Distance Runners: CNC/MOH scenarios show dramatic EPS upside potential by 2029

研报英文原文证据摘录

Distance Runners: CNC/MOH scenarios show dramatic EPS upside potential by 2029

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trend rises or risk pools deteriorate, they will always be slow to catch up (creating the Katie FitzGerald Research Analyst

margin pressure we see today). But with risk pools starting to stabilize, rates should BofAS

begin to catch up in 2027 as more recent risk pool/trend data is captured, pointing to a +1katie.fitzgerald@bofa.com646 556 2930

trough margin in 2026 and above average EPS growth in 2027-2029.

Won’t the risk pool problem keep getting worse? Exhibit 1: CNC PO from $60 to $72

The short answer is that we do expect the risk pool to keep getting worse in 2027-2029. Old vs New CNC PO

However, not only is this set up different than 2023 (when the risk pool shift began to

Old PO New POhappen) it is almost the polar opposite. Instead of the industry operating at peak PO $60 $72

margins like in 2023 (making states less likely to be compelled to raise rates even Multiple 13.3x 16.0x

though trend was getting worse), today industry margins are largely negative, meaning Source: BofA Global Research

that states will likely feel more pressure to raise rates just when the data that they are BofA GLOBAL RESEARCH

seeing clearly points to rates needing to be raised to reflect higher trend.

Are we too early? Q2 is a big proof point See Abbreviations on pages 13 - 14

MCOs always get more clarity on cost trend as time passes and Q2 is when they will

likely feel more comfortable letting upside flow through, potentially setting the stage for

larger beats and raises. If we are wrong and the risk pool continues to deteriorate, we

could see risk to 2026 estimates, but if so, it only gives us more confidence that a year

from now, the Market will be underwriting dramatic improvement on margins as