“The sticky nature of the persistent and elevated trend is extending the timeframe for full margin recovery past 2027, as we've previously discussed and you highlighted.”

In context

“Dan Kueter: Yeah. Thanks, Steve. Hi, Justin. Thanks for the question. Let me unpack a little bit for you what's going on in commercial business, as obviously trend and margin are tied together. I think it's pretty straightforward. First on trend, modestly above 11% that we were expecting, as Tim shared. There are multiple drivers. First, the ineffective IDR process that's associated with the No Surprises Act is being exploited by select providers and select geographies. It's contributing 50 basis points or so of incremental trend in 2026, now totaling at least 100 basis points of total cost. Additionally, provider coding intensity with office visits, emergency departments, and selective other care sites, being the primary drivers, is also contributing incremental trend to last year and to our expectations. Some consistent drivers continue to be pharmacy costs. I'd highlight specialty drugs reflecting both higher net costs and growth of newly covered indications. Anti-inflammatory and GLP-1s are part of that mix, as you would expect. Lastly, on the utilization and care patterns, we're not seeing any other areas of meaningful offset or pullback in those categories. Now the impact of that trend environment on our margins. We came into 2026 planning for margin expansion, as you highlighted, and simply put, we're not yielding the full margin expansion for which we'd planned in 2026. I see 2026 as a delay to that margin recovery trajectory, not a setback. The sticky nature of the persistent and elevated trend is extending the timeframe for full margin recovery past 2027, as we've previously discussed and you highlighted. We remain on a multi-year journey. We remain confident that that journey will result in a return to our historic margin performance of 7% or greater for the commercial group business. That performance is pacing, that recovery is built on a few things. Improved administrative cost efficiency, AI enhanced fraud, waste, and abuse efforts, and diligent focus, as always, on medical cost affordability. Thanks for the question.”