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What changed in Elevance Health's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Elevance Health's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+477 added−472 removedSource: 10-K (2026-02-06) vs 10-K (2025-02-20)

Top changes in Elevance Health's 2025 10-K

477 paragraphs added · 472 removed · 395 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

126 edited+38 added−41 removed132 unchanged
Biggest changeFinally, we expect to continue to rationalize our portfolio of businesses and products and align our investments to optimize our core businesses, invest in high-growth opportunities, and accelerate value creation through expanded capabilities and services. -4- Impact on Our Results of Operations Our results of operations depend in large part on our ability to accurately predict and effectively manage healthcare costs through effective contracting with providers of care to our members, product pricing, medical management and health and wellness programs, including service coordination and case management for addressing complex and specialized healthcare needs, innovative product design and our ability to maintain or achieve improvement in our Centers for Medicare and Medicaid Services (“CMS”) Star Ratings.
Biggest changeImpact on Our Results of Operations Our results of operations depend in large part on our ability to accurately predict and effectively manage healthcare costs through effective care provider contracting, product pricing, medical management and health and wellness programs, including service coordination and case management for complex and specialized healthcare needs.
In addition, providers may have incentives to achieve certain quality measures, may share medical cost risk or may have other incentives to deliver quality medical services in a cost-effective manner. Also, certain plans offer members incentives for healthy behaviors, such as smoking cessation and weight management.
In addition, providers may have incentives to achieve certain quality measures, may share medical cost risk or may have other incentives to deliver quality medical services in a cost-effective manner. Certain plans also offer members incentives for healthy behaviors, such as smoking cessation and weight management.
We believe that participants in the managed care industry compete for customers based on quality of service, price, access to provider networks, access to care management and wellness programs (including health information), innovation, effective use of digital technology, breadth and flexibility of products and benefits, expertise and reputation (including National Committee on Quality Assurance (“NCQA”) accreditation status as well as CMS Star Ratings), brand recognition and financial stability.
We believe that participants in the managed care industry compete for customers based on quality of service, price, access to care provider networks, access to care management and wellness programs (including health information), innovation, effective use of digital technology, breadth and flexibility of products and benefits, expertise and reputation (including National Committee for Quality Assurance (“NCQA”) accreditation status as well as CMS Star Ratings), brand recognition and financial stability.
Although previously we did not have a right to sell products and services using the BCBS names and marks outside of our exclusive service areas, under the terms of the In re Blue Cross Blue Shield Antitrust Litigation subscriber settlement agreement and release (“Subscriber Settlement Agreement”) some large national employers with self-funded plans (specifically identified in the Subscriber Settlement Agreement), have a right to request a second Blue plan bid in addition to a bid from the local Blue plan, effective as of September 2024.
Although previously we did not have a right to sell products and services using the BCBS names and marks outside of our exclusive service areas, under the terms of the In re Blue Cross Blue Shield Antitrust Litigation subscriber settlement agreement and release (the “Subscriber Settlement Agreement”), some large national employers with self-funded plans (specifically identified in the Subscriber Settlement Agreement) have a right to request a second Blue plan bid in addition to a bid from the local Blue plan, effective as of September 2024.
Prior to Nike, he served as Chief Technology Officer/CIO of Kohl’s Corporation (“Kohls”) (retailer) from March 2016 to June 2019, and he held other various roles at Kohl's beginning in 2011, including Executive Vice President, Digital Technology, and Senior Vice President of Digital Innovation. Prior to Kohl's, Mr.
Prior to Nike, he served as Chief Technology Officer/CIO of Kohl’s Corporation (“Kohls”) (retailer) from March 2016 to June 2019, and he held various other roles at Kohl's beginning in 2011, including Executive Vice President, Digital Technology, and Senior Vice President of Digital Innovation. Prior to Kohl's, Mr.
These requirements and restrictions include, among other things: minimum capital and liquidity requirements; enrollment and customer service performance requirements; participation in programs that provide portability of membership between plans; disclosures to the BCBSA relating to enrollment and financial conditions; disclosures as to the structure of the BCBS system in contracts with third parties and in public statements; plan governance requirements; cybersecurity requirements; a requirement that at least 80% (or, in the case of Blue Cross of California, substantially all) of a licensee’s annual combined local net revenue, as defined by the BCBSA, attributable to healthcare plans and related services within its service areas must be sold, marketed, administered or underwritten under the BCBS names and marks; a requirement that neither a plan nor any of its licensed affiliates may permit an entity other than a plan or a licensed affiliate to obtain control of the plan or the licensed affiliate or to acquire a substantial portion of its assets related to licensable services; governance requirements such as a requirement that we divide our Board of Directors into three classes serving staggered three-year terms; a requirement that we guarantee certain contractual and financial obligations of our licensed affiliates; and a requirement that we indemnify the BCBSA against any claims asserted against it resulting from the contractual and financial obligations of any subsidiary that serves as a fiscal intermediary providing administrative services for Medicare Parts A and B.
These requirements and -14- restrictions include, among other things: minimum capital and liquidity requirements; enrollment and customer service performance requirements; participation in programs that provide portability of membership between plans; disclosures to the BCBSA relating to enrollment and financial conditions; disclosures as to the structure of the BCBS system in contracts with third parties and in public statements; plan governance requirements; cybersecurity requirements; a requirement that at least 80% (or, in the case of Blue Cross of California, substantially all) of a licensee’s annual combined local net revenue, as defined by the BCBSA, attributable to healthcare plans and related services within its service areas must be sold, marketed, administered or underwritten under the BCBS names and marks; a requirement that neither a plan nor any of its licensed affiliates may permit an entity other than a plan or a licensed affiliate to obtain control of the plan or the licensed affiliate or to acquire a substantial portion of its assets related to licensable services; governance requirements such as a requirement that we divide our Board of Directors into three classes serving staggered three-year terms; a requirement that we guarantee certain contractual and financial obligations of our licensed affiliates; and a requirement that we indemnify the BCBSA against any claims asserted against it resulting from the contractual and financial obligations of any subsidiary that serves as a fiscal intermediary providing administrative services for Medicare Parts A and B.
Our results of operations are also impacted by levels and mix of membership, which has changed, and will continue to change, as a result of the quality and pricing of our health benefits products and services, Medicaid redeterminations, an aging population, healthcare utilization patterns, previously uninsured members entering the healthcare system, provider and member fraud, economic conditions, changes in unemployment, the continued and future impact of large-scale emergencies, acquisitions, entry into new markets and expansions in or exits from existing markets.
Our results of operations are also impacted by membership levels and mix of membership, which has changed, and will continue to change, as a result of the pricing of our health benefits products and services, Medicaid redeterminations, an aging population, healthcare utilization patterns, previously uninsured members entering the healthcare system, provider and member fraud, economic conditions, changes in unemployment, the continued and future impact of large-scale emergencies, acquisitions, entry into new markets and expansions in or exits from existing markets.
See Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for additional details on the impact if we were not to comply with these license agreements and Note 14, “Commitments and Contingencies – Litigation and Regulatory Proceedings – Blue Cross Blue Shield Antitrust Litigation ,” of the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information on the Subscriber Settlement Agreement.
See Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for additional details on the impact if we were not to comply with these license agreements and Note 14, “Commitments and Contingencies – Litigation and Regulatory Proceedings – Blue Cross Blue Shield Antitrust Litigation ,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information on the Subscriber Settlement Agreement.
Our Medicaid business includes our managed care alternatives through public-funded healthcare programs, including Medicaid; Medicaid expansion programs; Temporary Assistance for Needy Families (“TANF”); programs for seniors and people with disabilities (“SPD”); Children’s Health Insurance -8- Programs (“CHIP”); and specialty programs such as those focused on long-term services and support (“LTSS”), HIV/AIDS, children living in foster care, behavioral health and/or substance abuse disorders, and intellectual disabilities and/or developmental disabilities.
Our Medicaid business includes our managed care alternatives through public-funded healthcare programs, including Medicaid; Medicaid expansion programs; Temporary Assistance for Needy Families (“TANF”); programs for seniors and people with disabilities (“SPD”); Children’s Health Insurance Programs (“CHIP”); and specialty programs such as those focused on long-term services and support (“LTSS”), HIV/AIDS, children living in foster care, behavioral health and/or substance abuse disorders, and intellectual disabilities and/or developmental disabilities.
Members are charged periodic, prepaid premiums and generally pay copayments, coinsurance and/or deductibles when they receive services. Health Benefits • Commercial Risk-Based Products. We offer employer groups a diversified mix of managed care risk-based products including: Preferred Provider Organization (“PPO”), Health Maintenance Organization (“HMO”), Consumer-Driven Health Plans (“CDHP”), Traditional Indemnity and Point-of-Service (“POS”) plans.
Members are charged periodic, prepaid premiums and generally pay copayments, coinsurance and/or deductibles when they receive services. -7- Health Benefits • Commercial Risk-Based Products. We offer employer groups a diversified mix of managed care risk-based products including Preferred Provider Organization (“PPO”), Health Maintenance Organization (“HMO”), Consumer-Driven Health Plans (“CDHP”), Traditional Indemnity and Point-of-Service (“POS”) plans.
In the Individual markets, we offer on-exchange products through state- or federally-facilitated marketplaces (the “Public Exchange”) in compliance with the Patient -6- Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the “ACA”) and off-exchange products. Federal subsidies are available for certain members, subject to eligibility, who purchase Public Exchange products.
In the Individual markets, we offer on-exchange products through state- or federally-facilitated marketplaces (the “Public Exchange”) in compliance with the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the “ACA”) and off-exchange products. Federal subsidies are available for certain members, subject to eligibility, who purchase Public Exchange products.
We believe that our pricing and bid strategy, brand name and network quality will provide a strong foundation for membership growth opportunities in the future. Our provider networks give us a highly competitive unit cost position and provide distinctive service levels which allow us to offer a broad range of affordable health benefit products to our customers.
We believe that our pricing and bid strategy, brand name and network quality will provide a strong foundation for membership growth opportunities in the future. -10- Our provider networks give us a highly competitive unit cost position and provide distinctive service levels which allow us to offer a broad range of affordable health benefit products to our customers.
Under a fee-for-service reimbursement methodology for physicians, fee schedules are developed at the state level based on an assessment of several factors and conditions, including the CMS resource-based relative value system (“RBRVS”), medical practice cost inflation and physician supply of each specialty. We utilize CMS RBRVS fee schedules as a reference point for fee schedule development and analysis.
Under a fee-for-service reimbursement methodology for physicians, fee schedules are developed at the state level based on an assessment of several factors and conditions, including the CMS resource-based relative value scale system (“RBRVS”), medical practice cost inflation and physician supply of each specialty. We utilize CMS RBRVS fee schedules as a reference point for fee schedule development and analysis.
Strong competition within the pharmacy industry has -10- generated greater demand for lower product and service pricing, increased revenue sharing and enhanced product and service offerings. Pricing and Underwriting of Our Products We price our products based on our assessment of current healthcare claim costs and emerging healthcare cost trends, combined with charges for administrative expenses, risk and profit.
Strong competition within the pharmacy industry has generated greater demand for lower product and service pricing, increased revenue sharing and enhanced product and service offerings. Pricing and Underwriting of Our Products We price our products based on our assessment of current healthcare claim costs and emerging healthcare cost trends, combined with charges for administrative expenses, risk and profit.
Additionally, the Governance Committee of our Board has primary responsibility for monitoring our corporate social responsibility and environmental sustainability initiatives and performance. We provide the age, gender and racial and ethnic compositions of our U.S. work force in our annual Impact Report, which includes Equal Employment Opportunity Employer Information Report (EEO-1) data.
Additionally, the Governance Committee of our Board has primary responsibility for monitoring our corporate social responsibility and environmental sustainability initiatives and performance. We provide the age, gender and racial and ethnic compositions of -20- our U.S. work force in our annual Impact Report, which includes Equal Employment Opportunity Employer Information Report (EEO-1) data.
Prior to joining us, she was Director of The Department of Healthcare and Family Services for the State of Illinois from 2015 to June 2018. Prior to that appointment, Ms. Norwood held various leadership roles at Aetna, with her most recent role as President of the Mid-America Region for Aetna from 2010 until 2013. Mr.
Prior to joining us, she was Director of The Department of Healthcare and Family Services for the State of Illinois from 2015 to June 2018. Prior to that appointment, Ms. Norwood held various leadership roles at Aetna, with her most recent role as President of the Mid-America Region for Aetna from 2010 until 2013. Ms.
In particular, our product development and marketing efforts take into account the differing characteristics between the various customers served by us, as well as the unique needs of educational and public entities, labor groups, the FEP ® , national employers and state-run programs servicing low-income, high-risk and underserved markets.
In particular, our product development and marketing efforts take into account the differing characteristics between the various -6- customers served by us, as well as the unique needs of educational and public entities, labor groups, FEP ® , national employers and state-run programs servicing low-income, high-risk and underserved markets.
We are committed to ensuring that all people, regardless of age, race or ethnicity, sexual orientation, gender identity, disability, and geographic or financial access can receive individualized care. Harnessing data gives a more complete picture of each member and their health needs and can help make healthcare more personalized and equitable.
We are committed to ensuring that all people, regardless of age, race or ethnicity, sexual orientation, gender identity, disability, and geographic or financial access, can receive individualized care. Harnessing data gives a more complete picture of each member and their health needs and can help make healthcare more personalized.
In addition, we intend to disclose on our website any amendments to, or waivers from, our Code of Conduct that are required to be publicly disclosed pursuant to rules of the SEC and the New York Stock Exchange. Elevance Health, Inc. is an Indiana corporation incorporated on July 17, 2001.
In addition, we intend to disclose on our website any amendments to, or waivers from, our Code of Conduct that are required to be publicly disclosed pursuant to rules of the SEC and the New York Stock Exchange. Elevance Health, Inc. is an Indiana corporation incorporated on July 17, 2001. -23-
We offer a broad spectrum of -3- network-based managed care risk-based plans to Individual, Employer Group, Medicaid and Medicare markets. In addition, we provide a broad array of managed care services to fee-based customers, including claims processing, stop loss insurance, provider network access, medical management, care management, wellness programs, actuarial services and other administrative services.
We offer a broad spectrum of network-based managed care risk-based plans to Individual, Employer Group, Medicaid and Medicare markets. In addition, we provide a broad array of managed care services to fee-based customers, including claims processing, stop loss insurance, care provider network access, medical management, care management, wellness programs, actuarial services and other administrative services.
Additionally, beginning in 2023, we were -19- required to make available to members personalized out-of-pocket cost information and the underlying negotiated rates for 500 covered healthcare items and services, including prescription drugs. Effective January 1, 2024, this ongoing requirement has expanded to include all items and services.
Additionally, beginning in 2023, we were required to make available to members personalized out-of-pocket cost information and the underlying negotiated rates for 500 covered healthcare items and services, including prescription drugs. Effective January 1, 2024, this ongoing requirement has expanded to include all items and services.
In addition to adhering to the laws and regulations in the states where our pharmacies are located, we may also be required to comply with certain laws and regulations in certain states into which one of our pharmacies delivers prescription drugs, including those requiring us to register with Boards of Pharmacy as a non-resident pharmacy.
In addition to adhering to the laws and regulations in the states where our pharmacies are located, we may also be required to comply with certain laws and regulations in certain states into which -18- one of our pharmacies delivers prescription drugs, including those requiring us to register with Boards of Pharmacy as a non-resident pharmacy.
Kendrick has been with the Company since 1995, and has held various leadership roles across the organization, including serving as President, Anthem National Accounts/Central Markets from 2015 until January 2021 and President of National Accounts and General Manager for Anthem Blue Cross and Blue Shield of Georgia from 2010 until 2015. -22- Mr.
Kendrick has been with the Company since 1995, and has held various leadership roles across the organization, including serving as President, Anthem National Accounts/Central Markets from 2015 until January 2021 and President of National Accounts and General Manager for Anthem Blue Cross and Blue Shield of Georgia from 2010 until 2015. Mr.
In addition, a change of control or violation of the BCBSA ownership limitations on our capital stock, impending financial insolvency or the appointment of a trustee or -14- receiver or the commencement of any action against us seeking our dissolution could cause a termination of our license agreements.
In addition, a change of control or violation of the BCBSA ownership limitations on our capital stock, impending financial insolvency or the appointment of a trustee or receiver or the commencement of any action against us seeking our dissolution could cause a termination of our license agreements.
These holding company laws and regulations -16- generally require registration with applicable state departments of insurance and the filing of reports describing capital structure, ownership, financial condition, certain intercompany transactions, enterprise risks, corporate governance and general business operations.
These holding company laws and regulations generally require registration with applicable state departments of insurance and the filing of reports describing capital structure, ownership, financial condition, certain intercompany transactions, enterprise risks, corporate governance and general business operations.
Culture, Engagement and Inclusion Each year we conduct internal associate engagement surveys that provide our associates with an opportunity to share their opinions and experiences with respect to their roles, their teams and the Company, and we also offer online feedback -20- tools.
Culture, Engagement and Inclusion Each year we conduct internal associate engagement surveys that provide our associates with an opportunity to share their opinions and experiences with respect to their roles, their teams and the Company, and we also offer online feedback tools.
We have also implemented our “Food as Medicine” strategy across many of our lines of business to create interventions that not only prevent, manage, and treat diseases but also address food and nutrition insecurity among our members.
We have also implemented our -13- “Food as Medicine” strategy across many of our lines of business to create interventions that not only prevent, manage, and treat diseases but also address food and nutrition insecurity among our members.
The National Association of Insurance Commissioners (“NAIC”) has adopted model regulations that, where adopted by states, require expanded governance practices, risk and solvency assessment reporting and the filing of periodic financial and operating reports.
The National Association of Insurance Commissioners (“NAIC”) has adopted model regulations that, where adopted by states, require expanded governance practices, risk and solvency assessment reporting and -16- the filing of periodic financial and operating reports.
Our management team reviews, monitors and analyzes associate feedback and acts on responses to identify opportunities to adjust our policies and benefits to improve our associates’ experiences. In addition, in 2024, over 20% of our U.S. workforce participated in our Business Resource Groups, or BRGs, which provide associates meaningful opportunities to connect, collaborate and grow.
Our management team reviews, monitors and analyzes associate feedback and acts on responses to identify opportunities to adjust our policies and benefits to improve our associates’ experiences. In addition, in 2025, over 20% of our U.S. workforce participated in our Business Resource Groups, or BRGs, which provide associates meaningful opportunities to connect, collaborate and grow.
For additional information describing each of our customer types and changes in medical membership over the last three years, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Membership ” included in Part II, Item 7 of this Annual Report on Form 10-K.
For additional information describing each of our customer types and changes in medical membership over the last three years, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Membership and other Metrics ” included in Part II, Item 7 of this Annual Report on Form 10-K.
Federal regulations have been finalized in the following areas that will continue to materially impact our operations: • Federal regulations on data interoperability that require claims data to be made available to third parties unaffiliated with us that may not be HIPAA regulated; and • Federal regulations requiring hospitals and health insurers to publish negotiated prices for services, including the health plan price transparency regulations issued in October 2020 by the U.S.
Federal regulations have been finalized in the following areas that will continue to materially impact our operations: • Federal regulations on data interoperability that require claims data to be made available to third parties unaffiliated with us that may not be HIPAA regulated; and • Federal regulations requiring hospitals and health insurers to publish negotiated prices for services, including the health plan price transparency regulations (the “Health Plan Transparency Rule”) issued in October 2020 by the HHS and U.S.
Being a licensee of the BCBS association of companies, of which there were 33 independent primary licensees including us as of December 31, 2024, provides significant market value, especially when competing for very large multi-state employer groups.
Being a licensee of the BCBS association of companies, of which there were 33 independent primary licensees including us as of December 31, 2025, provides significant market value, especially when competing for very large multi-state employer groups.
We are licensed to conduct insurance operations in all 50 states, the District of Columbia and Puerto Rico through our subsidiaries. Through various subsidiaries, we also offer pharmacy services through our CarelonRx business, and other healthcare related services as Carelon Insights and Carelon Health.
We are licensed to conduct insurance operations in all 50 states, the District of Columbia and Puerto Rico through our subsidiaries. Through various subsidiaries, we also offer pharmacy services through our CarelonRx business, and other healthcare related services as Carelon Services.
As the year progresses, members will generally reach their deductible and out-of-pocket maximum limit, and benefit expense in our Carelon Services businesses will typically increase to cover member costs. Medical Management Programs We have a broad array of medical management activities that facilitate improvements in the quality of care provided to our members and promote cost-effective medical care.
As the year progresses, members will generally reach their deductible and out-of-pocket maximum limit, and benefit expense in our Carelon Services businesses will typically increase. Medical Management Programs We have a broad array of medical management activities that facilitate improvements in the quality of care provided to our members and promote cost-effective medical care.
We have a mixed in-office, hybrid and remote workplace strategy, and we foster associate engagement through a variety of activities based in our key office locations. -21- Information About Our Executive Officers The following sets forth certain information regarding our executive officers and Chief Accounting Officer as of February 1, 2025. Name Age Position Gail K.
We have a mixed in-office, hybrid and remote workplace strategy, and we foster associate engagement through a variety of activities in our key office locations. -21- Information About Our Executive Officers The following sets forth certain information regarding our executive officers and Chief Accounting Officer as of February 1, 2026. Name Age Position Gail K.
Medicare Advantage membership also includes Medicare Advantage members in our Group Retiree Solutions business who are retired members of commercial accounts or groups who are not affiliated with our commercial accounts that have selected a Medicare Advantage product through us. MMP is focused on serving members who are dually eligible for Medicaid and Medicare.
Medicare Advantage membership also includes Medicare Advantage members in our Group Retiree Solutions business who are retired members of commercial accounts or groups who are not affiliated with our commercial accounts that have selected a Medicare Advantage product through us. MMPs are focused on serving members who are dually eligible for Medicaid and Medicare.
For additional information on our networks and provider relations, product pricing and healthcare cost management programs, see “Pricing and Underwriting of Our Products,” “Networks and Provider Relations,” “Medical Management Programs,” “Care Management and Wellness Products and Programs” and “Healthcare Quality Initiatives” below in this “Business” section.
For further information on our networks and care provider relations, product pricing and healthcare cost management programs, see “Pricing and Underwriting of Our Products,” “Networks and Provider Relations,” “Medical Management Programs,” “Care Management and Wellness Products and Programs” and “Healthcare Quality Initiatives” below in this “Business” section.
Certain pharmacies must also register with the U.S. Drug Enforcement Agency (“DEA”) and individual state-controlled substance authorities to dispense controlled substances.
Certain pharmacies must also register with the U.S. Drug Enforcement Administration (“DEA”) and individual state-controlled substance authorities to dispense controlled substances.
Pharmacy Services and Drug Benefit Regulation Pharmacy services, including pharmacy benefit managers, are regulated at both the federal and state levels and must comply with federal and state statutes and regulations governing a pharmacy benefit manager's business, including, but not limited to, pharmacy network restrictions and configurations, formulary management, affiliate pharmacy reimbursement, anti-steering to affiliated pharmacies, prohibition on pharmacy claim processing/transaction fees, pharmacy effective rates, guarantees and reconciliations, reimbursement pricing type mandates, purchase discount and/or rebate arrangements with drug manufacturers, advertising and licensing.
Pharmacy Services and Drug Benefit Regulation Pharmacy services, including pharmacy benefit managers, are regulated at both the federal and state levels and must comply with federal and state statutes and regulations governing a pharmacy benefit manager's business, including, but not limited to, pharmacy network restrictions and configurations, formulary management, affiliate pharmacy reimbursement, anti-steering to affiliated pharmacies, prohibition on pharmacy claim processing/transaction fees, pharmacy effective rates, guarantees and reconciliations, reimbursement pricing type mandates, purchase discount and/or rebate arrangements with drug manufacturers, price transparency, restrictions on spread pricing, rebate pass-through obligations, advertising and licensing.
The Health Benefits segment offers health products on a full-risk basis; provides a broad array of administrative managed care services to our fee-based customers; and provides a variety of specialty and other insurance products and services such as stop loss, dental, vision and supplemental health insurance benefits. Our CarelonRx segment includes our pharmacy services business.
The Health Benefits segment offers health products on a full-risk basis; provides a broad array of administrative managed care services to our fee-based customers; and provides a variety of specialty and other insurance products and services such as stop loss, dental, vision and supplemental health insurance benefits.
Our Carelon businesses promote affordability by managing complex areas of the healthcare system, leveraging data and insights to improve how our members receive safe, appropriate, high-quality care and providers are reimbursed accurately and timely. Our approach to cost management relies on capabilities including provider enablement, value-based networks, member engagement, and utilization management.
Our Carelon businesses promote affordability by managing complex areas of the healthcare system, leveraging data and insights to improve how our members receive safe, appropriate, high-quality care and the accurate and timely reimbursement of our providers. Our approach to cost management relies on capabilities including provider enablement, value-based networks, member engagement, and utilization management.
Carelon businesses promote affordability by managing complex areas of the healthcare system, leveraging data and insights to improve how our members receive safe, appropriate, high-quality care and providers are reimbursed accurately and timely. Our approach to cost management relies on capabilities including provider enablement, value-based networks, member engagement, and utilization management.
Our Carelon businesses promote affordability by managing complex areas of the healthcare system, leveraging data and insights to improve how our members receive safe, appropriate, high-quality care and the accurate and timely reimbursement of our providers. Our approach to cost management relies on capabilities including provider enablement, value-based networks, member engagement, and utilization management.
As of December 31, 2024, the RBC levels of our insurance and HMO subsidiaries exceeded all applicable mandatory RBC requirements.
As of December 31, 2025, the RBC levels of our insurance and HMO subsidiaries exceeded all applicable mandatory RBC requirements.
CDHPs generally combine a high-deductible PPO plan with an employer-funded and/or employee-funded personal care account, which may result in tax benefits to the employee and allow some or all of the dollars remaining in the personal care account at year-end to be rolled over to the next year for future healthcare needs.
CDHPs generally combine a high-deductible PPO plan with an employer-funded and/or employee-funded personal care account, which can offer tax benefits to the employee and allow some or all of the dollars remaining in the personal care account at year-end to be rolled over for future healthcare needs.
We have invested in a number of strategies to improve how we address health related social needs.
We have invested in a number of strategies to improve how we address our members' health-related social needs.
We offer various instructor-led and virtual instructor-led programs and maintain a vast curriculum of relevant, on-demand learning and development resources. In 2024, we invested a significant amount in human capital development, averaging approximately 27 hours of training and development per associate.
We offer various instructor-led and virtual instructor-led programs and maintain a vast curriculum of relevant, on-demand learning and development resources. In 2025, we invested a significant amount in human capital development, averaging approximately 26 hours of training and development per associate.
Supervisory agencies, including federal and state regulators, departments of health and insurance and secretaries of state, have broad authority to: • grant, suspend and revoke licenses to transact business; • regulate our products and services in great detail; • regulate, limit, or suspend our ability to market products, including participation in Medicare and the Public Exchanges; • determine through a procurement process our ability to participate in certain programs, including state Medicaid programs; • retroactively adjust premium rates; • monitor our solvency and reserve adequacy; • audit, and recover audit discrepancies, including risk adjustment data validation (“RADV”) audits; • scrutinize our investment activities on the basis of quality, diversification and other quantitative criteria; and • impose monetary and criminal sanctions for non-compliance with regulatory requirements.
Supervisory agencies, including federal and state regulators, departments of health and insurance and secretaries of state, have broad authority to: • grant, suspend and revoke licenses to transact business; • regulate our products and services in great detail; • regulate, limit, or suspend our ability to market products, including participation in Medicare and the Public Exchanges; • determine through a procurement process our ability to participate in certain programs, including state Medicaid programs; • retroactively adjust premium rates; • monitor our solvency and reserve adequacy; • audit, and recover audit discrepancies, including risk adjustment data validation (“RADV”) audits; • scrutinize our investment activities on the basis of quality, diversification and other quantitative criteria; and • impose monetary and criminal sanctions for non-compliance with regulatory requirements. -15- To carry out these tasks, these government entities periodically examine our operations and accounts.
CarelonRx markets and offers pharmacy services to our affiliated health plan customers, as well as to external customers outside of the health plans we own.
Our CarelonRx segment includes our pharmacy services business. CarelonRx markets and offers pharmacy services to our affiliated health plan customers, as well as to external customers outside of the health plans we own.
Through our participation in various federal government programs, we generated approximately 31%, 29% and 28% of our total consolidated revenues from agencies of the U.S. government for the years ended December 31, 2024, 2023 and 2022, respectively. The majority of these revenues are contained in our Health Benefits segment as described below.
Through our participation in various federal government programs, we generated approximately 32%, 31% and 29% of our total consolidated revenues from agencies of the U.S. government for the years ended December 31, 2025, 2024 and 2023, respectively. The majority of these revenues are included in our Health Benefits segment as described below.
The methodology and measures included in the Star Ratings system can be modified by CMS annually. Our 2024 Star Ratings, which are -17- used for payment year 2025, reflect that 53% of our Medicare Advantage members are enrolled in plans rated at least 4.0 Stars or higher.
The methodology and measures included in the Star Ratings system can be modified by CMS annually. Our 2025 Star Ratings, which are used for payment year 2026, reflect that approximately 40% of our Medicare Advantage members are enrolled in plans rated at least 4.0 Stars or higher.
In 2024, we provided Medicaid and other state sponsored services, such as administrative services, in Arkansas, California, Colorado, District of Columbia, Florida, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New York, North Carolina, Ohio, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin. • Federal Employee Program ® .
In 2025, we provided Medicaid and other state sponsored services, such as administrative services, in Arkansas, California, Colorado, District of Columbia, Florida, Georgia, Indiana, Iowa, Kansas, Louisiana, Maryland, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Puerto Rico, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin. • Federal Employee Program ® .
Beginning in July 2022, the Health Plan Transparency Rule required us to disclose, on a monthly basis, detailed pricing information regarding negotiated rates for all covered items and services between the plan or issuer and in-network providers and historical payments to, and billed charges from, out-of-network providers.
Departments of Labor and Treasury (collectively, the Tri-Agencies). -19- Beginning in July 2022, the Health Plan Transparency Rule required us to disclose, on a monthly basis, detailed pricing information regarding negotiated rates for all covered items and services between the plan or issuer and in-network providers and historical payments to, and billed charges from, out-of-network providers.
An immaterial amount of our total consolidated revenues is derived from activities outside of the U.S. and Puerto Rico. -5- Reportable Segments We report our results of operations in the following four reportable segments: Health Benefits, CarelonRx, Carelon Services and Corporate & Other (our businesses that do not individually meet the quantitative thresholds for an operating segment, as well as corporate expenses not allocated to our other reportable segments).
An immaterial amount of our total consolidated revenues is derived from activities outside of the U.S. and Puerto Rico. -5- Reportable Segments We report our results of operations in the following four reportable segments: Health Benefits, CarelonRx, Carelon Services and Corporate & Other (which includes our businesses that do not individually meet the quantitative thresholds for an operating segment, along with certain enterprise-level corporate expenses not allocated to our other reportable segments).
Traditional indemnity plans offer the member an option to select any healthcare provider for covered services, with coverage subject to deductibles and coinsurance and with member cost-sharing usually limited by out-of-pocket maximums. POS products -7- blend the characteristics of HMO, PPO and indemnity plans.
Traditional indemnity plans offer the member an option to select any healthcare provider for covered services, with coverage subject to deductibles, coinsurance, and out-of-pocket maximums. POS products blend the characteristics of HMO, PPO and indemnity plans.
Medicare Supplement plans typically pay the difference between healthcare costs incurred by a beneficiary and amounts paid by the traditional Medicare Fee-For-Service program. Medicare Part D offers a prescription drug plan to Medicare and MMP beneficiaries. • Medicaid Plans and Other State-Sponsored Programs.
Medicare Supplement plans typically pay the difference between healthcare costs incurred by a beneficiary and amounts paid by the traditional Medicare Fee-For-Service program. Medicare Part D offers a prescription drug plan to Medicare and MMP beneficiaries. In 2026, we will no longer offer Medicare Part D plans. • Medicaid Plans and Other State-Sponsored Programs.
Competition continues to be intense due to aggressive marketing, pricing, bid activity for government-sponsored programs, business consolidations, new strategic alliances, new competitors in the market, a proliferation of new products, technological advancements, the impact of legislative reform, increased quality awareness and price sensitivity among customers and changing market practices, such as increased usage of telehealth.
Competition continues to be intense due to aggressive marketing, pricing, bid activity for government-sponsored programs, business consolidations, new strategic alliances, new competitors in the market, a proliferation of new products, technological advancements, the impact of legislative reform, increased quality awareness and price sensitivity among customers and changing market practices, such as evolving care delivery models, including expanded telehealth and digital-first services.
Through these programs, medical professionals help to educate participants regarding their care and condition. Our 24/7 NurseLine offers access to qualified, registered nurses to allow our members to make informed decisions about the appropriate level of care and avoid unnecessary worry.
Our care management, infertility services and maternity management programs serve as adjuncts to physician care. Through these programs, medical professionals help to educate participants regarding their care and condition. Our 24/7 NurseLine offers access to qualified, registered nurses to allow our members to make informed decisions about the appropriate level of care and avoid unnecessary worry.
We are advancing our efforts through consistent screening of our members for their social needs by using industry-standard tools such as the Protocol for Responding to & Assessing Patients’ Assets, Risks & Experiences, co-creating social action plans with our members, connecting members to related social support services, and evaluating the entire process for continuous quality improvement.
We are advancing our efforts in this area by using industry-standard tools such as the Protocol for Responding to & Assessing Patients’ Assets, Risks & Experiences, co-creating social action plans with our members, connecting members to related social support services, and evaluating the entire process for continuous quality improvement.
Human Capital The foundation of our strategy starts with our culture, and our associates are critical to fulfilling our purpose of improving the health of humanity. As of December 31, 2024, our employee population, including all full-time, part-time and temporary workers, consisted of approximately 104,200 individuals, 76,300 in the United States and 27,900 internationally.
Human Capital The foundation of our strategy starts with our culture, and our associates are critical to fulfilling our purpose of improving the health of humanity. As of December 31, 2025, our employee population, including all full-time, part-time and temporary workers, consisted of approximately 97,100 individuals, 71,900 in the United States and 25,200 internationally.
Approximately 52.3% and 18.0% of our premium revenue and medical membership, respectively, were subject to the minimum MLR regulations as of and for the year ended December 31, 2023. • The creation of an incentive payment program for Medicare Advantage plans.
Approximately 54.2% and 18.4% of our premium revenue and medical membership, respectively, were subject to the minimum MLR regulations as of and for the year ended December 31, 2024. • The creation of an incentive payment program for Medicare Advantage plans.
We believe our pricing and bid strategy, based on predictive modeling, proprietary research and data-driven processes, has positioned us to benefit from the potential growth opportunities available through entry into new markets, expansions in existing markets and as a result of any future changes to the current regulatory scheme.
We believe our pricing and bid strategy, based on predictive modeling, proprietary research and data-driven processes, has positioned us to pursue growth opportunities available through entry into new markets, expansions in existing markets and in response to future changes to the current regulatory scheme.
Our digital engagement platform, Sydney Health, is designed to give our members access to personalized health and wellness resources, medical, pharmacy, dental and vision benefits details, and virtual care services, all in one place. Our care management, infertility services and maternity management programs serve as adjuncts to physician care.
Our digital engagement platform, Sydney Health, is designed to give our members access to personalized health and wellness resources, medical, pharmacy, dental and vision benefits details, and virtual care services, all in one place.
Our initiatives in this area are led by our Chief Talent Officer, and our workforce embodies a multitude of dimensions, including skills, experiences, age, tenure, gender, race, ethnicity, physical abilities and geographic location. Fair Pay We are committed to a fair pay workplace.
Our initiatives in this area are led by our Chief Talent Officer, and our workforce embodies a multitude of dimensions, including skills, experiences, age, tenure, gender, race, ethnicity, physical abilities and geographic location. Fair Pay Elevance Health is committed to maintaining a fair and equitable pay workplace grounded in our pay-for-performance philosophy.
We offer a wide variety of plans, products and options to individuals age 65 and older such as Medicare Advantage, including Special Needs Plans (“SNPs”), dual-eligible programs through Medicare-Medicaid Plans (“MMPs”), Medicare Supplement plans and Medicare Part D Prescription Drug Plans (“Medicare Part D”).
We offer a wide variety of plans, products and options to individuals age 65 and older such as Medicare Advantage, including Special Needs Plans (“SNPs”), dual-eligible programs through Medicare-Medicaid Plans (“MMPs”), Medicare Supplement plans and Medicare Part D Prescription Drug Plans (“Medicare Part D”). -8- Medicare Advantage plans provide Medicare beneficiaries with a managed care alternative to traditional Medicare and often include a Medicare Part D benefit.
State Regulation of Insurance Companies and HMOs Our insurance and HMO subsidiaries must obtain a certificate of authority and maintain that license in the jurisdictions in which they conduct business.
Litigation has been filed challenging these final regulations. State Regulation of Insurance Companies and HMOs Our insurance and HMO subsidiaries must obtain a certificate of authority and maintain that license in the jurisdictions in which they conduct business.
She also served as Chief Executive Officer of UnitedHealthcare (managed healthcare company), a subsidiary of UHGI from 2011 to 2014 and as President of the Commercial Business of UnitedHealthcare from 2008 to 2010.
Boudreaux was Executive Vice President of UnitedHealth Group Incorporated (“UHGI”) (diversified healthcare company) from 2008 to 2015. She also served as Chief Executive Officer of UnitedHealthcare (managed healthcare company), a subsidiary of UHGI from 2011 to 2014 and as President of the Commercial Business of UnitedHealthcare from 2008 to 2010.
As a result, states were permitted to begin removing ineligible beneficiaries from their Medicaid programs starting April 1, 2023, and the majority of our Medicaid markets began doing so as of June 30, 2023. Although most states have completed this process, CMS has provided that states have until December 31, 2025, to complete these eligibility redeterminations.
As a result, states were permitted to begin removing ineligible beneficiaries from their Medicaid programs starting April 1, 2023, and the majority of our Medicaid markets began doing so as of June 30, 2023. CMS required states to complete Medicaid eligibility redeterminations by December 31, 2025.
Fee-based health plans are also able to use our provider networks and to realize savings through our negotiated provider arrangements, while allowing employers the ability to design certain health benefit plans in accordance with their own requirements and objectives.
Fee-based health plans are also able to use our provider networks and to benefit from savings through our negotiated provider arrangements, while allowing employers the ability to design certain health benefit plans to meet their own workforce and cost-management objectives.
Pharmacy benefit managers are also subject to continued changes in public policy, legislation, laws, and regulations relating to drug benefits and pharmacy services, which include, but are not limited to, (1) regulation of rebates from drug manufacturers that would require rebate dollars to be applied at the point-of-sale or passed through to the plan sponsor, (2) federal policy changes to set the prices for a subset of drugs covered under the Medicare program, (3) reforms to the Medicare drug benefit, such as beneficiary cost-sharing changes that aim to lower consumer costs and prohibit pharmacy benefit managers and their affiliates from deriving income based on the price of the drug, (4) attempts at both the federal and state levels to prohibit the use of spread pricing contracts in both the commercial and Medicaid markets, (5) prior authorizations of drugs, (6) transparency and public disclosure of costs and profits, (7) prohibiting exclusive specialty and mail pharmacy networks, (8) limiting pharmacy accreditation and credentialing requirements, (9) consumer choice/any willing provider requirements, and (10) prohibiting steering to affiliated pharmacies.
Pharmacy benefit managers are also subject to continued changes in public policy, legislation, laws, and regulations relating to drug benefits and pharmacy services, which include, but are not limited to, (1) federal policy changes to set the prices for a subset of drugs covered under the Medicare program, (2) reforms to the Medicare drug benefit, such as beneficiary cost-sharing changes that aim to lower consumer costs and prohibit pharmacy benefit managers and their affiliates from deriving income based on the price of the drug, (3) prior authorizations of drugs, (4) prohibiting exclusive specialty and mail pharmacy networks, (5) limiting pharmacy accreditation and credentialing requirements, (6) consumer choice/any willing provider requirements, and (7) prohibiting steering to affiliated pharmacies.
To carry out these tasks, these government entities periodically examine our operations and accounts. The health benefits business, pharmacy services, and related healthcare products and services businesses also may be adversely impacted by court and regulatory decisions that expand or invalidate the interpretations of existing statutes and regulations.
The health benefits business, pharmacy services, and related healthcare products and services businesses also may be adversely impacted by court and regulatory decisions that expand or invalidate the interpretations of existing statutes and regulations.
The Inflation Reduction Act of 2022 The Inflation Reduction Act of 2022 contains a variety of provisions that have impacted, and continue to impact, our business including extending the American Rescue Plan Act of 2021's enhanced Premium Tax Credits (“PTC”) through 2025; imposing a new corporate alternative minimum tax; providing a one percent excise tax on repurchases of stock; allowing CMS to negotiate prices on a limited set of prescription drugs beginning in 2026; instituting caps on insulin cost sharing in Medicare; redesigning the Medicare Part D benefit; requiring drug manufacturers to pay rebates if prices increase beyond inflation; and delaying the implementation of the Trump Administration Medicare drug rebate rule to 2032.
These provisions include extending the American Rescue Plan Act of 2021's enhanced PTCs through 2025; imposing a new corporate alternative minimum tax; establishing a one percent excise tax on repurchases of stock by issuers; authorizing CMS to negotiate prices on a limited set of Medicare prescription drugs beginning in 2026; instituting caps on insulin cost sharing in Medicare; redesigning the Medicare Part D benefit; requiring drug manufacturers to pay rebates if prices increase beyond inflation; and delaying the implementation of the Trump Administration Medicare drug rebate rule until at least 2032.
We believe that physicians and other providers primarily consider customer volume, reimbursement rates, timeliness of reimbursement and administrative service capabilities along with the reduction of non-value added administrative tasks when deciding whether to contract with a health benefits plan. At the sales and distribution level, we compete for qualified agents and brokers to recommend and distribute our products.
To build our provider networks, we compete with other health benefits plans for the best contracts with hospitals, physicians and other providers. We believe that physicians and other providers primarily consider customer volume, reimbursement rates, timeliness of reimbursement and administrative service capabilities along with the reduction of non-value-added administrative tasks when deciding whether to contract with a health benefits plan.
These products usually feature medical management and other quality and cost optimization measures such as pre-admission review and approval for certain non-emergency services, pre-authorization of outpatient surgical procedures, network credentialing to determine that network physicians and hospitals have the required certifications and expertise, and various levels of care management programs to help members better understand and navigate the healthcare system.
These products usually feature medical management and other quality and cost optimization measures such as pre-admission review and approval for certain non-emergency services, pre-authorization of select outpatient surgical procedures, network credentialing to confirm that contracted in-network physicians and hospitals have the required certifications and expertise, and various types of care management programs that engage members to support navigation, appropriate care transitions and complex condition management.
Seasonality Within our Health Benefits segment, although premium revenues for our commercial business are not seasonal, our benefit costs rise as members pay their contractual portion of claims responsibility, hitting their deductibles and out-of-pocket maximums.
Seasonality Within our Health Benefits segment, premium revenues for our commercial business are generally not seasonal, and our benefit costs rise as members satisfy their deductibles and out-of-pocket maximums over the course of the year.
Medicare Advantage plans provide Medicare beneficiaries with a managed care alternative to traditional Medicare and often include a Medicare Part D benefit. In addition, our Medicare Advantage SNPs provide tailored benefits to special needs individuals who are institutionalized or have severe or disabling chronic conditions and to dual-eligible customers, who are low-income seniors and persons under age 65 with disabilities.
In addition, our Medicare Advantage SNPs provide tailored benefits to special needs individuals who are institutionalized or have severe or disabling chronic conditions and to dual-eligible customers, who are low-income seniors and persons under age 65 with disabilities. These plans emphasize coordinated care, care management, and customized benefits aligned to members’ clinical and social needs.
We perform management review for home health and post-acute institutional services provided to Medicare members through our Carelon Post Acute Solutions, Inc. subsidiary, with the goal of ensuring they receive appropriate, high-quality -13- care and supporting their transition back into the home.
We perform management review for home health and post-acute institutional services provided to Medicare members through Carelon Post Acute Solutions, with the goal of ensuring they receive appropriate, high-quality care and supporting their transition back into the home. Effective management of these services can help reduce preventable hospital admissions and readmissions, thereby improving healthcare outcomes for patients.
The medical management programs available to our members may vary depending on the particular plan or product in which they participate. Care coordination is one of the strategies we utilize and is based on nationally recognized criteria developed by third-party medical specialists to help coordinate inpatient as well as outpatient care and monitor appropriate utilization of such services.
Care coordination is also one of the strategies we utilize and is based on nationally recognized criteria developed by third-party medical specialists to help coordinate inpatient as well as outpatient care and monitor appropriate utilization of such services.
These non-resident states generally expect our pharmacies to follow the laws of the state in which the -18- pharmacies are located, but some non-resident states also require us to comply with certain of their pharmacy regulations as well.
These non-resident states generally expect our pharmacies to follow the laws of the state in which the pharmacies are located, but some non-resident states also require us to comply with certain of their pharmacy regulations. Additionally, pharmacies that participate in Medicare or Medicaid pharmacy networks are required to comply with applicable Medicare and Medicaid provider rules and regulations.
Strong competition exists among insurance companies and health benefits plans for agents and brokers with demonstrated ability to secure new business and maintain existing accounts.
At the sales and distribution level, we compete for qualified agents and brokers to recommend and distribute our products. Strong competition exists among insurance companies and health benefits plans for agents and brokers with demonstrated ability to secure new business and maintain existing accounts.
While following industry standards, we are simultaneously seeking to lead transformation efforts within our healthcare system, moving from a fragmented model premised on episodic intervention to one based on proactive, coordinated care built around the whole health needs of the patient.
While following industry standards, we are simultaneously seeking to lead transformation efforts within our healthcare system, moving from a fragmented model premised on episodic intervention to one based on proactive, coordinated care built around the whole health needs of the patient. -11- Our network contracting strategy is focused on ensuring competitive market-based hospital reimbursement terms and timely, appropriate payment for physicians and other clinicians.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese new and changing laws and regulations include the regulation that was issued by HHS in November 2020 (but delayed to 2032 by the Inflation Reduction Act) related to drug manufacturer rebates, Medicaid spread pricing contract arrangements, the pricing of pharmaceuticals, the 2021 Appropriations Act provisions on drug price reporting and potential new regulations or legislation regarding commercial spread pricing, rebates, fees from pharmaceutical companies, the development and use of formularies and other utilization management tools, pharmacy benefit manager compensation, the use of average wholesale prices or other pricing benchmarks, pricing for specialty pharmaceuticals, limited access to networks, prohibitions on pharmacy steering and pharmacy network reimbursement methodologies, and reporting requirements, as well as greater state regulation of pharmacy benefit managers and state involvement in the self-insured and Medicare Part D markets, which are typically preempted by federal law.
Biggest changeThese new and changing laws and regulations include or could include changes to compensation, prohibitions or limitations on spread pricing contracting, requirements regarding rebates and/or fees, additional data reporting to plan sponsors and public sources, restrictions on the development and use of formularies and other utilization management tools, the use of average wholesale prices or other pricing benchmarks, pricing for -33- specialty pharmaceuticals, limited access to networks, prohibitions on pharmacy steering and pharmacy network reimbursement methodologies, and reporting requirements, as well as greater state regulation of pharmacy benefit managers, their ownership of pharmacy services and state involvement in the self-insured and Medicare Part D markets, which are typically preempted by federal law.
A cyber-attack or other privacy or data security incident sustained by us or third parties we rely on could result in an unauthorized disclosure of sensitive or confidential information, cause a loss of data, disrupt our operations, give rise to remediation or other expenses, expose us to liability under our contracts, federal, state and international laws, and subject us to litigation and investigations, which could have an adverse effect on our business, reputation, cash flows, financial condition and results of operations.
A cyber-attack or other privacy or data security incident sustained by us or third parties we rely on could result in an unauthorized disclosure of sensitive or confidential information, cause a loss of data, disrupt our operations, give rise to remediation or other expenses, expose us to liability under our contracts and federal, state and international laws, and subject us to litigation and investigations, which could have an adverse effect on our business, reputation, cash flows, financial condition and results of operations.
As part of our normal operations, we collect, store, process, retain and analyze certain sensitive and confidential information, including personal information subject to privacy, security and data breach notification requirements. Some of the data we process, store and transmit is outside of the U.S. due to the structure of our information technology systems and our internal business operations.
As part of our normal operations, we collect, process, retain and analyze certain sensitive and confidential information, including personal information subject to privacy, security and data breach notification requirements. Some of the data we process, store and transmit is outside of the U.S. due to the structure of our information technology systems and our internal business operations.
The following are some risks that we could experience as a result of future public health crises, all of which could increase our costs, impair our ability to provide services, and have a material adverse effect on our business, cash flows, financial condition and results of operations: • Increased healthcare costs due to higher utilization rates of medical facilities and services and behavioral health services, increased labor costs resulting from labor shortages and increases in medical expenses and associated hospital and pharmaceutical costs, including testing, treatment and the administration of vaccines and other therapeutics and costs due to care deferred during the public health crisis, which may lead to additional care resulting from missed treatments. • Increased estimation uncertainty for our claims liability, as well as decreased predictability of Medicare and Medicaid rates due to changes in utilization of medical facilities and services, medical expenses and other costs. • A reduction in enrollment in our health benefits, pharmacy services, or other healthcare services and products or a change in membership mix to less profitable lines of business by existing customers due to reductions in workforce and other impacts of an economic downturn. • Cash flow volatility or shortfalls caused by delayed, delinquent or non-collectable payments.
The following are some risks that we could experience as a result of future public health crises, all of which could increase our costs, impair our ability to provide services, and have an adverse effect on our business, cash flows, financial condition and results of operations: • Increased healthcare costs due to higher utilization rates of medical facilities and services and behavioral health services, increased labor costs resulting from labor shortages and increases in medical expenses and associated hospital and pharmaceutical costs, including testing, treatment and the administration of vaccines and other therapeutics and costs due to care deferred during the public health crisis, which may lead to additional care resulting from missed treatments. • Increased estimation uncertainty for our claims liability, as well as decreased predictability of Medicare and Medicaid rates due to changes in utilization of medical facilities and services, medical expenses and other costs. • A reduction in enrollment in our health benefits, pharmacy services, or other healthcare services and products or a change in membership mix to less profitable lines of business by existing customers due to reductions in workforce and other impacts of an economic downturn. • Cash flow volatility or shortfalls caused by delayed, delinquent or non-collectable payments.
These could include claims relating to the denial or limitation of health benefits; federal and state false claims act laws; dispensing of drugs associated with our pharmacy services business; professional liability claims arising out of the delivery of healthcare and related services to the public; development or application of medical policies and coverage and clinical guidelines; medical malpractice actions; allegations of anti-competitive and unfair business activities; provider disputes over reimbursement and contracts; provider tiering programs; narrow networks; termination of provider contracts; the recovery of overpayments from providers; fee-based business; disputes over co-payment calculations; reimbursement of out-of-network claims; the failure to disclose certain business practices; the failure to comply with various state or federal laws, including but not limited to: ERISA and the Mental Health Parity Act; the calculation of minimum -31- MLR and rebates related thereto; claims related to privacy, intellectual property and vendor disputes; claims related to our use of personal information and other proprietary data; and, customer audits and contract performance, including government contracts.
These could include claims relating to the denial or limitation of health benefits; federal and state false claims act laws; dispensing of drugs associated with our pharmacy services business; professional liability claims arising out of the delivery of healthcare and related services to the public; development or application of medical policies and coverage and clinical guidelines; medical malpractice actions; allegations of anti-competitive and unfair business activities; provider disputes over reimbursement and contracts; provider tiering programs; narrow networks; termination of provider contracts; the recovery of overpayments from providers; fee-based business; disputes over co-payment calculations; reimbursement of out-of-network claims; the failure to disclose certain business practices; the failure to comply with various state or federal laws, including but not limited to ERISA and the Mental Health Parity Act; the calculation of minimum MLR and rebates related thereto; claims related to privacy, intellectual property and vendor disputes; claims related to our use of personal information and other proprietary data; and customer audits and contract performance, including government contracts.
If the information systems we rely upon to run our business were found to be inaccurate or unreliable or if we fail to adequately maintain, upgrade, enhance, expand and protect our information systems, security controls and data integrity effectively, we could experience problems in determining medical cost estimates and establishing appropriate pricing and reserves, have disputes with customers and providers, lengthen the pace of integration activities or otherwise delay the launch of acquired products, face regulatory problems, including sanctions and penalties, incur increases in operating expenses or suffer other adverse consequences, including a decrease in membership.
If the information systems we rely upon to run our business were found to be inaccurate or unreliable or if we fail to adequately maintain, upgrade, enhance, expand and protect our information systems, security controls and data integrity -29- effectively, we could experience problems in determining medical cost estimates and establishing appropriate pricing and reserves, have disputes with customers and providers, lengthen the pace of integration activities or otherwise delay the launch of acquired products, face regulatory problems, including sanctions and penalties, incur increases in operating expenses or suffer other adverse consequences, including a decrease in membership.
These governmental audits, or changes in how these audits are conducted, including changes that may result from the final RADV Audit rule that was issued in 2023, and our internal reviews, have, and could in the future, result in reports or disclosures for prior, current or future filing years to federal or state regulatory agencies, submission of data corrections, and/or significant adjustments in payments made to our health plans and future Medicare Advantage bids, which could adversely affect our financial condition and results of operations.
These governmental audits, or changes in how these audits are conducted, including changes that may result from the final RADV Audit rule that was issued in 2023, and our internal reviews, have resulted, and could in the future result, in reports or disclosures for prior, current or future filing years to federal or state regulatory agencies, submission of data corrections, and/or significant adjustments in payments made to our health plans and future Medicare Advantage bids, which could adversely affect our financial condition and results of operations.
Noncompliance with any privacy, security or data protection laws and regulations, or any security breach, cyber-attack or cybersecurity breach, and any incident involving the misappropriation, exfiltration, theft, loss or other unauthorized disclosure or use of, or access to, sensitive or confidential information, whether by us or by one of our third-party service providers or their vendors, previously have and could in the future require us to expend significant resources to continue to modify or enhance our protective measures and to remediate any damage.
Noncompliance with any privacy, security or data protection laws and regulations, or any security breach, cyber-attack or cybersecurity breach, and any incident involving the misappropriation, compromise, exfiltration, theft, loss or other unauthorized disclosure or use of, or access to, sensitive or confidential information, whether by us or by one of our third-party service providers or their vendors, previously have and could in the future require us to expend significant resources to continue to modify or enhance our protective measures and to remediate any damage.
Revenues from the Medicare and Medicaid programs are determined, in whole or in part, by the federal government and/or applicable state governments, and base premium rates paid by each state or federal agency differ depending upon a combination of factors such as defined upper payment limits, a member’s health status, age, gender, county or region, benefit mix, member eligibility category and risk scores.
Revenues from the Medicare and Medicaid programs are determined, in whole or in part, by the federal government and/or applicable state governments, and base premium rates paid by each state or federal agency differ depending upon a combination of factors such as defined upper payment limits, a member’s health status, age, gender, county or region, benefit mix, member -26- eligibility category and risk scores.
In addition, because the techniques used to obtain unauthorized access, disable, disrupt or degrade service or sabotage systems change frequently, are becoming increasingly sophisticated (in part due to the use of evolving technologies), and may not immediately produce signs of intrusion, we may be unable to anticipate these techniques and threats, timely discover or counter them or implement adequate preventative measures.
In addition, because the techniques used to obtain unauthorized access, disable, disrupt or degrade service or sabotage systems change frequently, are becoming increasingly sophisticated (in part due to the use of evolving technologies), and may not immediately produce signs of intrusion, we may be unable to anticipate these techniques and threats, timely discover or counter them or implement adequate -25- preventative measures.
In addition, legislative reforms such as the regulation issued by HHS related to rebates and the 2021 Appropriations Act, which requires reporting of plan spending, the cost of plan pharmacy benefits, enrollee premiums and any manufacturer rebates received by the plan or issuer, may adversely affect our competitive position, cash flows, financial condition and results of operations.
In addition, legislative reforms such as the regulation issued by HHS related to rebates and the -35- 2021 Appropriations Act, which requires reporting of plan spending, the cost of plan pharmacy benefits, enrollee premiums and any manufacturer rebates received by the plan or issuer, may adversely affect our competitive position, cash flows, financial condition and results of operations.
The following are some of the risks associated with mergers, acquisitions, divestitures, joint ventures and strategic alliances and investments, referred to collectively as business combinations, that could have a material adverse effect on our business, cash flows, financial condition and results of operations: • some business combinations may not achieve anticipated revenues, earnings or cash flow, business opportunities, synergies, growth prospects or other anticipated benefits; • we may assume liabilities that were not disclosed to us, or which were underestimated, and which could lead to legal challenges, investigations and enforcement actions, and we may not be able to adequately recover from sellers or insurance carriers for such assumed liabilities; • we may experience difficulties in integrating business combinations, including into our internal control environment and culture, be unable to integrate business combinations successfully or as quickly as expected and be unable to realize anticipated economic, operational and other benefits in a timely manner or at all; • business combinations and proposed business combinations that are not completed could disrupt our ongoing business, lead to the incurrence of significant fees, distract management, result in the loss of key associates, divert resources, result in tax costs or inefficiencies and make it difficult to maintain our current business standards, controls, information technology systems, policies and procedures; • IT system vulnerabilities may be more acute for IT systems associated with recently acquired businesses, and we may be unable to address such vulnerabilities, inadequacies, or failures immediately after acquiring a business, which could undermine integration activities, delay launch of acquired products, and increase infrastructure risk; -35- • we may finance future business combinations by issuing common stock for some or all of the purchase price, which could dilute the ownership interests of our shareholders; • we may compete with other firms, some of which may have greater financial and other resources, to acquire attractive companies; • we may experience disputes with or competition from our partners or former partners in our strategic alliances, investments and joint ventures, which could result in litigation or a loss of business; • we may not be able to obtain required regulatory approval for an acquisition, in a timely manner, or at all, and government actions such as actions by the Federal Trade Commission, Department of Justice, or state governmental agencies, may affect our ability to complete our business combinations, which could result in additional expenditures required to develop products and services internally, place us at a competitive disadvantage, or impact market perceptions of our business and brand; • the integration of entities we acquire into our business may affect the way in which existing and future laws and rules apply to us, including expansion of applicability; and • future business combinations may make it difficult to comply with the requirements of the BCBSA and lead to a risk that our BCBSA license agreements may be terminated.
The following are some of the risks associated with mergers, acquisitions, divestitures, joint ventures and strategic alliances and investments, referred to collectively as business combinations, that could have an adverse effect on our business, cash flows, financial condition and results of operations: • some business combinations may not achieve anticipated revenues, earnings or cash flow, business opportunities, synergies, growth projections or other anticipated benefits; • we may assume liabilities that were not disclosed to us, or which were underestimated, and which could lead to legal challenges, investigations and enforcement actions, and we may not be able to adequately recover from sellers or insurance carriers for such assumed liabilities; • we may experience difficulties in integrating business combinations, including into our internal control environment and culture, be unable to integrate business combinations successfully or as quickly as expected and be unable to realize anticipated economic, operational and other benefits in a timely manner or at all; • business combinations and proposed business combinations that are not completed could disrupt our ongoing business, lead to the incurrence of significant fees, distract management, result in the loss of key associates, divert resources, result in tax costs or inefficiencies and make it difficult to maintain our current business standards, controls, information technology systems, policies and procedures; • IT system vulnerabilities may be more acute for IT systems associated with recently acquired businesses, and we may be unable to address such vulnerabilities, inadequacies, or failures immediately after acquiring a business, which could undermine integration activities, delay launch of acquired products, and increase infrastructure risk; • we may finance future business combinations by issuing common stock for some or all of the purchase price, which could dilute the ownership interests of our shareholders; • we may compete with other firms, some of which may have greater financial and other resources, to acquire attractive companies; • we may experience disputes with or competition from our partners or former partners in our strategic alliances, investments and joint ventures, which could result in litigation or a loss of business; • we may not be able to obtain required regulatory approval for an acquisition, in a timely manner, or at all, and government actions such as actions by the Federal Trade Commission, Department of Justice, or state governmental agencies may affect our ability to complete our business combinations, which could result in additional expenditures required to develop products and services internally, place us at a competitive disadvantage, or impact market perceptions of our business and brand; • the integration of entities we acquire into our business may affect the way in which existing and future laws and rules apply to us, including expansion of applicability; and -36- • future business combinations may make it difficult to comply with the requirements of the BCBSA and lead to a risk that our BCBSA license agreements may be terminated.
For additional information on the CVS Agreement, see “Business - Product and Service Descriptions,” in Part I, Item 1 of this Annual Report on Form 10-K. -28- The failure to properly maintain the integrity or availability of our data, or to successfully maintain, protect and upgrade our information systems could adversely affect our business.
For additional information on the CVS Agreement, see “Business - Product and Service Descriptions,” in Part I, Item 1 of this Annual Report on Form 10-K. The failure to properly maintain the integrity or availability of our data, or to successfully maintain, protect and upgrade our information systems could adversely affect our business.
Further, various government agencies have conducted and continue to conduct investigations and studies into certain pharmacy services practices, which have resulted and may in the future result in pharmacy benefit managers agreeing to civil penalties, including the payment of money and entry into corporate integrity agreements, or could materially and adversely impact the pharmacy services business model.
Further, various government agencies have conducted and continue to conduct investigations and studies into certain pharmacy services practices, which have resulted and may in the future result in pharmacy benefit managers agreeing to civil penalties, including the payment of money and entry into corporate integrity agreements, or could adversely impact the pharmacy services business model.
We are subject to risks associated with our use of AI, which could adversely affect our business, reputation or financial results. As part of our operations, we are making investments in certain AI administrative tools and solutions to enhance our operations and positively impact the experience of our members, and we continue to explore further innovation using AI.
We are subject to risks associated with our use of AI, which could adversely affect our business, reputation or financial results. As part of our operations, we are making investments in certain AI tools and solutions to enhance our operations and positively impact the experience of our members, and we continue to explore further innovation using AI.
Furthermore, -34- decisions to buy our products and services are increasingly made or influenced by consumers, through means such as direct purchasing (for example, Medicare Advantage plans) and insurance exchanges that allow individual choice, or by large employers that may increasingly be able to contract directly with providers.
Furthermore, decisions to buy our products and services are increasingly made or influenced by consumers, through means such as direct purchasing (for example, Medicare Advantage plans) and insurance exchanges that allow individual choice, or by large employers that may increasingly be able to contract directly with providers.
If a Medicare Advantage, MMP or Medicare Part D contract pays minimum -27- MLR rebates for three consecutive years, it will become ineligible to enroll new members. If a Medicare Advantage or Medicare Part D contract pays such rebates for five consecutive years, it will be terminated by CMS. A change in our healthcare product mix may impact our profitability.
If a Medicare Advantage, MMP or Medicare Part D contract pays minimum MLR rebates for three consecutive years, it will become ineligible to enroll new members. If a Medicare Advantage or Medicare Part D contract pays such rebates for five consecutive years, it will be terminated by CMS. A change in our healthcare product mix may impact our profitability.
Failure or disruption of our performance of, or our ability to perform, key business functions, including as a result of the unavailability or cyber-attack of our information technology systems or those of third parties (including cloud service providers), could decrease response times, lower levels of service satisfaction and harm our reputation and brand.
Failure or disruption of our performance of, or our ability to perform, key business functions, including as a result of the unavailability of, or cyber-attack on, our information technology systems or those of third parties (including cloud service providers), could decrease response times, lower levels of service satisfaction and harm our reputation and brand.
The direct provision of healthcare services by certain of our subsidiaries involves risks of additional litigation brought against us or our associates for alleged malpractice or professional liability claims arising out of the delivery of healthcare and related services. In addition, liability may arise from maintaining healthcare premises that serve the public.
The direct provision of healthcare services by certain of our subsidiaries involves risks of additional litigation brought against us or our associates for alleged malpractice or professional liability claims arising out of the delivery of healthcare and related -32- services. In addition, liability may arise from maintaining healthcare premises that serve the public.
Restrictions on our ability to obtain funds from our regulated subsidiaries could limit our ability to repurchase shares, pay dividends and meet our obligations and materially adversely affect our business, cash flows, financial condition and results of operations. As a holding company, we are dependent on dividends and administrative expense reimbursements from our subsidiaries.
Restrictions on our ability to obtain funds from our regulated subsidiaries could limit our ability to repurchase shares, pay dividends and meet our obligations and adversely affect our business, cash flows, financial condition and results of operations. As a holding company, we are dependent on dividends and administrative expense reimbursements from our subsidiaries.
In addition, price transparency initiatives, such as the Health Plan Transparency Rule, may impact our ability to obtain or maintain favorable contract terms. For example, hospitals are required to publish online payer-specific negotiated charges for each item or service the hospital provides.
In addition, price transparency initiatives, such as the Health Plan Transparency in Coverage Rule, may impact our ability to obtain or maintain favorable contract terms. For example, hospitals are required to publish online payer-specific negotiated charges for each item or service the hospital provides.
Certain of our contracts currently have pending RADV audits by CMS and the HHS Office of Inspector General that are awaiting CMS finalization. In addition, we routinely perform ordinary course reviews of, among other things, our Medicare Advantage data submitted to CMS.
Certain of our contracts currently have pending RADV audits -27- by CMS and the HHS Office of Inspector General that are awaiting CMS finalization. In addition, we routinely perform ordinary course reviews of, among other things, our Medicare Advantage data submitted to CMS.
Claims-paying ability, financial strength and debt ratings by nationally recognized statistical rating organizations are important factors in establishing the competitive position of insurance and health benefits companies. We believe our strong credit ratings are an important factor in marketing our products to customers.
Claims-paying ability, financial strength and debt ratings by nationally recognized credit rating organizations are important factors in establishing the competitive position of insurance and health benefits companies. We believe our strong credit ratings are an important factor in marketing our products to customers.
We are dependent on the success of our relationships with third parties for various services and functions. We contract with various third parties to perform certain functions and services and provide us with certain information technology systems. Certain of these third parties provide us with significant portions of our business infrastructure and operating requirements.
We are dependent on the success of our relationships with third parties for various services and functions. -28- We contract with various third parties to perform certain functions and services and provide us with certain information technology systems. Certain of these third parties provide us with significant portions of our business infrastructure and operating requirements.
The insurance holding company system acts and certain health statutes of the states in which our insurance company or HMO subsidiaries are regulated restrict the ability of any person to obtain control of an insurance company or HMO without prior regulatory approval.
The insurance holding company system acts and certain health statutes of the states in which our insurance company or HMO subsidiaries are regulated restrict the ability of any person to obtain control of an insurance company or HMO without prior -34- regulatory approval.
If we default under our credit agreement, the lenders could cease to make further extensions of credit or cause all of our outstanding debt obligations under our credit agreement to become immediately due and payable, together with accrued and unpaid interest.
If we default under our credit agreement, the lenders could cease to make further extensions of credit or cause all of our outstanding debt obligations under our credit agreement to become immediately due and payable, together -37- with accrued and unpaid interest.
An inability of our subsidiaries to pay dividends in the future in an amount sufficient for us to meet our financial obligations may materially adversely affect our business, cash flows, financial condition and results of operations.
An inability of our subsidiaries to pay dividends in the future in an amount sufficient for us to meet our financial obligations may adversely affect our business, cash flows, financial condition and results of operations.
Further, in the past, Congress has considered, and may consider in the future, various forms of managed care reform legislation which, if adopted, could fundamentally alter the treatment of coverage decisions under ERISA, including limiting ERISA’s preemptive effect on state laws, and other laws and could increase our costs, expose us to expanded liability, permit greater state regulation on our operations, or require us to revise the ways in which we conduct business.
Further, Congress has considered, and may consider in the future, various forms of managed care reform legislation which, if adopted, could fundamentally alter the treatment of coverage decisions under ERISA, including limiting ERISA’s preemptive effect on state laws, and could increase our costs, expose us to expanded liability, permit greater state regulation of our operations, or require us to revise the ways in which we conduct business.
If we fail to report and correct errors discovered through our own auditing procedures, during a RADV or RAC audit or during state regulatory audits, or otherwise fail to comply with applicable laws and regulations, we could be subject to fines, civil penalties or other sanctions, which could have a material adverse effect on our ability to participate in these programs, and on our financial condition, cash flows and results of operations.
If we fail to report and correct errors discovered through our own auditing procedures, during a RADV or RAC audit or during state regulatory audits, or otherwise fail to comply with applicable laws and regulations, we could be subject to fines, civil penalties or other sanctions, which could have an adverse effect on our ability to participate in these programs, and on our financial condition, cash flows and results of operations.
There is continuing risk that declines in the fair value of our investments may occur and material impairments may be charged to income in future periods, resulting in recognized losses.
There is continuing risk that declines in the fair value of our investments may occur and impairments may be charged to income in future periods, resulting in recognized losses.
Further, our state Medicaid contracts have not always been renewed, we have not always been awarded new contracts as a result of the competitive procurement process, and in some cases, we have lost members under existing contracts as a result of a post-award challenge by unsuccessful bidders, each of which could take place in the future and have a material adverse effect on our business, cash flows, financial condition and results of operations.
Further, our state Medicaid contracts have not always been renewed, we have not always been awarded new contracts as a result of the competitive procurement process, and in some cases, we have lost members under existing contracts as a result of a post-award challenge by unsuccessful bidders, each of which could take place in the future and have an adverse effect on our business, cash flows, financial condition and results of operations.
Numerous factors affecting healthcare costs may adversely affect our ability to predict and manage such costs, and may impact our business, cash flows, financial condition and results of operations.
Numerous factors affecting healthcare costs may adversely affect our ability to predict and manage such costs, and could adversely impact our business, cash flows, financial condition and results of operations.
Litigation and misappropriation of our proprietary information could hinder our ability to market and sell products and services, which could materially and adversely affect our results of operations, financial position and cash flows.
Litigation and misappropriation of our proprietary information could hinder our ability to market and sell products and services, which could adversely affect our results of operations, financial position and cash flows.
Our pharmacy services business would be adversely affected if we are unable to contract on favorable terms with third-party vendors, including pharmaceutical manufacturers. We delegate certain pharmacy benefit manager services, including, but not limited to, claims adjudication, pharmacy network administration, rebate administration, advanced home delivery back-end dispensing, and customer service, to CVS pursuant to the CVS Agreement.
Our pharmacy services business would be adversely affected if we are unable to contract on favorable terms with third-party vendors, including pharmaceutical manufacturers. We delegate certain pharmacy benefit manager services, including, but not limited to, claims adjudication, pharmacy network administration, rebate administration, and advanced home delivery back-end dispensing to CVS pursuant to the CVS Agreement.
We expect state legislatures will continue to focus on healthcare delivery and financing issues, including actions to reduce or limit increases to premium payments, provider billing protections, access to care and other reforms of state health insurance markets. State ballot initiatives could also be put to voters that could materially impact our operating environment.
We expect state legislatures will continue to focus on healthcare delivery and financing issues, including actions to reduce or limit increases to premium payments, provider billing protections, access to care and other reforms of state health insurance markets. State ballot initiatives could also be put to voters that could adversely impact our operating environment.
Following an investigation, we may be subject to civil or criminal fines, penalties, and other sanctions if we are determined to be in violation of applicable laws or regulations. Liabilities that may result from these actions could have a material adverse effect on our cash flows, results of operations and financial condition.
Following an investigation, we may be subject to civil or criminal fines, penalties, and other sanctions if we are determined to be in violation of applicable laws or regulations. Liabilities that may result from these actions could have an adverse effect on our cash flows, results of operations and financial condition.
If we or another BCBS licensee are not in compliance with all legal requirements or are unable to perform administrative services as required, this could have an adverse effect on our members and our ability to maintain our licenses, which could have a material adverse effect on our business, cash flows, financial condition and results of operations.
If we or another BCBS licensee are not in compliance with all legal requirements or are unable to perform administrative services as required, this could have an adverse effect on our members and our ability to maintain our licenses, which could have an adverse effect on our business, cash flows, financial condition and results of operations.
We continue to evolve our business to offer products and services beyond traditional health insurance, including digital health technology, pharmacy services, home health, and behavioral and clinical care services, which subjects us to litigation and regulatory risks that are different from our traditional product and services offerings and may materially affect our exposure to other risks.
We continue to evolve our business to offer products and services beyond traditional health insurance, including digital health technology, pharmacy services, home health, and behavioral and clinical care services, which subjects us to litigation and regulatory risks that are different from our traditional product and services offerings and may adversely affect our exposure to other risks.
In addition, the pharmacy services industry is highly competitive, and our pharmacy services business unit is subject to competition from national, regional and local pharmacy services providers, other insurers, health plans, large retail pharmacy chains, large retail stores, supermarkets, mail order and web pharmacies, discount cards and specialty pharmacies.
In addition, the pharmacy services industry is highly competitive, and our pharmacy services business unit is subject to competition from national, regional and local pharmacy services providers, other insurers, health plans, large retail pharmacy chains, large retail stores, supermarkets, mail order, web, and direct-to-consumer pharmacies, discount cards and specialty pharmacies.
Failure to adequately implement, consolidate, integrate, streamline, maintain and upgrade effective and efficient information systems, including those powered by or incorporating AI, with sufficiently advanced technological capabilities could result in investigations, audits, fines and penalties, competitive and cost disadvantages to us compared to our competitors, contractual damages, and diversion of management’s time, and could have a material adverse effect on our business, financial condition and results of operations.
Failure to adequately implement, consolidate, integrate, streamline, maintain and upgrade effective and efficient information systems, including those powered by or incorporating AI, with sufficiently advanced technological capabilities could result in investigations, audits, fines and penalties, competitive and cost disadvantages to us compared to our competitors, contractual damages, and diversion of management’s time, and could have an adverse effect on our business, financial condition and results of operations.
Such publicity may lead to more regulation and legislative review of industry practices, which may increase business costs and impact profitability by constraining our ability to market, maintain or expand our product and service offerings and result in increased regulatory oversight of our operations.
Such publicity and sentiment may lead to increased regulation and legislative review of industry practices, which may increase business costs and impact profitability by constraining our ability to market, maintain or expand our product and service offerings and result in increased regulatory oversight of our operations.
These factors include, among others: changes in healthcare practices; healthcare utilization patterns; demographic characteristics including the aging population; previously uninsured members entering the healthcare system; short and long-term risks associated with our members' lifestyle decisions; medical cost inflation; increased labor costs; provider and member fraud; evolution of new technologies, drugs and treatments; increased cost of individual services; increased number and cost of prescription drugs; direct-to-consumer marketing by drug manufacturers; clusters of high cost cases; increased use of services, including resulting from pandemics, large-scale medical emergencies, increasing natural -23- disasters in connection with climate change, geopolitical instability and other public health crises; and new mandated benefits and treatment guidelines and changes to other regulations impacting our business.
These factors include, among others: changes in healthcare practices; healthcare utilization patterns; demographic characteristics including the aging population; previously uninsured members entering the healthcare system; short and long-term risks associated with our members' lifestyle decisions; medical cost inflation; increased labor costs; provider and member fraud; evolution of new technologies, drugs and treatments; increased cost of individual services; increased number and cost of prescription drugs; direct-to-consumer marketing by drug manufacturers; clusters of high cost cases; increased use of services, including resulting from pandemics, large-scale medical emergencies, natural disasters, geopolitical instability and other public health crises; and new mandated benefits and treatment guidelines and changes to other regulations impacting our business.
In addition, this could negatively affect our operations, cause system disruptions, damage our reputation, cause membership losses and contract breaches, expose us or our members to the risk of financial or medical -25- identity theft, and result in regulatory enforcement actions, material fines and penalties, litigation or other actions that could have a material adverse effect on our business, cash flows, financial condition and results of operations.
In addition, this could negatively affect our operations, cause system disruptions, damage our reputation, cause membership losses and contract breaches, expose us or our members to the risk of financial or medical identity theft, and result in regulatory enforcement actions, material fines and penalties, litigation or other actions that could have an adverse effect on our business, cash flows, financial condition and results of operations.
Typically, government-sponsored programs also involve our higher-risk healthcare products. A shift of enrollees from more profitable products to less profitable products could have a material adverse effect on our cash flows, financial condition and results of operations.
Typically, government-sponsored programs also involve our higher-risk healthcare products. A shift of enrollees from more profitable products to less profitable products could have an adverse effect on our cash flows, financial condition and results of operations.
Indiana law, other applicable laws, our articles of incorporation and bylaws, and provisions of our BCBSA license agreements may prevent or discourage takeovers and business combinations that our shareholders might consider to be in their best interest.
Indiana law, other applicable laws, our articles of incorporation and bylaws, and provisions of our BCBSA license agreements may prevent or discourage takeovers and business combinations that our shareholders might consider to be in their best interests.
If CVS fails to provide pharmacy benefit manager services as contractually required, we may not be able to meet the full demands of our customers, which could have a material adverse effect on our business, reputation and results of operations. Additionally, we may not maintain favorable terms and conditions, including financial terms, to compete in the market.
If CVS fails to provide pharmacy benefit manager services as contractually required, we may not be able to meet the full demands of our customers, which could have an adverse effect on our business, reputation and results of operations. Additionally, we may not maintain favorable terms and conditions, including financial terms, to compete in the market.
Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or associates, restrictions or outright prohibitions on the conduct of our business and significant reputational harm and could adversely affect our ability to market our products and services, which may have a material adverse effect on our business, financial condition and results of operations.
Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or associates, restrictions or outright prohibitions on the conduct of our business and significant reputational harm and could adversely affect our ability to market our products and services, which may have an adverse effect on our business, financial condition and results of operations.
Our pharmacy services business is subject to the risks inherent in the dispensing, packaging, fulfillment and distribution of pharmaceuticals and other healthcare products, including exposure to liabilities and reputational harm related to clinical quality, patient safety, infusion center operations, and other risks inherent in the dispensing, packaging and distribution of drugs, and other operational errors by us or our pharmacy services suppliers.
Our pharmacy services business is subject to the risks inherent in the dispensing, packaging, fulfillment and distribution of pharmaceuticals and other healthcare products, including exposure to liabilities and reputational harm related to clinical quality, patient safety, infusion center operations, and other risks inherent in these activities, and other operational errors by us or our pharmacy services suppliers.
Legislation, regulation enforcement activity and judicial decisions that cause the Public Exchange to operate in a manner different than we projected in setting premium rates, including the potential expiration of enhanced PTCs at the end of 2025, could affect our results.
Legislation, regulation enforcement activity and judicial decisions that cause the Public Exchange to operate in a manner different than we projected in setting premium rates, including any potential changes relating to the expiration of enhanced PTCs at the end of 2025, could affect our results.
Additionally, other extreme events such as natural disasters, war, terrorism, increased crime, civil unrest and sanctions could create public health crises, operations disruptions or otherwise have a material adverse effect on our business, cash flows, financial condition and results of operations.
Additionally, other extreme events such as natural disasters, war, terrorism, increased crime, civil unrest and sanctions could create public health crises, operations disruptions or otherwise have an adverse effect on our business, cash flows, financial condition and results of operations.
Negative publicity and perception of the health benefits industry in general, the BCBSA, other BCBSA licensees, us, or our key vendors could limit our ability to attract and retain talent, impact the security of our workforce, and adversely affect our business, cash flows, financial condition and results of operations.
Negative publicity and sentiment regarding the health benefits industry in general, the BCBSA, other BCBSA licensees, us, or our key vendors could limit our ability to attract and retain talent, impact the security of our workforce, and adversely affect our business, cash flows, financial condition and results of operations.
The license agreements may be modified by the BCBSA, which could have a material adverse effect on our future expansion plans or results of operations. Further, BCBS licensees have certain requirements to perform administrative services for members of other BCBS licensees.
The license agreements may be modified by the BCBSA, which could have an adverse effect on our future expansion plans or results of operations. Further, BCBS licensees have certain requirements to perform administrative services for members of other BCBS licensees.
Both our lack of contracts with certain providers and the development of new federal and state laws could result in significant litigation or arbitration proceedings, to the extent a provider attempts to obtain payment from our members for the difference between the amount we have paid and the amount they have charged, or other increases in rates paid to out-of-network providers.
Both our lack of contracts with certain providers and the development of new federal and state laws could result in significant litigation or arbitration proceedings, including instances in which a provider attempts to obtain payment from our members for the difference between the amount we have paid and the amount they have charged, or other increases in rates paid to out-of-network providers.
In addition, any variation from our cost expectations regarding acuity, enrollment levels, adverse selection, or other assumptions utilized in setting premium rates, could have a material adverse effect on our results of operations, financial position, and cash flows.
In addition, any variation from our cost expectations regarding acuity, enrollment levels, adverse selection, or other assumptions utilized in setting premium rates, could have an adverse effect on our results of operations, financial position, and cash flows.
An inability to retain and attract associates and executives could have a material adverse effect on our business, cash flows, financial condition and results of operations.
An inability to retain and attract associates and executives could have an adverse effect on our business, cash flows, financial condition and results of operations.
Any such future litigation or governmental investigation could divert the attention of management from the operation of our business, result in reputational damage and have a material adverse impact on our business, cash flows, financial condition, and results of operations.
Any such future litigation or governmental investigation could divert the attention of management from the operation of our business, result in reputational damage and have an adverse impact on our business, cash flows, financial condition, and results of operations.
Frequent and sometimes unpredictable changes to existing laws, rules and regulations or judicial interpretation, application or enforcement thereof, or development of new laws, rules, regulatory interpretations or judgments could force us to change how we conduct our business, affect the products and services we offer (and where we offer them), restrict revenue and enrollment growth, increase our costs, including operating, healthcare technology and administrative costs, restrict our ability to obtain new product approvals and implement changes in premium rates, and require enhancements to our compliance infrastructure and internal controls environment, which could adversely impact our business and results of operations.
Frequent and sometimes unpredictable changes to existing laws, rules and regulations or judicial interpretation, application or enforcement thereof, or development of new laws, rules, regulatory interpretations or judgments could force us to change how we conduct our business, affect the products and services we offer (and where we offer them), restrict revenue and enrollment growth, increase our costs, including operating, healthcare technology and administrative costs, restrict our ability to obtain new product approvals, modify existing products, and implement changes in premium rates, and require enhancements to our compliance infrastructure and internal controls environment.
As of December 31, 2024, we provided health benefit and other healthcare services to approximately 34 million Blue Cross and/or Blue Shield enrollees.
As of December 31, 2025, we provided health benefit and other healthcare services to approximately 34 million Blue Cross and/or Blue Shield enrollees.
Our inability to maintain positive trends, or to contract on favorable terms with CVS, wholesalers or pharmaceutical manufacturers for, among other things, rebates, discounts, administrative fees and inventory purchase prices, or a failure to identify and implement new ways to mitigate pricing pressures, could negatively impact our ability to attract or retain customers, negatively impact our margins and have a material adverse effect on our business and results of operations.
Our inability to maintain positive trends, satisfy financial commitments to customers, or to contract on favorable terms with CVS, wholesalers or pharmaceutical manufacturers for, among other things, rebates, discounts, administrative fees and inventory purchase prices, or a failure to identify and implement new ways to mitigate pricing pressures, could negatively impact our ability to attract or retain customers, negatively impact our margins and have an adverse effect on our business and results of operations.
Any future evaluations requiring an impairment of our goodwill and other intangible assets could materially affect our results of operations and shareholders’ equity which could, in turn, negatively impact our debt ratings or potentially impact our compliance with existing debt covenants.
Any future evaluations requiring an impairment of our goodwill and other intangible assets could adversely affect our results of operations and shareholders’ equity which could, in turn, negatively impact our debt ratings or adversely impact our compliance with existing debt covenants.
Changes in existing laws or regulations applicable to these programs, or their interpretations, are difficult to predict and could have a material adverse effect on our business, cash flows, financial condition and results of operations.
Changes in existing laws or regulations applicable to these programs, or their interpretations, are difficult to predict and could have an adverse effect on our business, cash flows, financial condition and results of operations.
Our failure to implement adequate business continuity and disaster recovery strategies could significantly reduce our ability to provide products and services to our customers and members, which could have a material adverse effect on our business and results of operations.
Our failure to implement adequate business continuity and disaster recovery strategies could significantly reduce our ability to provide products and services to our customers and members, which could have an adverse effect on our business and results of operations.
If enacted into law, these state proposals and actions could have a material adverse impact on our business, cash flows, operations or financial condition. Additionally, state legislative actions and litigation could impact ERISA pre-emption.
If enacted into law, these state proposals and actions could have an adverse impact on our business, cash flows, operations or financial condition. Additionally, state legislative actions and litigation could impact ERISA pre-emption.
As a health company offering health benefits, pharmacy services and other diversified products and services, we operate in a highly competitive industry that is subject to significant changes from and competition due to legislative reform, business consolidations, new strategic alliances, new market entrants, aggressive marketing practices, technological advancements and changing market practices such as increasing usage of telehealth.
As a health company offering health benefits, pharmacy services and other diversified products and services, we operate in a highly competitive industry that is subject to significant changes from and competition due to legislative reform, business consolidations, new strategic alliances, new market entrants, aggressive marketing practices, technological advancements and changing market practices.
Other factors affecting our pharmaceutical costs include, but are not limited to, existing prices, geographical variation in utilization of new FDA-approved pharmaceuticals and new FDA-approved indications for existing pharmaceuticals, and changes in discounts. In addition to the challenge of managing healthcare costs, we face pressure to contain premium rates.
Other factors affecting our pharmaceutical costs include, but are not limited to, existing prices, geographical variation in utilization of new FDA-approved pharmaceuticals and new FDA-approved indications for existing pharmaceuticals, current and potential future tariffs and changes in discounts. -24- In addition to the challenge of managing healthcare costs, we face pressure to contain premium rates.
Our information systems require an ongoing investment, commitment of significant resources to maintain, integrate, upgrade, enhance and expand existing systems, and development of new systems to keep pace with continuing changes in information processing technology, emerging cybersecurity risks, changing customer preferences, evolving industry and regulatory standards and legal requirements, including as a result of the ACA, the Health Plan Transparency Rule, the 2021 Appropriations Act and federal data interoperability regulations.
Our information systems require an ongoing investment, commitment of significant resources to maintain, integrate, upgrade, enhance and expand existing systems, and development of new systems, including systems powered by or incorporating AI and machine learning (including generative AI), to keep pace with continuing changes in information processing technology, emerging cybersecurity risks, changing customer preferences, evolving industry and regulatory standards and legal requirements, including as a result of the ACA, the Health Plan Transparency Rule, the 2021 Appropriations Act and federal data interoperability regulations.
Further, the integration into our business of entities that we acquire, or our expansion into new businesses or jurisdictions, may increase our regulatory risk and affect the way in which existing laws and rules apply to us.
Further, the integration into our business of entities that we acquire, or our expansion into new businesses or jurisdictions, may increase our regulatory risk and affect how existing laws and rules apply to us.
In order to achieve our long-term financial targets, we need to not only grow our profitable medical membership, but also continue to profitably grow and diversify our sources of revenue and earnings, including through the increased sale of our pharmacy services, both integrated and external, other healthcare services and products, and specialty products, such as stop loss, dental, vision and other supplemental products, expand our products and services and establish new cost of care solutions.
In order to achieve our long-term financial targets, we need to not only grow our profitable medical membership, but also continue to profitably grow and diversify our sources of revenue and earnings, including through the increased sale of our pharmacy services, both integrated and external, other healthcare services and products, and specialty products, expand our products and services and establish new cost of care solutions.
In particular, further regulations and modifications to the ACA and laws and regulations stemming from the ACA could impact the market for our products, funding for ACA programs, the regulations applicable to us and the fees and taxes payable by us and otherwise affect our business and future operations, some of which may adversely affect our financial condition and results of operations.
In particular, further regulations and modifications to the ACA and laws and regulations stemming from the ACA could impact the market for our products, funding for ACA programs, the regulations applicable to us, the methodologies used to determine our reimbursement, and the fees and taxes payable by us and otherwise affect our business and future operations, any of which may adversely affect our financial condition and results of operations.
Actual results may be materially -26- different than our assumptions and estimates and could have a material adverse effect on our business, financial condition and results of operations.
Actual results may be materially different than our assumptions and estimates and could have an adverse effect on our business, financial condition and results of operations.
If any such negative economic conditions do not improve, we may experience a reduction in existing and new business, which could have a material adverse effect on our business, cash flows, financial condition and results of operations.
If any such negative economic conditions fail to improve, we may experience a reduction in existing and new business, which could have an adverse effect on our business, cash flows, financial condition and results of operations.
We are not currently able to estimate our potential financial obligations, losses or the availability of offsets associated with potential guaranty association assessments; however, any significant increase in guaranty association assessments could have a material adverse effect on our business, cash flows, financial condition, and results of operations.
We are not currently able to estimate our potential financial obligations, losses or the availability of offsets associated with future guaranty association assessments; however, any significant increase in guaranty association assessments could have an adverse effect on our business, cash flows, financial condition, and results of operations. We are subject to various risks associated with our international operations.
Each of the ratings organizations reviews our ratings periodically, and there can be no assurance that our current ratings will be maintained in the future. The value of our intangible assets may become impaired. As of December 31, 2024, we had $40.4 billion of goodwill and other intangible assets, representing 34.5% of our total consolidated assets.
Each of the ratings organizations reviews our ratings periodically, and there can be no assurance that our current ratings will be maintained in the future. The value of our intangible assets may become impaired. As of December 31, 2025, we had approximately $39.5 billion of goodwill and other intangible assets, representing 32.5% of our total consolidated assets.
In addition, legislative and/or regulatory policies or proposals that seek to manage the healthcare industry or otherwise impact our business may cause the market price of our securities to decrease, even if such policies or proposals never become effective.
Any of these developments could adversely impact our business and results of operations. In addition, legislative and/or regulatory policies or proposals that seek to manage the healthcare industry or otherwise impact our business may cause the market price of our securities to decrease, even if such policies or proposals never become effective.
Our profitability depends on accurately predicting and pricing for healthcare costs. Profitability is also dependent on our ability to manage future healthcare costs through medical management, product design, negotiation of favorable provider contracts and underwriting criteria. Total healthcare costs are affected by the type, number and unit cost of individual services rendered.
It also depends on our ability to manage future healthcare costs through medical management, product design, negotiation of favorable provider contracts and underwriting criteria. Total healthcare costs are affected by the type, number and unit cost of individual services rendered.
Further, if we do not improve our Star Ratings, or if quality-based bonus payments are reduced or eliminated, we will experience further negative impact on our revenues and the benefits that our plans can offer, which could materially and adversely affect the marketability of our plans, our ability to expand our business, our membership levels, results of operations, financial condition and cash flows.
If we do not maintain our Star Ratings in future years, or if quality-based bonus payments are reduced or eliminated, we would likely experience a negative impact on our revenues and the benefits that our plans can offer, which could adversely affect the marketability of our plans, our ability to expand our business, our membership levels, and our results of operations, financial condition and cash flows.
A pandemic or other large-scale medical emergency or public health crisis, such as the COVID-19 pandemic, referred to collectively as “public health crises,” may cause illness, death, quarantines, business and school shutdowns, reductions in business activity, travel and financial transactions, unemployment, inflation, labor shortages, supply chain interruptions, disruptions in public and private infrastructure and overall economic and financial market instability.
A pandemic or other large-scale medical emergency or public health crisis, such as the COVID-19 pandemic, referred to collectively as “public health crises,” may cause illness, death, quarantines, reduced operations or shutdowns of businesses and schools, unemployment, inflation, labor shortages, supply chain interruptions, disruptions in public and private infrastructure and overall economic and financial market instability.
In addition, changes in government regulations, policies or funding that apply to government-sponsored programs such as Medicare and Medicaid including, among other things, reimbursement levels, quality-based bonus payment determinations, eligibility and redetermination requirements, benefit coverage requirements and additional governmental participation, have adversely affected, and could in the future adversely affect, our business, cash flows, financial condition, and results of operations.
In addition, changes in government regulations, policies or funding that apply to government-sponsored programs such as Medicare and Medicaid including, among other things, reimbursement levels, quality-based bonus payment determinations, eligibility and redetermination requirements, taxes or assessments for our programs, such as premium taxes on health insurance, benefit coverage requirements, rate-setting methodologies, audit and oversight practices, and additional governmental participation, have adversely affected, and could in the future adversely affect, our business, cash flows, financial condition, and results of operations.
Growth of our home delivery, specialty pharmacy and infusion services businesses subjects us to an increase in licensure requirements, and to regulatory and operational risks as our pharmacy services business becomes more vertically integrated. Also, we and our third-party vendors may be subject to certain registration requirements and state and federal laws related to the practice of pharmacy.
Growth of our home delivery, specialty pharmacy and infusion services businesses subjects us to an increase in licensure requirements, and to statutory, regulatory and operational risks due to the integrated nature of our pharmacy services business. Also, we and our third-party vendors are subject to certain registration requirements and state and federal laws related to the practice of pharmacy.
For example, CMS made significant changes to the structure of the hierarchical condition category model in version 28, which may impact risk adjustment factor (“RAF”) scores for a larger percentage of Medicare Advantage beneficiaries and could result in changes to beneficiary RAF scores with or without a change in the patient’s health status.
For example, CMS made significant changes to the structure of the hierarchical condition category model in version 28, which impacted risk adjustment factor (“RAF”) scores for a larger percentage of Medicare Advantage beneficiaries and resulted in changes to beneficiary RAF scores regardless of a change in the patient’s health status.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition to the ISSC, we have defined risk functions to cover overall enterprise risks and information technology and cybersecurity risks within our enterprise risk management framework, including, but not limited to: our IT Risk Management program, led by our CISO; our Responsible Artificial Intelligence (“RAI”) Program, led by our Chief Digital Information Officer; Compliance, led by our CCO; Internal Audit, led by our Chief Audit Executive (“CAE”); Enterprise Risk Management programs led by our CRO; Third-Party Risk Management, comprised of business and information security leaders; IT due diligence processes, led by business, technology and information security leaders; and our Corporate Insurance Program, including cybersecurity insurance, led by our Treasurer.
Biggest changeThe ISSC is chaired by our Chief Information Security Officer (“CISO”) and is comprised of senior business leaders including our Chief Compliance Officer (“CCO”), Chief Risk Officer (“CRO”), legal counsel, and human resources, procurement and business segment leaders. -39- In addition to the ISSC, we have defined risk functions to cover overall enterprise risks and information technology and cybersecurity risks within our enterprise risk management framework, including, but not limited to: our IT Risk Management Program, led by our CISO; our Responsible Artificial Intelligence (“RAI”) Program, led by our Chief Digital and Information Officer; Compliance, led by our CCO; Internal Audit, led by our Chief Audit Executive (“CAE”); Enterprise Risk Management programs led by our CRO; Third-Party Risk Management, comprised of business and information security leaders; IT due diligence processes, led by business, technology and information security leaders; and our Corporate Insurance Program, including cybersecurity insurance, led by our Treasurer.
The Policy, together with the Plan, identifies applicable requirements for incident disclosure and reporting and also provides protocols for incident evaluation based on facts and circumstances of each incident, including the use of third-party service providers and partners, processes for notification and internal escalation of information to our senior management, including to our chief legal officer and CEO, a subcommittee of our SEC disclosure committee, and ultimately, our Board of Directors and appropriate Board committees.
The Policy, together with the Plan, identifies applicable requirements for incident disclosure and reporting and also provides protocols for incident evaluation based on the facts and circumstances of each incident, including the use of third-party service providers and partners, processes for notification and internal escalation of information to our senior management, including to our chief legal officer and CEO, a subcommittee of our SEC disclosure committee, and, ultimately, our Board of Directors and appropriate Board committees.
In addition to our internal Information Security teams, we also utilize trusted third-party auditors and recognized cybersecurity consultants and certified assessors, to assess cybersecurity risks, related controls, and alignment to relevant regulatory and legal requirements. A third party evaluates our information security policies, standards and control environment at least annually.
In addition to our internal Information Security teams, we utilize trusted third-party auditors and recognized cybersecurity consultants and certified assessors, to assess our cybersecurity risks, related controls, and alignment to relevant regulatory and legal requirements. A third-party evaluates our information security policies, standards and control environment at least annually.
ITEM 1C. CYBERSECURITY We operate in a highly regulated industry. Federal, state and international laws and contractual commitments guide our collection, use and disclosure of confidential information such as protected health information, personal financial information and personally identifiable information.
ITEM 1C. CYBERSECURITY We operate in a highly regulated industry. Federal, state and international laws and regulations and contractual commitments guide our collection, use and disclosure of confidential information such as protected health information, personal financial information and personally identifiable information.
The Plan provides a framework to our Cyber Incident Response Taskforce, comprised of our Chief Privacy Officer (“CPO”), CISO and applicable legal counsel and business and corporate services leaders, for responding to cybersecurity incidents.
The Plan provides a framework to our Cyber Incident Response Taskforce, comprised of our Chief Privacy Officer (“CPO”), our CISO, legal counsel and business and corporate services leaders, for responding to cybersecurity incidents.
Cybersecurity Risk Assessment Our cybersecurity and risk management programs are part of our continuously evolving enterprise-wide risk management practices.
Cybersecurity Risk Assessment Our comprehensive cybersecurity and risk management programs are part of our continuously evolving enterprise-wide risk management practices.
Our success depends on maintaining a high level of trust among our stakeholders, including our consumers, clients, business partners, providers, regulators and associates. Failure to effectively secure, maintain and upgrade our information systems, or the availability and integrity of our data, could adversely affect our business, including our business strategy, cash flows, financial condition and results of operations.
Our success depends on maintaining a high level of trust among our stakeholders, including our customers, business partners, providers, regulators and associates. Failure to effectively secure, maintain and upgrade our information systems, or the availability and integrity of our data, could adversely affect our business, including our business strategy, cash flows, financial condition and results of operations.
These risks include, but are not limited to, regulatory compliance; third-party management, including risks from business partners and software providers; mergers and acquisitions; system availability and disruption of business operations; data use and security; vulnerability and configuration management; fraud and extortion; and reputation risk.
These risks include, but are not limited to, legal and regulatory compliance; third-party management, including risks from business partners and software providers; mergers and acquisitions; system availability and disruption of business operations; data use and security; vulnerability and configuration management; fraud and extortion; and reputational risk.
Assessments and testing protocols are performed against industry best practices and widely recognized security frameworks. We face many cybersecurity risks in connection with our business.
Assessments and testing protocols are performed by third parties against industry best practices and widely recognized security frameworks. We face many cybersecurity risks in connection with our business.
As of December 31, 2024, no known cybersecurity threats have materially affected, or are reasonably likely to materially affect, the Company, including our business strategy, cash flows, financial condition or results of operations; however, future cybersecurity incidents or threats may materially affect us, including by affecting our business strategy, results of operations or financial conditions. See Part I, Item 1A.
As of December 31, 2025, no known cybersecurity threats have materially affected, or are reasonably likely to materially affect, the Company, including our business strategy, cash flows, financial condition or results of operations; however, future cybersecurity incidents or threats may materially affect us, including by affecting our business strategy, results of operations or financial conditions.
“Risk Factors” for more information on the Company’s cybersecurity-related risks. -38- Management and Governance of Cybersecurity Risk To manage our cybersecurity risk, we employ a cross-organizational steering committee, the Information Security Steering Committee (“ISSC”), that supports the direction and governance of our enterprise-wide Information Security Program.
See Part I, Item 1A, “Risk Factors” for more information on our cybersecurity-related risks. Management and Governance of Cybersecurity Risk To manage our cybersecurity risk, we employ a cross-organizational steering committee, the Information Security Steering Committee (“ISSC”), that supports the direction and governance of our enterprise-wide Information Security Program.
Our job summaries contain specific educational and knowledge requirements necessary for cybersecurity jobs. In addition, a criminal background check is completed for all new associates and performance reviews are conducted annually to measure performance results and achievements and to assess the job competency of our associates.
In addition, a criminal background check is completed for all new associates and performance reviews are conducted annually to measure performance results and achievements and to assess the job competency of our associates.
Periodically, the Board also receives third party assessments of our information security. The Audit Committee receives regular updates on both information security and data privacy matters, and oversees data privacy, integrity, incident and breach risks.
Periodically, the Board also receives third-party assessments of our information security. The Audit Committee receives regular updates on both information security and data privacy matters, and oversees data privacy, integrity, incident and breach risks. Cybersecurity Expertise Our Information Security Program is designed to minimize risk and safeguard the data of our members, customers, and associates.
He holds advanced certifications including Certified Information Systems Security Professional and Certified Secure Software Lifecycle Professional. Our associates, including those responsible for cybersecurity, are evaluated for competence, including the knowledge and skills necessary to accomplish tasks that define associates’ roles and responsibilities and undergo regular training regarding security-awareness, privacy, ethics and compliance.
Our associates, including those responsible for cybersecurity, are evaluated for competence, including the knowledge and skills necessary to accomplish tasks that define associates’ roles and responsibilities, and undergo regular training regarding security-awareness, privacy, ethics and compliance. Our job summaries contain specific educational and knowledge requirements necessary for cybersecurity jobs.
Removed
The ISSC is chaired by our Chief Information Security Officer (“CISO”) and is comprised of accountable senior business leaders including our Chief Compliance Officer (“CCO”), Chief Risk Officer (“CRO”), legal counsel, and human resources, procurement and business segment leaders.
Added
The program is led by our Chief Digital and Information Officer and our CISO, both of whom have extensive backgrounds in information security and technology.
Removed
Cybersecurity Expertise Our Information Security Program has been established with the mission of minimizing risk to our member, client and associate data and it is managed by our CISO. Our current CISO has over 30 years of experience in information security and technology and has held a wide variety of technical and strategic leadership positions.
Added
Our Chief Digital and Information Officer has more than 25 years of experience, including leading enterprise digital transformation initiatives at major corporations, while our CISO brings over 25 years of experience across technical, operational, and strategic security leadership roles in global organizations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES. We lease our principal executive offices located at 220 Virginia Avenue, Indianapolis, Indiana. In addition to this location, we have operating facilities located in each state where we operate as licensees of the BCBSA and in other states or countries where we operate under our other brands. A majority of these locations are also leased properties.
Biggest changeITEM 2. PROPERTIES. We lease our principal executive offices located at 220 Virginia Avenue, Indianapolis, Indiana. In addition to this location, we have operating facilities located in each state where we operate as licensees of the BCBSA and in other state and countries where we operate under our other brands. A majority of these locations are also leased properties.
Our facilities -39- support our various business segments. We operate in a hybrid workforce environment and believe that our properties are adequate and suitable for our business as presently conducted.
Our facilities support our various business segments. We operate in a hybrid workforce environment and believe that our properties are adequate and suitable for our business as presently conducted. -40-

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS. For information regarding our legal proceedings, see Note 14, “Commitments and Contingencies – Litigation and Regulatory Proceedings ,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which information is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. -40- PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS. For information regarding our legal proceedings, see Note 14, “Commitments and Contingencies – Litigation and Regulatory Proceedings ,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which information is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. -41- PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The following table presents information related to our repurchases of common stock for the periods indicated ( in millions, except share and per share data ): Period Total Number of Shares Purchased 1 Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs 2 Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs October 1, 2024 to October 31, 2024 801,484 421.93 798,055 $ 10,774 November 1, 2024 to November 30, 2024 1,859,856 409.95 1,856,962 10,013 December 1, 2024 to December 31, 2024 1,858,281 383.93 1,857,988 9,300 4,519,621 4,513,005 1 Total number of shares purchased includes 6,616 shares delivered to or withheld by us in connection with employee payroll tax withholding upon exercise or vesting of stock awards.
Biggest changeIssuer Purchases of Equity Securities The following table presents information related to our repurchases of common stock for the periods indicated ( in millions, except share and per share data ): Period Total Number of Shares Purchased 1 Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs 2 Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs October 1, 2025 to October 31, 2025 594,345 346.27 591,126 $ 6,961 November 1, 2025 to November 30, 2025 497,122 320.82 496,635 6,802 December 1, 2025 to December 31, 2025 316,670 338.92 316,361 6,695 1,408,137 1,404,122 1 Total number of shares purchased includes 4,015 shares delivered to or withheld by us in connection with employee payroll tax withholding upon exercise or vesting of stock awards.
Stock grants to employees and directors and stock issued for stock option plans and stock purchase plans in the consolidated statements of shareholders’ equity are shown net of these shares purchased. 2 Represents the number of shares repurchased through the common stock repurchase program authorized by our Board of Directors, which the Board evaluates periodically.
Stock grants to employees and directors and stock issued for stock option plans and stock purchase plans in the consolidated statements of total equity are shown net of these shares purchased. 2 Represents the number of shares repurchased through the common stock repurchase program authorized by our Board of Directors, which the Board evaluates periodically.
The graph assumes an investment of $100 on December 31, 2019 in each of our common stock and these indices (and the reinvestment of all dividends).
The graph assumes an investment of $100 on December 31, 2020 in each of our common stock and these indices (and the reinvestment of all dividends).
No duration has been placed on our common stock repurchase program, and we reserve the right to discontinue the program at any time. -41- Performance Graph The following Performance Graph and related information compares the cumulative total return to shareholders of our common stock for the period from December 31, 2019 through December 31, 2024, with the cumulative total return over such period of (i) the Standard & Poor’s 500 Stock Index (the “S&P 500 Index”) and (ii) the Standard and Poor’s 500 Health Care Index (the “S&P 500 Health Care Index”).
No duration has been placed on our common stock repurchase program, and we reserve the right to discontinue the program at any time. -42- Performance Graph The following Performance Graph and related information compares the cumulative total return to shareholders of our common stock for the period from December 31, 2020 through December 31, 2025, with the cumulative total return over such period of (i) the Standard & Poor’s 500 Stock Index (the “S&P 500 Index”) and (ii) the Standard and Poor’s 500 Health Care Index (the “S&P 500 Health Care Index”).
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock, par value $0.01 per share, is listed on the NYSE under the symbol “ELV.” Holders As of February 1, 2025, there were 46,307 shareholders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock, par value $0.01 per share, is listed on the NYSE under the symbol “ELV.” Holders As of February 1, 2026, there were 44,119 shareholders of record of our common stock.
During the year ended December 31, 2024, we repurchased 6,661,737 shares at an aggregate cost of $2,900 under the program, including the cost of options to purchase shares. The Board of Directors has authorized our common stock repurchase program since 2003.
During the year ended December 31, 2025, we repurchased 7,434,937 shares at an aggregate cost of $2,605 under the program, including the cost of options to purchase shares. The Board of Directors has authorized our common stock repurchase program since 2003.
December 31, 2019 2020 2021 2022 2023 2024 Elevance Health, Inc. $ 100 $ 108 $ 157 $ 176 $ 164 $ 130 S&P 500 Index 100 118 152 125 158 197 S&P 500 Health Care Index 100 113 143 140 143 147 Based upon an initial investment of $100 on December 31, 2019 with dividends reinvested.
December 31, 2020 2021 2022 2023 2024 2025 Elevance Health, Inc. $ 100 $ 146 $ 163 $ 152 $ 121 $ 117 S&P 500 Index 100 129 105 133 166 196 S&P 500 Health Care Index 100 126 124 126 129 148 Based upon an initial investment of $100 on December 31, 2020 with dividends reinvested.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOur shareholders’ net income as a percentage of total revenues slightly decreased in 2024 as compared to 2023 as a result of all the factors discussed above. -53- Reportable Segments Results of Operations The following table presents a summary of our reportable segment financial information for the years ended December 31, 2024, 2023 and 2022: Years Ended December 31 Change 2024 vs. 2023 2023 vs. 2022 2024 2023 2022 $ % $ % Operating Revenue Health Benefits $ 150,275 $ 148,571 $ 138,484 $ 1,704 1.1 % $ 10,087 7.3 % CarelonRx 35,961 33,835 28,526 2,126 6.3 % 5,309 18.6 % Carelon Services 17,961 14,147 12,860 3,814 27.0 % 1,287 10.0 % Corporate & Other 309 479 399 (170) (35.5) % 80 20.1 % Eliminations (29,302) (26,823) (24,609) (2,479) 9.2 % (2,214) 9.0 % Total operating revenue $ 175,204 $ 170,209 $ 155,660 $ 4,995 2.9 % $ 14,549 9.3 % Operating Gain (Loss) Health Benefits $ 6,243 $ 6,888 $ 6,022 $ (645) (9.4) % $ 866 14.4 % CarelonRx 2,172 1,975 1,868 197 10.0 % 107 5.7 % Carelon Services 717 680 535 37 5.4 % 145 27.1 % Corporate & Other (1,270) (1,044) (142) (226) 21.6 % (902) 635.2 % Operating Margin Health Benefits 4.2 % 4.6 % 4.3 % (40) bp 30 bp CarelonRx 6.0 % 5.8 % 6.5 % 20 bp (70) bp Carelon Services 4.0 % 4.8 % 4.2 % (80) bp 60 bp The following table summarizes Health Benefits operating revenues by Commercial, Medicare, Medicaid and FEP ® lines of business for the years ended December 31, 2024, 2023 and 2022: Years Ended December 31 Change 2024 vs. 2023 2023 vs. 2022 2024 2023 2022 $ % $ % Health Benefits Operating Revenue Commercial $ 46,816 $ 43,266 $ 41,674 $ 3,550 8.2 % $ 1,592 3.8 % Medicare 36,795 35,067 31,604 1,728 4.9 % 3,463 11.0 % Medicaid 51,937 56,601 52,886 (4,664) (8.2) % 3,715 7.0 % Federal Employee Program ® 14,727 13,637 12,320 1,090 8.0 % 1,317 10.7 % Total Health Benefits operating revenues $ 150,275 $ 148,571 $ 138,484 $ 1,704 1.1 % $ 10,087 7.3 % Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Health Benefits Operating revenue increased primarily as a result of higher premium yields driven by premium rate increases in all of our lines of business in recognition of medical cost trends, partially offset by membership attrition in our Medicaid business.
Biggest changeOur shareholders’ net income as a percentage of total revenues decreased in 2025 as compared to 2024 as a result of all the factors discussed above. -54- Reportable Segments Results of Operations The following table presents a summary of our reportable segment financial information for the years ended December 31, 2025, 2024 and 2023: Years Ended December 31 Change 2025 vs. 2024 2024 vs. 2023 2025 2024 2023 $ % $ % Operating Revenue Health Benefits $ 167,094 $ 150,275 $ 148,571 $ 16,819 11.2 % $ 1,704 1.1 % CarelonRx 43,400 35,961 33,835 7,439 20.7 % 2,126 6.3 % Carelon Services 28,316 17,961 14,147 10,355 57.7 % 3,814 27.0 % Corporate & Other 463 309 479 154 49.8 % (170) (35.5) % Eliminations (41,689) (29,302) (26,823) (12,387) 42.3 % (2,479) 9.2 % Total operating revenue $ 197,584 $ 175,204 $ 170,209 $ 22,380 12.8 % $ 4,995 2.9 % Operating Gain (Loss) Health Benefits $ 4,158 $ 6,243 $ 6,888 $ (2,085) (33.4) % $ (645) (9.4) % CarelonRx 2,418 2,172 1,975 246 11.3 % 197 10.0 % Carelon Services 960 717 680 243 33.9 % 37 5.4 % Corporate & Other (337) (1,270) (1,044) 933 (73.5) % (226) 21.6 % Total operating gain $7,199 $7,862 $8,499 $ (663) (8.4) % $ (637) (7.5) % Operating Margin Health Benefits 2.5 % 4.2 % 4.6 % (170) bp (40) bp CarelonRx 5.6 % 6.0 % 5.8 % (40) bp 20 bp Carelon Services 3.4 % 4.0 % 4.8 % (60) bp (80) bp The following table summarizes Health Benefits operating revenues by Commercial, Medicare, Medicaid and FEP ® lines of business for the years ended December 31, 2025, 2024 and 2023: Years Ended December 31 Change 2025 vs. 2024 2024 vs. 2023 2025 2024 2023 $ % $ % Health Benefits Operating Revenue Commercial $ 50,401 $ 46,816 $ 43,266 $ 3,585 7.7 % $ 3,550 8.2 % Medicare 44,752 36,795 35,067 7,957 21.6 % 1,728 4.9 % Medicaid 56,620 51,937 56,601 4,683 9.0 % (4,664) (8.2) % Federal Employee Program ® 15,321 14,727 13,637 594 4.0 % 1,090 8.0 % Total Health Benefits operating revenues $ 167,094 $ 150,275 $ 148,571 $ 16,819 11.2 % $ 1,704 1.1 % 1 Operating revenue within our Commercial line of business related to our Individual business, including ACA products, was $9,295, $8,295 and $6,187 for the year ended December 31, 2025, 2024, and 2023, respectively.
Centers is a managed long-term care plan that serves New York state Medicaid and dual-eligible Medicaid/Medicare members, enabling adults with long-term care needs and disabilities to live safely and independently in their own home. This acquisition aligns with our strategic plan to grow the Health Benefits segment and leverage industry-leading expertise while serving Medicaid and dual-eligible populations.
Centers is a managed long-term care plan that serves New York state Medicaid and dual-eligible Medicaid/Medicare members, enabling adults with long-term care needs and disabilities to live safely and independently in their own home. This acquisition aligns with our strategic plan to grow the Health Benefits segment and leverage industry-leading expertise while serving Medicaid and dual-eligible Medicaid/Medicare populations.
The impact of this deferral can be significant in the period in which the increased premium rates are first recognized depending on the magnitude of the premium rate increase, the number of members to which it applies and the length of the delay between the -45- effective date of the rate increase and the final contract date.
The impact of this deferral can be significant in the period in which the increased premium rates are first recognized depending on the magnitude of the premium rate increase, the number of members to which it applies and the length of the delay between the effective date of the rate increase and the final contract date.
Some fee-based customers choose to purchase stop loss coverage to limit their retained risk. Employer Group fee-based accounts are generally sold through independent brokers or consultants retained by the customer working with our in-house sales force.
Some fee-based customers choose to purchase stop loss coverage to limit their retained risk. Employer Group fee-based accounts are generally sold through independent brokers or consultants retained by the -50- customer working with our in-house sales force.
For additional information, see Note 3, “Business Acquisitions and Divestitures,” and Note 10, “Goodwill and Other Intangible Assets,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information, see Note 3, “Business Acquisitions,” and Note 10, “Goodwill and Other Intangible Assets,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
New Accounting Pronouncements For information regarding new accounting pronouncements that were issued or became effective during the year ended December 31, 2024 that had, or are expected to have, a material impact on our financial position, results of operations or financial statement disclosures, see the “ Recently Adopted Accounting Guidance ” and “Recent Accounting Guidance Not Yet Adopted” sections of Note 2, “Basis of Presentation and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
New Accounting Pronouncements For information regarding new accounting pronouncements that were issued or became effective during the year ended December 31, 2025 that had, or are expected to have, a material impact on our financial position, results of operations or financial statement disclosures, see the “ Recently Adopted Accounting Guidance ” and “Recent Accounting Guidance Not Yet Adopted” sections of Note 2, “Basis of Presentation and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Several economic factors related to healthcare costs, such as regulatory mandates of -44- coverage as well as direct-to-consumer advertising by providers and pharmaceutical companies, have a direct impact on the volume of care consumed by our members.
Several economic factors related to healthcare costs, such as regulatory mandates of coverage as well as direct-to-consumer advertising by providers and pharmaceutical companies, have a direct impact on the volume of care consumed by our members.
Employer Group risk-based accounts include Local Group customers and National Accounts. Local Group consists of those employer customers with less than 5% of eligible employees located outside of the headquarter state, as -49- well as customers with more than 5% of eligible employees located outside of the headquarter state with up to 5,000 eligible employees.
Employer Group risk-based accounts include Local Group customers and National Accounts. Local Group consists of those employer customers with less than 5% of eligible employees located outside of the headquarter state, as well as customers with more than 5% of eligible employees located outside of the headquarter state with up to 5,000 eligible employees.
For the year ended December 31, 2024, this metric was 12.3%, largely driven by favorable completion factor development from 2023 as well as favorable trend factor development at the end of 2023.
For the year ended December 31, 2024, this metric was 12.3% and was largely driven by favorable completion factor development from 2023 as well as favorable trend factor development at the end of 2023.
Our results of operations depend in large part on our ability to accurately predict and effectively manage healthcare costs through effective contracting with providers of care to our members, product pricing, medical management and health and wellness programs, including service coordination and case management for addressing complex and specialized healthcare needs, innovative product design and our ability to maintain or achieve improvement in our Centers for Medicare and Medicaid Services Star Ratings.
Our results of operations depend in large part on our ability to accurately predict and effectively manage healthcare costs through effective contracting with providers of care to our members, product pricing, medical management and health and wellness programs, including service coordination and case management for addressing complex and specialized healthcare needs, innovative product design and our ability to maintain or achieve improvement in our Centers for Medicare & Medicaid -45- Services (“CMS”) Star Ratings.
This information is not intended to be considered in isolation or as a substitute for income before income tax expense, net income or fully-diluted shareholders’ earnings per share (“EPS”) prepared in accordance with GAAP. For additional details on operating gain, see our “Reportable Segments Results -43- of Operations” discussion included in this MD&A.
This information is not intended to be considered in isolation or as a substitute for income before income tax expense, net income or fully-diluted shareholders’ earnings per share -44- (“EPS”) prepared in accordance with GAAP. For additional details on operating gain, see our “Reportable Segments Results of Operations” discussion included in this MD&A.
There were no adjustments to quoted market prices obtained from the pricing services during the years ended December 31, 2024 and 2023. In certain circumstances, it may not be possible to derive pricing model inputs from observable market activity, and therefore, such inputs are estimated internally. Such securities are designated Level III in accordance with FASB guidance.
There were no adjustments to quoted market prices obtained from the pricing services during the years ended December 31, 2025 and 2024. In certain circumstances, it may not be possible to derive pricing model inputs from observable market activity, and therefore, such inputs are estimated internally. Such securities are designated Level III in accordance with FASB guidance.
However, it is possible that the actual completion rates for the current period will develop differently from historical patterns and therefore could fall outside the possible variations described herein. The other major assumption used in the establishment of the December 31, 2024 incurred but not paid claim liability was the trend factors.
However, it is possible that the actual completion rates for the current period will develop differently from historical patterns and therefore could fall outside the possible variations described herein. The other major assumption used in the establishment of the December 31, 2025 incurred but not paid claim liability was the trend factors.
Once sufficient information is available to ascertain that the re-estimate of the liability is reasonable, the determination is made. While numerous factors contribute to our medical claims payable liability estimation, the two assumptions having the most significant impact on our incurred but not paid claims liability as of December 31, 2024, were the completion and trend factors.
Once sufficient information is available to ascertain that the re-estimate of the liability is reasonable, the determination is made. While numerous factors contribute to our medical claims payable liability estimation, the two assumptions having the most significant impact on our incurred but not paid claims liability as of December 31, 2025, were the completion and trend factors.
A detailed discussion of 2022 items and year-over-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 included in our Annual Report on Form 10-K for the year ended December 31, 2023.
A detailed discussion of 2023 items and year-over-year comparisons between 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 included in our Annual Report on Form 10-K for the year ended December 31, 2024.
In general, under the RBC Model Act, an insurance company must submit a report of its RBC level to the state insurance department or insurance commissioner, as appropriate, at the end of each calendar year. Our regulated subsidiaries’ respective RBC levels as of December 31, 2024 were in excess of all applicable mandatory RBC requirements.
In general, under the RBC Model Act, an insurance company must submit a report of its RBC level to the state insurance department or insurance commissioner, as appropriate, at the end of each calendar year. Our regulated subsidiaries’ respective RBC levels as of December 31, 2025 were in excess of all applicable mandatory RBC requirements.
Because historical trend factors are often not representative of current claim trends, the trend experience for the most recent six to nine months, plus knowledge of recent events likely affecting current trends, have been taken into consideration in establishing the incurred but not paid claims liability at December 31, 2024.
Because historical trend factors are often not representative of current claim trends, the trend experience for the most recent six to nine months, plus knowledge of recent events likely affecting current trends, have been taken into consideration in establishing the incurred but not paid claims liability at December 31, 2025.
See Note 12, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for a reconciliation of the beginning and ending balance for medical claims payable for the years ended December 31, 2024, 2023 and 2022.
See Note 12, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for a reconciliation of the beginning and ending balance for medical claims payable for the years ended December 31, 2025, 2024 and 2023.
Under this process, historical paid claims data is formatted into “claim triangles,” which compare claim incurred dates to the dates of claim -55- payments. This information is analyzed to create “completion factors” that represent the average percentage of total incurred claims that have been paid through a given date after being incurred.
Under this process, -56- historical paid claims data is formatted into “claim triangles,” which compare claim incurred dates to the dates of claim payments. This information is analyzed to create “completion factors” that represent the average percentage of total incurred claims that have been paid through a given date after being incurred.
In our analysis for the claim liabilities at December 31, 2024, the variability in months three to five was estimated to be between 40 and 90 basis points, while months six through twelve have much lower estimated variability ranging from 0 to 30 basis points.
In our analysis for the claim liabilities at December 31, 2025, the variability in months three to five was estimated to be between 40 and 90 basis points, while months six through twelve have much lower estimated variability ranging from 0 to 30 basis points.
We did not incur any impairment losses as a result of our 2024 annual impairment tests, as it was determined that it is more likely than not that the estimated fair values of our reporting units were substantially in excess of the carrying values as of December 31, 2024.
We did not incur any impairment losses as a result of our 2025 annual impairment tests, as it was determined that it is more likely than not that the estimated fair values of our reporting units were substantially in excess of the carrying values as of December 31, 2025.
Medicare program business accounted for 6.5%, 6.3% and 6.1% of our medical members at December 31, 2024, 2023 and 2022, respectively. • Medicaid membership represents eligible members who receive health benefits through publicly funded healthcare programs, including Medicaid, ACA-related Medicaid expansion programs, Temporary Assistance for Needy Families, programs for seniors and people with disabilities, Children’s Health Insurance Programs, and specialty programs such as those focused on long-term services and support, HIV/AIDS, foster care, behavioral health and/or substance abuse disorders, and intellectual disabilities or developmental disabilities, among others.
Medicare program business accounted for 6.9%, 6.5% and 6.3% of our medical members at December 31, 2025, 2024 and 2023, respectively. • Medicaid membership represents eligible members who receive health benefits through publicly funded healthcare programs, including Medicaid, ACA-related Medicaid expansion programs, Temporary Assistance for Needy Families, programs for seniors and people with disabilities, Children’s Health Insurance Programs, and specialty programs such as those focused on long-term services and support, HIV/AIDS, foster care, behavioral health and/or substance abuse disorders, and intellectual disabilities or developmental disabilities, among others.
We are licensed to conduct insurance operations in all 50 states, the District of Columbia and Puerto Rico through our subsidiaries. Through various subsidiaries, we also offer pharmacy services through our CarelonRx business, and other healthcare related services as Carelon Insights and Carelon Health.
We are licensed to conduct insurance operations in all 50 states, the District of Columbia and Puerto Rico through our subsidiaries. Through various subsidiaries, we also offer pharmacy services through our CarelonRx business, and other healthcare related services as Carelon Services.
We forecast, analyze and monitor our cash flows to enable investment and financing within the overall constraints of our financial strategy. -60- A substantial portion of the assets held by our regulated subsidiaries are in the form of cash and cash equivalents and investments.
We forecast, analyze and monitor our cash flows to enable investment and financing within the overall constraints of our financial strategy. -61- A substantial portion of the assets held by our regulated subsidiaries are in the form of cash and cash equivalents and investments.
For additional information, see Note 18, “Leases,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. • Other liabilities: These liabilities primarily consist of future policy reserves, projected other postretirement benefits, deferred compensation, supplemental executive retirement plan liabilities and certain other miscellaneous long-term obligations.
For additional information, see Note 18, “Leases,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. • Other liabilities: These liabilities primarily consist of future policy reserves, deferred compensation, supplemental executive retirement plan liabilities and certain other miscellaneous long-term obligations.
We have not transferred assets to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not hold any variable interest in an unconsolidated entity where such entity provides us with financing, liquidity, market risk or -64- credit risk support.
We have not transferred assets to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not -65- hold any variable interest in an unconsolidated entity where such entity provides us with financing, liquidity, market risk or credit risk support.
Employer Group risk-based accounted for 8.1%, 8.0% and 8.4% of our medical members at December 31, 2024, 2023 and 2022, respectively. • Employer Group fee-based customers represent employer groups, Local Group, and National Accounts, who purchase fee-based products and elect to retain most or all of the financial risk associated with their employees’ healthcare costs.
Employer Group risk-based accounted for 8.0%, 8.1% and 8.0% of our medical members at December 31, 2025, 2024 and 2023, respectively. • Employer Group fee-based customers represent employer groups, Local Group, and National Accounts, who purchase fee-based products and elect to retain most or all of the financial risk associated with their employees’ healthcare costs.
Most fixed maturity securities are available to support current -58- operations and, accordingly, we classify such investments as current assets without regard to their contractual maturity. Investments used to satisfy contractual, regulatory or other requirements are classified as long-term, without regard to contractual maturity. Our impairment review is subjective and requires a high degree of judgment.
Most fixed maturity securities are available to support current operations and, accordingly, we classify such investments as current assets without regard to their contractual maturity. -59- Investments used to satisfy contractual, regulatory or other requirements are classified as long-term, without regard to contractual maturity. Our impairment review is subjective and requires a degree of judgment.
For additional information, see Note 22, “Statutory Information,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information, see Note 21, “Statutory Information,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
There are many drivers of medical cost trends that can cause variance from our estimates, such as changes in the level and mix of services utilized, regulatory changes, aging of the population, health status and other demographic characteristics of our members, epidemics, pandemics, advances in medical technology, new high-cost prescription drugs, new indications of existing prescription drugs, provider contracting inflation, labor costs and healthcare provider or member fraud.
There are many drivers of medical cost trends that can cause variance from our estimates, such as changes in the level and mix of services utilized, regulatory changes, aging of the population, health status and other demographic characteristics of our members, epidemics, pandemics, advances in medical technology, new high-cost prescription drugs, new indications of existing prescription drugs, provider contracting inflation, labor costs and healthcare fraud, waste and abuse.
For additional information, see Note 13, “Debt,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. • Operating leases: We lease office space and certain computer equipment, for which the future estimated payments were $886, with $184 due within the next twelve months.
For additional information, see Note 13, “Debt,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. • Operating leases: We lease office space and certain computer equipment, for which the future estimated payments were $743, with $159 due within the next twelve months.
BlueCard ® host membership accounted for 14.5%, 14.3% and 13.8% of our medical members at December 31, 2024, 2023 and 2022, respectively. • Medicare customers are Medicare-eligible individual members age 65 and over who have enrolled in Medicare Advantage, including Special Needs Plans (“SNPs”), also known as Medicare Advantage SNPs; dual-eligible programs through Medicare-Medicaid Plans (“MMPs”); Medicare Supplement plans; and Medicare Part D Prescription Drug Plans (“Medicare Part D”).
BlueCard ® host membership accounted for 14.4%, 14.5% and 14.3% of our medical members at December 31, 2025, 2024 and 2023, respectively. • Medicare customers are Medicare-eligible individual members age 65 and over who have enrolled in Medicare Advantage, including Special Needs Plans (“SNPs”), also known as Medicare Advantage SNPs; dual-eligible programs through Medicare-Medicaid Plans (“MMPs”); Medicare Supplement plans; and Medicare Part D Prescription Drug Plans (“Medicare Part D”).
CarelonRx markets and offers pharmacy services to our affiliated health plan customers throughout the country, as well as to customers outside of the health plans we own.
CarelonRx : CarelonRx markets and offers pharmacy services to our affiliated health plan customers throughout the country and to customers outside of the health plans we own.
At December 31, 2024, we had $365 of outstanding short-term borrowings from the FHLBs. As discussed in “ Financial Condition ” above, many of our subsidiaries are subject to various government regulations that restrict the timing and amount of dividends and other distributions that may be paid.
At December 31, 2025, we had $150 of outstanding short-term borrowings from the FHLBs. As discussed in “ Financial Condition ” above, many of our subsidiaries are subject to various government regulations that restrict the timing and amount of dividends and other distributions that may be paid.
At December 31, 2024, we held $2,357 of cash, cash equivalents and investments at the parent company, which are available for general corporate use, including investment in our businesses, acquisitions, potential future common stock repurchases and dividends to shareholders, repurchases of debt securities and debt and interest payments.
At December 31, 2025, we held $2,572 of cash, cash equivalents and investments at the parent company, which are available for general corporate use, including investment in our businesses, acquisitions, potential future common stock repurchases and dividends to shareholders, repurchases of debt securities and debt and interest payments.
For the year ended December 31, 2023, this metric was 11.4% and was largely driven by favorable trend factor development at the end of 2022 as well as favorable completion factor development from 2022. For the year ended December 31, 2022, this metric was 7.0% and was largely driven by favorable trend factor development at the end of 2021.
For the year ended December 31, 2023, this metric was 11.4% and was largely driven by favorable trend factor development at the end of 2022 as well as favorable completion factor development from 2022.
The BCBSA and the Blue plans have approved a settlement agreement and release (the “Provider Settlement Agreement”) with the provider plaintiffs, and in October 2024, the provider plaintiffs filed a motion for preliminary approval with the Court. The Court granted preliminary approval of the Provider Settlement Agreement on December 4, 2024.
The BCBSA and the Blue plans approved a settlement agreement and release (the “Provider Settlement Agreement”) with the provider plaintiffs, and in October 2024, the provider plaintiffs filed a motion for preliminary approval with the Court. The Court granted preliminary approval of the Provider Settlement Agreement in December 2024.
Employer Group fee-based accounted for 45.0%, 43.2% and 42.4% of our medical members at December 31, 2024, 2023 and 2022, respectively. • BlueCard ® host customers represent enrollees of Blue Cross and/or Blue Shield plans not owned by Elevance Health who receive healthcare services in our BCBSA licensed markets.
Employer Group fee-based accounted for 45.5%, 45.0% and 43.2% of our medical members at December 31, 2025, 2024 and 2023, respectively. • BlueCard ® host customers represent enrollees of Blue Cross and/or Blue Shield plans not owned by Elevance Health who receive healthcare services in our BCBSA licensed markets.
Overview Elevance Health is a health company with the purpose of improving the health of humanity. We are one of the largest health insurers in the United States in terms of medical membership, serving approximately 45.7 million medical members through our affiliated health plans as of December 31, 2024.
Overview Elevance Health is a health company with the purpose of improving the health of humanity. We are one of the largest health insurers in the United States in terms of medical membership, serving approximately 45.2 million medical members through our affiliated health plans as of December 31, 2025.
Further, the weighted-average credit rating of the fixed maturity securities without a guarantee, for which such information is available, was “A” as of December 31, 2024. -59- Fair values of fixed maturity and equity securities are based on quoted market prices, where available.
Further, the weighted-average credit rating of the fixed maturity securities without a guarantee, for which such information is available, was “A” as of December 31, 2025. -60- Fair values of fixed maturity and equity securities are based on quoted market prices, where available.
For additional information about our business and reportable segments, see Part I, Item 1 “Business” and Note 20, “Segment Information” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information about our organization, see Part I, Item 1, “Business” and Note 20, “Segment Information” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
FEP ® business accounted for 3.6%, 3.5% and 3.4% of our medical members at December 31, 2024, 2023 and 2022, respectively. The following table presents our medical membership by customer type as of December 31, 2024, 2023 and 2022. Also included below is other membership by product and other metrics.
FEP ® business accounted for 3.5%, 3.6% and 3.5% of our medical members at December 31, 2025, 2024 and 2023, respectively. -51- The following table presents our medical membership by customer type as of December 31, 2025, 2024 and 2023. Also included below is other membership by product and other metrics.
Individual business accounted for 2.8%, 2.2% and 1.7% of our medical members at December 31, 2024, 2023 and 2022, respectively. • Employer Group risk-based consists of employer customers who purchase products on a full-risk basis, which are products for which we charge a premium and indemnify our policyholders against costs for health benefits.
Individual business accounted for 2.9%, 2.8% and 2.2% of our medical members at December 31, 2025, 2024 and 2023, respectively. • Employer Group risk-based consists of employer customers who purchase products on a full-risk basis, which are products for which we charge a premium and indemnify our policyholders against costs for health benefits.
The difference in completion factor assumptions results in variability of 2%, or approximately $295, in the December 31, 2024 incurred but not paid claims liability, depending on the completion factors chosen. It is important to note that the completion factor methodology inherently assumes that historical completion rates will be reflective of the current period.
The difference in completion factor assumptions results in variability of 2.0%, or approximately $329, in the December 31, 2025 incurred but not paid claims liability, depending on the completion factors chosen. It is important to note that the completion factor methodology inherently assumes that historical completion rates will be reflective of the current period.
The following table shows the variance between total net incurred medical claims as reported in Note 12, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for each of 2023 and 2022 and the incurred claims for such years had it been determined retrospectively (computed as the difference between “net incurred medical claims – current year” for the year shown and “net incurred medical claims – prior years redundancies” for the immediately following year): Years Ended December 31 2023 2022 Total net incurred medical claims, as reported $ 120,227 $ 112,545 Retrospective basis, as described above 120,067 111,843 Variance $ 160 $ 702 Variance to total net incurred medical claims, as reported 0.1 % 0.6 % Given that our business is primarily short tailed (which means that medical claims are generally paid within twelve months of the member receiving service from the provider), the variance to total net incurred medical claims, as reported above, is used to assess the reasonableness of our estimate of ultimate incurred medical claims for a given calendar year with the benefit of one year of experience.
The following table shows the variance between total net incurred medical claims as reported in Note 12, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for each of 2024 and 2023 and the incurred claims for such years had it been determined retrospectively (computed as the difference between “net incurred medical claims – current year” for the year shown and “net incurred medical claims – prior years redundancies” for the immediately following year): Years Ended December 31 2024 2023 Total net incurred medical claims, as reported $ 123,639 $ 120,227 Retrospective basis, as described above 124,080 120,067 Variance $ (441) $ 160 Variance to total net incurred medical claims, as reported 0.4 % 0.1 % Given that our business is primarily short tailed (which means that medical claims are generally paid within twelve months of the member receiving service from the provider), the variance to total net incurred medical claims, as reported above, is used to assess the reasonableness of our estimate of ultimate incurred medical claims for a given calendar year with the benefit of one year of experience.
Plans must have a Star Rating of 4.0 or higher to qualify for bonus payments. Our 2024 Star Ratings, which are used for payment year 2025, reflect that 53% of our Medicare Advantage members were enrolled in plans rated at least 4.0 Stars or higher.
Plans must have a Star Rating of 4.0 or higher to qualify for bonus payments. Our 2025 Star Ratings, which are used for payment year 2026, reflect that approximately 40% of our Medicare Advantage members were enrolled in plans rated at least 4.0 Stars or higher.
We follow FASB guidance for business combinations and goodwill and other intangible assets, which specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill. Under the guidance, goodwill and other intangible assets (with indefinite lives) are not amortized but are tested for impairment at least annually.
We follow Financial Accounting Standards Board (“FASB”) guidance for business combinations and goodwill and other intangible assets, which specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill. Under the guidance, goodwill and other intangible assets (with indefinite lives) are not amortized but are tested for impairment at least annually.
Ineffective management of these risks could have an impact on our future results of operations and financial condition. Our investment portfolio includes fixed maturity securities with a fair value of $26,236 at December 31, 2024. The weighted-average credit rating of these securities was “A” as of December 31, 2024.
Ineffective management of these risks could have an impact on our future results of operations and financial condition. Our investment portfolio includes fixed maturity securities with a fair value of $27,005 at December 31, 2025. The weighted-average credit rating of these securities was “A” as of December 31, 2025.
On January 22, 2025, our Audit Committee declared a quarterly cash dividend to shareholders of $1.71 per share on the outstanding shares of our common stock. This quarterly dividend is payable on March 25, 2025 to the shareholders of record as of March 10, 2025. Under our Board of Directors’ authorization, we maintain a common stock repurchase program.
On January 27, 2026, our Audit Committee declared a quarterly cash dividend to shareholders of $1.72 per share on the outstanding shares of our common stock. This quarterly dividend is payable on March 25, 2026 to the shareholders of record as of March 10, 2026. Under our Board of Directors’ authorization, we maintain a common stock repurchase program.
This MD&A generally discusses 2024 and 2023 items and year-over-year comparisons between 2024 and 2023.
This MD&A generally discusses 2025 and 2024 items and year-over-year comparisons between 2025 and 2024.
Other significant changes in sources and uses of cash year-over-year included (a) additional sources of cash from issuances of short- and long-term debt, net of repayments, proceeds from sales, maturities, calls and redemptions of investments, net of purchases, and issuances of common stock under employee stock plans and (b) increased uses of cash from purchases of subsidiaries, net of cash acquired, the repurchase and retirement of common stock, the purchase of property and equipment, cash dividends, and other uses of cash, net. -61- Financial Condition We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $35,716 at December 31, 2024.
Other significant changes in sources of cash year-over-year included (a) additional sources of cash from other sources of cash, net, issuances of short- and long-term debt, net of repayments, issuances of common stock under employee stock plans and proceeds from sales, maturities, calls and redemptions of investments, net of purchases and (b) increased uses of cash from the repurchase and retirement of common stock, cash dividends and the purchase of property and equipment. -62- Financial Condition We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $37,236 at December 31, 2025.
Certain accounting practices prescribed by insurance regulatory authorities, or statutory accounting practices, differ from GAAP. Changes that occur in statutory accounting practices, if any, or other regulatory requirements, could impact our subsidiaries’ future dividend capacity. In addition, we have agreed to certain undertakings to regulatory authorities, including the requirement to maintain certain capital levels in certain of our subsidiaries.
Changes that occur in statutory accounting practices, if any, or other regulatory requirements, could impact our subsidiaries’ future dividend capacity. In addition, we have agreed to certain undertakings to regulatory authorities, including the requirement to maintain certain capital levels in certain of our subsidiaries.
We believe cash on hand, operating cash receipts, investments and amounts available under our commercial paper program, our 5-Year Facility and borrowings available from the FHLBs will be adequate to fund our expected cash disbursements over the next twelve months. -63- Long-Term Liquidity Requirements As of December 31, 2024, our long-term cash disbursements required under various contractual obligations and commitments were: • Debt and interest expense: Future debt and estimated interest payments are $52,073, with $2,855 due within the next twelve months.
We believe cash on hand, operating cash receipts, investments and amounts available under our commercial paper program, our 5-Year Facility and borrowings available from the FHLBs will be adequate to fund our expected cash disbursements over the next twelve months. -64- Long-Term Liquidity Requirements As of December 31, 2025, our long-term cash disbursements required under various contractual obligations and commitments were: • Debt and interest expense: Future debt and estimated interest payments are $54,160, with $2,490 due within the next twelve months.
As of December 31, 2024, we had Board authorization of $9,300 to repurchase our common stock. No duration has been placed on our common stock repurchase program, and we reserve the right to discontinue the program at any time. We intend to utilize this authorization over a multi-year period, subject to market and industry conditions.
As of December 31, 2025, we had remaining Board authorization of $6,695 to repurchase our common stock. No duration has been placed on our common stock repurchase program, and we reserve the right to discontinue the program at any time. We intend to utilize this authorization over a multi-year period, subject to market and industry conditions.
Our debt-to-capital ratio may not be comparable to similarly titled measures reported by other companies. Our consolidated debt-to-capital ratio was 43.0% and 38.9% as of December 31, 2024 and 2023, respectively. Our senior debt is rated “A” by S&P Global Ratings, “BBB+” by Fitch Ratings, Inc., “Baa2” by Moody’s Investors Service, Inc. and “bbb+” by AM Best Company, Inc.
Our debt-to-capital ratio may not be comparable to similarly titled measures reported by other companies. Our consolidated debt-to-capital ratio was 42.1% and 43.0% as of December 31, 2025 and 2024, respectively. Our senior debt is rated “A-” by S&P Global Ratings, “BBB+” by Fitch Ratings, Inc., “Baa2” by Moody’s Investors Service, Inc. and “bbb+” by AM Best Company, Inc.
Employer Group risk-based accounts are generally sold through brokers or consultants who work with industry specialists from our in-house sales force and are offered both on and off the Public Exchanges.
Some exceptions are allowed based on broker and consultant relationships. Employer Group risk-based accounts are generally sold through brokers or consultants who work with industry specialists from our in-house sales force and are offered both on and off the Public Exchanges.
Total Medicaid program business accounted for 19.5%, 22.4% and 24.3% of our medical members at December 31, 2024, 2023 and 2022, respectively. -50- • FEP ® members consist of United States government employees and their dependents who receive health benefits within our geographic markets.
Total Medicaid program business accounted for 18.8%, 19.5% and 22.4% of our medical members at December 31, 2025, 2024 and 2023, respectively. • FEP ® members consist of United States government employees and their dependents who receive health benefits within our geographic markets.
As of December 31, 2024, our debt-to-capital ratio, as defined and calculated under the 5-Year Facility, was 43.0%. We do not believe the restrictions contained in our 5-Year Facility covenants materially affect our financial or operating -62- flexibility. As of December 31, 2024, we were in compliance with all of our debt covenants under the 5-Year Facility.
As of December 31, 2025, our debt-to-capital ratio, as defined and calculated under the 5-Year Facility, was 42.1%. We do not believe the restrictions contained in our 5-Year Facility covenants materially affect our financial or operating flexibility. As of December 31, 2025, we were in compliance with all of our debt covenants under the 5-Year Facility.
Should commercial paper issuance become unavailable, we have the ability to use a combination of cash on hand and/or our 5-Year Facility, which provides for credit in the amount of $4,000, to redeem any outstanding commercial paper upon maturity. At December 31, 2024, we had $0 outstanding under our commercial paper program.
Should commercial paper issuance become unavailable, we have the ability to use a combination of cash on hand and/or our 5-Year Facility, which provides for credit in the amount of $5,000, to redeem any outstanding commercial paper upon maturity. At December 31, 2025, there were no amounts outstanding under our commercial paper program.
Given the inherent uncertainty of changes in market conditions and the significant judgments involved, there is continuing risk that declines in fair value may occur and additional impairment losses on investments may be recorded in future periods. In addition to marketable investment securities, we held additional long-term investments of $9,749, or 8.3% of total consolidated assets, at December 31, 2024.
Given the inherent uncertainty of changes in market conditions and the judgments involved, there is continuing risk that declines in fair value may occur and additional impairment losses on investments may be recorded in future periods. In addition to marketable investment securities, we held additional other invested assets of $10,839, or 8.9% of total consolidated assets, at December 31, 2025.
In our analysis for the period ended December 31, 2024, there was a 380 basis point differential in the high and low trend factors. This range of trend factors would imply variability of 4%, or approximately $560, in the incurred but -56- not paid claims liability, depending upon the trend factors used.
In our analysis for the period ended December 31, 2025, there was a 340 basis point differential in the high -57- and low trend factors. This range of trend factors would imply variability of 4.0%, or approximately $630, in the incurred but not paid claims liability, depending upon the trend factors used.
Investments Current and long-term marketable investment securities were $27,428 at December 31, 2024 and represented 23.5% of our total consolidated assets at December 31, 2024. We classify fixed maturity securities in our investment portfolio as “available-for-sale” and report those securities at fair value.
Investments Current and long-term marketable investment securities were $27,745 at December 31, 2025 and represented 22.8% of our total consolidated assets at December 31, 2025. We classify fixed maturity securities in our investment portfolio as “available-for-sale” and report those securities at fair value.
While there is no assurance in the current economic environment, we believe the lenders participating in our 5-Year Facility, if market conditions allow, would be willing to provide financing in accordance with their legal obligations.
There were no amounts outstanding under the 5-Year Facility at December 31, 2025. While there is no assurance in the current economic environment, we believe the lenders participating in our 5-Year Facility, if market conditions allow, would be willing to provide financing in accordance with their legal obligations.
The 5-Year Facility provides credit of up to $4,000 and matures in April 2027. Our ability to borrow under the 5-Year Facility is subject to compliance with certain covenants, including covenants requiring us to maintain a defined debt-to-capital ratio of not more than 60%, subject to increase in certain circumstances set forth in the credit agreement for the 5-Year Facility.
Our ability to borrow under the 5-Year Facility is subject to compliance with certain covenants, including covenants requiring us to maintain a defined debt-to-capital ratio of not more than 60%, subject -63- to increase in certain circumstances set forth in the credit agreement for the 5-Year Facility.
The BCBSA and Blue plans approved a settlement agreement and release with the subscriber plaintiffs (the “Subscriber Settlement Agreement”), and the ultimate amount paid by the Company under the Subscriber Settlement Agreement was $604, which was primarily accrued in 2020.
The BCBSA and Blue plans approved a settlement agreement and release with the subscriber plaintiffs (the “Subscriber Settlement Agreement”), which received final approval from the Court in September 2022. The ultimate amount paid by the Company under the Subscriber Settlement Agreement was $604, which was primarily accrued in 2020.
Medical Claims Payable The most subjective accounting estimate in our consolidated financial statements is our liability for medical claims payable. At December 31, 2024, this liability was $15,746 and represented 20.9% of our total liabilities. We record this liability and the corresponding benefit expense for incurred but not paid claims, including the estimated costs of processing such claims.
Medical Claims Payable The most subjective accounting estimate in our consolidated financial statements is our liability for medical claims payable. At December 31, 2025, this liability was $17,084 and represented 22.1% of our total liabilities. We record this liability and the corresponding benefit expense for incurred but not paid claims, including the estimated costs of processing such claims.
The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 88.5% for 2024, 88.0% for 2023 and 87.3% for 2022. This ratio serves as an indicator of claims processing speed whereby 2024 claims were processed at a similar speed to 2023 and 2022.
The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 89.5% for 2025, 88.5% for 2024 and 88.0% for 2023. This ratio serves as an indicator of claims processing speed whereby 2025 claims were processed at a slightly faster speed to 2024 and 2023.
We expect that substantially all of the development of the 2024 estimate of medical claims payable will be known during 2025. -57- The 2023 variance to total net incurred medical claims, as reported, of 0.1% was less than the 2022 percentage of 0.6%.
We expect that substantially all of the development of the 2025 estimate of medical claims payable will be known during 2026. -58- The 2024 variance to total net incurred medical claims, as reported, of 0.4% was more than the 2023 percentage of 0.1%.
Business Acquisitions and Divestitures Investments in Joint Ventures and Completed Acquisitions On December 31, 2024, we completed our acquisition of Centers Plan for Healthy Living LLC and Centers for Specialty Care Group IPA, LLC (“Centers”).
Business Acquisitions Completed Acquisitions -48- On December 31, 2024, we completed our acquisition of Centers Plan for Healthy Living LLC and Centers for Specialty Care Group IPA, LLC (“Centers”).
We have continued growing our government-sponsored business through organic growth and acquisitions. In all other markets, we intend to maintain our position by delivering excellent service, offering competitively priced products, providing access to high-quality provider networks and effectively capitalizing on the brand strength of the Blue Cross and Blue Cross and Blue Shield names and marks.
In all other markets, we intend to maintain our position by delivering excellent service, offering competitively priced products, providing access to high-quality provider networks and effectively capitalizing on the brand strength of the Blue Cross and Blue Cross and Blue Shield names and marks.
CMS released our 2025 Star Ratings in October 2024, which will be used to determine our Medicare Advantage bonus payments in 2026. Our 2025 Star Ratings reflect that 38% of our Medicare Advantage members were enrolled in plans rated at least 4.0 Stars or higher.
CMS released our 2026 Star Ratings in October 2025, which will be used to determine our Medicare Advantage bonus payments in 2027. Our 2026 Stars Ratings reflect that approximately 59% of our Medicare Advantage members are enrolled in plans rated at least 4.0 Stars or higher, or the equivalent.
Amounts due within twelve months were $35, with $1,956 due in future periods. Estimated future payments for funded pension benefits have been excluded from these numbers, as we had no funding requirements under the Employee Retirement Income Security Act of 1974, as amended, at December 31, 2024, as a result of the value of the assets in the plans.
Amounts due within twelve months were $38, with $2,284 due in future periods. Estimated future payments for funded pension benefits have been excluded from these numbers, as we had no funding requirements under the Employee Retirement Income Security Act of 1974, as amended, at December 31, 2025, as a result of the overfunded status of the plans.
December 31, 2024 Compared to December 31, 2023 Medical Membership Total medical membership declined during the twelve months ended December 31, 2024. This was driven primarily by attrition in Medicaid membership, including as a result of eligibility redeterminations and certain market exits, decreases in our Employer Group risk-based and Medicare Supplement businesses.
December 31, 2025 Compared to December 31, 2024 Medical Membership Total medical membership declined during the twelve months ended December 31, 2025. This was driven primarily by attrition in Medicaid membership, primarily as a result of eligibility redeterminations, and decreases in our BlueCard ® , Employer Group risk-based and FEP ® businesses.
Based upon these requirements, we currently estimate that approximately $2,700 of dividends will be paid to us by our subsidiaries during 2025. During 2024, we received $6,322 of dividends from our subsidiaries.
Based upon these requirements, we currently estimate that approximately $2,100 of dividends will be paid to us by our subsidiaries during 2026. During 2025, we received $2,543 of dividends from our subsidiaries.
As a result, states were permitted to begin removing ineligible beneficiaries from their Medicaid programs starting April 1, 2023, and the majority of our Medicaid markets began doing so as of June 30, 2023.
As a result, states were permitted to begin removing ineligible beneficiaries from their Medicaid programs starting April 1, 2023, and the majority of our Medicaid markets began doing so as of June 30, 2023. CMS required states to complete Medicaid eligibility redeterminations by December 31, 2025.
For the year ended December 31, 2024, this metric was 1.4%, which was calculated using the redundancy of $1,731. This metric was 1.4% for 2023 and 0.9% for 2022.
For the year ended December 31, 2025, this metric was 1.0%, which was calculated using the redundancy of $1,290. This metric was 1.4% for each of 2024 and 2023.
For further information, see Note 14, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. • Investment commitments: These include unfunded capital commitments for alternative investments and low-income housing tax credits. Estimated amounts due were $1,444, including $409 due within the next twelve months.
For further information, see Note 14, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. • Investment commitments: These include unfunded capital commitments for alternative investments, energy tax credits and low-income housing tax credits.
Included in this balance are investments in fixed maturity securities of states, municipalities and political subdivisions of $835 that are guaranteed by third parties. With the exception of 14 securities with a fair value of $8, these securities are all investment-grade and carry a weighted-average credit rating of “AA” as of December 31, 2024.
Included in this balance are investments in fixed maturity securities of states, municipalities and political subdivisions and corporate securities of $1,970 and $6, respectively, that are guaranteed by third parties. With the exception of three securities with a fair value of $5, these securities are all investment-grade and carry a weighted-average credit rating of “AA” as of December 31, 2025.
In addition to the above medical membership, we also serve customers who purchase one or more of our other products or services that are often ancillary to our health business. • Individual consists of individual customers under age 65 and their covered dependents.
Non-BCBS-branded business refers to members in our non-BCBS-branded plans, which include Wellpoint, MMM and Simply Healthcare plans. In addition to the above medical membership, we also serve customers who purchase one or more of our other products or services that are often ancillary to our health business. • Individual consists of individual customers under age 65 and their covered dependents.
This was primarily driven by the fact that the change in prior year redundancy reported for 2023 as compared to 2022 was less than the change in the prior year redundancy reported for 2022 as compared to 2021.
This was primarily driven by the fact that the change in prior year redundancy reported for 2024 as compared to 2023 decreased whereas the change in prior year redundancy reported for 2023 as compared to 2022 increased.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeLong-Term Debt Our total long-term debt at December 31, 2024 consisted of senior unsecured notes and subordinated surplus notes issued by one of our insurance subsidiaries. At December 31, 2024, the carrying value and estimated fair value of our long-term debt was $30,867 and $28,460, respectively.
Biggest changeLong-Term Debt Our total long-term debt at December 31, 2025 consisted of senior unsecured notes and subordinated surplus notes issued by one of our insurance subsidiaries. At December 31, 2025, the carrying value and estimated fair value of our long-term debt was $31,896 and $30,207, respectively.
In a declining economic environment, corporate yields will usually increase, prompted by concern over the ability of corporations to make interest payments, thus causing a decrease in the price of corporate securities, and the decline in value of the corporate fixed maturity portfolio.
In a declining economic environment, corporate yields will usually increase, prompted by concern over the ability of corporations to make interest payments, thus causing a decrease in the price of corporate securities, and the decline in value of our corporate fixed maturity portfolio.
These investments are also subject to credit quality risk, interest rate risk and market valuation risk, as public market valuations will form a basis for valuations for these investments. Given their -65- illiquid nature, we focus on appropriate sizing of these investments relative to our liquidity needs and risk tolerance.
These investments are also subject to credit quality risk, interest rate -66- risk and market valuation risk, as public market valuations will form a basis for valuations for these investments. Given their illiquid nature, we focus on appropriate sizing of these investments relative to our liquidity needs and risk tolerance.
For additional information regarding our derivatives, see Note 6, “Derivative Financial Instruments,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. -66-
For additional information regarding our derivatives, see Note 6, “Derivative Financial Instruments,” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. -67-
We have evaluated the impact on the interest rate swaps’ fair value considering an immediate 100 basis point change in interest rates. A 100 basis point increase in interest rates would result in an approximate $383 decrease in fair value, whereas a 100 basis point decrease in interest rates would result in an approximate $383 increase in fair value.
We have evaluated the impact on the interest rate swaps’ fair value considering an immediate 100 basis point change in interest rates. A 100 basis point increase in interest rates would result in an approximate $375 decrease in fair value, whereas a 100 basis point decrease in interest rates would result in an approximate $375 increase in fair value.
Potential impacts discussed below are based upon sensitivity analyses performed on our financial position as of December 31, 2024. Actual results could vary from these estimates.
Potential impacts discussed below are based upon sensitivity analyses performed on our financial position as of December 31, 2025. Actual results could vary from these estimates.
An immediate 10% decrease in each equity investment’s value, arising from market movement, would result in a fair value decrease of $119. Alternatively, an immediate 10% increase in each equity investment’s value, attributable to the same factor, would result in a fair value increase of $119.
An immediate 10% decrease in each equity investment’s value, arising from market movement, would result in a fair value decrease of $74. Alternatively, an immediate 10% increase in each equity investment’s value, attributable to the same factor, would result in a fair value increase of $74.
Our risk tolerance is formed by the level of illiquidity and short-term price movements from market valuation risk we are willing to accept relative to the higher long-term expected returns over the life of these investments. As of December 31, 2024, 4% of our marketable investments were equity securities.
Our risk tolerance is formed by the level of illiquidity and short-term price movements from market valuation risk we are willing to accept relative to the higher long-term expected returns over the life of these investments. As of December 31, 2025, 3% of our marketable investments were equity securities.
Additionally, we have the capability of holding any security to maturity, which would allow us to realize full par value. Investments in fixed maturity securities include corporate securities, which account for 53% of our total fixed maturity securities at December 31, 2024 and are subject to credit/default risk.
Additionally, we have the capability of holding any security to maturity, which would allow us to realize full par value. Investments in fixed maturity securities include corporate securities, which account for 51% of our total fixed maturity securities at December 31, 2025 and are subject to credit/default risk.
We have evaluated the impact on the fixed maturity portfolio’s fair value considering an immediate 100 basis point change in interest rates. A 100 basis point increase in interest rates would result in an approximate $1,424 decrease in fair value, whereas a 100 basis point decrease in interest rates would result in an approximate $1,527 increase in fair value.
We have evaluated the impact on the fixed maturity portfolio’s fair value considering an immediate 100 basis point change in interest rates. A 100 basis point increase in interest rates would result in an approximate $1,558 decrease in fair value, whereas a 100 basis point decrease in interest rates would result in an approximate $1,646 increase in fair value.
We have used these types of instruments as designated hedges against specific liabilities. Changes in interest rates will affect the estimated fair value of these derivatives. As of December 31, 2024, we recorded a net liability of $142, the estimated fair value of the swaps at that date.
We have used these types of instruments as designated hedges against specific liabilities. Changes in interest rates will affect the estimated fair value of these derivatives. As of December 31, 2025, we recorded a net asset of $39, the estimated fair value of the swaps at that date.