, and changes resulting from any such guidance or rulemakings, as well as current and potential litigation, arbitration proceedings, and government audits related to the IDR and No Surprises Act, could have an adverse effect on our business, cash flows, results of operations and financial condition.

The regulations modify certain procedures and requirements governing the operation and administration of the IDR process.

Additional regulatory guidance or rulemakings are possible, and changes resulting from any such guidance or rulemakings, as well as current and potential litigation, arbitration proceedings, and government audits related to the IDR and No Surprises Act, have had and could continue to have an adverse effect on our Commercial business, cash flows, results of operations and financial condition.

In February 2026, Congress passed the Consolidated Appropriations Act of 2026, which includes pharmacy benefit manager reforms requiring pharmacy benefit managers to remit all rebates, fees (other than bona fide service fees), and other remuneration received from entities such as manufacturers and group purchasing organizations to commercial plan sponsors, and to provide detailed commercial claims reporting, effective 30 months after enactment.

1 unchanged sentence

There continues to be the potential that similar or additional legislation may be adopted at the state or federal level.

In addition, in June 2025, the Centers for Medicare and Medicaid Services (“CMS”) finalized the Marketplace Integrity and Affordability Regulation, which modifies the Public Exchange open enrollment period beginning in plan year 2027 and eligibility for PTCs, among other requirements.

In September 2025, a federal court delayed the effective dates for several provisions of the Marketplace Integrity and Affordability Regulation pending the resolution of ongoing litigation challenging the legality of those provisions.

Also, in September 2025, CMS issued guidance modifying eligibility requirements for ACA catastrophic plans.

These requirements, as well as any similar or additional legislative or regulatory changes, could have an adverse effect on our business, cash flows, results of operations and financial condition.

In addition, in June 2025, the Centers for Medicare and Medicaid Services (“CMS”) finalized the Marketplace Integrity and Affordability Regulation, which modifies the open enrollment period for all Exchanges beginning in plan year 2027 and eligibility for PTCs, among other requirements.

In August 2025, a federal court stayed certain provisions of the regulation, and in June 2026, vacated several provisions, a decision that is currently under appeal.

In May 2026, CMS finalized the Notice of Benefit and Payment Parameters for 2027, effective July 2026, which establishes additional Public Exchange enrollment and eligibility requirements, among other changes.

Certain provisions of the 2027 regulation were stayed by a federal court in July 2026 pending ongoing litigation.

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.

19 unchanged sentences

As a result, the cost of Public Exchange coverage premiums has increased for those individuals previously receiving the APTCs, which has impacted our Individual market enrollment.

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.

8 unchanged sentences

These actions also include the modernization of certain information technology platforms, targeted workforce reductions and role realignments.

Actions to be taken under the Transformation Program were ongoing as of June 30, 2026.

Actions to be taken under the Transformation Program were ongoing as of September 30, 2026.

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.

Our 2025 Star Ratings, which are used for payment year 2026, reflect that approximately 40% of our Medicare Advantage members were enrolled in plans rated at least 4.0 Stars or higher.

CMS released our 2026 Star Ratings in October 2025, which will be used to determine our Medicare Advantage bonus payments in 2027.

Our 2026 Star Ratings reflect that approximately 59% of our Medicare Advantage members are enrolled in plans rated at least 4.0 Stars or higher, or the equivalent.

Our 2026 Star Ratings, which are used for payment year 2027, reflect that approximately 55% of our Medicare Advantage members were enrolled in plans rated at least 4.0 Stars or higher at the time of the rating.

CMS released our 2027 Star Ratings in October 2026, which will be used to determine our Medicare Advantage payments in 2028.

Our 2027 Star Ratings reflect that approximately 49% of our current Medicare Advantage members are enrolled in plans that will be rated at least 4.0 Stars or higher.

Membership changes during the Medicare Advantage enrollment periods may cause this number to fluctuate.

In connection with the notice that the Company received in February 2026 from CMS regarding certain Medicare Advantage risk adjustment data submission requirements related to diagnosis codes for dates of service 2015 through April 2023, CMS provided a series of steps required to be completed by July 31, 2026 in order to avoid sanctions being imposed on the Company.

11 unchanged sentences

Selected Operating Performance

From June 30, 2025 to June 30, 2026, total medical membership declined by 1.5%.

This was driven by attrition in Medicaid membership, primarily as a result of eligibility redeterminations, and decreases in our Medicare Advantage, Employer Group Risk-Based and FEP ® businesses.

These decreases were partially offset by increases in our Employer Group Fee-Based business.

Operating revenue for the three months ended June 30, 2026 was $49,826, an increase of $405, or 0.8%, from the three months ended June 30, 2025.

Operating revenue for the six months ended June 30, 2026 was $99,320, an increase of $1,134, or 1.2%, from the six months ended June 30, 2025.

The increases for the three and six months ended June 30, 2026 were primarily the result of premium rate increases in our Health Benefits segment in recognition of medical cost trends and growth in CarelonRx product revenues, partially offset by membership attrition.

Shareholders’ net income for the three months ended June 30, 2026 was $1,463, a decrease of $280, or 16.1%, from the three months ended June 30, 2025.

Shareholders’ net income for the six months ended June 30, 2026 was $3,227, a decrease of $699, or 17.8%, from the six months ended June 30, 2025.

The decrease in net income for the three months ended June 30, 2025 was primarily due to a decrease in operating gain in our Corporate and Other, Health Benefits and Carelon Services

The decrease was partially offset by increased net investment income, decreased net losses on financial instruments and decreased income tax expense.

The decrease in net income for the six months ended June 30, 2026 was primarily due to the loss contingency accrual for our best estimate of the identified potential exposure for the resubmission of certain historical Medicare Advantage risk adjustment data within our Corporate & Other segment and a decrease in operating gain in our Health Benefits and Carelon Services segments.

The decrease was partially offset by decreased net losses on financial instruments, increased net investment income and decreased income tax expense.

Our fully-diluted shareholders’ earnings per share (“EPS”) was $6.71 for the three months ended June 30, 2026, which represented a 13.1% decrease from EPS of $7.72 for the three months ended June 30, 2025.

Our EPS was $14.73 for the six months ended June 30, 2026, which represented a 15.0% decrease from EPS of $17.33 for the six months ended June 30, 2025.

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

Operating cash flow for the six months ended June 30, 2026 and 2025 was $6,245 and $3,071, respectively.

The increase in net cash provided by operating activities was primarily due to favorable working capital impacts, partially offset by lower shareholders’ net income for the six months ended June 30, 2026.

From September 30, 2025 to September 30, 2026, total medical membership declined by 1.1%.

This was driven by attrition in Medicaid membership, primarily as a result of eligibility redeterminations, and decreases in our Medicare Advantage, Commercial Risk-Based and FEP ® businesses.

These decreases were partially offset by an increase in our Commercial Fee-Based business.

Operating revenue for the three months ended September 30, 2026 was $50,440, an increase of $353, or 0.7%, from the three months ended September 30, 2025.

Operating revenue for the nine months ended September 30, 2026 was $149,760, an increase of $1,487, or 1.0%, from the nine months ended September 30, 2025.

The increases for the three and nine months ended September 30, 2026 were primarily the result of premium rate increases in our Health Benefits segment in recognition of medical cost trends and growth in CarelonRx product revenues, partially offset by lower Medicare Advantage, Medicaid, and Employer Group Risk-Based membership.

Shareholders’ net income for the three months ended September 30, 2026 was $1,365, an increase of $176, or 14.8%, from the three months ended September 30, 2025.

Shareholders’ net income for the nine months ended September 30, 2026

was $4,592, a decrease of $523, or 10.2%, from the nine months ended September 30, 2025.

The increase in shareholders’ net income for the three months ended September 30, 2026 was primarily due to increased investment income and lower amortization of other intangible assets.

The increase was partially offset by an increase in income tax expense.

The decrease in shareholders’ net income for the nine months ended September 30, 2026 was primarily due to the loss contingency accrual for our best estimate of the identified potential exposure for the resubmission of certain historical Medicare Advantage risk adjustment data within our Corporate & Other segment and a decrease in operating gain in our Health Benefits segment.

The decrease was partially offset by an increase in investment income and a decrease in net losses on financial instruments.

Our fully-diluted shareholders’ earnings per share (“EPS”) was $6.27 for the three months ended September 30, 2026, which represented a 17.9% increase from EPS of $5.32 for the three months ended September 30, 2025.

Our EPS was $21.01 for the nine months ended September 30, 2026, which represented a 7.3% decrease from EPS of $22.67 for the nine months ended September 30, 2025.

The increase in EPS for the three months ended September 30, 2026 resulted primarily from increased shareholders’ net income and the impact of fewer diluted shares outstanding.

The decrease in EPS for the nine months ended September 30, 2026 resulted primarily from decreased shareholders’ net income, partially offset by the impact of fewer diluted shares outstanding.

Operating cash flow for the nine months ended September 30, 2026 and 2025 was $7,512 and $4,206, respectively.

The increase in net cash provided by operating activities was primarily due to favorable working capital impacts, partially offset by lower shareholders’ net income for the nine months ended September 30, 2026.

Membership and Other Metrics

The following table presents our medical membership by customer type as of June 30, 2026 and 2025.

The following table presents our medical membership by customer type as of September 30, 2026 and 2025.

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

28 unchanged sentences

Medical Membership

The decrease in medical membership was primarily driven by attrition in Medicaid membership, primarily as a result of eligibility redeterminations, and decreases in our Medicare Advantage, Employer Group Risk-Based and FEP ® businesses.

These decreases were partially offset by increases in our Employer Group Fee-Based business.

These decreases were partially offset by an increase in our Commercial Fee-Based business.

Other Membership

4 unchanged sentences

Consolidated Results of Operations

Our consolidated summarized results of operations and other financial information for the three and six months ended June 30, 2026 and 2025 are as follows:

Our consolidated summarized results of operations and other financial information for the three and nine months ended September 30, 2026 and 2025 are as follows:

Three Months Ended

June 30 Six Months Ended

June 30 Change

September 30 Nine Months Ended

September 30 Change

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2025 2026 vs.

14 unchanged sentences

Net income 1,343 1,187 4,557 5,115 156 13.1 % (558) (10.9) %

Net loss (gain) attributable to noncontrolling interests

9 (1) 13 (2) 10 NM 15 NM

Net loss attributable to noncontrolling interests 22 2 35 — 20 NM 35 NM

Shareholders’ net income $ 1,365 $ 1,189 $ 4,592 $ 5,115 $ 176 14.8 % $ (523) (10.2) %

12 unchanged sentences

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

Premiums for the three months ended June 30, 2026 and 2025 were $41,279 and $41,271, respectively.

Premiums for the six months ended June 30, 2026 and 2025 were $82,303 and $82,158, respectively.

Premiums for the three months ended September 30, 2026 and 2025 were $41,704 and $41,791, respectively.

Premiums for the nine months ended September 30, 2026 and 2025 were $124,007 and $123,949, respectively.

3 bp = basis point;

1 unchanged sentence

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

Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025

Total operating revenue increased primarily as a result of premium rate increases in our Health Benefits segment in recognition of medical cost trends and growth in CarelonRx product revenues, partially offset by membership attrition.

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

Net losses on financial instruments decreased due to lower impairment on other invested assets and lower realized losses on sales of financial instruments.

Benefit expense increased primarily due to higher medical costs across most lines of business within our Health Benefits segment.

These increases were partially offset by decreases in Carelon Services benefit expense related to the partial termination and modification of a care delivery services contract with an unaffiliated customer.

Our benefit expense ratio increased primarily as a result of expected elevated medical cost trend in our Medicaid and Medicare businesses, partially offset by improved performance in our Individual ACA business.

Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025

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

Net losses on financial instruments increased due to higher realized losses on sales of financial instruments, partially offset by changes in other invested asset balances.

Benefit expense decreased primarily due to decreased Carelon Services benefit expense related to the partial termination and modification of a care delivery services contract with an unaffiliated customer.

This decrease was partially offset by higher medical costs across most lines of business within our Health Benefits segment.

Our benefit expense ratio decreased primarily as a result of improved performance in our Medicare business.

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 a higher cost per prescription in 2026, reflecting pricing impacts and product mix, despite lower adjusted prescription volumes.

Operating expense increased primarily due to increases in targeted investments to support and strengthen our workforce and accelerate technology adoption, an increase in expenses to address regulatory matters and an increase in premium tax expenses and assessments.

Our operating expense ratio increased primarily due to targeted investments to support and strengthen our workforce and accelerate technology adoption, an increase in expenses to address regulatory matters and an increase in premium tax expenses and assessments.

Operating expense increased primarily due to increases in targeted investments to accelerate technology adoption, an increase in premium tax expenses and assessments and an increase in expenses to address regulatory matters.

Our operating expense ratio increased primarily due to increases in targeted investments to accelerate technology adoption, an increase in premium tax expenses and assessments and an increase in expenses to address regulatory matters.

Other expense decreased primarily due to a decrease in amortization of other intangible assets due to assets being amortized under an accelerated depreciation method, which results in higher expense recognition in earlier periods and progressively lower amortization in later periods, partially offset by an increase in interest expense.

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

Our shareholders’ net income as a percentage of total revenues decreased in the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 as a result of all factors discussed above.

Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025

Our effective tax rate increased primarily due to investment tax credits purchased and recognized in the prior-year quarter, with less tax credits purchased in the current-year quarter.

Our shareholders’ net income as a percentage of total revenues increased in the three months ended September 30, 2026 as compared to the three months ended September 30, 2025 as a result of all factors discussed above.

Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025

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

Net losses on financial instruments decreased due to lower impairment on other invested assets and lower realized losses on sales of financial instruments.

Benefit expense increased primarily due to higher medical costs across all lines of business within our Health Benefits segment, with the exception of Medicare.

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

Net losses on financial instruments decreased due to changes in other invested asset balances and lower realized losses on sales of financial instruments.

Benefit expense increased primarily due to higher medical costs across most lines of business within our Health Benefits segment.

Our benefit expense ratio increased primarily due to expected elevated medical cost trend in our Medicaid business, partially offset by improved performance in our Individual ACA business.

Our benefit expense ratio increased primarily due to elevated medical cost trend in our Medicaid business, partially offset by improved performance in our Individual ACA and Medicare programs and decreases in Carelon Services benefit expense related to the partial termination and modification of a care delivery services contract with an unaffiliated customer.

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

1 unchanged sentence

Operating expense increased primarily due to the loss contingency accrual for our best estimate of the identified potential exposure for the resubmission of certain historical Medicare Advantage risk adjustment data, increases in targeted investments to support and strengthen our workforce and accelerate technology adoption and increases related to the Transformation Program.

investments to support and strengthen our workforce and accelerate technology adoption and increases related to the Transformation Program.

Our operating expense ratio increased primarily due to the loss contingency accrual for our best estimate of the identified potential exposure for the resubmission of certain historical Medicare Advantage risk adjustment data, increases in targeted investments to support and strengthen our workforce and accelerate technology adoption and increases related to the Transformation Program.

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

Our shareholders’ net income as a percentage of total revenues decreased in the six months ended June 30, 2026 as compared to six months ended June 30, 2025 as a result of all factors discussed above.

Our shareholders’ net income as a percentage of total revenues decreased in the nine months ended September 30, 2026 as compared to nine months ended September 30, 2025 as a result of all factors discussed above.

Reportable Segments Results of Operations

12 unchanged sentences

For additional information, see Note 13, “Segment Information,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The following table presents a summary of the reportable segment financial information for the three and six months ended June 30, 2026 and 2025:

Six Months Ended

The following table presents a summary of the reportable segment financial information for the three and nine months ended September 30, 2026 and 2025:

Three Months Ended

June 30 Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

September 30 Three Months Ended

September 30 Nine Months Ended

2026 2025 2026 2025 $ % $ %

19 unchanged sentences

one hundred basis points = 1%.

The following table summarizes the operating revenues for our Commercial, Medicare, Medicaid and FEP ® lines of business within our Health Benefits segment for the three and six months ended June 30, 2026 and 2025:

The following table summarizes the operating revenues for our Commercial, Medicare, Medicaid and FEP ® lines of business within our Health Benefits segment for the three and nine months ended September 30, 2026 and 2025:

Three Months Ended

June 30 Six Months Ended

June 30 Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

September 30 Three Months Ended

September 30 Nine Months Ended

2026 2025 2026 2025 $ % $ %

6 unchanged sentences

$ 43,357 $ 42,246 $ 128,567 $ 125,259 $ 1,111 2.6 % $ 3,308 2.6 %

1 Operating revenue within our Commercial line of business related to our Individual ACA plans was $2,720 and $2,328 for the three months ended June 30, 2026 and 2025, respectively.

Operating revenue within our Commercial line of business related to our Individual ACA plans was $5,260 and $4,689 for the six months ended June 30, 2026 and 2025, respectively.

Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025

1 Operating revenue within our Commercial line of business related to our Individual ACA plans was $2,514 and $2,358 for the three months ended September 30, 2026 and 2025, respectively.

Operating revenue within our Commercial line of business related to our Individual ACA plans was $7,774 and $7,047 for the nine months ended September 30, 2026 and 2025, respectively.

Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025

Health Benefits

Operating revenue increased primarily as a result of higher premium yields driven by premium increases in all of our lines of business, partially offset by deliberate repositioning in our Medicare Advantage business and Medicaid membership attrition.

Operating gain decreased primarily as a result of higher overall medical costs and increases in targeted investments to support and strengthen our workforce and accelerate technology adoption, partially offset by higher operating revenue.

Operating gain decreased primarily as a result of higher overall medical costs and increases in operating expenses, primarily due to targeted investments to accelerate technology adoption, partially offset by higher operating revenue.

Operating revenue increased primarily due to higher average revenue per prescription, partially offset by a negative change in product mix and lower prescription volumes.

2 unchanged sentences

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

These increases were partially offset by decreases related to the partial termination and modification of a care delivery services contract with an unaffiliated customer and fewer post-acute solutions services provided as a result of lower Medicare membership.

The decrease in operating gain was primarily driven by less favorable results on certain contracts and lower health plan membership within our post-acute solutions services, partially offset by improved performance in Carelon Insights.

These increases were partially offset by decreases related to the partial termination and modification of a care delivery services contract with an unaffiliated customer.

The increase in operating gain was primarily driven by improved performance and expansion in our specialty care and home-based care services.

These increases were partially offset by less favorable results on certain contracts within our behavioral health services.

Corporate & Other

Operating revenue decreased primarily due to lower affiliate revenues.

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

Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025

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

Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025

Health Benefits

Operating gain decreased primarily due to higher overall medical costs and increases in targeted investments to support and strengthen our workforce and accelerate technology adoption, partially offset by higher operating revenue.

Operating revenue increased primarily due to higher average revenue per prescription, partially offset by a negative change in product mix and lower prescription volumes.

Operating gain decreased primarily due to higher overall medical costs and increases in operating expenses primarily due to targeted investments to support and strengthen our workforce and accelerate technology adoption, partially offset by higher operating revenue.

Operating revenue increased primarily due to higher average revenue per prescription, partially offset by a change in product mix and lower prescription volumes.

The increase in operating gain was primarily driven by improved specialty pharmacy profitability and lower operating expenses, partially offset by normal timing variations in recognition of performance-related adjustments.

1 unchanged sentence

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

The decrease in operating gain was primarily driven by less favorable results on certain contracts and lower health plan membership within our post acute solutions services, lower health plan membership and seasonality related to the launch of risk-based capabilities in our specialty care solutions business.

The decrease was partially offset by improved performance in our behavioral health business and the expansion of CareBridge.

These increases were partially offset by decreases related to the partial termination and modification of a care delivery services contract with an unaffiliated customer.

The increase in operating gain was primarily driven by the continued expansion and improved performance within our specialty care and home-based care services.

The increase was partially offset by less favorable results on certain contracts and lower health plan membership within our post-acute solutions services.

Corporate & Other

5 unchanged sentences

We consider our most important accounting policies that require significant estimates and management judgment to be those policies with respect to liabilities for medical claims payable, goodwill and other intangible assets and investments.

Our accounting policies related to these items are discussed in our 2025 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, 2025, as well as in the “Critical Accounting Policies and Estimates” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of June 30, 2026, our critical accounting policies and estimates have not changed from those described in our 2025 Annual Report on Form 10-K.

Our accounting policies related to these items are discussed in our 2025 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, 2025, 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, 2026, our critical accounting policies and estimates have not changed from those described in our 2025 Annual Report on Form 10-K.

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

4 unchanged sentences

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

As of June 30, 2026, our critical accounting policies and estimates related to medical claims payable have not changed from those described in our 2025 Annual Report on Form 10-K.

For a reconciliation of the beginning and ending balance for medical claims payable for the six months ended June 30, 2026 and 2025, see Note 8, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The following table provides a summary of the two key assumptions having the most significant impact on our incurred but not paid liability estimates for the six months ended June 30, 2026 and 2025, which are the trend and completion factors.

As of September 30, 2026, our critical accounting policies and estimates related to medical claims payable have not changed from those described in our 2025 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, 2026 and 2025, see Note 8, “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, 2026 and 2025, 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.

1 unchanged sentence

Changes in Key Assumptions

Six Months Ended

Nine Months Ended

Assumed trend factors $ 643 $ 1,035

1 unchanged sentence

Total $ 1,295 $ 1,266

The favorable development recognized in the six months ended June 30, 2026 resulted from trend factors in late 2025 developing more favorably than originally expected as well as from faster than expected development of completion factors from the latter part of 2025.

The favorable development recognized in the six months ended June 30, 2025 resulted from trend factors in late 2024 developing more favorably than originally expected as well as a smaller contribution from faster than expected development of completion factors from the latter part of 2024.

The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 78.9% and 80.3% for the six months ended June 30, 2026 and 2025, respectively.

This ratio serves as an indicator of claims processing speed whereby speed for claims payments was slightly slower during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.

The favorable development recognized in the nine months ended September 30, 2026 resulted from faster than expected development of completion factors from the latter part of 2025 as well as from trend factors in late 2025 developing more favorably than originally expected.

The favorable development recognized in the nine months ended September 30, 2025 resulted from trend factors in late 2024 developing more favorably than originally expected as well as a smaller contribution from faster than expected development of completion factors from the latter part of 2024.

The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 85.1% and 86.3% for the nine months ended September 30, 2026 and 2025, respectively.

This ratio serves as an indicator of claims processing speed whereby speed for claims payments was slightly slower during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.

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 six months ended June 30, 2026, this metric was 7.7%, which was mainly driven by both favorable trend factor development at the end of 2025 as well as favorable completion factor development from 2025.

For the six months ended June 30, 2025, this metric was 7.3%, mainly driven by favorable trend factor development at the end of 2024, with favorable completion factor development from 2024 also contributing.

For the nine months ended September 30, 2026, this metric was 8.4%, which was mainly driven by both favorable trend factor development at the end of 2025 as well as favorable completion factor development from 2025.

For the nine months ended September 30, 2025, this metric was 8.9%, which was mainly driven by favorable trend factor development at the end of 2024, with favorable completion factor development from 2024 also contributing.

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 six months ended June 30, 2026, this metric was 0.8%, which was calculated using the redundancy of $1,195.

For the six months ended June 30, 2025, the comparable metric was 0.9%, which was calculated using the redundancy of $1,065.

For the nine months ended September 30, 2026, this metric was 0.9%, which was calculated using the redundancy of $1,295.

For the nine months ended September 30, 2025, the comparable metric was 1.0%, which was calculated using the redundancy of $1,266.

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

6 unchanged sentences

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 2025 Annual Report on Form 10-K.

For additional information regarding our sources and uses of capital during the three and six months ended June 30, 2026, see Note 4, “Investments,” Note 5, “Derivative Financial Instruments,” Note 9, “Debt,” and Note 11, “Capital Stock – Use of Capital – Dividends and Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

A summary of our major sources and uses of cash and cash equivalents for the six months ended June 30, 2026 and 2025 is as follows:

Six Months Ended

For additional information regarding our sources and uses of capital during the three and nine months ended September 30, 2026, see Note 4, “Investments,” Note 5, “Derivative Financial Instruments,” Note 9, “Debt,” and Note 11, “Capital Stock – Use of Capital – Dividends and Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

A summary of our major sources and uses of cash and cash equivalents for the nine months ended September 30, 2026 and 2025 is as follows:

Nine Months Ended

2026 2025 Change

2 unchanged sentences

Purchases of subsidiaries, net of cash acquired

Proceeds from sales, maturities, calls and redemptions of investments, net of purchases — 329 (329)

Issuances of short- and long-term debt, net of repayments — 659 (659)

Proceeds from issuance of common stock under employee stock plans 88 21 67

7 unchanged sentences

Cash dividends (1,122) (1,152) 30

Changes in bank overdrafts (1,181) — (1,181)

Other uses of cash, net (29) (73) 44

1 unchanged sentence

Effect of foreign exchange rates on cash and cash equivalents (14) 1 (15)

Net increase (decrease) in cash and cash equivalents

$ 741 $ 272 $ 469

Other significant changes in cash year-over-year included (a) decreased usage of cash to repay short-and long-term debt, net of issuances, and (b) increased cash outflow from changes in bank overdrafts, increased purchases of investments, net of proceeds from sales, maturities, calls and redemptions and increased repurchases and retirements of common stock.

We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $38,773 at June 30, 2026.

Since December 31, 2025, total cash, cash equivalents and investments in fixed maturity and equity securities increased by $1,537, primarily due to increased cash generated from operations and decreased cash used in repayment of short- and long-term debt, net of issuances.

This increase was partially offset by increased cash used for changes in bank overdrafts and increased amounts for the repurchase and retirement of common stock.

Net increase in cash and cash equivalents $ 857 $ 425 $ 432

The increase in net cash provided by operating activities was primarily due to favorable net working capital impacts, partially offset by lower shareholders' net income.

Other significant changes in cash year-over-year included (a) decreased repurchases and retirements of common stock and increased proceeds from issuance of common stock under employee stock plans, and (b) increased purchases of investments, net of proceeds from sales, maturities, calls and redemptions, and increased repayments of short- and long-term debt, net of issuances.

We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $39,057 at September 30, 2026.

Since December 31, 2025, total cash, cash equivalents and investments in fixed maturity and equity securities increased by $1,821, primarily due to increased cash generated from operations and an increase in investment balances in equity securities.

This increase was partially offset by cash used for the repurchase and retirement of common stock, cash dividends, repayments of short- and long-term debt, net of issuances, and purchases of property and equipment.

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.

2 unchanged sentences

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 June 30, 2026, we held $2,062 of cash, cash equivalents and investments at the parent company, which are available for general corporate use, including investment in our businesses, acquisitions, potential future common stock repurchases and dividends to shareholders, repurchases of debt securities and debt and interest payments.

At September 30, 2026, we held $2,416 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.

7 unchanged sentences

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

Our consolidated debt-to-capital r atio was 40.8% and 42.1% as of June 30, 2026 and December 31, 2025, respectively.

Our consolidated debt-to-capital r atio was 40.7% and 42.1% as of September 30, 2026 and December 31, 2025, respectively.

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

10 unchanged sentences

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

As of June 30, 2026, our debt-to-capital ratio, as defined and calculated under the 5-Year Facility, was 40.8%.

As of September 30, 2026, our debt-to-capital ratio, as defined and calculated under the 5-Year Facility, was 40.7%.

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

As of June 30, 2026, we were in compliance with all of our debt covenants under the 5-Year Facility.

As of September 30, 2026, we were in compliance with all of our debt covenants under the 5-Year Facility.

We have an authorized commercial paper program of up to $5,000, 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 $0 and $0 of outstanding commercial paper at June 30, 2026 and December 31, 2025, respectively.

We had $0 of outstanding commercial paper as of both September 30, 2026 and December 31, 2025.

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 $0 and $150 of outstanding short-term borrowings from the FHLBs as of June 30, 2026 and December 31, 2025, respectively.

We had $0 and $150 of outstanding short-term borrowings from the FHLBs as of September 30, 2026 and December 31, 2025, 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 June 30, 2026, see Note 4, “Investments,” Note 5, “Derivative Financial Instruments,” Note 9, “Debt,” and Note 11, “Capital Stock – Use of Capital – Dividends and Stock

Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For additional information regarding our sources and uses of capital at September 30, 2026, see Note 4, “Investments,” Note 5, “Derivative Financial Instruments,” Note 9, “Debt,” and Note 11, “Capital Stock – Use of Capital – Dividends and

Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this 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”).

55 unchanged sentences

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