Centene Corp (CNC) — Q1 2021 Earnings Call Transcript

Thank you, Rocco, and good morning, everyone. Thank you for joining us on our first quarter 2021 earnings results conference call. Michael Neidorff, Chairman, President and Chief Executive Officer; and Jeff Schwaneke, Executive Vice President and Chief Financial Officer of Centene, will host this morning's call, which also can be accessed through our website at centene.com. Any remarks that Centene may make about future expectations, plans and prospects constitute forward-looking statements for the purpose of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements, as a result of various important factors, including those discussed in Centene's most recent Form 10-Q filed today, and the Form 10-K dated February 22, 2021, and other public SEC filings, including the risks and uncertainties described with respect to the potential impacts of COVID-19 on our business and results of operation. Centene anticipates that subsequent events and developments may cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. The call will also 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, which is available on the company's website under the Investors section. Additionally, please mark your calendars for our upcoming Investor Day to be held virtually on June 16, 2021. With that, I would like to turn the call over to our Chairman, President and CEO, Michael Neidorff. Michael?

Thank you, Jennifer. Good morning and thank you for joining Centene's first quarter earnings call. Today, I will review our first quarter performance, provide an update on our markets and products, and discuss how we are positioned to sustain our momentum in the ongoing pandemic environment. While we have made great progress in working our way out of the pandemic, nationally, as we have seen recently, it is not yet over. We are off to a strong start in 2021, with solid revenue and earnings growth. It was a good quarter. Our teams continue to execute well, generating revenue of $30 billion, an increase of 15% compared to the first quarter of 2020. Membership was $25.1 million at the quarter end. This represents an increase of $1.3 million compared to the year-ago quarter. Adjusted diluted earnings per share of $1.63 compared to $0.86 in the prior year quarter, representing an increase of 90%. Overall, we are pleased with our first quarter performance and the trajectory of our business. And today, we are updating our full year guidance. This is primarily driven by several tailwinds. These include continued Medicaid membership growth, amid suspended eligibility redeterminations. Our current guidance anticipates the suspension continuing to at least August 1, based on the fact that it is renewed 90 days at a time. Second, the marketplace special enrollment period, which I will discuss in more detail shortly. And third, the hold on the Medicare sequestration. Our results to date also reflect a decrease in normal utilization, offset by COVID-19 expenses and stake recoupment of premiums, which Jeff will provide additional detail on shortly. As we have done throughout the pandemic, we continue to monitor the headwinds and tailwinds we anticipate will impact our operating landscape for the remainder of the year and possibly into 2022. Consistent with past quarters, I will provide you with updates based on the facts as we know them today. When taken together, we believe the essence of these factors is positive. Anticipated tailwinds include continued lower than normal utilization. Overall, the first quarter was lower compared to the prior quarter, although we saw an increase in non-COVID utilization in our marketplace business. While the trajectory of utilization depends on the pandemic and remains uncertain, we continue to expect utilization to come in below historical averages during the second quarter, with the potential for some normalization starting to occur in the second half of the year. Other key profitable tailwinds we see include potential for continued growth resulting in higher-than-anticipated membership in our marketplace business from the special enrollment period, and a probable extension of the Medicaid eligibility redetermination suspension beyond August and through the end of the year, possibly into the beginning of 2022. As a potential headwind, we continue to monitor additional state rate adjustments. For 2021, we anticipate a $550 million revenue impact of state revenue actions and rate actions. Jeff will provide some additional color on this shortly. But I will share that we have seen only one action in the first quarter of the year. And we are not currently aware of any additional planned adjustments for other quarters. In fact, some quarters may -- we believe may be allowed to expire. To reiterate, overall, as we see them today, we believe these factors balance in our favor. As we conclude the first quarter of 2021, we are pleased with our ability to drive significant growth and our updated guidance reflects the strength of our business through the year. We also remain vigilant that this is a year with unique drivers, including the suspension of Medicaid eligibility redeterminations and the marketplace special enrollment period, which we cannot be certain will continue throughout all of 2022. Consistent with prior years, at our June Investor Day, we will provide an update on these factors in 2022. We recognize many factors, as we see them today, balance positively and the outlook remains fluid, dependent on the prevalent policy landscape. The strength of our diversified business is apparent across our product portfolio. In our Medicaid business, we continue to participate in an active RFP pipeline. We successfully renewed our contract in Hawaii at the end of March. North Carolina and Oklahoma both remain on track to go live later this year. For 2021, we continue to expect a composite rate adjustment of 1.7%, consistent with our initial guidance. Our Medicare business delivered continued growth. Medicare grew by over $1 billion year-over-year in the first quarter, representing growth of 41% and demonstrating the strength of the platform and our ability to leverage our national scale going forward. In our marketplace business, we are pleased to be operating in a supportive environment. The administration continues to invest in the product. Just last week, an additional $80 million was announced for navigators to boost enrollment. Based on data released by CMS, Centene is a clear leader in new enrollment on the federal exchange. Since the beginning of the year, we have enrolled over 320,000 new members in our marketplace product. We believe these results demonstrate the strength of our strategy to provide consistent quality care and not to participate in a price-related race to the bottom with narrow network coverage. I will remind you that narrow networks often encourage out-of-network utilization, which tends to be uncontrolled and expensive. We see an opportunity to further grow with the enhanced advanced premium tax credits that took effect on April 1. The impact of which we believe will encourage consumers to prioritize quality, consistency, and experience over premium costs. Moving ahead, we intend to maintain and consider building additional products around this strategy. On the technology front, we're making meaningful progress to advance our capabilities to provide high-quality integrated care for our members. We look forward to providing you more details on our unique technology strategy at our Investors Day in June. We continue to advance towards the completion of the Magellan Health acquisition and remain on track to close the transaction early in the second half of 2021. The Hart-Scott-Rodino waiting period expired in mid-March, and we're working diligently towards obtaining the necessary state approvals. Our integration planning efforts are in full swing, and we are enthusiastic about the combination, which will enable us to expand access to specialty care and nurture a fully integrated model across behavioral and physical health. I would like to take a moment to comment on the situation in Ohio. We are still in an active RFP process, where we finished second out of 11 bidders, according to a scoring summary released by the Ohio Department of Medicaid. Regarding the legal and regulatory landscape, Centene has been clear that we maintain the claims to be unfounded. For additional information about our position on this matter, I want to direct you to our website for links to our court filings. We look forward to answering any questions from our governmental partners regarding this issue and remain committed to the highest levels of quality and transparency in how we serve our state partners. Before I close, I'd like to talk about Centene's role in COVID-19 vaccine distribution. Over the past few months, our data and care management teams have worked tirelessly to identify members at the highest risk for COVID-19 and provide those individuals with personalized and culturally sensitive outreach. In addition, we have partnered with Lyft to support individuals with transportation to vaccine appointments. With the Gold Jackets of the Pro Football Hall of Fame, with whom we have had an ongoing partnership, we created PSAs focused on increasing awareness about the safety and efficacy of COVID vaccines. This type of innovative work is happening across the organization, and I want to recognize and thank our employees for their unwavering commitment and dedication. In closing, we started the year strong and look forward to carrying this positive momentum through the remainder of 2021 as we experience a supportive environment in expanding access to care. We continue to see long-term opportunities to drive growth in our top and bottom line and enhance margins as we provide the highest level of care to our members at the lowest cost. I look forward to seeing all of you, albeit virtually at our investor event on June 16th. Thank you for your continued interest in Centene. I'll now hand the call over to Jeff.

Thank you, Michael, and good morning, everyone. This morning, we reported first quarter 2021 results and what was a good start to the year. First quarter revenues were $30 billion, an increase of 15% compared to the first quarter of 2020, and adjusted diluted earnings per share was $1.63, compared to $0.86 last year. As a result of the strong first quarter performance, we increased our full year 2021 adjusted EPS guidance by $0.05 per share to a range of $5.05 to $5.35. I will provide further comments related to our updated financial guidance shortly. First, let me provide additional details for the first quarter. Total revenues grew by $4 billion over the first quarter of 2020 due to a full quarter of contribution from WellCare and the ongoing suspension of Medicaid Eligibility Redeterminations, partially offset by an overall decrease in marketplace membership, state rate and risk-sharing actions and the repeal of the health insurer fee in 2021. Our marketplace membership decline in the quarter was less significant than previously expected as a result of membership gains achieved during the special enrollment period. Total membership increased to 25.1 million in the quarter, up 5% compared to a year ago. Since the pandemic began in March of 2020, we have added a total of two million Medicaid members. Our HBR was 86.8% in the first quarter, compared to 88% in the first quarter of 2020. The HBR benefited from lower overall medical utilization trends due to the COVID pandemic and lower costs associated with the flu. This was partially offset by COVID-related costs, state risk-sharing mechanisms, and higher COVID and traditional utilization in the marketplace business. Our adjusted selling, general and administrative expense ratio was 8.1% in the first quarter this year compared to 8.6% last year and 9.7% in the fourth quarter of 2020. The adjusted SG&A expense ratio benefited from the ongoing suspension of Medicaid eligibility redeterminations and the leveraging of expenses over higher revenues due to recent acquisitions. Cash flow provided by operations was $43 million in the first quarter. The lower operating cash flow for the quarter was primarily driven by a delay in premium payments of $910 million from the state of New York due to the end of their fiscal year, which was collected in April. We continue to maintain a strong liquidity position of $369 million of unregulated cash in our balance sheet at quarter end, debt at quarter end was $16.8 billion, which includes $152 million of borrowings on our revolving credit facility. Our debt-to-capital ratio was 38.5%, excluding our non-recourse debt, compared to 39% in the fourth quarter of 2020. Our debt-to-capital ratio was 38% when netting our unregulated cash with our debt at quarter end, which represents a 90 basis point decrease since March of 2020. Our medical claims liability totaled $12.8 billion at quarter end and represents 49 days in claims payable, compared to 51 days in the fourth quarter of 2020. DCP was impacted by the timing of medical and pharmacy claim payments. We are making excellent progress toward the closure of Magellan, and we remain comfortable with our previously communicated accretion targets. Over the last several months, we have gained increased visibility into a number of important factors and have included those items in our updated 2021 financial guidance. These factors specifically include the ongoing suspension of Medicaid eligibility redeterminations through August 1. The delay in the California pharmacy carve out until July 1, and the delay in the New York pharmacy carve out through year-end 2022. The new business win in Oklahoma with an assumed go-live date of October 1, expected marketplace membership gains through the special enrollment period, Medicare membership fee schedule increase and sequestration delay and updated expectations of state rate and risk-sharing mechanisms. These changes increased our total revenue guidance for the year by $4 billion at the midpoint to be within a range of $120.1 million and $122.1 billion. Our HBR guidance increased by 50 basis points at the midpoint due to the mix of items, such as the Medicare fee schedule, increased state risk-sharing mechanisms and Medicaid growth, which all carry a higher HBR. Taken all together, this has an overall neutral effect on earnings, and the dynamics are consistent with the headwinds and tailwinds we provided on our fourth-quarter earnings call. Additionally, as I highlighted earlier, we have increased our adjusted diluted EPS guidance for the full year at the midpoint by $0.05, reflecting our strong first quarter performance. Let me highlight some more details on some of these items. We now expect Medicare Advantage enrollment growth to exceed 20% in 2021. This strong growth demonstrates the value of the WellCare acquisition, providing positive momentum for the organization to build off of as we formulate our bids for Medicare Advantage in 2022. As Michael mentioned, marketplace enrollment expectations for 2021 are better than our previous estimates. The special enrollment period provides Centene with an opportunity to reach many more eligible consumers. This strong growth demonstrates our organizational commitment to leadership in this product. We continue to view the marketplace as a long-term growth opportunity for Centene. We have increased our estimate for state rate and risk-sharing mechanisms from our previous guidance to $550 million for 2021. In the first quarter, the state of New York implemented a risk corridor retroactive to April 1, 2020, that increased our payback by $40 million. At this time, we are not aware of any new corridors or retroactive rates and the increase in our full year estimate reflects the performance of risk mitigation programs enacted last year. As Michael noted, we continue to monitor utilization. During the first quarter, we saw overall utilization that continues to be below the historical baseline and also slightly lower than the fourth quarter of 2020. COVID inpatient admissions and costs peaked in January and decreased throughout the quarter. We continue to see a diverging pattern of COVID and non-COVID utilization. The updated financial guidance reflects typical utilization that remains below the historical baseline during the first half of 2021, continuing to trend to normalized levels by the end of the year. COVID utilization, including testing and treatment costs, is expected to partially offset the impact of lower traditional utilization. The duration and intensity of higher COVID costs will be impacted by the trajectory of the pandemic and vaccination rates. Finally, as Michael discussed, we continue to monitor some additional factors that are not in our updated guidance today. They include the potential for additional SEP membership gains in the marketplace above our expectations driven by the enhanced advanced premium tax credits. The potential for Medicaid Redeterminations to be extended beyond August 1, any additional state rate and risk-sharing actions and the uncertainty associated with both COVID and traditional medical utilization for the remainder of the year. We believe these additional factors represent a net tailwind to the company for the remainder of 2021. The seasonality of our earnings remains unchanged with approximately 60% in the first half of the year. I'll close by reiterating our confidence in the strength of our business; our balance sheet remains strong, and we believe we have ample liquidity to meet our operational and strategic needs. We remain focused on executing against our strategic plans and are committed to delivering shareholder value. That concludes my remarks, and operator, you may now open the line for questions.

Thanks. Good morning.

Good morning.

I think I'm still trying to process an Investor Day on a Wednesday, not a Friday. So I'm a little off. My real question is Medicare revenues 41% in the quarter. I know some of that was anniversarying of WellCare. But MA lives were up 19% sequentially. It sounds like the outlook for the year is closer to 20%. So that's up from previous expectations. So can you break out how much of that revenue growth was organic in the quarter? Maybe a sense of what revenues will do this year? And where are you seeing that success in terms of geographies and products from competitors or fee-for-service?

Yes, I'll start off. The growth is very balanced across our various markets. There's no one market contributing significantly. We have been successfully expanding into new markets. As we mentioned when we entered the WellCare deal, we recognized their strengths in areas we could leverage. Additionally, Centene Corporation has a national presence, which has allowed us to build out organically. While we do take some share from competitors, a portion also comes from fee-for-service. Overall, our growth is well-distributed across different areas, with no single area being more influential than another.

And just as a follow-up, I know the stars has been a big focus, and you guys are looking for improvement. Should we think about 2022 as an improvement here and not necessarily looking for another 20% growth here? But just in terms of positioning and margin, etc., do you feel like there will be better results and better competitive positioning going forward as well?

Yes, I'm not ready to provide a specific number on growth until June. However, I'm confident we will see significant growth, which people are already aware of. We will be working towards that. Regarding our star ratings, we were very close to achieving 4 stars last year, and we have some aggressive programs in place. It does take time to see results, as it involves a one or two-year look back. We believe we will continue to improve our star ratings and have communicated to the Medicare team that we aim for not just 4 stars, but also 4.5 and higher. So, we are striving for excellence in that regard, and it remains a balanced effort.

Perfect. Thanks.

Great. Thanks. Just wanted to see how to think about the guidance and how much we should be thinking about as being a good base. First, we're thinking about future growth. It sounds like most of the revenue guide is one-time in nature. Is that fair? I guess you're waiting for the Oklahoma contract, but most of the other things, whether it's sequestration or redeterminations or maybe even a special enrollment period, might be things that we wouldn't necessarily flow through to the future year. And I guess, similar type question, but on MLR. It sounds like some of the MLR guidance is on items that are happening this year, but maybe you wouldn't expect to be in the baseline for next year, just how do we think about those two dynamics?

Yes. Kevin, I’ll begin. We will provide more guidance in June during our Investor Day, which is our usual practice, especially regarding the top line. These are unique years. We anticipate that the redetermination process will continue for the rest of the year, but we will provide updates quarterly, just as the federal government does. This approach reflects our aim to be fairly conservative, and we are exercising caution in this area. In the marketplace, our growth this past quarter has shown that we are leaders in the field and are in a strong position to maintain that growth. We expect to continue this trend throughout the remainder of the year, and we believe there is potential for further upside. Additionally, regarding the redetermination, if individuals lose Medicaid coverage, they may turn to the marketplace, as the cost structure and tax allowances enable them to do so without any issues. I feel it's important to note that we are observing this situation closely.

Yes.

So, I think we will see growth continue. But as we said, governmental policies do have something to play, and it is a fluid situation, and we work very well both sides, as we've talked about in the past. We're working with them now in various policies and approaches. And as that unfolds, I think, between now and June, I hope to have more insight than we do as to what it will mean for the balance of this year and going into 2022. The essence is positive.

Maybe just a quick follow-up there. You mentioned that some rate corridors may expire. When would you get visibility on that?

Pardon me. The states have not been discussing adding to what we've talked about, and the attitude seems to be stabilizing. I'm trying to provide a sense of our current situation and what we're observing. I'm not specifying which ones because it's part of our approach. We only had one adjustment this past quarter, which is a very positive sign. I'm attempting to offer some insight as we see it together.

All right, great. Thanks.

Thanks. Good morning.

Good morning.

A couple of questions on the quarter. First, the PYD looked pretty strong relative to last year, I was wondering if you could parse out the impact that had on the quarter? And then you talked about a little bit higher cost on the marketplace business. Any more color there you can give us in terms of what you're seeing there, any geographies? And then where margins end up for this year given that cost pressure? Thanks.

Jeff, do you want to take those?

Yes, sure, Justin. As we look at development, we obviously track this from quarter-to-quarter. We're looking for consistency; in our view, it's very consistent with what we've seen in the past. Now you have to, obviously, account for the acquisition of WellCare, but roughly around that 1% range of prior year medical cost. So I would say nothing unusual on the development front from our perspective, which is, I think we've had a consistent practice over a long number of years. On the marketplace business, on the cost side, what we did see was just a little bit higher inpatient authorizations on COVID, specifically in January. And then a little higher non-inpatient, really just compared to our expectations. So it doesn't really change the margin profile for the year. I would just say a tad higher than versus what we had modeled in Q1.

That could have a positive impact on this adjustment for us.

That's right. The other thing we're tracking is the acuity of our membership. And obviously, the SEP members as well. So that's all going to factor into the risk adjustment calculation. And that's relative to your competition, and the data on that doesn't come out until really the end of Q2, so more to come on that.

Great. Thanks for the color.

Thanks. Hi, everyone. I was intrigued by Michael's comments regarding the marketplace and the competition among narrow networks. You've clearly been a leader in this space over the past few years. One of our key strategies has been adopting a more limited network approach compared to some traditional commercial products. However, it seems that other competitors are advancing further in this area. Considering the membership dynamics, I understand that it's a segment prone to switching, influenced not by premiums, due to numerous subsidies. In your opinion, are networks the primary factor influencing selection on the exchanges right now, or are there other elements at play that affect how people make their choices and the related strategies?

I believe it's important to note that we experienced significant pricing changes at the end of last year, which impacted our membership. This occurred because of a narrow network strategy that some competitors adopted, but we chose not to participate in that approach to preserve our broader networks. I will now turn it over to Brent to provide more insights on this matter. Brent?

During the Special Enrollment Period, what we are seeing is really a focus on strong provider network, so not narrow networks. We're also seeing a commitment to customer service from enrollees. We're hearing this everywhere. That at the end of the day, people that left us in 2020, today in 2021, what they're finding is true commitment to a strong provider network and a real focus on the customer. And that's really fueling our growth. When you have a supportive administration, you have a Special Enrollment Period that's now going for 180 days. You have the enhanced tax credits being implemented on April 1. At the same time, we really have a commitment to a strong distribution strategy. This is leading to our growth.

Okay. All right, thanks. Maybe just, Jeff, the 90-day Public Health Emergency, if that were to get extended to year-end, what would that mean for you guys?

I'll give you a little flavor on the membership. I think we expect our membership to peak roughly 2.2 million members since the pandemic began, roughly in July. If it got extended, we think that could go up to 2.4 million; so we'd top out at 2.4 million before the end of the year.

Okay. All right, thanks a lot.

What that really means is, we recouped what we have recouped to date plus from what we lost in the last quarter of last year, and we see it continuing to grow significantly. Yes.

Thanks.

Yes. Hi, good morning.

Yes. Hi, good morning.

Could you discuss your profitability in Medicare Advantage? I’m curious about this in light of the impressive growth you’ve experienced, but I wonder if some of that growth has impacted your margins, and whether that was anticipated.

Well, we have not gotten specific by product line. I want to assure you, Matt, that everything we do will be driven by profit and with a view to expanding margins. I think we have a clear-cut approach to it.

Yes. Matt, this is Jeff. A couple of things. Obviously, as Michael mentioned, it's a unique year. We had a Medicare fee schedule cut. So that's not helping. And then obviously, we have a lot of room for margin expansion in the future years based on stars performance. So, I think as you look at this year in isolation, I would say, margin expansion opportunities going forward primarily from eliminating the cut and then obviously performing better on stars, which is one of the important tasks that we're focused on.

If I could ask a different question on the Medicaid redeterminations. If we get into that, whether it's later this year or at the beginning of 2022, has your thinking in terms of the impact changed at all versus maybe what we had discussed? I'm thinking back to the December Investor Day?

I think it's important to note that we'll have a clearer perspective on this during the June Investor Day. Typically, that's when we discuss these matters. However, I did mention that our stance in the marketplace is that if there are redeterminations and people lose Medicaid coverage, we believe they will transition to our marketplace since it's the same network and offers similar benefits, which would be a strong incentive, especially with their costs being subsidized. Ultimately, it comes down to where that membership ends up.

Got it, thank you.

Hi, thanks. Good morning.

Good morning.

First question, I'm curious if you have any updates on what you’re learning about the changes to New York rates, especially in light of the recent developments in the New York budget after the art bill was passed. I know you mentioned the retroactive risk corridor, but do you have any updates regarding the previously assumed 3% in the budget? Also, I’m interested in the status of quality payments in New York, as I understand that has been an important factor for you. How are things trending in that area?

Yes, Scott. This is Jeff. I think it's just too early to tell. These things aren't finalized and can tend to change late in the game, as we've seen in the past. From my perspective, it's just too early to determine where it will land. However, we're comfortable with the numbers we have for this year.

Okay. And then, just a follow-up question. I saw that you guys have your updated view in the revenue guidance on the start date of the carve-out of the Medical PBM contract. I know the state had announced that they were going to be conducting a review just around the Magellan acquisition and looking at some things. Just interested at this point, has that review concluded and you've now gotten visibility from the state, or is that still ongoing? And if there has been any feedback so far on any changes that the state would be requiring as part of the Magellan acquisition? Thanks.

Sarah, do you want to make a comment on that? You worked hard.

Yes, happy to. Magellan is working very closely with DHCS and California Department leadership on a conflict avoidance plan that is still in process, but progressing well. We don't yet have clarity from the department on when the program would be kicked off, but we're hoping to have a sense within the next month or so of the resolution of that conflict as planned.

Okay, so that stated, do you have in the updated revenue guidance just that sort of an estimate at this point? Okay, thanks.

Yes, hi, good morning. A question on the utilization and the acuity level. So Michael, you said that you are tracking acuity closely. What are you seeing to date in terms of the calculation that's coming back, what's the acuity levels on the core ex-COVID? And then, when we think about you're saying that utilization is below baseline, I assume that relates to core utilization as well, but maybe you can give us a little bit more color on how it's trending per market? And do you think because you're now seeing sort of the mix towards more of an MA population that's impacting sort of utilization trends you're seeing versus Medicaid in the market?

I think Jeff just commented that in the marketplace, we saw some incremental increase in utilization when that's offset some in Medicaid. Jeff, why don't you tell the numbers?

Yes, on the utilization front, a lot packed into that question, so I'm not sure I heard the final piece of that, but we really haven't seen a change in the acuity outside of our expectations. Specifically, just take the marketplace business, we knew our acuity was going to change based on the open enrollment, and that's why we commented that we think our risk adjustments payable will go down substantially this year. So far, I would say we haven't seen any acuity change in our base membership other than what we've expected. So that I hope that answers part of your question. And if it doesn't, what was the second part?

Yes. So to your point, no change in acuity versus your expectation. So to add in that, what is embedded into guidance by year-end, are you assuming unchanged acuity or higher acuity? And then the second part of the question was under-utilization, you said no change, I'm trying to understand how did look for the Medicare population versus Medicaid?

Yes, two things. What I would say is, we know the acuity of the members we have, right? We have projected that in our guidance, and if you go to our prepared remarks, what we've said is we expect utilization to stay below the historical baseline for the first half trending towards normal by the end of the year. So I hope that helps. And yes, there is a difference in behavior between, I would say, Medicaid marketplace and Medicare; the demographics of those members are extremely different from an age perspective. So there are different utilization patterns. But we obviously incorporate that into our guidance.

Yes, good morning. Could you talk a little bit about your long-term strategic growth outlook at this point? And in particular, I was interested in how do you look at your major priorities beyond Medicaid and marketplace and how much of the growth longer term do you think you're going to come from those areas like Medicare, Health Care Enterprise, or value-based care? Thanks.

I appreciate the question. I think we will get into more detail on 2022 growth, giving you some sense of where it's coming from in June, which is our practice. We still see ourselves very much as a growth company. We see balanced growth across all product lines; we demonstrated growth in Medicare. We've talked about that being a growth engine for us. We think the marketplace will continue to be a growth engine, as well as Medicaid. We have a government in place now that believes that people should be insured. So, we will work. Now, if we come up with the numbers for you that are reasonable, we will give you in June. But we see us growing across all our product lines and growing responsibly with expanding margins and containing costs and improving quality. It's a balance that we're trying to strike and we have a couple of new products that we're working on, that I'm not going to talk about for confidentiality reasons.

And just to clarify on the healthcare enterprise and some of the things with value-based care delivery that maybe you're doing in Florida or places like that, how material are they to growth prospects over the next one, two, three years?

Well, I think it's going to see that those things put in place for long-term growth, and now we have some technology you're going to hear about at the June Investor Day that will drive growth and will drive demand for our products because of what it can do for the quality and as systems utilizing talk about the provider and recipients to light.

Great, thanks for the questions. Actually just wanted to go back to A.J.'s question about the competitive landscape, Michael, in the marketplace. You've mentioned a few times, obviously, end of last year that you saw some more competitive pricing behaviors from some of the players there. I was wondering if maybe during the special enrollment period, you've seen any of those competitors change behavior or continue with a more aggressive pricing strategy? And I think, within that, just curious how widespread has this been, is it really kind of contained to a state or two, or are you seeing it more broadly?

So I think we will focus on ourselves and how we do things. As we said at the time, we're not going to join that race to the bottom, and we know that's not something we're going to do and it couldn't be sustained in my opinion. So what we've done is maintain our network. We have the subsidies that are necessary. They have really taken price off the table in my opinion, where people will look at the quality of the service that Brent talked about, and that's what we're seeing the growth in return of membership to us, as well as the incremental new membership. And so, I think what we really focus on is how to continue to grow it, and I know your long time as online in consumer packaged goods. When you're trying to go in against some ways, that's a clear leader in the marketplace, which we were earlier in a category, the only way you can hope to try and come in is on price. And so, I think we had a strategic positioning that the people causing membership land pricing in a COVID environment as we come out of it. As I think we've demonstrated in the first quarter of this year, we've recouped all we lost and then some, and we'll be giving you guidance in June, and it shows continued growth.

Got it. That's helpful. And maybe just one quick follow-up, Jeff, I know at the Analyst Day, you talked about the cadence of earnings maybe being a little bit more front-half weighted, like 65%. Any updated thoughts, as you got one quarter under the belt now, as far as how you're seeing earnings play out for the year?

Yes, I think in a 60% front half would be where I would direct you to, and again, if you just think about the utilization kind of assumptions that we have, that gives you the reason why there is more earnings in the front half of the year.

Yes, good morning, and thanks for taking the questions. Jeff, just kind of a simple one, can you talk about the vaccine initiatives and the uptake that you're seeing in the managed Medicaid population? And then, my quick follow up would be, as I know that we've seen a continued suspension of the redeterminations, but we continue to see smatterings of press releases, as it relates to raising barriers to access like increased use of prior off and step edits that are coming out of various states. I'm wondering if you're seeing this and if it is having an impact on utilization or might be too early to tell?

So your first one was on the vaccine take-up rate; obviously, part of what some of the initiatives that Michael had mentioned where we're trying to stratify our membership population for those that are most at risk and trying to get the vaccination to them. I think some of the challenges we've had on the data side is that potential members could get vaccinations from alternative sites. So that's not within our ecosystem. But we are tracking that data as best we can and trying to obviously get our high-risk members vaccinated. And the second question again, I didn't catch that last part?

Yes, just re-subscribing through state Medicaid agency press release distribution lists, and we're starting to see a smattering of data flow around state agencies wanting to raise barriers to access, so reinstituting prior authorizations with care delivery reinstituting step edits. I'm just wondering if you're seeing any of this, if you expect it to impact utilization, or if it might be too early to tell?

I would say it's still early; we haven't observed anything yet, and that's something we will continue to monitor.

I want to add one thing about the vaccine. Our focus has really been with the goal jackets from the Hall of Fame and others is to help people that in our population that may be hesitant for various historic reasons to not take the vaccine, to say it's okay and having people that are well-respected in sports and other areas. We had Bob Costas way back doing a Public Service announcement wearing a mask. So it's a matter of getting people that are respected, encouraging, and providing an incentive. What we're trying to really focus on is they're not doing this for themselves, but they're doing it for their loved ones. They're doing it for their parents, children, spouses, other members of the family. What's really important is just encouraging. So that's why we spent a lot of time, energy and work with government officials to try and demonstrate that we're being responsible in that area.

We thank you and we look forward to Investor Day in the second quarter as I said earlier. I believe we have the momentum to continue the positive impact we'll have in the marketplace. So stay safe everybody. Thank you.