Healthcare Services: MCO Sentiment Shift, Distributor Resiliency, and Facility Policy Outlook – Key Thoughts Heading Into the Quarter

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Healthcare Services: MCO Sentiment Shift, Distributor Resiliency, and Facility Policy Outlook – Key Thoughts Heading Into the Quarter

Our 2026 Key Themes and What We Are Watching For in 2Q

Key 2026 Outlook Themes and Preferences What Happened in Recent Months? Did it Change Our View?

Most MCOs continue to emphasize that while the funding

MCOs: MA Margin Improvement We still think MA margins improve in ‘26 and ‘27 environment lags trend, that they plan to prioritize margins

over membership in 2027 AEP. We believe plans will be We thought MA margin improvement was key for ‘26/’27 Earnings commentary supported the thesis that despite

rational and disciplined on benefits. Trend appears to be with most MCOs below target margins. At the time, we insufficient rates, MCOs will prioritize margin improvement

progressing in-line with expectations based on saw potential for ‘27 rate upside supporting LT earnings. in 2027 AEP.

commentary and intra-quarter updates.

MCOs: Preference for Large Diversified MCOs We continue to think diversified MCOs can work MCOs have sounded solid in recent months with

utilization appearing to be tracking in-line to favorable to We highlighted UNH and CVS as two of our favorite ways We continue to think CVS/UNH have levers for +DD%

expectations, with investors getting incrementally more to play MCOs with the benefit of continued margin EPS growth with services growth coupled with MA margin

comfortable about the multi-year margin recovery story. improvement and strong services businesses. improvement.

We think investors now expect better-than feared ACA

MCOs: Medicaid and ACA Exchanges Caution Exchanges/Medicaid performance We think there has been ACA Exchange positivity