“If trends develop unfavorably and persist at the significant levels we have experience in recent months, our fourth quarter reported NBR could increase by over 700 basis points as compared to the fourth quarter of 2023.”

In context

“ges, as you have seen with our third quarter results. Similar to others within the industry, Medicare Advantage utilization continues to be elevated. We have also grown membership very rapidly with a very rich benefit offering, which has resulted in benefit-induced utilization. Medicaid continues to be pressured by the dislocation between acuity and rates, as well as seeing some pockets of higher utilization. We have also seen rapid growth in our individual exchange business, which has led to several disappointing updates on risk-adjusted revenue and, in some states, higher than expected utilization. To date, the combination of these factors has challenged our visibility and our 2024 outlook. While we are not providing formal guidance today, let me walk you through one potential scenario. If trends develop unfavorably and persist at the significant levels we have experience in recent months, our fourth quarter reported NBR could increase by over 700 basis points as compared to the fourth quarter of 2023. Additionally in this scenario, we would likely need to take a PDR on our group Medicare Advantage business related to 2025 dates of service, which would further pressure 2024 results. Despite challenges in 2024, we have taken deliberate actions that position us for growth in 2025 and beyond. While we will not give formal 2025 guidance until next year when we have better visibility on our 2025 medical cost baseline and our changing membership, I want to provide an update on some of the key headwinds and tailwinds. Starting first with the headwinds, in our PCW segment we expect earnings to decline in line with our long term guidance framework. As David mentioned, we are encouraged by the adoption of CVS CostVantage and the shift of commercial scripts to this model on January 1. We expect 20”