Sarah M. London
Chief Executive Officer at Centene
Thank you, Jen, and thanks everyone for joining us this morning as we review our fourth quarter and full-year 2022 results and provide our updated outlook for 2023. First, let's close-out the year. 2022 was a dynamic and productive year for Centene. We took on many challenges, including a leadership transition, transforming our organizational structure, modernizing our approach to corporate governance, focusing on our core business, improving operations and quality and delivering on our financial commitments along the way. This morning we reported fourth quarter adjusted EPS of $0.86 and full-year 2022 adjusted EPS of $5.78. These strong results came in above the top-end of our most recently issued 2022 guidance and were 7% higher than the midpoint of our initial outlook for the year.
Looking back over 2022, our three core business lines performed well. In marketplace, we materially improved the profitability of our Ambetter product lines through advancements in our clinical programs and strategic product positioning, delivering more than 500 basis points in margin improvement we promised, while continuing to show solid growth and market expansion. This provided Ambetter with a strong jumping-off point to achieve our long-term target margin and profitable growth goals in 2023.
In our Medicare Advantage business, Centene generated outsized growth in 2022, ending the year with 21% more members compared to year end 2021. Our focus throughout the year was on strong clinical program performance, quality improvement, which you've heard a lot about, expanded value-based care relationships and providing enrollees with a more seamless member experience. In 2022, the strength of WellCare's underlying performance was demonstrated through year-over-year HBR improvement and were confident our increasingly disciplined approach to quality operations will provide an important lever as we move through 2023 and work to improve WellCare's profitability on its expanded scale.
Our local markets also performed well throughout the year, serving more Medicaid members in more geographies than ever before. Our Delaware go-live as well as a significant number of successful re-procurements and program expansions, including in Louisiana, Nebraska, Texas and Missouri, to name just a few, bolstered our market presence and leadership position in Medicaid managed-care. In California, Centene was ultimately selected to serve the state through direct contracts in 10 key markets, including Los Angeles and Sacramento counties. We are working towards readiness for the 1/1/'24 start date of the new California contracts and we look forward to our continued partnership with the state to improve the Medi-Cal healthcare delivery system and advance the state's innovative CalAIM programing.
2022 also marked the first full-year of execution on our value-creation plan and it was by every measure a success. We had all major milestones, including redesigning our UM function function across the enterprise, successfully negotiating a new PBM partnership, reducing our real estate footprint by 70% to accommodate new workforce flexibility, itself an important cultural evolution for the company and making important investments in data and digital tools that will make it easier for our members, our providers and our employees to work with us.
We exit 2022 not only well-positioned to achieve our $400 million in targeted SG&A savings in 2023, but also having added $300 million in new SG&A opportunities to our longer-term backlog. In addition to achieving these value-creation milestones, we made meaningful progress on our portfolio review process. We closed three divestitures in 2022 and announced the fourth. Notably, in the first weeks of 2023, we closed the previously-announced sale of Magellan Specialty as well as the sales of Centurion and HealthSmart, bringing our total number of divestitures since Q4 of 2021 to seven.
This disciplined execution has streamlined our enterprise, reduced distraction and allowed us to increase our focus on our core business lines. It has also powered significant and timely share repurchases during 2022 and year-to-date in 2023. Finally, in December, we aligned the enterprise around a long-term strategic plan, inclusive of a commitment to 12% to 15% long-term adjusted EPS growth. With our senior leadership team in place and the company's demonstrated progress against our strategic and financial goals in 2022, we are well-positioned to capitalize on the momentum of the past year and successfully continue our value-creation journey for shareholders and members in 2023.
With that, let's talk about 2023 so far. Centene's marketplace products yielded exceptional growth during this year's open enrollment, outpacing even the robust growth of the total market itself. This year's OEP performance only reinforces our view of the increasing durability of the marketplace as a coverage vehicle and Ambetter's leadership position within this market. To harness this growth opportunity, our Ambetter team applied a portfolio approach to pricing and product positioning, decisively leveraging our local expertise and strong broker relationships on a market-by-market basis to attract and retain membership across our marketplace footprint.
While it is still early days with respect to claims experience, we want to share a few observations about Ambetter's strong OEP growth and provide some performance expectations, given the team's outperformance on membership. Approximately 70% of our 2023 membership is enrolled in a Silver plan compared to approximately 72% in 2022. Silver plans have consistently represented the majority of our membership year-after-year, and 2023 is no different. Similar to previous plan years, the majority of our 2023 membership selected our core product. At the same time, we are pleased with the continued uptake we are seeing in our newer products, demonstrating the value of flexibility and plan design for our members. Key membership demographics like gender, age, geography and subsidy levels are consistent with what we experienced last year. Most importantly, these factors are also consistent with the pricing assumptions we used for 203 product positioning.
We continue to expect our marketplace business to achieve margins within the long-term targeted range of 5% to 7.5% during 2023, and we are pleased to have the opportunity to serve so many marketplace members as the reach of that product continues to expand. As we highlighted for investors last month, Medicare Advantage enrollment results for 2023 developed softer than expectations we provided at Investor Day in December. Our goal for the 2023 AEP was to foundationally align our Medicare offerings for long-term margin recovery, product stability and overall quality, capitalizing on the scale we achieved through outsized growth in 2021 and 2022.
In our effort to better control the overall member experience which requires operational stability and contributes directly to quality results, we made the decision to change our distribution strategy and focus more on proprietary channels. Near-term sales and retention were more significantly impacted by our distribution strategy than expected, particularly in light of competitor investments in channels we deprioritized. That said, several the channels we prioritize performed better-than-expected, reinforcing our long-term view of an optimal go-to-market strategy for Medicare Advantage and dual-eligible members.
Despite the soft membership results relative to expectations, we continue to expect 100 basis points of Medicare HBR improvement in 2023. Importantly, we are already seeing positive operational impact for members and brokers with strong service levels, improved customer satisfaction and a 30% reduction in overall calls compared to this time last year.
Turning to more recent Medicare news. Regarding the finalization of the RADV rule, we are supportive of CMS's decision to limit the scope of historical audits. CMS's decision in this regard avoid significant costs and abrasion for our provider partners. That said, the lack of fee-for-service adjustment and the as yet undefined sampling an extrapolation methodology leaves a number of open questions as to the viability of the final approach. We are working in collaboration with our industry partners to determine the best path forward.
Regarding last week's preliminary rate notice, 2024 initial rates are less favorable than recent years and below our internal expectation for funding. We will fully exercise our ability to provide feedback to CMS during the comment period and look-forward to collaborating with the agency as we work towards rate finalization in April. That said, we see a path to achieving Medicare Advantage results that meet member needs and support our 2024 financial goals.
Finally, as we all know, 2023 will be an important year for the Medicaid business. In December, Congress passed a Federal Consolidated Appropriations Act for 2023, which ends a continuous coverage provision on March 31st. This teed up redeterminations to begin this spring, an event we have been working to prepare for throughout 2022. As we approach the redeterminations process, we are focused on three things. First, optimizing the verification process for members. We are working closely with our state partners and our network of community partners in each market to facilitate member transition and coverage continuity. In the last month, we've deployed internal and external training designed to maximize each member touch point and our ability to support beneficiaries as our eligibility is reviewed. Leveraging Centene's unique and powerful data, we've launched eligibility likelihood modeling across our Medicaid footprint in order to prioritize and customize Member outreach, and we've launched enhanced reporting and membership dashboards for clear tracking of redeterminations related activities across the enterprise.
Second, we are focused on ensuring that state program rates reflect any shifting of the risk pool created by membership changes. We recognize the dynamics in each market are different, so we are leveraging our data to support early collaborative discussions with our state partners.
And third, we are focused on maximizing the opportunity to provide coverage continuity to members who are no longer eligible for Medicaid, but who are eligible for subsidized coverage on the marketplace.
Given the strong overlap of our Medicaid and marketplace footprint in 25 states, we continue to size the opportunity for our marketplace products at 200, 000 to 300,000 lives throughout the duration of redeterminations. In 15 of the 25 states where we have both Medicaid and marketplace products, w will reach out to our current members directly with educational information regarding the enrollment process, as well as with marketplace plan options. We expect that state count to grow as we advance through the redeterminations process and we have a robust scalable plan in place to support this communication and education efforts.
Finally, I'd like to highlight some important news that came just a few weeks ago. In late January, the FCC issued guidance to improve member communication opportunities related to maintaining Medicaid and other governmental healthcare coverage. We view this as an incredibly important step, not only relative to supporting a seamless verification process, but also a meaningful step forward in modernizing the industry's overall approach to Medicaid member engagement. We are working closely with states to integrate this guidance into our redetermination strategy and to prove the value of digital engagement in reducing cost and improving member outcomes.
On balance, when you take into account our more informed view of open enrollment for 2023, the updated timing of redeterminations and recently closed divestitures, we are well-positioned to achieve the top half of our full-year 2023 adjusted EPS guidance. Drew will provide greater detail on our outlook in just a moment.
As we look ahead, 2023 promises to be another transformative year for the enterprise, and one in which we will need to navigate notable market dynamics across our product lines from redeterminations to Medicare positioning to fast-growing marketplace products. This is not new for Centene. And we are better equipped to manage through this change than we ever have been before. Thanks to the work we have done over the last 18 months, to focus and fortify our operations and to align the organization around value-creation principles. As we look down field, we continue to see tremendous opportunity for all three of our core businesses, including complex Medicaid populations and dual-eligibles, marketplace adjacencies and STAR score improvement. We continue to track well against our long-term goals and look forward to executing against our strategic plan, driving strong results and delivering value to members and shareholders.
With that, I will turn it over to Drew to review our results and outlook in more detail.
