Exchanges—1Q26 Stat Filings Show Solid Evidence of Margin Recovery Despite Overly Conservative Risk Adj Assumptions

Research evidence excerpt

Exchanges—1Q26 Stat Filings Show Solid Evidence of Margin Recovery Despite Overly Conservative Risk Adj Assumptions

Equity Research

Multi Company Update — June 4, 2026

Managed Care

Exchanges—1Q26 Stat Filings Show Solid

Evidence of Margin Recovery Despite Overly

Conservative Risk Adj Assumptions

Rating Changes

Our Call Rating Price Target

Exchange stat filings show MLRs -500bps y/y despite plans booking risk adj too Ticker Curr. Prior Curr. Prior

conservatively. While still early, enrollment and morbidity impacts appear to be tracking OSCR EW UW $20.00 $11.00

better than we feared, and we are more confident in meaningful margin recovery.

Early Exchange Read. Industry MLRs were down 350bps y/y in 1Q26 & 500bps y/y Stephen Baxter, CFA

when rebalancing 1H25 PMPMs to reflect risk adj visibility improving at mid-year. This Equity Analyst | Wells Fargo Securities, LLC

Stephen.Baxter@wellsfargo.com | 212-214-8041

improvement looks understated, as plans seem to be collectively booking risk adj too

Mitchell Ostrovskyconservatively in 1Q26. Overall, enrollment & morbidity impacts appear to be tracking

better than we feared in 2026 and now see meaningful margin recovery as more probable. AssociateMitchell.Ostrovsky@wellsfargo.comEquity Analyst | Wells Fargo| 212-214-7243Securities, LLC

That said, the trajectory of this market beyond 2026 remains quite uncertain.

Thomas Muller

Associate Equity Analyst | Wells Fargo Securities, LLC

Risk Adjustment (RA). With RA on the exchanges a zero-sum game, we looked to see if Thomas.Muller@wellsfargo.com | 332-214-6218

there were indications that non-zero y/y changes in accruals are being made – whether James Lemmis

too many plans are assuming their RA position improved / deteriorated than is possible.