CENTENE CORP

Previous wording

We are currently experiencing an accelerated increase in medical cost trend. The drivers of trend include increasing medical demand, expanded access to care facilitated by program changes at the state level, and the rapid release and availability of new, high-cost pharmaceuticals. Increasingly, state healthcare policies are providing for expanded access through carve-ins for incremental coverage (for example, behavioral healthcare and home and community-based services).

Current wording

In 2025, we have experienced an accelerated increase in medical cost trend. The drivers of trend include increasing medical demand, expanded access to care facilitated by program changes at the state level, and the rapid release and availability of new, high-cost pharmaceuticals. Increasingly, state healthcare policies are providing for expanded access through carve-ins for incremental coverage (for example, behavioral healthcare and home and community-based services).

Previous wording

The medical cost drivers are likely intensified by an environment where legislative changes to the United States healthcare model have been widely publicized (and with increasing intensity over the last six months). Changes to the model include references to members in certain programs who may lose eligibility and certain provider reimbursement models that may be reduced in the future. Changes in Medicaid and Marketplace, including changes in the availability of enhanced Advance Premium Tax Credits (APTCs) for Marketplace products coupled with the One Big Beautiful Bill Act (OBBBA), create member uncertainty surrounding the future availability, affordability, funding, and access to health insurance. This backdrop may be prompting members to seek care at an increased rate (given potential eligibility and subsidy funding shifts) and providers may be modifying operations, all further exacerbating the medical cost trend.

Current wording

The medical cost drivers are likely intensified by an environment where legislative changes to the United States healthcare model have been widely publicized (and with increasing intensity over the last nine months). Changes to the model include references to members in certain programs who may lose eligibility and certain provider reimbursement models that may be reduced in the future. Changes in Medicaid and Marketplace, including potential changes in the availability of enhanced Advance Premium Tax Credits (APTCs) for Marketplace products coupled with the One Big Beautiful Bill Act (OBBBA), create member uncertainty surrounding the future availability, affordability, funding, and access to health insurance. This backdrop may be prompting members to seek care at an increased rate (given potential eligibility and subsidy funding shifts) and providers may be modifying operations, all further exacerbating the medical cost trend.

Previous wording

We continue to work with our state partners to establish Medicaid premium rates that appropriately match the acuity of the population as well as reflect the most recent medical cost trend. We also provide states with data to help them analyze the implications of policy decisions as well as design effective risk adjustment programs. In Marketplace, we commenced the process of refiling 2026 policy year rates to reflect a higher projected baseline of Marketplace morbidity than previously expected, and expect to be able to take corrective pricing actions for 2026 in states representing a substantial majority of our Marketplace membership.

Current wording

We continue to work with our state partners to establish Medicaid premium rates that appropriately match the acuity of the population as well as reflect the most recent medical cost trend. We also provide states with data to help them analyze the implications of policy decisions as well as design effective risk adjustment programs. In Marketplace, we completed the process of refiling 2026 policy year rates during the third quarter of 2025 to reflect a higher projected baseline of Marketplace morbidity than previously expected. Barring state-specific changes, we expect to be able to take corrective pricing actions for 2026 in states representing approximately 95% of our Marketplace membership.

Previous wording

The COVID-19 pandemic impacted our business as it relates to Medicaid eligibility changes. From the onset of the public health emergency (PHE) through March 2023, our Medicaid membership increased by 3.6 million members (excluding new states North Carolina and Delaware and various state product expansions or managed care organization changes). Since March 31, 2023, redeterminations are the primary driver of our Medicaid membership decline. While some states may still be concluding the redetermination process for certain populations of members, we anticipate that any remaining reductions will be limited as the majority of states have substantially completed their unwinding processes as of December 2024. We continue to work with our state partners to match rates to acuity post-redeterminations.

Current wording

The COVID-19 pandemic impacted our business as it relates to Medicaid eligibility changes. From the onset of the public health emergency (PHE) through March 2023, our Medicaid membership increased by 3.6 million members (excluding new states North Carolina and Delaware and various state product expansions or managed care organization changes). Since March 31, 2023, redeterminations are the primary driver of our Medicaid membership decline. While some states may still be concluding the redetermination process for certain populations of members, we anticipate that future reductions could occur resulting from ongoing state redetermination processes. We continue to work with our state partners to match rates to acuity post-redeterminations.

Previous wording

The OBBBA, passed in July 2025, includes requirements that may reduce the number of members eligible for state Medicaid Expansion programs by requiring work or community engagement by members and for state Medicaid agencies to redetermine member eligibility at more frequent intervals, along with adding a "Cost Sharing" or "Co-Pay" for certain medical services. These changes could have the effect of increasing the overall morbidity of the Medicaid Expansion population as early as 2027. Several other provisions of the OBBBA, such as adjustments to provider taxes and state directed payments beginning in 2028, may have the effect of reducing the amount of federal funding for Medicaid, which could result in changes in the design of Medicaid programs, including coverage of benefits, eligibility, and/or provider payment rates.

Current wording

The OBBBA, passed in July 2025, includes requirements that may reduce the number of members eligible for state Medicaid Expansion programs by requiring work or community engagement by members and for state Medicaid agencies to redetermine member eligibility at more frequent intervals, along with adding a "Cost Sharing" or "Co-Pay" for certain medical services. These changes could have the effect of increasing the overall morbidity of the Medicaid Expansion population largely beginning in 2027, subject to state implementation plans. Several other provisions of the OBBBA, such as adjustments to provider taxes and state directed payments beginning in 2028, may have the effect of reducing the amount of federal funding for Medicaid, which could result in changes in the design of Medicaid programs, including coverage of benefits, eligibility, and/or provider payment rates. The OBBBA also includes a restriction against paying certain providers designated as "prohibited entities" as of October 1, 2025, which has the potential to create access to care issues and network gaps. An extended government shutdown may delay regulatory guidance and implementation of these requirements and other rulemaking changes.

Previous wording

The Marketplace Integrity & Affordability Final Rule (Final Rule) was published in the Federal Register on June 25, 2025. The Final Rule makes changes to policies to strengthen program integrity measures in the Marketplace. For example, the Special Enrollment Period for those under 150% of the Federal Poverty Level (FPL) has been repealed beginning August 25, 2025. Further, beginning in plan year 2026, consumers who automatically re-enroll into a fully subsidized Marketplace plan will be re-enrolled into the same plan with a $5 premium until the consumer updates their exchange application to confirm APTC eligibility. In addition, exchanges may no longer accept a consumer's self-attestation of projected annual household income when the Internal Revenue Service (IRS) cannot verify it due to lack of tax return data; rather, exchanges must verify household income using other trusted data sources.

Current wording

The Marketplace Integrity & Affordability Final Rule (Final Rule) was published in the Federal Register on June 25, 2025. The Final Rule makes changes to policies to strengthen program integrity measures in the Marketplace. For example, the Special Enrollment Period for those under 150% of the Federal Poverty Level (FPL) has been repealed beginning August 25, 2025. Several of the provisions of the Final Rule have been stayed due to ongoing litigation. These include a requirement for certain consumers who automatically re-enroll into a fully subsidized Marketplace plan will be re-enrolled into the same plan with a $5 premium until the consumer updates their exchange application to confirm APTC eligibility. Additionally, exchanges may no longer accept a consumer's self-attestation of projected annual household income when the Internal Revenue Service (IRS) cannot verify it due to lack of tax return data; rather, exchanges must verify household income using other trusted data sources.

Previous wording

In addition, the OBBBA placed additional restrictions on APTC requirements. For example, beginning January 1, 2026, should individuals underestimate their projected income, the OBBBA requires them to reimburse the IRS for the full amount of excess tax credit received. In addition, as of January 1, 2026, the OBBBA prohibits individuals from receiving APTCs if they enroll in health coverage through a Special Enrollment Period associated with their income. We anticipate that the combined effect of the expiration of the enhanced APTCs, the Final Rule, and the OBBBA will reduce 2026 Marketplace membership and continue to increase the overall morbidity of the Marketplace population. We have commenced the process of refiling 2026 policy year rates to reflect a higher projected baseline of Marketplace morbidity than previously expected. We continue to advocate for legislation and regulations aimed at leveraging Medicaid and the Health Insurance Marketplace to maintain health insurance coverage and affordability for consumers.

Current wording

In addition, the OBBBA placed additional restrictions on APTC requirements. For example, beginning January 1, 2026, should individuals mis-estimate their projected income, the OBBBA requires them to reimburse the IRS for the full amount of excess tax credit received. In addition, as of January 1, 2026, the OBBBA prohibits individuals from receiving APTCs if they enroll in health coverage through a Special Enrollment Period associated with their income. We anticipate that the combined effect of the expiration of the enhanced APTCs, the Final Rule, and the OBBBA will reduce 2026 Marketplace membership and continue to increase the overall morbidity of the Marketplace population. We completed the process of refiling 2026 policy year rates during the third quarter of 2025 to reflect a higher projected baseline of Marketplace morbidity than previously expected. Barring state-specific changes, we expect to be able to take corrective pricing actions for 2026 in states representing approximately 95% of our Marketplace membership. We continue to advocate for legislation and regulations aimed at leveraging Medicaid and the Health Insurance Marketplace to maintain health insurance coverage and affordability for consumers.

Previous wording

The IRA significantly changed Medicare Prescription Drug Plans (PDPs) in 2025, most notably by eliminating the coverage gap and capping members' annual out-of-pocket costs at $2,000 in order to provide more predictable and affordable prescription drug coverage for Medicare beneficiaries. The IRA changes effective for 2025 result in a meaningful shift in cost-sharing responsibilities between members, drug companies, Centers for Medicare and Medicaid Services (CMS), and PDPs and have resulted in a significant increase in our premiums in consideration for our PDPs' responsibility for a larger portion of total Part D benefit costs. To help mitigate significant premium impacts and address these changes, CMS introduced the Medicare Part D Premium Stabilization Demonstration program. This program began in calendar year 2025 and was intended by CMS to exist for three years. The parameters of the program are expected to be different each year. CMS believes the demonstration will provide plans greater flexibility to manage costs and assist in stabilizing beneficiary premiums. We continue to advocate for policies that promote cost-effective, high-quality care for our PDP enrolled members. We have receivables due to us from CMS for Part D risk-sharing programs attributable to the 2024 and 2025 plan years that we expect to be paid by CMS approximately 12 to 13 months after the plan year closes. If the payments from CMS are delayed, our cash flows may be materially adversely affected.

Current wording

The IRA significantly changed Medicare Part D, impacting stand-alone Medicare Prescription Drug Plans (PDPs) as well as the Part D benefit in many of our Medicare Advantage plans beginning in 2025, most notably by eliminating the coverage gap and capping members' annual out-of-pocket costs at $2,000 in order to provide more predictable and affordable prescription drug coverage for Medicare beneficiaries. The members' Part D annual out-of-pocket cap for 2026 is $2,100. The IRA changes effective for 2025 result in a meaningful shift in cost-sharing responsibilities between members, drug companies, Centers for Medicare and Medicaid Services (CMS), and PDPs and have resulted in a significant increase in our premiums in consideration for our PDPs' responsibility for a larger portion of total Part D benefit costs. To help mitigate significant premium impacts and address these changes, CMS introduced the Medicare Part D Premium Stabilization Demonstration program. This program began in calendar year 2025 and was intended by CMS to exist for three years. The parameters of the program are expected to be different each year. CMS believes the demonstration will provide plans greater flexibility to manage costs and assist in stabilizing beneficiary premiums. We continue to advocate for policies that promote cost-effective, high-quality care for our PDP enrolled members. We have receivables due to us from CMS for Part D risk-sharing programs attributable to the 2024 and 2025 plan years that we expect to be paid by CMS approximately a year after the plan year closes. If the payments from CMS are delayed, our cash flows may be materially adversely affected.

Previous wording

In addition, the CMS calendar year 2025 Medicare and Part D policy rule and finalized regulations will require beneficiaries dually enrolled in Medicare and a Medicaid Managed Care Plan to receive integrated care through the Medicaid company's Medicare Advantage Dual Eligible Special Needs Plans (D-SNPs) beginning in 2030, with certain provisions beginning in 2027. However, some states have already moved or are planning to exclusively align dual-eligible enrollment under an aligned D-SNP before this timeframe. We believe we are well positioned given our overlapping Medicaid and Medicare Advantage footprints and are committed to navigating evolving regulations.

Current wording

In addition, the CMS calendar year 2025 Medicare and Part D policy rule and finalized regulations will require beneficiaries dually enrolled in Medicare and a Medicaid Managed Care Plan to receive integrated care through the same parent company's Medicaid and Medicare Advantage Dual Eligible Special Needs Plans (D-SNPs) beginning in 2030, with newly eligible enrollees beginning in 2027. However, some states have already moved or are planning to exclusively align dual-eligible enrollment under an aligned D-SNP and Medicaid plan before this timeframe. We believe we continue to be well-positioned given our overlapping Medicaid and Medicare Advantage footprints and are committed to navigating evolving regulations.

Previous wording

We remain focused on the promise of delivering high-quality healthcare services on behalf of states and the federal government to under-insured and uninsured families and commercial organizations. Our decades of experience and deep industry knowledge has allowed us to deliver cost-effective services to our government partners and our members. With a focus on the personalization of healthcare technology, we continue the use of data and analytics to improve the provider and member experience. We continue to believe we have both the capacity and capability to successfully navigate industry changes to the benefit of our members, customers, providers, and shareholders.

Current wording

We remain focused on our promise of delivering high-quality healthcare services on behalf of states and the federal government to under-insured and uninsured families and commercial organizations. Our decades of experience and deep industry knowledge have allowed us to deliver cost-effective services to our government partners and our members. With a focus on the personalization of healthcare technology, we continue the use of data and analytics to improve the provider and member experience. We continue to believe we have both the capacity and capability to successfully navigate industry changes to the benefit of our members, customers, providers, and shareholders.

Previous wording

Our financial performance for the second quarter of 2025 is summarized as follows:

Current wording

Our financial performance for the third quarter of 2025 is summarized as follows:

Previous wording

•Managed care membership of 28.0 million, a decrease of 473 thousand members, or (2)% year-over-year.

Current wording

•Managed care membership of 28.0 million, a decrease of 672 thousand members, or (2)% year-over-year.

Previous wording

•Total revenues of $48.7 billion, representing 22% growth year-over-year.

Current wording

•Total revenues of $49.7 billion, representing 18% growth year-over-year.

Previous wording

•Premium and service revenues of $42.5 billion, representing 18% growth year-over-year.

Current wording

•Premium and service revenues of $44.9 billion, representing 22% growth year-over-year.

Previous wording

•Operating cash flows provided cash of $1.8 billion in the second quarter of 2025.

Current wording

•Operating cash flows provided cash of $1.4 billion in the third quarter of 2025.

Previous wording

A reconciliation from GAAP diluted earnings (loss) per share to adjusted diluted earnings (loss) per share is highlighted below, and additional detail is provided above under the heading "Non-GAAP Financial Presentation":

Current wording

A reconciliation from GAAP diluted earnings (loss) per share to adjusted diluted EPS is highlighted below, and additional detail is provided above under the heading "Non-GAAP Financial Presentation":

Previous wording

We reference an adjusted SG&A expense ratio, defined as adjusted SG&A expenses, which excludes acquisition and divestiture related expenses and other items, divided by premium and service revenues. A reconciliation from GAAP SG&A to adjusted SG&A and additional detail is provided above under the heading "Non-GAAP Financial Presentation." We also reference effective tax rate on adjusted earnings, defined as GAAP income tax expense (benefit) excluding the income tax effects of adjustments to net earnings divided by adjusted earnings (loss) before income tax expense.

Current wording

We reference an adjusted SG&A expense ratio, defined as adjusted SG&A expenses, which excludes acquisition and divestiture related expenses and other items, divided by premium and service revenues. A reconciliation from GAAP SG&A to adjusted SG&A and additional detail is provided above under the heading "Non-GAAP Financial Presentation." We also reference effective tax rate on adjusted earnings, defined as GAAP income tax expense (benefit) excluding the income tax effects of adjustments to net earnings divided by adjusted earnings before income tax expense.

Previous wording

(2)The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment.

Current wording

(2)The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. The three months ended September 30, 2025, include a tax benefit of $4 million, or $0.01 per share, related to tax adjustments on previously reported divestitures and impacts of the OBBBA. The three months ended September 30, 2024, include a tax benefit of $2 million, or $0.00 per share, related to tax adjustments on previously reported divestitures.

Previous wording

•In July 2025, our subsidiary, Magnolia Health Plan (Magnolia), commenced the Mississippi Division of Medicaid contract to continue serving the state's Coordinated Care Organization Program consisting of the Mississippi Coordinated Access Network and the Mississippi CHIP. The contract has a four-year term, with two optional one-year extensions, for a total of six possible contract years.

Current wording

•In July 2025, our subsidiary, Magnolia Health Plan (Magnolia), commenced the Mississippi Division of Medicaid contract to continue serving the state's Coordinated Care Organization Program consisting of the Mississippi Coordinated Access Network and the Mississippi Children's Health Insurance Program (CHIP). The contract has a four-year term, with two optional one-year extensions, for a total of six possible contract years.

Previous wording

•In January 2025, our subsidiary, Sunflower Health Plan, commenced the contract to continue providing managed health care services through KanCare, the State of Kansas' Medicaid and Children's Health Insurance Program. The contract has a three-year term, with two optional one-year extensions, for a total of five possible contract years.

Current wording

•In January 2025, our subsidiary, Sunflower Health Plan, commenced the contract to continue providing managed health care services through KanCare, the State of Kansas' Medicaid and CHIP. The contract has a three-year term, with two optional one-year extensions, for a total of five possible contract years.

Previous wording

•Given our strong bid positioning, PDP membership increased 19% year-over-year. Additionally, the IRA changes effective for 2025 result in a meaningful shift in cost-sharing responsibilities between members, drug companies, CMS, and PDPs and have led to a significant increase in our premiums in consideration for our PDPs responsibility for a larger portion of total Part D benefit costs. These changes also result in a change to the quarterly progression of the Medicare segment HBR.

Current wording

•Given our strong bid positioning, PDP membership increased 18% year-over-year. Additionally, the IRA changes effective for 2025 result in a meaningful shift in cost-sharing responsibilities between members, drug companies, CMS, and PDPs and have led to a significant increase in our premiums in consideration for our PDPs responsibility for a larger portion of total Part D benefit costs. These changes also result in a change to the quarterly progression of the Medicare segment HBR.

Previous wording

•In December 2024, we recorded a premium deficiency reserve of $92 million related to the 2025 Medicare Advantage contract year. The premium deficiency reserve was increased to $270 million in the first quarter of 2025 and to $389 million in the second quarter of 2025 based on the progression of earnings during the year (with higher earnings at the beginning of the year and lower at the end of the year, given cost sharing progression). The premium deficiency reserve related to the 2025 Medicare Advantage contract year will be released in the fourth quarter of 2025.

Current wording

•In December 2024, we recorded a premium deficiency reserve of $92 million related to the 2025 Medicare Advantage contract year. The premium deficiency reserve was increased to $270 million in the first quarter of 2025, to $389 million in the second quarter of 2025 and decreased by $107 million to $282 million in the third quarter of 2025 based on the progression of earnings during the year (with higher earnings at the beginning of the year and lower at the end of the year, given cost sharing progression). The premium deficiency reserve related to the 2025 Medicare Advantage contract year will be released in the fourth quarter of 2025.

Previous wording

•On July 1, 2025, we announced a reduction to our expectation for the 2025 benefit year net risk adjustment revenue transfer as a result of significantly higher estimated aggregate market morbidity, with a corresponding decrease in our earnings expectations for 2025. Our updated risk adjustment transfer estimate has been incorporated in our June 30, 2025 financial results. The six months ended June 30, 2024, benefited from outperformance in Marketplace risk adjustment for the 2023 benefit year.

Current wording

•In July 2025, we announced a reduction to our expectation for the 2025 benefit year net risk adjustment revenue transfer as a result of significantly higher estimated aggregate market morbidity, with a corresponding decrease in our earnings expectations for 2025. The nine months ended September 30, 2024, benefited from outperformance in Marketplace risk adjustment for the 2023 benefit year.

Previous wording

•In 2025, our Health Insurance Marketplace product, Ambetter Health, expanded its geographic footprint, adding 60 new counties across 10 states, which includes expansion into Iowa. Additionally, Marketplace membership increased 33% year-over-year due to the expanded footprint, strong open enrollment results, as well as overall market growth.

Current wording

•In 2025, our Health Insurance Marketplace product, Ambetter Health, expanded its geographic footprint, adding 60 new counties across 10 states, which includes expansion into Iowa. Additionally, Marketplace membership increased 29% year-over-year due to the expanded footprint, strong open enrollment results, as well as overall market growth.

Previous wording

•In August 2024, our subsidiary, PA Health and Wellness, was selected by the Pennsylvania Department of Human Services to continue to administer Pennsylvania's Community HealthChoices program, the Medicaid managed care program that covers adults who are dually eligible for Medicare and Medicaid or who qualify to receive Medicaid long-term services and supports due to a need for the level of care provided in a nursing facility. The contract is expected to begin in January 2026 and has a five-year term, with three optional one-year extensions, for a total of eight possible contract years.

Current wording

•In August 2024, our subsidiary, PA Health and Wellness, was selected by the Pennsylvania Department of Human Services to continue to administer Pennsylvania's Community HealthChoices program, the Medicaid managed care program that covers adults who are dually eligible for Medicare and Medicaid or who qualify to receive Medicaid long-term services and supports due to a need for the level of care provided in a nursing facility. A bid protest continues to be litigated and, at this time, it is unclear when the contract could be implemented.

Previous wording

•In December 2023, our subsidiary, Arizona Complete Health, was selected by the Arizona Health Care Cost Containment System – Arizona's single state Medicaid agency – to provide managed care for the Arizona Long Term Care System (ALTCS). The program supports Arizonans who are elderly and/or have a physical disability (E/PD) with physical and behavioral healthcare, as well as provides pharmacy benefits and home and community-based services. A prolonged bid protest continues to be litigated and, at this time, it is unclear when the contract could be implemented.

Current wording

•In December 2023, our subsidiary, Arizona Complete Health, was selected by the Arizona Health Care Cost Containment System – Arizona's single state Medicaid agency – to provide managed care for the Arizona Long Term Care System (ALTCS). The program supports Arizonans who are elderly and/or have a physical disability (E/PD) with physical and behavioral healthcare, as well as provides pharmacy benefits and home and community-based services. A prolonged bid protest has led the agency to cancel the original awards and issue a rebid. The rebid is expected to be open for submissions in late summer 2026 with a new contract effective date of October 2027.

Previous wording

•In October 2024, CMS issued 2025 Medicare Advantage Star Ratings on the Medicare Plan Finder. Based on the data as well as our successful appeal of the initial scoring of our TTY (Text-to-Voice teletypewriter services for the hearing impaired), we had approximately 55% of our Medicare Advantage membership enrolled in plans rated 3.5 stars or higher – compared to approximately 23% in the prior year. This represents meaningful progress despite higher than industry-anticipated cut point changes.

Current wording

•In October 2024, CMS issued 2025 Medicare Advantage Star Ratings on the Medicare Plan Finder. Based on the data, we had approximately 55% of our Medicare Advantage membership enrolled in plans rated 3.5 stars or higher – compared to approximately 23% in the prior year.

Previous wording

From June 30, 2024 to June 30, 2025, our managed care membership decreased by 473 thousand, or (2)%. The following table sets forth our membership by line of business:

Current wording

From September 30, 2024 to September 30, 2025, our managed care membership decreased by 672 thousand, or 2%. The following table sets forth our membership by line of business:

Previous wording

The following discussion and analysis is based on our Consolidated Statements of Operations, which reflect our results of operations for the three and six months ended June 30, 2025 and 2024, prepared in accordance with generally accepted accounting principles in the United States (GAAP).

Current wording

The following discussion and analysis is based on our Consolidated Statements of Operations, which reflect our results of operations for the three and nine months ended September 30, 2025 and 2024, prepared in accordance with generally accepted accounting principles in the United States (GAAP).

Previous wording

Summarized comparative financial data for the three and six months ended June 30, 2025 and 2024 is as follows ($ in millions, except per share data in dollars):

Current wording

Summarized comparative financial data for the three and nine months ended September 30, 2025 and 2024 is as follows ($ in millions, except per share data in dollars):

Previous wording

Total revenues increased 22% in the three months ended June 30, 2025, over the corresponding period in 2024, primarily driven by premium and membership growth in the PDP business along with overall market growth in the Marketplace business, rate increases in the Medicaid business and increased premium tax revenue, partially offset by lower Medicaid membership as a result of redeterminations and lower Marketplace net risk adjustment revenue. The three months ended June 30, 2024, benefited from outperformance in Marketplace risk adjustment for the 2023 benefit year.

Current wording

Total revenues increased 18% in the three months ended September 30, 2025, over the corresponding period in 2024, primarily driven by premium and membership growth in the PDP business, overall market growth in the Marketplace business, and rate increases in the Medicaid business, partially offset by lower Medicaid membership.

Previous wording

The HBR for the three months ended June 30, 2025, was 93.0%, compared to 87.6% in the same period in 2024. The increase was primarily driven by a reduction in our net 2025 Marketplace risk adjustment revenue transfer estimate, increased Marketplace medical costs, higher medical costs in Medicaid driven primarily by behavioral health, home health and high-cost drugs, and an increase to the 2025 Medicare Advantage premium deficiency reserve based on the progression of earnings during the year (with higher earnings at the beginning of the year and lower at the end of the year, given cost sharing progression).

Current wording

The HBR for the three months ended September 30, 2025, was 92.7%, compared to 89.2% in the same period in 2024. The increase was primarily driven by increased Marketplace medical costs, lower Marketplace estimated risk adjustment revenue and program changes in the PDP business as a result of the IRA as compared to the third quarter of 2024. The increase was also driven by higher medical costs in Medicaid driven primarily by behavioral health and home health, partially offset by Medicaid rate and revenue increases.

Previous wording

Cost of services decreased by $39 million in the three months ended June 30, 2025, compared to the corresponding period in 2024. The cost of service ratio for the three months ended June 30, 2025, was 88.2%, compared to 81.6% in the same period in 2024.

Current wording

Cost of services decreased by $41 million in the three months ended September 30, 2025, compared to the corresponding period in 2024. The cost of service ratio for the three months ended September 30, 2025, was 84.3%, compared to 88.3% in the same period in 2024.

Previous wording

The SG&A expense ratio was 7.1% for the second quarter of 2025, compared to 8.0% in the second quarter of 2024. The adjusted SG&A expense ratio was 7.1% for the second quarter of 2025, compared to 8.0% in the second quarter of 2024. The decreases were primarily driven by continued leveraging of expenses over higher revenues and growth in the PDP business. The decreases were partially offset by growth in the Marketplace business, which operates at a meaningfully higher SG&A expense ratio as compared to the overall company.

Current wording

The SG&A expense ratio was 7.0% for the third quarter of 2025, compared to 8.3% in the third quarter of 2024. The adjusted SG&A expense ratio was 7.0% for the third quarter of 2025, compared to 8.3% in the third quarter of 2024. The decreases were primarily driven by continued leveraging of expenses over higher revenues and growth in the PDP business, which operates at a meaningfully lower SG&A expense ratio as compared to the overall company. The decreases were partially offset by growth in the Marketplace business, which operates at a meaningfully higher SG&A expense ratio.

Previous wording

Investment and other income. Investment and other income decreased by $92 million in the three months ended June 30, 2025, compared to the corresponding period in 2024 driven primarily by lower interest rates and lower average investment balances during the quarter.

Current wording

Investment and other income. Investment and other income increased by $18 million in the three months ended September 30, 2025, compared to the corresponding period in 2024.

Previous wording

Total revenues increased 10% in the six months ended June 30, 2025, compared to the corresponding period in 2024. The increase in total revenues was primarily driven by rate increases, partially offset by lower membership, primarily due to redeterminations. Gross margin decreased $856 million in the six months ended June 30, 2025, compared to the corresponding period in 2024. Gross margin decreased due to higher medical costs driven primarily by behavioral health, home health and high-cost drugs.

Current wording

Total revenues increased 6% in the three months ended September 30, 2025, compared to the corresponding period in 2024. The increase in total revenues was primarily driven by rate increases, partially offset by lower membership, primarily due to redeterminations. Gross margin increased $57 million in the three months ended September 30, 2025, compared to the corresponding period in 2024 primarily driven by rate and revenue increases.

Previous wording

Total revenues increased 58% in the three months ended June 30, 2025, compared to the corresponding period in 2024 primarily driven by increased PDP premium and membership, partially offset by lower Medicare Advantage membership. Gross margin increased $218 million in the three months ended June 30, 2025, compared to the corresponding period in 2024, primarily driven by premium and membership growth in the PDP business, including changes from the IRA impacting the quarterly progression of medical costs, partially offset by an increase to the 2025 premium deficiency reserve based on the progression of earnings during the year (with higher earnings at the beginning of the year and lower at the end of the year, given cost sharing progression).

Current wording

Total revenues increased 66% in the three months ended September 30, 2025, compared to the corresponding period in 2024 primarily driven by increased PDP premiums and membership, partially offset by lower Medicare Advantage membership. Gross margin decreased $137 million in the three months ended September 30, 2025, compared to the corresponding period in 2024 primarily driven by the PDP business, specifically changes from the IRA, partially offset by premium and membership growth.

Previous wording

Total revenues increased 19% in the six months ended June 30, 2025, over the corresponding period in 2024, primarily driven by premium and membership growth in the PDP business along with overall market growth in the Marketplace business, rate increases in the Medicaid business and increased premium tax revenue, partially offset by lower Medicaid membership as a result of redeterminations and lower Marketplace net risk adjustment revenue. The six months ended June 30, 2024, benefited from outperformance in Marketplace risk adjustment for the 2023 benefit year.

Current wording

Total revenues increased 19% in the nine months ended September 30, 2025, over the corresponding period in 2024, primarily driven by premium and membership growth in the PDP business, overall market growth in the Marketplace business, and rate increases in the Medicaid business and increased premium tax revenue, partially offset by lower Medicaid membership as a result of redeterminations and lower Marketplace estimated risk adjustment revenue. The nine months ended September 30, 2024, benefited from outperformance in Marketplace risk adjustment for the 2023 benefit year.

Previous wording

Cost of services decreased by $10 million in the six months ended June 30, 2025, compared to the corresponding period in 2024. The cost of service ratio for the six months ended June 30, 2025, was 89.0%, compared to 82.2% in the same period in 2024.

Current wording

Cost of services decreased by $51 million in the nine months ended September 30, 2025, compared to the corresponding period in 2024. The cost of service ratio for the nine months ended September 30, 2025, was 87.4%, compared to 84.2% in the same period in 2024.

Previous wording

The SG&A expense ratio for the six months ended June 30, 2025, was 7.5%, compared to 8.5% for the corresponding period in 2024. The adjusted SG&A expense ratio for the six months ended June 30, 2025, was 7.5%, compared to 8.3% for the six months ended June 30, 2024. The decreases were primarily driven by continued leveraging of expenses over higher revenues and growth in the PDP business. The decreases were partially offset by growth in the Marketplace business, which operates at a meaningfully higher SG&A expense ratio as compared to the overall company.

Current wording

The SG&A expense ratio for the nine months ended September 30, 2025, was 7.3%, compared to 8.4% for the corresponding period in 2024. The adjusted SG&A expense ratio for the nine months ended September 30, 2025, was 7.3%, compared to 8.3% for the nine months ended September 30, 2024. The decreases were primarily driven by continued leveraging of expenses over higher revenues and growth in the PDP business, which operates at a meaningfully lower SG&A expense ratio as compared to the overall company. The decreases were partially offset by growth in the Marketplace business, which operates at a meaningfully higher SG&A expense ratio.