(In Millions, Except Per Share Data or as Otherwise Stated Herein)

On May 18, 2022, our shareholders approved a proposal to amend our amended and restated articles of incorporation to change our name from Anthem, Inc. to Elevance Health, Inc., which amendment and name change went into effect on June 27, 2022. We began operating as Elevance Health, Inc. and trading under our new ticker symbol "ELV" on June 28, 2022. References to the terms "we," "our," "us," or "Elevance Health" used throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") refer to Elevance Health, Inc., an Indiana corporation, and unless the context otherwise requires, its direct and indirect subsidiaries. References to the "states" include the District of Columbia and Puerto Rico, unless the context otherwise requires.

This MD&A should be read in conjunction with the accompanying consolidated financial statements and notes, our consolidated financial statements and notes as of and for the year ended December 31, 2021 and the MD&A included in our 2021 Annual Report on Form 10-K.

Results of operations, cost of care trends, investment yields and other measures for the three and six months ended June 30, 2022 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2022, or any other period.

Overview

Elevance Health is a health company with the purpose of improving the health of humanity. We are the largest health insurer in the United States in terms of medical membership, serving over 47 million medical members through our affiliated health plans as of June 30, 2022. We are an independent licensee of the Blue Cross and Blue Shield Association ("BCBSA"), an association of independent health benefit plans. We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield ("BCBS") licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (in the New York City metropolitan area and upstate New York), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) and Wisconsin. In a majority of these service areas, we do business as Anthem Blue Cross, Anthem Blue Cross and Blue Shield, and Empire Blue Cross Blue Shield or Empire Blue Cross. In addition, we conduct business through arrangements with other BCBS licensees as well as other strategic partners. Through our subsidiaries, we also serve customers in numerous states as AIM Specialty Health, Amerigroup, Aspire Health, Beacon, CareMore, Freedom Health, HealthLink, HealthSun, Integra Managed Care, MMM, Optimum HealthCare, Simply Healthcare, and/or UniCare. We offer pharmacy benefits management ("PBM") services through our IngenioRx, Inc. ("IngenioRx") subsidiary. We are licensed to conduct insurance operations in all 50 states, the District of Columbia and Puerto Rico through our subsidiaries.

As part of our name change to Elevance Health, on June 15, 2022 we announced that over the next several years we will organize our brand portfolio into the following core go-to-market brands:

•Anthem Blue Cross/Anthem Blue Cross and Blue Shield - represents our existing Anthem-branded and affiliated Blue Cross and/or Blue Shield licensed plans;

•Wellpoint - we intend to unite select non-BCBSA licensed Medicare, Medicaid and Commercial plans under the Wellpoint name; and

•Carelon - this brand will bring together our healthcare brands and capabilities, including our Diversified Business Group and IngenioRx business under a single brand name. We now refer to our Diversified Business Group as Carelon. In January 2023, IngenioRx will become CarelonRx.

There are currently no segment changes associated with this branding strategy.

For additional information about our organization, see Part I, Item 1, "Business" and Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our 2021 Annual Report on Form 10-K. Additional information on our segments can be found in this MD&A and in Note 15, "Segment Information" of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.



                                      -43-

--------------------------------------------------------------------------------

COVID-19

The COVID-19 pandemic continues to impact the global economy, cause market instability and uncertainty in the labor market and put pressure on the healthcare system, and it has impacted, and will likely continue to impact, our membership, benefit expense and members behavior, including how members access healthcare services. See "Business Trends" below for a discussion of the impact of COVID-19 on our pricing and medical costs.

The COVID-19 pandemic continues to evolve and the full extent of its impact will depend on future developments, which are highly uncertain and cannot be predicted at this time. We will continue to monitor the COVID-19 pandemic as well as resulting legislative and regulatory changes to manage our response and assess and mitigate potential adverse impacts to our business. For additional discussion regarding our risks related to the COVID-19 pandemic and our other risk factors, see Part I, Item 1A, "Risk Factors" included in our 2021 Annual Report on Form 10-K.

Business Trends

We made the decision to modestly expand our participation in the Individual on-exchange products through state- or federally-facilitated marketplaces (the "Public Exchange") for 2022 after also expanding in 2021. As a result, for 2022 we are offering Public Exchange products in 122 of the 143 rating regions in which we operate, in comparison to 103 of 143 rating regions in 2021. Our strategy has been, and will continue to be, to only participate in rating regions where we have an appropriate level of confidence that these markets are on a path toward sustainability, including, but not limited to, factors such as expected financial performance, regulatory environment and underlying market characteristics. Changes to our business environment are likely to continue as elected officials at the national and state levels continue to enact, and both elected officials and candidates for election continue to propose, significant modifications to existing laws and regulations, including changes to taxes and fees. In addition, the continuing growth in our government-sponsored business exposes us to increased regulatory oversight.

Our IngenioRx subsidiary markets and offers PBM services to our affiliated health plan customers throughout the country, as well as to customers outside of the health plans we own. Our comprehensive PBM services portfolio includes features such as formulary management, pharmacy networks, a prescription drug database, member services and mail order capabilities. IngenioRx delegates certain PBM administrative functions, such as claims processing and prescription fulfillment, to CaremarkPCS Health, L.L.C., which is a subsidiary of CVS Health Corporation, pursuant to a five-year agreement. With IngenioRx, we retain the responsibilities for clinical and formulary strategy and development, member and employer experiences, operations, sales, marketing, account management and retail network strategy.

Pricing Trends: We strive to price our health benefit products consistent with anticipated underlying medical cost trends. We continue to closely monitor the COVID-19 pandemic (including new COVID-19 variants, which may be more contagious or severe, or less responsive to treatment or vaccines) and the impacts it may have on our pricing, such as surges in COVID-19 related hospitalizations, infection rates, the cost of COVID-19 vaccines, testing and treatment and the return of non-COVID-19 healthcare utilization to our estimate of normal levels, based on historical utilization patterns. We frequently make adjustments to respond to legislative and regulatory changes as well as pricing and other actions taken by existing competitors and new market entrants. Product pricing in our Commercial & Specialty Business segment, including our Individual and small group lines of business, remains competitive. Revenues from the Medicare and Medicaid programs are dependent, in whole or in part, upon annual funding from the federal government and/or applicable state governments.

Medical Cost Trends: Our medical cost trends are primarily driven by increases in the utilization of services across all provider types and the unit cost increases of these services. We work to mitigate these trends through various medical management programs such as care and condition management, program integrity and specialty pharmacy management and utilization management, as well as benefit design changes. 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, contracting inflation and healthcare provider or member fraud.

At its onset, the COVID-19 pandemic caused a decrease in utilization of non-COVID-19 health services, which decreased our claim costs in 2020. As the pandemic continued through 2021, our non-COVID-19 healthcare utilization experience gradually increased and largely normalized. Our COVID-19 related healthcare expenses increased during 2021 as new variants (Delta and Omicron) emerged and vaccinations and boosters became available.



                                      -44-

--------------------------------------------------------------------------------

The Omicron surge quickly declined during the first quarter of 2022, with COVID-19 inpatient authorizations, provider-based tests, visits and vaccinations all decreasing to lower levels by the end of the first quarter of 2022; concurrently, non-COVID-19 healthcare utilization throughout the second quarter of 2022 recovered from lower levels earlier in the year. For the remainder of 2022, we anticipate additional claim costs for new pharmaceutical treatments for COVID-19 and compliance with governmental regulations on COVID-19 testing reimbursement. We expect claims costs related to COVID-19 testing, treatment and hospitalizations will continue throughout 2022 even during periods with lower COVID-19 infection and confirmed case activity. The ongoing cost and volume of covered services related to the COVID-19 pandemic may have a material adverse effect on our future claim costs. We continue to closely monitor the COVID-19 pandemic and its impacts on our business, financial condition, results of operations and medical cost trends.

For additional discussion regarding business trends, see Part I, Item 1, "Business" included in our 2021 Annual Report on Form 10-K.

Regulatory Trends and Uncertainties

Federal and state governments have enacted, and may continue to enact, legislation and regulations in response to the COVID-19 pandemic that have had, and we expect will continue to have, a significant impact on health benefits, consumer eligibility for public programs and our cash flows for all lines of business, and which have introduced increased uncertainty around our cost structure. These actions, which are or have been in effect for various durations, provide, among other things:

•mandates to waive cost-sharing for COVID-19 testing (including over-the-counter testing in accordance with state and federal requirements), vaccines and related services;

•reforms, including waiving Medicare originating site restrictions for qualified providers of telehealth services;

•financial support to healthcare providers, including expansion of the Medicare accelerated payment program to all providers receiving Medicare payments;

•mandated expansion of premium payment terms, including the time period for which claims can be denied for lack of payment; and

•mandates related to prior authorizations and payment levels to providers, additional consumer enrollment windows and an increased ability to provide telehealth services.

At the end of the currently enacted public health emergency, which has been extended until October 2022, Medicaid eligibility recertification will resume. Recertifications could begin as early as November 2022, but may not occur until 2023 in certain states, and we expect a decline in our Medicaid membership once recertification resumes. At the same time, we expect growth in our Commercial risk-based and fee-based plans, including through the Public Exchange, as members exiting Medicaid in our fourteen Commercial states seek coverage elsewhere.

Beginning in July 2022, the health plan price transparency regulations issued in October 2020 by the U.S. Departments of Health and Human Services, Labor and Treasury (the "Health Plan Transparency Rule") require 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. Additionally, beginning in 2023, we will be 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. In 2024, this requirement will expand to all items and services.

The Consolidated Appropriations Act of 2021, which was enacted in December 2020 (the "Appropriations Act"), has impacted and in the future may have a material effect upon our business, including procedures and coverage requirements related to surprise medical bills and new mandates for continuity of care for certain patients, price comparison tools, disclosure of broker compensation, mental health parity reporting, and reporting on pharmacy benefits and drug costs. The requirements of the Appropriations Act applicable to us have varying effective dates, some of which were effective in December 2021 and others that have been extended since the enactment of the Appropriations Act.

The American Rescue Plan Act of 2021, (the "Rescue Plan"), which was enacted in March 2021, contains several health-related provisions that have impacted our business, including expansion of premium tax credits for our Public Exchange business and full subsidization of the Consolidated Omnibus Budget Reconciliation Act ("COBRA") continuation coverage for those who were involuntarily terminated or had their work hours reduced. The Rescue Plan's premium tax credit


                                      -45-

--------------------------------------------------------------------------------

provisions became effective in January 2021, while the COBRA premium subsidization was effective from April 2021 through September 2021. Expiration of the premium tax credit provisions on December 31, 2022, unless extended by Congress, may have an adverse effect upon our business.

Since its enactment in 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the "ACA"), has introduced new risks, regulatory challenges and uncertainties, has impacted our business model and strategy and has required changes in the way our products are designed, underwritten, priced, distributed and administered. We expect the ACA will continue to significantly impact our business and results of operations, including pricing, minimum medical loss ratios and the geographies in which our products are available, and as a result of future modifications of, and guidance by federal regulatory agencies related to, the ACA and our businesses more broadly. We will continue to evaluate the impact of the ACA as any further developments occur.

For additional discussion regarding regulatory trends and uncertainties and risk factors, see Part I, Item 1, "Business - Regulation", Part I, Item 1A, "Risk Factors", and the "Regulatory Trends and Uncertainties" section of Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2021 Annual Report on Form 10-K.

Other Significant Items

Business and Operational Matters

As mentioned above, we began operating as Elevance Health on June 28, 2022. This change is intended to better reflect our business and our journey from a traditional health benefits organization to a lifetime, trusted health partner. Elevance Health supports health at every stage, offering health plans and clinical, behavioral, pharmacy and complex-care solutions that promote whole health.

On May 5, 2022, we completed our acquisition of Integra Managed Care ("Integra"). Integra is a managed long-term care plan that serves New York state Medicaid members, enabling adults with long-term care needs and disabilities to live safely and independently in their own homes.

On June 29, 2021, we completed our acquisition of MMM Holdings, LLC ("MMM") and its Medicare Advantage plan, Medicaid plan and other affiliated companies. MMM is a Puerto Rico-based integrated healthcare organization and seeks to provide its Medicare Advantage and Medicaid members with a whole health experience through its network of specialized clinics and wholly owned independent physician associations. This acquisition aligns with our vision to be an innovative, valuable and inclusive healthcare partner by providing care management programs that improve the lives of the people we serve.

On April 28, 2021, we completed our acquisition of myNEXUS, Inc. ("myNEXUS"). myNEXUS is a comprehensive home-based nursing management company for payors and, at the time of acquisition, delivered integrated clinical support services for Medicare Advantage members across twenty states. This acquisition aligns with our strategy to manage integrated, whole person multi-site care and support by providing national, large-scale expertise to manage nursing services in the home and facilitate transitions of care.

For additional information, see Note 3, "Business Acquisitions," of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

In 2020, we introduced enterprise-wide initiatives to optimize our business and as a result, recorded a charge of $653 in selling, general and administrative expenses. We believe these initiatives largely represent the next step forward in our progression towards becoming a more agile organization, including process automation and a reduction in our office space footprint. In the fourth quarter of 2021, we identified additional office space reductions and related fixed asset impairments due to the continuing COVID-19 pandemic and recorded a charge of $202 in selling general and administrative expenses. For additional information, see Note 4, "Business Optimization Initiatives," of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.


                                      -46-

--------------------------------------------------------------------------------

Litigation Matters

In the consolidated multi-district proceeding in the United States District Court for the Northern District of Alabama (the "Court") captioned In re Blue Cross Blue Shield Antitrust Litigation ("BCBSA Litigation"), the BCBSA and Blue Cross and/or Blue Shield licensees, including us (the "Blue plans") have approved a settlement agreement and release (the "Subscriber Settlement Agreement") with the plaintiffs representing a putative nationwide class of health plan subscribers. Generally, the lawsuits in the BCBSA Litigation challenge elements of the licensing agreements between the BCBSA and the independently owned and operated Blue plans. The cases were brought by two putative nationwide classes of plaintiffs, health plan subscribers and providers, and the Subscriber Settlement Agreement applies only to the putative subscriber class. No settlement agreement has been reached with the provider plaintiffs at this time, and the defendants continue to contest the consolidated cases brought by the provider plaintiffs.

If approved by the Court, the Subscriber Settlement Agreement will require the defendants to make a monetary settlement payment, our portion of which is estimated to be $594, and will include certain terms imposing non-monetary obligations on the defendants. As of June 30, 2022, the liability balance accrued for our estimated remaining payment obligation was $507, net of payments made. All terms of the Subscriber Settlement Agreement are subject to approval by the Court before they become effective. For additional information regarding the BCBSA Litigation, see Note 11, "Commitments and Contingencies - Litigation and Regulatory Proceedings - Blue Cross Blue Shield Antitrust Litigation," of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Selected Operating Performance

For the twelve months ended June 30, 2022, total medical membership increased by 2.7 million, or 6.1%. The Government Business segment increase was driven primarily by the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic. In addition, Medicaid membership growth was impacted by the launch of our Healthy Blue managed care alliance in North Carolina in the third quarter of 2021, the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022 and the acquisition of Integra in the second quarter of 2022, as well as organic growth in our Medicare Advantage business. Our Commercial & Specialty Business segment experienced organic growth in both our Group fee-based and Group risk-based membership as sales exceeded lapses. BlueCard membership increased due to favorable membership activity at other BCBSA plans whose members reside in or travel to our licensed areas. Individual membership increased due to our Public Exchange expansion in 2022.

Operating revenue for the three months ended June 30, 2022 was $38,482, an increase of $5,203, or 15.6%, from the three months ended June 30, 2021. Operating revenue increased primarily as a result of higher premium revenue in our Medicaid business, including due to membership growth from the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic, the acquisition of MMM in the second quarter of 2021, the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022, as well as from premium rate increases to cover medical cost trends and membership growth in our Medicare Advantage and Commercial & Specialty Business risk-based businesses. The increase in operating revenue was further attributable to increased pharmacy product revenue in our IngenioRx segment, the acquisition of Integra in the second quarter of 2022 and the launch of our Healthy Blue managed care alliance in North Carolina in the third quarter of 2021.

Operating revenue for the six months ended June 30, 2022 was $76,368, an increase of $10,991, or 16.8%, from the six months ended June 30, 2021. This increase in operating revenue was primarily driven by higher premium revenue in our Medicaid business, including due to membership growth from the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic, the acquisition of MMM in the second quarter of 2021 and the retroactive reinstatement of a Medicare directed payment program. Membership growth and premium rate increases to cover medical cost trends in our Medicare Advantage and Commercial & Specialty Business risk-based businesses also contributed to higher premium revenue. The increase in operating revenue was further attributable to increased pharmacy product revenue in our IngenioRx segment, the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022, the launch of our Healthy Blue managed care alliance in North Carolina in the third quarter of 2021 and the acquisition of Integra in the second quarter of 2022.

Net income for the three months ended June 30, 2022 was $1,650, a decrease of $151, or 8.4%, from the three months ended June 30, 2021. The decrease in net income was primarily due to losses on financial instruments in 2022, as compared



                                      -47-

--------------------------------------------------------------------------------

to gains on financial instruments in 2021, as well as increased intangible amortization in 2022 related to recent acquisitions and the rebranding of our products, as we expect to retire certain trade names in the future. These decreases were partially offset by operating gain increases in each of our business units.

Net income for the six months ended June 30, 2022 was $3,445, a decrease of $23, or 0.7%, from the six months ended June 30, 2021. The decrease in net income was primarily due to losses on financial instruments in 2022, as compared to gains on financial instruments in 2021, as well as increased intangible amortization in 2022 related to recent acquisitions and the rebranding of our products, as we expect to retire certain trade names in the future. These decreases were partially offset by a net operating gain increase from our business units.

Our fully-diluted shareholders' earnings per share ("EPS") was $6.79 for the three months ended June 30, 2022, which represented a 6.3% decrease from EPS of $7.25 for the three months ended June 30, 2021. Our diluted shares for the three months ended June 30, 2022 were 243.4, a decrease of 4.0, or 1.6%, compared to the three months ended June 30, 2021. The decrease in EPS for the three months ended June 30, 2022 resulted primarily from reduced shareholders' net income, partially offset by the impact of fewer diluted shares outstanding.

Our fully-diluted shareholders' EPS was $14.18 for the six months ended June 30, 2022, which represented a 1.6% increase from fully-diluted EPS of $13.95 for the six months ended June 30, 2021. Our diluted shares for the six months ended June 30, 2022 were 243.9, a decrease of 3.9, or 1.6%, compared to the six months ended June 30, 2021. The increase in EPS for the six months ended June 30, 2022 resulted primarily from the impact of fewer diluted shares outstanding.

Operating cash flow for the six months ended June 30, 2022 and 2021 was $4,993 and $4,188, respectively. The increase was primarily due to higher net income in 2022, excluding the non-cash impact of losses/gains on investments, as we recognized realized losses during the first six months of 2022 compared to realized gains in the first six months of 2021. The increase was further attributable to the timing of working capital changes.



                                      -48-

--------------------------------------------------------------------------------

Membership

The following table presents our medical membership by reportable segment and customer type as of June 30, 2022 and 2021. Also included below is other membership by product. The medical membership and other membership data presented are unaudited and in certain instances include estimates of the number of members represented by each contract at the end of the period. For a more detailed description of our medical membership, see the "Membership" section of Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2021 Annual Report on Form 10-K.



                                                 June 30
(In thousands)                             2022            2021        Change      % Change
Medical Membership
Commercial & Specialty Business:
Individual                                  803              738            65        8.8  %
Group Risk-Based                          4,020            3,851           169        4.4  %
Commercial Risk-Based                     4,823            4,589           234        5.1  %
BlueCard®                                 6,445            6,235           210        3.4  %
Group Fee-Based                          20,086           19,372           714        3.7  %
Commercial Fee-Based                     26,531           25,607         924          3.6  %
Total Commercial & Specialty Business    31,354           30,196       1,158          3.8  %
Government Business:
Medicare Advantage                        1,946            1,824           122        6.7  %
Medicare Supplement                         942              936             6        0.6  %
Total Medicare                            2,888            2,760         128          4.6  %
Medicaid                                 11,181            9,754         1,427       14.6  %
Federal Employees Health Benefits         1,628            1,631           (3)       (0.2) %
Total Government Business                15,697           14,145         1,552       11.0  %
Total Medical Membership                 47,051           44,341         2,710        6.1  %
Other Membership
Life and Disability Members               4,779            4,732          47          1.0  %
Dental Members                            6,620            6,606          14          0.2  %
Dental Administration Members             1,589            1,497          92          6.1  %
Vision Members                            9,385            7,819       1,566         20.0  %
Medicare Part D Standalone Members          276              433        (157)       (36.3) %


Medical Membership

Medical membership increased in both our Government Business and Commercial & Specialty Business segments primarily due to organic growth. The Government Business segment organic growth was primarily driven by the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic. In addition, Medicaid membership growth was impacted by the launch of our Healthy Blue managed care alliance in North Carolina in the third quarter of 2021, the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022 and the acquisition of Integra in the second quarter of 2022, as well as organic membership growth in Medicare Advantage. Our Commercial & Specialty Business segment experienced organic growth in both our Group fee-based and Group risk-based membership as sales exceeded lapses. BlueCard membership increased due to favorable membership activity at other BCBSA plans whose members reside in or travel to our licensed areas. Individual membership increased due to our Public Exchange expansion in 2022.

Other Membership

Our other membership can be impacted by changes in our medical membership, as our medical members often purchase our other products that are ancillary to our health business. Life and disability membership increased primarily due to new



                                      -49-

--------------------------------------------------------------------------------

sales of disability products, partially offset by lapses and negative in-group change of life membership. Dental membership increased primarily due to sales exceeding lapses in our Group risk-based accounts and penetration increases in our Federal Employees Health Benefits ("FEHB") program, partially offset by the loss of a significant Group fee-based account. Dental administration membership increased primarily due to increased sales to other BCBS plans associated with the FEHB program. Vision membership increased primarily due to the launch of a new entry level vision product in our Group markets, as well as the growth in our Medicare Advantage business. Medicare Part D Standalone membership declined as we discontinued certain legacy products.

© Edgar Online, source Glimpses