Good day, and welcome to the Molina Healthcare First Quarter 2022 Earnings Conference Call. [Operator Instructions] And I'd now like to turn the conference over to Joe Krocheski, Senior Vice President of Investor Relations. Please go ahead..

Good morning, and welcome to Molina Healthcare's first quarter 2022 earnings call. Joining me today are Molina's President and CEO, Joe Zubretsky; and our CFO, Mark Keim. A press release announcing the first quarter earnings was distributed after the market closed yesterday and is available on our Investor Relations website.

Shortly after the conclusion of this call, a replay will be made available for 30 days. The numbers to access the replay are in the earnings release.

For those who listen to the rebroadcast of this presentation, we remind you that the remarks made are as of today, Thursday, April 28, 2022, and will not be updated subsequent to the initial earnings call. In this call, we will refer to certain non-GAAP measures.

A reconciliation of these measures with the most directly comparable GAAP measures can be found in our first quarter 2021 press release.

During our call, we will be making certain forward-looking statements, including, but not limited to, statements regarding current 2022 guidance, our growth strategy and expected growth, our RFPs positions, the COVID-19 pandemic, our acquisitions, our future margins and embedded earnings power and our long-term outlook.

Listeners are cautioned that all of our forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from our current expectations.

We advise listeners to review the Risk Factors discussed in our Form 10-K annual report for the 2020 year filed with the SEC as well as the Risk Factors listed in our Form 10-Q and our Form 8-K filings with the SEC. After the completion of our prepared remarks, we will open the call to take your questions.

I will now turn the call over to our Chief Executive Officer, Joe Zubretsky.

Joe?.

We are increasing our full year 2022 adjusted earnings per share guidance to know less than $17.10.

Specifically our increased 2022 earnings guidance reflects the favorable impacts of strong first quarter performance, underlying strength in the business in the rest of the year, the margin associated with the increase in our premium revenue, the combination of which is largely offset by a $0.50 per share increase in projected net effect of COVID.

We have remained cautious in forecasting utilization trends in the remaining nine months of the year.

Due to the uncertainties of COVID, and related utilization curtailment as well as core medical cost trend we believe at the end of the second quarter our membership will have seasoned enough to allow us to fine tune our forecast of COVID related medical cost and core medical cost trend.

We are confident in our 2022 outlook that features revenue growth rates consistent with our long-term targets, and after tax margin at the midpoint of our long-term guidance range and strong earnings per share growth of 26%. Turning now to an update on our strategy for sustaining profitable growth.

Building on our momentum from last year, we are off to a strong start in 2022. Based on our past track record, we are confident in successfully retaining the Medicaid contract that are currently in a procurement process. Our RFP responses have been submitted in Mississippi and California and are pending evaluation and subsequent award announcement.

The Texas STAR+PLUS RFP has been issued by the state and our response is currently being developed. We have a high degree of confidence in retaining these contracts as a result of our operational and clinical excellence, standing and reputation, innovation and the demonstrated ability to write winning proposals.

At the beginning of the year we successfully launched our Medicaid plan in Nevada, adding a new state to our footprint and 125,000 members. With multiple RFP opportunities over the coming years, we remain confident in our ability to win additional new state contracts.

We have one new state proposal pending in Rhode Island and many other new state business development opportunities well in process. Our M&A platform continues to execute at a high level. On January 1st, we closed on the acquisition of Cigna's Texas Medicaid business, deepening our service offerings in the state and adding 44,000 high acuity members.

Our acquired businesses are achieving or exceeding their earnings accretion targets. The pipeline of acquisition opportunities remains robust. We are confident in our ability to drive continued value from this important dimension of our growth strategy.

The company's performance continues to validate our long-term strategy and its value creation and potential. We can and will grow the top line at 13% to 15% per year on average over time by a combination of market share gains, new contract wins, footprint expansion and of course bolt-on M&A.

We can achieve this growth and maintain pre-tax margins in the range of 4Tto 5%. Rates are stable and our effectiveness at medical cost management while ensuring optimum quality has been consistently demonstrated. A number of external factors are combining to support government sponsored healthcare.

In particular demographics, economic disruptions and political priorities are working together to generate meaningful tailwinds for the industry. And finally, our strong cash flow generation gives us ample capacity to invest in new capabilities and acquisitions.

Our strategy is sound validated with each quarter's performance and will continue to be valued creating.

As I conclude my remarks, I want to express my continued gratitude to our management team and to our nearly 14,000 Molina colleagues, their skill, dedication and steadfast service form the foundation for everything we have achieved and everything we will achieve in the years to come.

With that, I will turn the call over to Mark Keim for some additional color on the financials.

Mark?.

Our reserve approach remains consistent with prior quarters and we continue to be confident in our reserve position. Days and claims payable at the end of the quarter was flat sequentially at 51 days of medical cost expense. Finally, a few comments on guidance. We have increased our 2022 adjusted earnings guidance to no less than $17.10 per share.

We continue to project slightly more than half of the year's earnings in the first two quarters. In addition, we have increased our view of embedded earnings by $0.25 to $2.75 per share.

The increase is driven by the higher net effect of COVID we are now expecting this year, partly offset by moderately higher impact from redetermination that we expect next year stemming from the extension of the public health emergency.

As a reminder, this embedded earnings power does not represent 2023 guidance, but rather an accounting of drivers that are temporarily suppressing our earnings profile, and our current projection of the impact of Medicaid redeterminations post 2022. This concludes our prepared remarks. Operator, we are now ready to take questions..

[Operator Instructions] And the first question comes from Matthew Borsch with BMO Capital Markets. Please go ahead..

Good morning. Thanks for taking my question here. Ben Rossi filling in for Matt. I just wanted to ask about the exchange.

So as a follow-up to the expected revenue number attrition for marketplace, which decreased about 30% for premiums and about half membership enrollment from year-end last year, can you help us think about how trends and marketplace margins were impacted by the diverse selection dynamic this past quarter compared to where margins sit at the end of the year? Because you previously mentioned last call about a possible 7 to 8 point increase during the quarter.

I'm just curious on how that progress is coming along.

And where do you think the rate of about 1.5% to 2% monthly attrition is still representative for the group?.

Hi Ben, this is Joe. The marketplace business is now perfectly positioned to achieve our mid-single digit pre-tax margin target for the year. I will tell you it's very difficult to make comparisons year-over-year given the substantial mix shift that we orchestrated from 2021 to 2022.

So some data points are 78.6% MCR in the quarter was burdened by 270 basis points of COVID – so on our ex-COVID basis is closer to 76 that will light grow for seasonality during the year modestly. And we believe we'll achieve in the middle of our long-term target range at 79% for the full year.

We're confident in that, as Marc said in the prepared remarks because of the mix of renewal membership versus new membership, which is now two-third renewal, one-third new. The mix of silver versus bronze, which is now 75/15 and last year it was 55/45 and the fact that the SEP period last year took all comers.

There were no income cutoffs and this year we believe the eligible population for SEP has been basically reduced by half due to the limitation on income to 150% of FPL. So year-over-year comparisons are very, very difficult given the dramatic orchestrated shift in the book.

The business is now very, very well positioned to achieve our mid annual digit pretax margin for the full year..

Great. Thank you..

The next question comes from Kevin Fischbeck with Bank of America. Please go ahead..

Great. Thanks. I just wanted to clarify the comment about how MLR has performed versus your long-term target in Q1.

Is that basically a comment that you'd expect the years MLR to come in as expected because some businesses, I guess, particularly the exchanges have that seasonality where you'd expect Q1 to always be the lowest in the quarter, and therefore almost always be below your target MLR for the year? Or are you saying it's below your target MLR for Q1? Just trying to understand if you're telling us that this will persist to the rest of the year or just whether Q1 was a good quarter?.

Sure. Kevin, it's Joe, and then I'll kick it to Mark. Yes, there is some modest seasonality to the business. In fact, I would say that the seasonality and marketplace is much more dampen than it has in the past due to the higher silver mix that we have one data two.

The answer to your question is both, we're hitting our long-term targets both on the quarter and we expect to hit them for the full year, although there's 70 to 90 basis points of seasonality from the front end of the year to the back end of the year.

Mark?.

Yes, that's exactly right, Joe. The answer is both within the quarter all three lines of business were in – within the long-term guidance.

In fact, Medicare was better and they're all tracking to be squarely in the middle of long-term guidance on a full year basis and of course that's reflected in our full year guidance Operator?.

The next question comes from Steven Valiquette with Barclays. Please go ahead..

Great, thanks. Good morning, everybody. So yes, just regarding the COVID impact on MLR across all your books of business in the first quarter, it was obviously pretty low on Medicaid, but then much higher on Medicare and marketplace.

I guess I'm curious which one of the three COVID impact trends really surprised you the most in the first quarter? And also as we think about that the extra $0.50 of EPS headwind in the guidance for 2022 from COVID, is there any bias for that to be skewed towards any of the specific books of business? Or is that just too hard to predict right now? Thanks..

Hi, Steven, it's Joe, and then I'll kick it to Mark for some additional color. The net effect of COVID was slightly higher than our expectations in the quarter.

I remind everyone that we calculate or estimate the net effect of COVID as being the direct inpatient cost of COVID related care offset by an estimate of what we believe to be utilization curtailment due to the pandemic. And furthermore the effect of our outperformance in the states that continued to carry the COVID related corridors forward.

That's how we calculate the impact. For the most part in the recent past we've seen the direct cost of COVID related care, which were very significant in the quarter. It surged in January and was significantly reduced in both February and March, pretty much offset by curtailment, not totally but pretty much.

And then of course our outperformance, which we continue to enjoy in the states that have carried for the corridors, continues to be captured by the corridors.

So it was a little higher than expected and the reason we increased our estimate for the full year is you're never completely comfortable that curtailment will always be a direct offset to COVID related care. And to the extent it doesn't, we wanted to be conservative with our outlook for the year..

Yes. And just to build on Joe's comments, clearly in Q1 we saw higher net effective COVID as a percentage or in the MCR in Medicare and marketplace. As Joe mentioned the increase of $0.50 across the rest of the year really about some certainties and some conservativism about the outlook for the cost of COVID in-patient in the related curtailment.

Where that might manifest? We've typically seen a little more in Medicare and marketplace, but it can move around among the lines of business but I think that's a pretty good overview of our outlook..

Okay. That's great. Thanks..

The next question comes from Justin Lake with Wolfe Research. Please go ahead..

Thanks. Good morning. I wanted to follow-up on your comments around the $2.75 of kind of pent-up earnings. And as I look at your – as I look at your run rates from an EPS perspective, it looks like your margins are towards the or pinned to the higher end of your old target rates across the book.

One is that right or do you feel like you've still got some room to the high end? And if so, if you are at the higher end, do you feel like you have upside to those margin targets? Do you feel like there's further room in terms of earnings power or should we look at that $2.75 as being more cushion again something that could happen, like state rates, get a little tougher or what have you?.

Sure. Justin, its Joe, and then I'll turn to Mark for some color. But we are operating in the first quarter given the seasonality of the business, at the high end of our margin range we produced an after tax margin of 3.7% on a pretax margin of 4.9%.

For the year, as I just suggested with the MCR seasonality commentary that that will moderate to where we estimate in our full year guidance of pretax margin of approximately 4.4% and 3.3% after tax in the middle of the range.

So yes, if you then take embedded earnings purely without any other puts and takes for future forecasting and guidance; it would bring you higher in the range, which is entirely possible. But as you suggest our embedded earnings guidance is not a forecast. Our embedded earnings estimate is not a forecast and is not guidance.

And yes, it could move us the top end of the range or act as a buffer against other things that we need to forecast in the future..

That's right, Justin. So as Joe mentioned, guidance is smack in the middle of the range, 3.3% is in the middle of the range of 3% to 3.7%, so next year that's $2.75 is certainly upside. The flip side as we grow our business, we stack on M&A, we add new procurements.

Those tend to come in a little lower in margin in the early years, and you've always got the impact of organic. So what we always say is it's certainly not guidance. It's just an accounting of some of the things that are depressing earnings this year. There'll be other things to add in next year, but it's certainly a good tailwind into 2023..

All right. Thanks for the color..

The next question comes from Nathan Rich with Goldman Sachs. Please go ahead..

Hi, good morning. Thanks for the question. I was wondering if you could just elaborate a little bit more on what drove the higher COVID headwind estimate that's now incorporated in guidance. And it seems like it may you related to just a more conservative forecasting on non-COVID utilization trends.

I was just wondering if you could kind of go into more detail on what you've seen in March, as COVID cases have died down and how we should think about kind of the 2Q and the go-forward there? Thank you..

Sure, Nathan. The first thing I would say is when I say it subsided during the quarter, it did so dramatically. Our COVID direct cost of care in January were the highest since the beginning of the pandemic.

In February those costs were cut to one-third of the January actual and in March cut yet another one-third in March off of February, a dramatic decline. But the BAQ was out there and while the infection rate is high, the severity and the treatment protocols are actually quite light.

However, we never know whether it's going to resurge and we wanted to be as you suggested cautious with our outlook for COVID, particularly because in the recent past utilization curtailment has nearly offset the entire direct cost of cover related care. We never have full assurance that that will continue.

Our second point, on what we call core medical cost trend, just the routine of cranking up our medical economics engine and truly understanding all the different dimensions of medical costs. We saw nothing in the quarter that surprised us or was unusual.

All the things that you've read about and are being reported on where orthopedic procedures coming back with joint replacements, the ambulatory and outpatient settings are back in business, and we're seeing an uptick, but nothing unusual.

We see spikes in pharmacy costs here and there; as some of our state single preferred drug lists sometimes promote the use of branded drugs. So nothing unusual and nothing surprising. It's the normal many inflection points here and there, but we wanted to remain cautious.

We are hopefully on the tail end of the pandemic and we usually are cautious in our medical cost forecasting and want to see Q2 results before we put a better fine tune estimate on it..

Thanks very much..

The next question comes from Michael Hall with Morgan Stanley. Please go ahead..

Hey, thank you guys. Just want to dive a little deeper on redeterminations.

So with the resumption of redetermination being pushed out further and further into the year just in terms of timing in cadence of recapturing those lives into your exchange book, as those lives drop off, would you anticipate more of a, I guess like an immediate turnaround on recapturing them or is it more reasonable to assume the [indiscernible] might take couple or a few months to sign up? And on the net impact on those labs, on one hand I know you price for sizeable margin improvement on those new lives, so they should becoming more profitable, but as these lives come onto your book later in the year, it becomes more difficult to properly risk score them.

So just want to get your thoughts on that?.

Well Michael, we always characterize the redetermination phenomenon as when it's going to happen is really just a mathematical exercise of when the membership trips and revenue follows, which fiscal years is it going to hit.

And right now it's – we're going to enjoy that membership and revenue for a longer period of time in 2022, and more of it will fall off in 2023. I think we think the real key point is how much of it persists beyond the redetermination period.

And our forecast is that we grew 750,000 even slightly higher than that of organic growth in Medicaid since the beginning of the pandemic, we forecast to retain half of it. We believe the revenue growth associated with that was $2.9 billion, and we'll continue to have $1.6 billion of that when the re-determined processes complete.

We also respect because CMS is now given clear guidance and is concerned with people being orphaned without healthcare, that they've made it a lot easier for us to work with our state customers to warm transfer members off of Medicaid if they're no longer eligible into marketplace and or Medicare, and these are products we continually enjoy.

So that's sort of the strategy we have operational protocols in place to handle all this. We are concerned with the individual state's ability to handle a tremendous amount of value, 80 million people going through redetermination and re-eligibility inside of one-year is a huge undertaking.

But we are really confident in the forecast that we've given on how much membership we will retain and potentially warm transfer into marketplace.

Mark anything on the year-over-year comparison?.

Joe, I think you hit the key points there. The only thing Michael that you also asked about is just the timing of them coming over from redetermination to marketplace, that'll vary.

In certain places we have really good operations to proactively reach out to people, help them with their redetermination and to the extent they lose Medicaid eligibility, immediately get them signed up in marketplace. In other cases, members may fall off and after a month or two come back on.

So I think state-by-state as the rules slightly vary exactly how those transitions work will vary as well, but I think you've hit the big points..

The next question comes from A. J. Rice with Credit Suisse. Please go ahead..

Hi, everybody. Just maybe to continue on discussion about the marketplace is obviously the enhanced subsidies under the ACA are potential to go away at the end of the year if Congress doesn't act.

Do you have a sense of how much of your marketplace membership today might be impacted by that? How is that if the possibility that might go away, how is that impacting your thinking about exchanges, recapture, re-verification, and so forth next year? Is there any contingency either in your bid approach or otherwise that you can put in place, and you're thinking about?.

AJ it's Joe. Just at a very, very high level we believe that the impact to Molina's marketplace business will more or less reflect what happens nationally.

So, if there's 14 plus million members in marketplace today across the industry, estimates have the enhanced subsidies causing an attrition of slightly more than, but just about three million members back down to 11. I also would remind you that there is this family glitch fix that will move the other way.

Estimates say that there's five million families in the United States that might at least be eligible. Our view is probably only 20% of that will actually come back into the product. So, fourteen minus three, plus one, maybe it's a $12 million membership portfolio nationally.

And we believe our – we have no reason to believe that our membership will react any differently than that. Look, it's an important product in the portfolio because we consider it to be an adjunct of Medicaid, not only operationally, but strategically.

And I think when these members redetermined this year, it's going to be the proof point that if we can warm transfer them into a marketplace product and enjoy their membership for another year or two, then it's position in the portfolio is validated. We like it at 7% of revenue at $2 billion.

Maybe that flex is up and down here with these two, industry phenomenon you described. But our goal is to maintain this business at mid-single digit margins. And we will let the revenue flex up and down with the goal of hitting mid-single digit pretax margins..

Okay, great. Thanks a lot..

The next question comes from Scott Fidel with Stephens. Please go ahead..

Hi, thanks. Good morning, everyone. Wanted to stick on the market a place and get your guys’ perspectives just on the sort of broader under [indiscernible]..

I'm sorry. We have experienced a technical difficulty here. If you were in a question queue, could you please re-queue? I will unmute Scott Fidel’s line in just a moment, Scott Fidel you are unmuted now..

Okay. Thanks. We'll I guess we'll try it again. Hey, good morning. Just wanted to ask about your thoughts on the underwriting cycle in the exchange market that we've seen in the last couple years had considerably more capacity coming into the market, some of that pretty irrational in terms of some of the pricing strategies.

And just trying to think about sort of where we're sitting in that dynamic heading into 2023, we've seen one of the most aggressive players in the market already talk about pulling back from a number of their state footprints and clearly losses for several of these [indiscernible] have gotten pretty extreme right over the last year or two.

So just interested in how you guys are thinking about the competitive dynamic for the exchange market for 2023.

And maybe how that presents itself around some of your strategy around pricing and growth for next year?.

Sure Scott, and then I'll kick it to Mark for color. But as [indiscernible] repeating the strategy is this is an adjunct to Medicaid. It leverages the Medicaid network. And it's a residual market for people that are no longer eligible for Medicaid, but still need subsidies to afford healthcare. We follow our Medicaid foot.

So, the strategy is very, very well understood here at the company. And the financial profile again, bears repeating.

We will allow revenue to flex up and down, whether it's trend related, whether it's new CMS rules related or whether it's competitive forces, we will let revenue flex up and down with the goal of maintaining this business at mid-single-digit margins, given that the financial complexity of it is, it's more complex than the other products we have in the portfolio..

Scott, your question is well placed though with many players not having a great experience with SEP, how will they price going is a really good question. As Joe mentioned, we will clearly prioritize our target margins over volume. As Joe said, revenue will flex up, flex down accordingly.

But what I like about our strategy is we're in 14 states and I can't predict who is going to price how in any one of those states. We'll put our best pricing out at our target margins. And with the diversification of 14 states, I can't predict any one of them, but across those states we'll be well positioned in some maybe less competitive in others.

But we should have a pretty good portfolio outcome at the target margins we're shooting for..

Okay. Thanks..

The next question comes from Stephen Baxter with Wells Fargo. Please go ahead..

Yes, hi. Thanks for the question. So, it's been a while since the 50% Medicaid retention figure was introduced, I was hoping you could give us a reminder of what your analysis just looks at to arrive at that figure? And then maybe some context about what metrics you're monitoring.

Essentially the question is why or why not has this metric changed as a result of the really strong employment market that we're seeing in subsequent quarters and some significant improving the employment levels there? Thank you..

Sure. Stephen I'll make some preliminary [ph] comments and then kick it to Mark. One of the things we like to remind people when they look at our 50% retention assumption, our membership organically grew approximately 25% since the beginning of the pandemic.

If we say we're going to keep half of it that implies a growth rate net of attrition of about 12%.

I think what a lot of us forget is that during the period of time if the pandemic never happened, the Medicaid roles will have grown or would have grown anyway, just due the natural growth in the population of the U.S., particularly at the end of the economy, the low wage service end of the economy.

So, in our view, the amount of membership we're going to retain from the organic growth during the pandemic is not that much more greater than the natural growth that the industry would have experienced since beginning of the pandemic.

Now I'll kick it to Mark about how we went state by state, and really try to drill down and understand the microeconomic effects in each state in order to arrive at our estimate..

Great. As Joe mentioned since the start of the pandemic, we've organically grown about 25%. If we're going to keep to that, that's about 12%. And if you look at the four or five years that that whole cycle takes, that's growth rate of 2%, 3% a year which is probably organically what Medicaid might have grown at anyway.

So, arguably you are right back to where you were if there hadn't been a pandemic.

Now, when we look bottoms up and we look at any given state where those members came from, that are in our increased roles, a good component of it is what's sometimes referred to as the woodwork effect, the people that were previously uncovered, but because of the pandemic realized it's a great time to come into the Medicaid pool and get covered, they're certainly going to stay with us.

Every time we see a crisis like this the roles of Medicaid move up and never quite go back to where they were. So, at a bare minimum, that woodwork effect will account for some of the increase. And again, over the four to five years, arguably you might be where you were without a pandemic coming out of it, just on normal growth rates..

And Steven, I also point to even though the unemployment rate national averages really don't mean a whole lot you have to actually look state by state and look at the low wage service economy. That's been ravaged by the economic distress that we're experiencing here in the U.S.

That combined with the reservation wage, the wage at which people want to go back to work has increased dramatically. And of course, the great resignation with people just hesitant to go back to work due to other factors.

So, the environment in this population certainly suggests that post-pandemic the Medicaid roles will be higher than they were pre-pandemic..

The next question comes from George Hill with Deutsche Bank. Please go ahead..

Yes, good morning. And thanks for taking the question.

I guess so this is kind of a broad-based question, but can you talk about how your rate discussions are going with states as you guys contemplate and think about inflation? And maybe just talk a little bit about how Molina kind of sees self-exposed to inflation is clearly a wage pressure internally.

Like to what degree does providers wanting exact price kind of take a toll in your book if at all given the Medicaid population? And just like, I ask this question, selfishly, internally, we talked a time about inflation here. We just love to think about how you guys are thinking about inflation impacting kind of your business.

And I'd probably ask you to focus on kind of like the ways that might not be obvious, like basically aside from wage pressure..

Sure. Yes, I'll answer the second part first, because it bears repeating. Clearly, it's been harder to keep our capacity filled and this is industry wide hiring has been very, very difficult. And people are feeling the inflation pressures. And we noted some additional contract labor costs and some additional overtime costs in the first quarter.

And people are feeling the stress of the pandemic. We feel that we've been very fair with our population and given them adequate merit increases to key pace with inflation. But we continue to monitor it. Right now, we see no unusual trend or outlook for our labor costs internally.

Our biggest challenge is keeping the seats filled and making sure that we never disappoint a customer because we lack the capacity to service the volume. On the medical cost side, we're not seeing it. Now bear in mind the basis, the chassis for our reimbursement is the Medicaid fee schedule.

And we're not seeing any dramatic shifts in the Medicaid fee schedules coming out from states. Now, you’ll also negotiate individually a percentage of that Medicaid fee schedule with the individual providers, whether they are physician groups or hospitals. And we're seeing no additional pressure there either.

I will tell you that we are comfortable that if we do start to see the inflationary pressures, the real question is, does the rating process keep pace with that? And we believe the answer is yes. States are very much in tune with the trends in medical cost and as are their actuaries.

And if we start to see inflationary pressures, the real question is will rates respond? And we believe the answer is yes, they will..

That's helpful. Thank you..

And our final question comes from Josh Raskin with Nephron Research. Please go ahead..

Thanks for taking the question. I guess my question will be on Medicare Advantage then this morning, the membership growth remains very strong. I was wondering if you could just speak to where those adds are coming about geographically and from where are they all coming from fee-for-service or competitors.

And then just on the yields, it looks like the yields were relatively flat. So, I'm trying to figure out if that's product or geography mix or something else. And I just would have expected a little bit of inflation with risk adjusters. So curious if those were not as additive as expected..

Well, Josh, our Medicare business is growing nicely. And of course, the margins don't get any better than this. It's a low income, high acuity strategy, MMP anti-SNP and in our MAPD launch, we clearly end the aim, the MAPD product at low-income individual. So, it's a low-income, high-acuity strategy. We grew 6,000 in a quarter up to 148.

Some of came in through the Cigna acquisition and the MAPD launch was very, very successful. We have three distribution channels. We have an external broker channel, independent broker channel, captive agent channel and a tele-sales channel.

And they are all really working hard to and have increased their productivity here over the last year under new leadership that we have in our distribution channel strategy. So, it's growing very nicely. I mean, the yields are in line with our expectation.

Look at the margins in the business at an 85.6% or 86.5% MCR for the quarter and an outlook to be at the bottom end of our long-term target range. And the rate increase that we're getting for next year. We believe our product is competitive, it has all the ancillary services that we allow it to be competitive.

Our star ratings are good enough that we can maintain these margins. And we're very, very bullish on the growth prospects of this business over time. We plan to grow it to 158,000 to the end of the year, which would be 10,000 growth just inside of the year..

We have no further questions. So, this concludes our question-and-answer session, which also concludes today's conference call. Thank you very much for attending and you may not disconnect..