Oct 22, 2026 earnings call — Medicaid rate gains and Florida CMS start
Preliminary 2027 premium expected at least $45 billion; building blocks sum to more than $9.50 per share.
Revenue $11.1B (est $10.9B) · EPS $0.89 (est $0.79)
Key quotes
"We increased our full year rate outlook from 4%-4.5% due to the combination of off-cycle and on-cycle rate updates in the third and fourth quarters."
"In the fourth quarter, our guidance includes Florida CMS for $1.5 billion of revenue, which tracks to the $6 billion of full year run rate."
"Our 2027 premium revenue is expected to be at least $45 billion."
Analyst Q&A 13
Medicaid costs and Q4 EPS drivers
Q (Andrew Mok · Barclays): Analyst asked what drives the Medicaid MLR improvement and stronger-than-usual Q4 EPS if you exclude the Florida contract dollar burden.
A: Management said the legacy Medicaid business improved by about 50 basis points this quarter due to recent rate updates and normal seasonality. They said there is nothing unusual in Q4 and that a $1 CMS drag is captured in the guidance. Overall the improvement supports the 5.5% trend jump-off for 2027.
"The underlying, the core, the legacy book of business is improving by 50 basis points in the quarter, a function of the recent rate updates, offset by or embed by normal seasonality of the business." — Joe Zubretsky (CEO)
Work requirements and member acuity changes
Q (Kevin Fischbeck · BofA): Analyst asked about what Nebraska shows on acuity shifts among stayers versus leavers and how to think about acuity when enrollment drops from work requirements.
A: Management said Nebraska and most states are interpreting CMS guidance to favor keeping people enrolled rather than removing them. They still project a 6% membership loss next year and allocated 4.5% of the 5.5% trend to core and 1% to acuity shift in their preliminary outlook. They remain comfortable carrying that 1% acuity assumption into next year.
"I think on balance, what we're seeing in Nebraska is an interpretation of the guidance given by CMS that leans more toward enrollment rather than disenrollment." — Joe Zubretsky (CEO)
Florida kids contract ramp to break even
Q (John Stansel · JPMorgan): Analyst asked what levers the company has to ramp the new Florida CMS contract to break even over the next year and how they balance continuity of care.
A: Management said the first 22 days were encouraging and implementation was nearly flawless, and that the program appears structurally intact with rates that appear to capture costs. They said break-even next year and target margin in year two look achievable but they will be cautious since it is a new program. Mark added the Q4 guide includes $1.5 billion of Florida revenue, with an expected 99% MCR and a 5% pre-tax loss, and that about 500 basis points of improvement will be needed next year (200 bps from one-time reserves and roughly 300 bps from MCR and G&A).
"Now, our view of the program is that it is structurally intact, that rates appear to capture the cost of the program." — Joe Zubretsky (CEO)
Florida G&A and cost trend run rate
Q (Justin Lake · Wolfe): Analyst asked whether Q4 has incremental Florida G&A versus Q3 and whether the back-half cost trend implies a higher run rate into next year.
A: Management said the 5.5% full-year trend is the right jumping-off point for 2027 and the increase is spread through the year rather than back-end weighted. Mark said about $100 million of expense hit in Q4 related to the Florida CMS contract and there was very little expense before that; of the $1.50 loss this year, roughly $1 was in Q4 and $0.50 in Q2–Q3 prep. They advised using the 5.5% as the baseline for 2027.
"No, the 5.5% for the full year is the right way of looking at the jump-off point into next year." — Joe Zubretsky (CEO)
Where margin recovery will come from
Q (A.J. Rice · UBS): Analyst asked whether margin recovery is concentrated in a subset of states or broad-based across the portfolio.
A: Management said their current pre-tax margin needs context given multi-year cost trends and underfunding, and that they project reaching 2.5% by 2029 (about 30 bps per year). They said most states are slightly underfunded, but the January 1 rate cycle shows an aggregate 7% on known rates with discrete rating for high-cost drugs, LTSS, and behavioral being recognized. Overall they are encouraged by the rate dynamics.
"I would say that in the portfolio, most states are slightly underfunded." — Joe Zubretsky (CEO)
2027 cost trend and acuity assumptions
Q (Stephen Baxter · Wells Fargo): Analyst asked why management considers a 1% acuity assumption conservative and whether current non-work-requirement acuity shifts will continue into 2027.
A: Management reviewed recent history showing Medicaid trend and split between core trend and acuity shifts; they said a 2027 trend of 5.5% with core ~4.5% and a 1% acuity shift is a reasonable early jumping-off point. They added 50 basis points of conservatism because it is October and will refine estimates in February. Mark said membership attrition for 2027 is preliminarily another 6%, and carrying core trend and 1%-1.5% acuity forward is reasonable.
"Each of the last 3 years, 2024, 2025, and 2026, if memory serves me correct, Medicaid trend was 6.5%, 7.5%, and 5.5%." — Joe Zubretsky (CEO)
Total Medicaid margin path with new contracts
Q (Scott Fidel · Goldman Sachs): Analyst asked for the margin trajectory for the whole Medicaid business including new, initially dilutive contracts and what that implies for 2027.
A: Management said growth wins can be dilutive initially, especially a $6 billion run-rate, high-acuity block on a $30 billion base, so they call out new contracts due to materiality. Mark said total Medicaid pre-tax margin will report about 1.2%, and excluding the 99% MCR Florida contract it would be 1.6%. For next year, if rates equal trend expect a flat MLR and G&A leverage from growth, but they are not ready to give firm guidance until February.
"On Medicaid total, we will report a pre-tax margin of 1.2%, barring the 99% on the Florida contract, that would be a 1.6%." — Mark Keim (CFO)
Timing of work-requirement enrollment losses
Q (Sarah James · Cantor Fitzgerald): Analyst asked whether slower pacing of work-requirement losses means more losses in the second half of 2027 or a shift into 2028, given self-attestation changes in 2028.
A: Management said cumulatively they see about a 9%-10% loss from work requirements over several years, and they previously applied roughly a 3% CAGR over three years. Their initial pick for 2027 is a 6% membership impact, implying most of the hit occurs in 2027 with some additional pressure in 2028 and 2029.
"What we said earlier is that cumulatively, we can see about a 10% loss over the next bunch of years." — Mark Keim (CFO)
Prospective rate bumps for acuity and states' actions
Q (Dave Windley · Jefferies): Analyst asked how prospective acuity rate adjustments are being implemented, which states are doing it, and how they are funded given state budget pressures.
A: Management said a handful of states have explicitly included a prospective allowance for acuity shift, while others would consider a mid-cycle review; actuaries use data on stayers, leavers, and joiners to model the impact. Mark said six states on January 1 built explicit adjustments for work requirements and redeterminations, and CMS encouraged actuaries to capture acuity effects.
"A handful of states have specifically included an allowance, a prospective rating adjustment for the potential for an acuity shift." — Joe Zubretsky (CEO)
Seasonality and pacing of Florida Kids contract
Q (Ryan Langston · TD Cowen): Analyst asked whether the Florida Kids contract will show different seasonality and how performance might pace through 2027 toward break even.
A: Management said the membership base is less driven by seasonality because care is month-to-month with regularly scheduled appointments. Given the move from about a -5% pre-tax in Q4 to break even in 2027, they said you might expect a fairly linear improvement through the year but they will not give quarter-to-quarter guidance yet. They may provide more detail in February.
"The nature of the membership base is less about seasonality, because this is kind of continual month-to-month programs in regularly scheduled appointments." — Mark Keim (CFO)
3Q Medicaid margins and prior period items
Q (Lance Wilkes · Bernstein): Analyst asked what drove 3Q Medicaid MCR and whether the acuity shift was fully reflected, plus the impact of prior period development.
A: Management said 3Q showed pretty much normal trend with only modest prior period development that was not meaningful. They noted that last year's prior year development was unusually low, so this year looks larger by comparison, and the trend increase to 5.5% reflects observations across the year rather than a Q3/Q4-specific event.
"What you had in 3Q was pretty much normal trend." — Mark Keim (CFO)
California asset limit and corridor exposure
Q (Michael Ha · Baird): Analyst asked how California's lower asset limit in July 2027 could affect Medicaid and D-SNP membership and how much downside is absorbed by corridor accounting.
A: Management said state eligibility and asset-limit changes are built from the bottom up and were fully contemplated in their outlook. They said corridor accounting is conservative and adjusted as experience emerges. Mark added that current-year membership declines have been concentrated in a few states including California, and they expect modeling next year to reflect disproportionate declines there but do not see a meaningful MLR impact at this time.
"Any eligibility rules in any state, this is built bottoms up." — Joe Zubretsky (CEO)
Range of state implementations for work rules
Q (George Hill · Deutsche Bank): Analyst asked about the range of outcomes across states for work and community engagement implementations, from more arduous to more benign.
A: Management said many states have not yet defined tier 1 medical frailty diagnosis codes, so outcomes remain uncertain at this early stage. They see about 80% of states leaning toward policies that promote enrollment; Nebraska has been surprisingly benign with 90% renewals, and that supports their 6% membership reduction outlook and 1% acuity assumption.
"At this early stage, it's fair to say, as of 10 days ago when I last checked, many of the states haven't even decided on their tier 1 definitions of medical frailty, which are the diagnosis codes that by themselves would constitute medical frailty." — Joe Zubretsky (CEO)