A.J. Rice: Okay. And maybe if I could just ask on the Marketplace product. Obviously, the last 1 years, 1.5 years, you’ve been focused on repricing and margin. Now that you sort of have gotten that in place. Any update on your long-term strategy toward marketplace and growing that? Or what’s your thought on that?
Joe Zubretsky: Sure. A.J., the small silver and stable strategy was a short-term reaction to having to re-position the business to maintain a profile of single digit — mid-single-digit pretax margins. That was a temporal way to look at the business. we invested about 300 basis points of what call excess margin from last year into the business this year, and that’s why we’re growing membership at 30% and premium revenues are growing at 20%. So, we like the nice steady progression of the business. We do expect to grow it. But being in the insurance business as long as I have, you never try to grow any portfolio organically that quickly because when underwriting isn’t allowed, which — that’s what this product is, you have to be very wary of where you’re bidding against the market, who else is in the market and where your results are coming out for the prior year.
So, we’re going to be cautious. But the nice steady growth we saw this year feels really good to us. We’re able to maintain a profile of high single-digit pretax margins and grow at this rate I think that’s what to expect.
Operator: The next question comes from Justin Lake with Wolfe Research.
Justin Lake : Thanks, good morning. A couple of questions here. First, last quarter, Joe, you mentioned an expectation that the company had visibility to grow EPS at the low end of your 15% to 18% outlook for 2025. Is that still the expectation? And then secondly, Joe, you mentioned that you’re assuming in Texas or it looks like you’re assuming in Texas that you get an average amount of share of the state from your new wins meaning there’s 4 plants in a region, you get 25%. First, is that correct? And then second, what are the level of visibility here? The reason I ask is that your local regional market share in Medicaid varies pretty broadly by state across plans. Texas, your share currently appears to be in the high-single digits versus a state like Washington, where I recall you have way above average share. I’m just curious on your visibility on getting that. Thanks.
Joe Zubretsky: The last quarter, we gave you the building blocks for an outlook into 2025, and we have not changed our view of those building blocks. Obviously, embedded earnings still at $4, we have actually changed the composition of that and how those emerge in upcoming years has changed slightly. But the building blocks haven’t changed. We continue to harvest earnings out of our existing footprint. We talked about operating leverage, talk about embedded earnings. Obviously, there likely will be a natural headwind from interest rate declines. — into next year. So, the building blocks haven’t changed, and that’s still our forward look for 2025, again, not guidance, but an outlook. On Texas, we don’t know. We used very conservative estimates of what our market share would likely to be in the 7 regions that we won and use kind of the average portfolio margins.
I don’t think there’s anything more to read into it than that. We think it’s a conservative and reasonable estimate of what that business will produce.
Justin Lake: So, can you share that market share assumption?
Joe Zubretsky: I don’t — it’s far too early, and we don’t want to get ahead of our customer on that. So, we’ll wait and see until we have more visibility into how membership will be allocated. I think that’s the prudent thing to do here.
Operator: The next question comes from Nathan Rich with Goldman Sachs.
Nathan Rich : I wanted to ask on Florida. Joe, I think you talked about the protests and the ultimate outcome could be different. I guess I’d be curious to get your view, Florida kind of shifted to more of a comprehensive care model in the state. And in your view, does that create, I guess, more friction than normal for the appeals process and potential changes there? And then as a follow-up, I wanted to ask if you had an updated view on the $46 billion revenue target by 2026. Obviously, that included some assumption for RFP wins, but there are a number of other factors in that bucket. So just curious if you still feel like that’s the right shooting point for 2026 revenue.
Joe Zubretsky: In, on Florida, we’re not making a prediction on how the process will unfold. We’re citing historical precedent. — historical precedent would suggest that this is not the end, it’s sort of the beginning of the end of the process. that there’s more discussions that will take place. So, I don’t want to, again, get ahead of the state on this. But if you look at the past two procurements in Florida, there have been extended conversations and there are regions in Florida that still do not have maximum awards given. So again, just citing historical precedent. On the $46 billion of revenue, but we have a $60 billion new contract pipeline. Kansas and Georgia are sitting out there currently live and in process. as I mentioned, Texas Star Kids.
We have great momentum in the State of Texas. North Carolina, we didn’t be down North Carolina last time because it was too early in our turnaround plan to bid on anything. So, we’re looking at the $60 billion pipeline and feeling pretty good about our prospects there. Look, we’re for 7 for 9 reprocurements and we started our growth journey. We’re 8 or 10 and new business wins. — we have 8 M&A transactions totaling $1 billion of revenue over the past four years. We’re feeling really good about the long-term revenue target here and our ability to produce continued 13% to 15% revenue growth and 15% to 18% earnings per share growth. Nothing’s changed. And our trajectory here, even though we’re disappointed with the 2 RFP situations in the second quarter — in the first quarter.
Nathan Rich: Great. Thank you.
Operator: The next question comes from Gary Taylor with TD Cowen.
Gary Taylor : Good morning, guys. Had two policy questions actually. One, just because I get asked a lot just about the expiring ACA credits for 2026, maybe leaving aside whether or not they get renewed and the politics of that. Just wondering, from a technical basis, how are you guys thinking about sort of elasticity of demand for exchange product, if some of the income level categories see a fairly material percentage change in the premium that would be required, just what you’re thinking now, if end of the worst case, those went away. What the impact might be, how much is retained. And then the second question would just be the big Medicaid rule that was out earlier this week, managed care, Medicaid rule. I think we were primarily focused on the state-directed payments changes there, but I know there are a few things on MCO transparency, MLR reporting changes. I just wanted to see if there’s anything that you felt was material to you going forward.
