CENTENE CORP

Previous wording

We are a leading healthcare enterprise that is committed to helping people live healthier lives. The Company takes a local approach with local teams to provide fully integrated, high-quality and cost-effective services to government-sponsored and commercial healthcare programs, focusing on under-insured and uninsured individuals. Centene offers affordable and high-quality products to more than 1 in 15 individuals across the nation, including Medicaid and Medicare members (including Medicare Prescription Drug Plans (PDPs) as well as individuals and families served by the Health Insurance Marketplace.

Current wording

We are a leading healthcare enterprise that is committed to helping people live healthier lives. The Company takes a local approach with local teams to provide fully integrated, high-quality and cost-effective services to government-sponsored and commercial healthcare programs, focusing on under-insured individuals. Centene offers affordable and high-quality products to more than 1 in 15 individuals across the nation, including Medicaid and Medicare members (including Medicare Prescription Drug Plans (PDPs)) as well as individuals and families served by the Health Insurance Marketplace.

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 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. For example, in July 2026, New York terminated its Essential Plan-5, which provided state-subsidized healthcare for individuals from 200% to 250% of the Federal Poverty Level (FPL). The timing of regulatory guidance and other rulemaking changes will be critical to ensuring state and MCO implementation readiness. On June 29, 2026, a coalition of 26 states, including 24 Democratic attorney generals and two governors, challenged CMS' interim rule issued on June 3, 2026 implementing the work requirements. The lawsuit is asking the court to block certain provisions of the interim final rule that it alleges are unlawful. The lawsuit may create additional delays and uncertainty regarding the implementation and effect of work requirements on Medicaid beneficiary eligibility.

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. For example, in July 2026, New York terminated its Essential Plan-5, which provided state-subsidized healthcare for individuals from 200% to 250% of the Federal Poverty Level (FPL). The timing of regulatory guidance and other rulemaking changes will be critical to ensuring state and MCO implementation readiness. On June 29, 2026, a coalition of 26 states, including 24 Democratic attorneys general and two governors, challenged the Centers for Medicare and Medicaid Services' (CMS) interim rule issued on June 3, 2026 implementing the work requirements. The lawsuit is asking the court to block certain provisions of the interim final rule that it alleges are unlawful. The lawsuit may create additional delays and uncertainty regarding the implementation and effect of work requirements on Medicaid beneficiary eligibility.

Previous wording

Effective January 1, 2027, the State of California will transition the Medi-Cal Unsatisfactory Immigration Status (UIS) population from managed care to the fee-for-service delivery system. The transition was enacted through California budget legislation following federal guidance indicating that capitation payments for this population are not eligible for federal matching funds. Based on current projections, approximately 250,000 UIS members served through Health Net's Medi-Cal contracts are expected to be affected by this transition. As a result, we expect a reduction in California Medicaid membership and associated premium revenue beginning in 2027. The ultimate financial impact will depend on final implementation requirements, member transition timing, and any related operational or administrative actions taken by the State.

Current wording

Effective January 1, 2027, the State of California will transition the Medi-Cal Unsatisfactory Immigration Status (UIS) population from managed care to the fee-for-service delivery system. The transition was enacted through California budget legislation following federal guidance indicating that capitation payments for this population are not eligible for federal matching funds. Based on current projections, approximately 175,000 UIS members served through Health Net's Medi-Cal contracts for which Health Net is at-risk are expected to be affected by this transition. As a result, we expect a reduction in California Medicaid membership and associated premium revenue beginning in 2027. The ultimate financial impact will depend on final implementation requirements, member transition timing, and any related operational or administrative actions taken by the State.

Previous 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. Further, 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. The combined effect of the expiration of the Enhanced APTCs and the Final Rule reduced 2026 Marketplace membership in the first six months of 2026 compared to 2025 and we anticipate that the combined effects will continue to increase the overall morbidity of the Marketplace population. 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

Further, 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 Internal Revenue Service (IRS) for the full amount of excess tax credit received. Further, 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. The combined effect of the expiration of the Enhanced APTCs and the Final Rule reduced 2026 Marketplace membership in the first nine months of 2026 compared to 2025 and we anticipate that the combined effects will continue to increase the overall morbidity of the Marketplace population. 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 Part D, impacting stand-alone Medicare 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 $2,100 in 2026 in order to provide more predictable and affordable prescription drug coverage for Medicare beneficiaries. The IRA changes, which went into effect beginning in 2025, resulted 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. For example, in 2025, participating PDPs operated under narrowed risk corridor thresholds as part of the supports CMS introduced to limit market volatility. For 2026, CMS eliminated these narrowed risk corridors entirely, shifting PDPs back toward standard program financial risk‑sharing. Starting in 2026, CMS created a Drug Subsidy to compensate plans for the loss of the Manufacturer Discount Program (MDP) for maximum fair price drugs. 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 2025 plan year that we expect to be paid by CMS within a year 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 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 $2,100 in 2026 in order to provide more predictable and affordable prescription drug coverage for Medicare beneficiaries. The IRA changes, which went into effect beginning in 2025, resulted in a meaningful shift in cost-sharing responsibilities between members, drug companies, 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 will expire at the end of 2026. The parameters of the program were different each year. For example, in 2025, participating PDPs operated under narrowed risk corridor thresholds as part of the supports CMS introduced to limit market volatility. For 2026, CMS eliminated these narrowed risk corridors entirely, shifting PDPs back toward standard program financial risk‑sharing. Starting in 2026, CMS created a Drug Subsidy to compensate plans for the loss of the Manufacturer Discount Program (MDP) for maximum fair price drugs. 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 2025 plan year that we expect to be paid by CMS within a year after the plan year closes. If the payments from CMS are delayed, our cash flows may be materially adversely affected.

Previous wording

Our financial performance for the second quarter of 2026 is summarized as follows:

Current wording

Our financial performance for the third quarter of 2026 is summarized as follows:

Previous wording

•Managed care membership of 25.9 million, a decrease of 2.1 million members, or (8)% year-over-year.

Current wording

•Managed care membership of 25.7 million, a decrease of 2.3 million members, or (8)% year-over-year.

Previous wording

•Total revenues of $53.6 billion, representing 10% growth year-over-year.

Current wording

•Total revenues of $50.6 billion, representing 2% growth year-over-year.

Previous wording

•Premium and service revenues of $44.4 billion, representing 4% growth year-over-year.

Current wording

•Premium and service revenues of $45.1 billion, representing 0.5% growth year-over-year.

Previous wording

•GAAP diluted earnings per share (EPS) of $2.19 for the second quarter of 2026.

Current wording

•Adjusted diluted earnings per share (EPS) of $0.58 for the third quarter of 2026.

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 before income tax expense.

Current 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". 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

(a) enterprise optimization costs of $37 million, or $0.07 per share ($0.06 after-tax), severance costs due to enterprise optimization and contract exits of $15 million, or $0.03 per share ($0.02 after-tax) and net gain on debt extinguishment of $6 million, or $0.01 per share ($0.01 after-tax).

Current wording

(a) severance costs due to enterprise optimization and contract exits of $276 million, or $0.56 per share ($0.42 after-tax), enterprise optimization third-party vendor costs of $35 million, or $0.07 per share ($0.06 after-tax), a net gain on real estate transactions of $18 million, or $0.04 per share ($0.03 after-tax), an additional loss associated with a prior divestiture of $15 million, or $0.03 per share ($0.03 after-tax), and a net gain on debt extinguishment of $1 million, or $0.00 per share ($0.00 after-tax).

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.

Previous wording

•The combined effect of ongoing, post-PHE state eligibility redeterminations and regulatory policy changes reduced our Medicaid membership in the second quarter compared to 2025.

Current wording

•The combined effect of ongoing, post-PHE state eligibility redeterminations and regulatory policy changes reduced our Medicaid membership in the third quarter compared to 2025.

Previous wording

•In July 2025, our subsidiary, Magnolia Health Plan, 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.

Current wording

•In July 2025, our subsidiary, Magnolia Health Plan, 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. The contract has a four-year term, with two optional one-year extensions, for a total of six possible contract years.

Previous 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. These ratings impact our 2026 plan year revenues.

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. These ratings are reflected in our 2026 plan year revenues.

Previous wording

•In January 2026, our subsidiary, Meridian Health Plan of Illinois, Inc., commenced the contract with the Illinois Department of Healthcare and Family Services to continue providing Medicare and Medicaid services for dually eligible Illinoisans through a Fully Integrated Dual Eligible Special Needs Plan (FIDE SNP). The contract has a four-year term, with optional extensions of six months to five and a half years.

Current wording

•In January 2026, our subsidiary, Meridian Health Plan of Illinois, Inc. (Meridian), commenced the contract with the Illinois Department of Healthcare and Family Services to continue providing Medicare and Medicaid services for dually eligible Illinoisans through a Fully Integrated Dual Eligible Special Needs Plan (FIDE SNP). The contract has a four-year term, with optional extensions of six months to five and a half years.

Previous wording

•In December 2024, we recorded a premium deficiency reserve of $92 million related to the 2025 Medicare Advantage contract year, which 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). No premium deficiency reserve related to the 2026 Medicare Advantage contract year has been recorded.

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). No premium deficiency reserve related to the 2026 Medicare Advantage contract year has been recorded.

Previous wording

•On June 30, 2026, the Centers for Medicare and Medicaid Services (CMS) published the final risk adjustment transfers for the 2025 benefit year. The final 2025 risk adjustment results, including offsetting increases in the Minimum Medical Loss Ratio (MLR) payable, Risk Adjustment Data Validation (RADV) accrual and other offsets, resulted in a pre-tax benefit of $481 million. The six months ended June 30, 2025, was impacted by lower Marketplace estimated risk adjustment revenue.

Current wording

•On June 30, 2026, CMS published the final risk adjustment transfers for the 2025 benefit year. The final 2025 risk adjustment results, including offsetting increases in the Minimum Medical Loss Ratio (MLR) payable, Risk Adjustment Data Validation (RADV) accrual and other offsets, resulted in a pre-tax benefit of $480 million. The nine months ended September 30, 2025, was impacted by lower Marketplace estimated risk adjustment revenue.

Previous wording

•In 2026, Ambetter Health is offered in 29 states. Ambetter Health Solutions is operating plans designed to attract Individual Coverage Health Reimbursement Arrangement (ICHRA) membership in off-exchange plans in 13 states in 2026 compared to 6 states in 2025.

Current wording

•In 2026, Ambetter Health is offered in 29 states. Ambetter Health Solutions is operating plans designed to attract CHOICE Arrangement (formerly known as Individual Coverage Health Reimbursement Arrangement, or ICHRA), membership in off-exchange plans in 13 states in 2026 compared to 6 states in 2025.

Previous wording

•Effective January 1, 2027, the State of California will transition the Medi-Cal Unsatisfactory Immigration Status (UIS) population from managed care to the fee-for-service delivery system. As a result, we expect a reduction in California Medicaid membership and associated premium revenue beginning in 2027.

Current wording

•Effective January 1, 2027, the State of California will transition the Medi-Cal UIS population from managed care to the fee-for-service delivery system. As a result, we expect a reduction in California Medicaid membership and associated premium revenue beginning in 2027.

Previous wording

•In July 2026, our subsidiary, Meridian Health Plan of Illinois, Inc. (Meridian), was selected by the Illinois Department of Healthcare and Family Services to continue providing services for the HealthChoice Illinois Medicaid managed care program. Under the contract, Meridian will continue providing managed care for Medicaid enrollees, including access to integrated primary, maternal, and behavioral health care. The contract is expected to begin in January 2027 and has a four-year term.

Current wording

•In July 2026, our subsidiary, Meridian was selected by the Illinois Department of Healthcare and Family Services to continue providing services for the HealthChoice Illinois Medicaid managed care program. Under the contract, Meridian will continue providing managed care for Medicaid enrollees, including access to integrated primary, maternal, and behavioral health care. The contract is expected to begin in January 2027 and has a four-year term.

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 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.

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 was submitted in September 2026 and we anticipate the contract award announcement will occur in early 2027 with a new contract effective date of October 2027.

Previous wording

In addition, we were not selected to continue providing services under the Florida Children's Medical Services (Florida CMS) program. Our current Florida CMS contract is scheduled to conclude at the end of September 2026. Further, we are in the process of protesting the results of Medicaid procurement awards in Georgia and Texas. If these protests are not successful, our future results of operations would be impacted.

Current wording

In addition, we were not selected to continue providing services under the Florida Children's Medical Services (Florida CMS) program and our contract concluded at the end of September 2026. Further, we are in the process of protesting the results of Medicaid procurement awards in Georgia and Texas. If these protests are not successful, our future results of operations would be impacted.

Previous wording

•In October 2025, CMS issued 2026 Medicare Advantage Star Ratings on the Medicare Plan Finder. Based on the data, we had approximately 60% of our Medicare Advantage membership enrolled in plans rated 3.5 stars or higher, including approximately 20% in 4-star rated plans. This compares to approximately 55% rated in 3.5 stars (and 1% in 4-star) in the prior year. These ratings impact our 2027 plan year revenues.

Current wording

•In October 2025, CMS issued 2026 Medicare Advantage Star Ratings on the Medicare Plan Finder. Based on the data, we had approximately 60% of our Medicare Advantage membership enrolled in plans rated 3.5 stars or higher, including approximately 20% in 4-star rated plans. This compares to approximately 55% of our Medicare Advantage membership enrolled in plans rated in 3.5 stars or higher (including 1% enrolled in 4-star rated plans) in the prior year. These ratings will be reflected in our 2027 plan year revenues.

Previous wording

From June 30, 2025 to June 30, 2026, our managed care membership decreased by 2.1 million, or (8)%. The following table sets forth our membership by line of business:

Current wording

From September 30, 2025 to September 30, 2026, our managed care membership decreased by 2.3 million, or (8)%. 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, 2026 and 2025, 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, 2026 and 2025, 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, 2026 and 2025 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, 2026 and 2025 is as follows ($ in millions, except per share data in dollars):

Previous wording

Total revenues increased 9% in the six months ended June 30, 2026, over the corresponding period in 2025, primarily driven by increased premium tax revenue driven by state pass-through payments, premium yield and membership growth in the PDP business, rate increases in Marketplace and in the Medicaid business to address medical trend, Marketplace risk adjustment revenue transfer for the 2025 and 2026 benefit years, and state directed payments. The increases were partially offset by lower Marketplace and Medicaid membership.

Current wording

Total revenues increased 2% in the three months ended September 30, 2026, over the corresponding period in 2025, primarily driven by increased premium tax revenue driven by state pass-through payments, premium yield and membership growth in the PDP business, rate increases in Marketplace and in the Medicaid business to address medical trend, and state directed payments. The increases were partially offset by lower Marketplace and Medicaid membership.

Previous wording

The HBR for the three months ended June 30, 2026, was 89.6%, compared to 93.0% in the same period in 2025. The consolidated HBR benefited from a lower Marketplace HBR resulting from improved pricing and risk transfer reflecting the acuity of the Marketplace membership. The HBR also decreased due to rate and revenue increases and continued tangible progress in managing medical costs in the Medicaid business. The HBR benefited by the favorable resolution of programmatic elements for the 2025 benefit year in Medicare and was also driven by an increase to the premium deficiency reserve (PDR) in 2025 versus no PDR in 2026 for our Medicare Advantage business as a result of our progression towards profitability.

Current wording

The HBR for the three months ended September 30, 2026, was 92.7%, unchanged from 92.7% in the same period in 2025. The consolidated HBR benefited from a lower Marketplace HBR resulting from improved pricing and risk transfer reflecting the acuity of the Marketplace membership as well as strong fundamental performance in both the Medicare Advantage and PDP businesses. The HBR in 2025 was positively impacted by a decrease to the premium deficiency reserve versus no premium deficiency reserve in 2026 for our Medicare Advantage business as a result of our progression towards profitability.

Previous wording

Cost of services increased by $88 million in the three months ended June 30, 2026, compared to the corresponding period in 2025. The cost of service ratio for the three months ended June 30, 2026, was 91.9%, compared to 88.2% in the same period in 2025.

Current wording

Cost of services increased by $24 million in the three months ended September 30, 2026, compared to the corresponding period in 2025. The cost of service ratio for the three months ended September 30, 2026, was 91.8%, compared to 84.3% in the same period in 2025.

Previous wording

The SG&A expense ratio was 7.0% for the second quarter of 2026, compared to 7.1% in the second quarter of 2025. The adjusted SG&A expense ratio was 6.9% for the second quarter of 2026, compared to 7.1% in the second quarter of 2025. The decreases were primarily driven by strong cost management, leveraging of expenses over higher revenues and reduced Marketplace membership, which operates at a meaningfully higher SG&A expense ratio, as well as overall discipline in Marketplace SG&A. The decreases were also driven by growth in the PDP business, which operates at a meaningfully lower SG&A expense ratio as compared to the overall company.

Current wording

The SG&A expense ratio was 7.2% for the third quarter of 2026, compared to 7.0% in the third quarter of 2025. The adjusted SG&A expense ratio was 6.5% for the third quarter of 2026, compared to 7.0% in the third quarter of 2025. The increase in the SG&A expense ratio was primarily driven by enterprise optimization severance and vendor costs. The decrease in the adjusted SG&A expense ratio was driven by strong cost management, leveraging of expenses over higher revenues and reduced Marketplace membership, which operates at a meaningfully higher SG&A expense ratio. The decrease was also driven by growth in the PDP business, which operates at a meaningfully lower SG&A expense ratio as compared to the overall company.

Previous wording

Debt extinguishment. During the three months ended June 30, we repurchased $260 million of par value Senior Notes due 2027 and 2028 through the senior note debt repurchase program, resulting in a $6 million pre-tax gain on the repurchase of the notes.

Current wording

Debt extinguishment. During the three months ended September 30, 2026 we repurchased $558 million of par value Senior Notes due 2027 and 2028 through the senior note debt repurchase program, resulting in a $1 million pre-tax net gain on the repurchase of the notes, including the impact of unamortized debt premium and discount as well as issuance costs.

Previous wording

Interest expense. Interest expense decreased by $17 million in the three months ended June 30, 2026, compared to the corresponding period in 2025.

Current wording

Interest expense. Interest expense decreased by $21 million in the three months ended September 30, 2026, compared to the corresponding period in 2025, primarily driven by Senior Notes repurchases resulting in lower overall debt balances.

Previous wording

Total revenues increased 12% in the six months ended June 30, 2026, compared to the corresponding period in 2025. The increase in total revenues was primarily driven by pass-through payments and rate increases, partially offset by lower membership primarily due to eligibility redeterminations. Gross margin increased $457 million in the six months ended June 30, 2026, compared to the corresponding period in 2025 primarily driven by rate and revenue increases and continued tangible progress in managing medical costs.

Current wording

Total revenues increased 6% in the three months ended September 30, 2026, compared to the corresponding period in 2025. The increase in total revenues was primarily driven by pass-through payments and rate increases, partially offset by lower membership primarily due to eligibility redeterminations. Gross margin decreased $4 million, or 0.3%, in the three months ended September 30, 2026, compared to the corresponding period in 2025, primarily due to the non-recurring benefit from a retroactive adjustment in the third quarter of 2025.

Previous wording

Total revenues increased 17% in the six months ended June 30, 2026, compared to the corresponding period in 2025, primarily driven by increased PDP premiums and membership, partially offset by lower Medicare Advantage membership. Gross margin increased $652 million in the six months ended June 30, 2026, compared to the corresponding period in 2025 primarily driven by the favorable resolution of programmatic elements for the 2025 benefit year, rate increases, and an increase to the PDR for our Medicare Advantage business in 2025 versus no PDR in 2026 as a result of our progression towards profitability, partially offset by medical and pharmacy costs.

Current wording

Total revenues increased 20% in the three months ended September 30, 2026, compared to the corresponding period in 2025 primarily driven by increased PDP premiums and membership, partially offset by lower Medicare Advantage membership. Gross margin increased $161 million in the three months ended September 30, 2026, compared to the corresponding period in 2025 primarily driven by rate increases partially offset by pharmacy and medical costs. Additionally, gross margin in 2025 was positively impacted by a decrease to the premium deficiency reserve versus no premium deficiency reserve in 2026 for our Medicare Advantage business as a result of our progression towards profitability.

Previous wording

Total revenues decreased 7% in the three months ended June 30, 2026, compared to the corresponding period in 2025 primarily driven by reduced membership in the Marketplace business. Gross margin increased $1.0 billion in the three months ended June 30, 2026, compared to the corresponding period in 2025 primarily driven by rate increases, the current 2026 risk adjustment revenue transfer estimate based on the first round of Wakely relative risk adjustment transfer data and final 2025 risk adjustment revenue transfer, partially offset by reduced membership in the Marketplace business.

Current wording

Total revenues decreased 21% in the three months ended September 30, 2026, compared to the corresponding period in 2025. Gross margin decreased $158 million in the three months ended September 30, 2026, compared to the corresponding period in 2025. The decreases were primarily driven by reduced membership in the Marketplace business, partially offset by lower Marketplace HBR resulting from improved pricing and risk transfer reflecting the acuity of the Marketplace membership.

Previous wording

Total revenues increased 10% in the three months ended June 30, 2026, over the corresponding period in 2025, primarily driven by increased premium tax revenue driven by state pass-through payments, premium yield and membership growth in the PDP business, rate increases in Marketplace and in the Medicaid business to address medical trend, Marketplace risk adjustment revenue transfer for the 2025 and 2026 benefit years, and state directed payments. The increases were partially offset by lower Marketplace and Medicaid membership.

Current wording

Total revenues increased 6% in the nine months ended September 30, 2026, over the corresponding period in 2025, primarily driven by rate increases in Marketplace and in the Medicaid business to address medical trend, increased premium tax revenue driven by state pass-through payments, premium yield and membership growth in the PDP business, state directed payments and Marketplace risk adjustment revenue transfer for the 2025 and 2026 benefit years. The increases were partially offset by lower Marketplace and Medicaid membership.

Previous wording

The HBR for the six months ended June 30, 2026, was 88.4%, compared to 90.2% in the same period in 2025. The consolidated HBR benefited from a lower Marketplace HBR resulting from improved pricing and risk transfer reflecting the acuity of the Marketplace membership. The HBR also decreased due to rate and revenue increases and continued tangible progress in managing medical costs in the Medicaid business. The HBR was benefited by the favorable resolution of programmatic elements for the 2025 benefit year in Medicare. The decreases were partially offset by the decline in Marketplace and Medicaid membership and the corresponding impact on consolidated member mix.

Current wording

The HBR for the nine months ended September 30, 2026, was 89.9%, compared to 91.1% in the same period in 2025. The consolidated HBR benefited from a lower Marketplace HBR resulting from improved pricing and risk transfer reflecting the acuity of the Marketplace membership. The HBR also decreased due to rate and revenue increases and continued tangible progress in managing medical costs in the Medicaid business. The HBR was benefited by the favorable resolution of programmatic elements for the 2025 benefit year in Medicare as well as strong fundamental performance in both the Medicare Advantage and PDP businesses. The decreases were partially offset by the decline in Marketplace membership and the corresponding impact on consolidated member mix.

Previous wording

Cost of services increased by $92 million in the six months ended June 30, 2026, compared to the corresponding period in 2025. The cost of service ratio for the six months ended June 30, 2026, was 91.7%, compared to 89.0% in the same period in 2025.

Current wording

Cost of services increased by $116 million in the nine months ended September 30, 2026, compared to the corresponding period in 2025. The cost of service ratio for the nine months ended September 30, 2026, was 91.7%, compared to 87.4% in the same period in 2025.