Ladies and gentlemen, thank you for standing by and welcome to the Anthem Conference Call. At this time, all lines are in a listen-only mode. Later there will there be a question and answer session, instructions will be given at that time. And as a reminder, this conference is being recorded. I would now like to turn the conference over to the company's management.

Good morning and welcome to Anthem's third quarter 2016 earnings call. This is Doug Simpson, Vice President of Investor Relations. With us this morning are Joe Swedish, Chairman, President and CEO, and John Gallina, our CFO. Joe will offer an overview of our third quarter 2016 results and our updated 2016 full year outlook. Then John will walk through the financial details and provide some incremental commentary on 2017, before Joe closes with some longer term strategic commentary. We will then be available for Q&A. During the call, we will reference certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available on our website at antheminc.com. We will also be making some forward looking statements on this call. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Anthem. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review the risk factors discussed in today's press release and in our quarterly and annual filings with the SEC. I will now turn the call over to Joe.

Thank you, Doug, and good morning. This morning we announced third quarter 2016 GAAP earnings per share of $2.30. Adjusted earnings per share was $2.45, consistent with our previous expectations. Within membership, we continue to post strong fully insured and self-funded enrollment results, as we ended the third quarter with over 39.9 million members. We grew an additional 160,000 lives during the quarter, bringing our year-to-date enrollment growth to 1.3 million lives or 3.4%. Specifically, insured enrollment increased by 39,000 lives during the quarter, as our Medicaid business grew by 81,000 lives to over 6.4 million members. Since closing the Amerigroup transaction in 2012, we've grown Medicaid enrollment by nearly 1.9 million lives or 41%, including growth of approximately 800,000 lives from Medicaid expansion. Within Commercial, our insured enrollment came in slightly ahead of expectations, as Local Group fully insured membership tracked well, particularly in the Large Group marketplace. Our public exchange enrollment declined by a less than expected 34,000 during the quarter to 889,000 lives. Our self-funded business increased by 121,000 during the quarter, reflecting the impact of enrollment growth from existing accounts and recently awarded contracts. Our solid membership results during the year translated into better than expected operating revenue of $21.1 billion during the quarter, an increase of $1.4 billion or 6.8% versus third quarter of 2015. The increase reflects the strong enrollment growth in the Government Business and additional premium revenue to cover overall cost trends. Additionally, administrative fee revenue grew by 6.4% versus the prior year quarter as a result of our strong self-funded membership trends. These increases were partially offset by fully insured membership losses in our Commercial business. The third quarter 2016 benefit expense ratio was in line with our previous expectations at 85.5%, an increase of 190 basis points versus the prior…

Thank you, Joe, and good morning. As Joe stated, our third quarter results were very consistent with the expectations we laid out last quarter. In order to provide you a bit more clarity on our performance, I will highlight some of our key financial metrics. First, I'd like to discuss the balance sheet. Consistent with our past practice, we have included a roll-forward of our medical claims payable balance in this morning's press release. For the nine months ended September 30, 2016, we experienced favorable prior-year reserve development of $773 million, which was moderately better than our expectations. We continue to be at the upper end of our range of mid to high single-digit margins for adverse deviation and believe our reserve balances remain consistent and strong as of September 30, 2016. Our Days in Claims Payable was 40.6 days as of September 30, unchanged from the 40.6 days we reported last quarter. As previously discussed and consistent with our expectations, this metric has trended down over the past year. And we expect Days in Claims Payable to be around 40 days over time. Our debt to cap ratio was 38.7% as of September 30, down 40 basis points from the 39.1% at the end of the second quarter, which reflects the impact of an increase in shareholder equity, as we did not repurchase any stock during the quarter. We ended the third quarter with approximately $2.1 billion of cash and investments at the parent company. And our investment portfolio was in an unrealized gain position of approximately $983 million as of the end of the quarter. For the three Rs, we continue to book reinsurance as appropriate and continue to reflect a net receivable position for risk adjusters. We also continue our conservative posture of recording a 100% valuation…

Thank you, John. Three years ago, we laid out our plan for growth, which reflected our strategy to capitalize on the substantial opportunities in the Government Business, while recognizing the changing nature of the Commercial marketplace, as a result of the implementation of the Affordable Care Act. Our plan was to establish a leadership position in the Medicaid market, stabilize our Medicare Advantage platform, and grow individual ACA compliant and ASO enrollment and mitigate the expected pressure in the Local Group fully insured segment. Since that time, we've been pleased with the growth in our Medicaid business, where enrollment has grown 47% since 2013. And we are well positioned to capitalize on the $81 billion pipeline of opportunity between now and 2021 that I mentioned earlier. In addition, we have reconfigured and upgraded our Medicare platform, as evidenced by the improvement in our margin profile and star rating performance. We expect to leverage our upgraded Medicare platform to grow MA enrollment in 2017 and beyond. Overall, the Government Business segment has grown nicely and now represents 54% of our consolidated company revenue, up from 44% in 2013. And we remain very optimistic about continued growth potential in this business. Switching to Individual, as we've discussed previously, the earnings contribution from the Individual ACA compliant business represents a meaningful headwind to our original targets. The volume shortfall from our previous expectation remains substantial. For your reference we laid out a plan to grow Individual ACA compliant enrollment to 3 million members by 2018, using the assumption that the overall Individual marketplace would be approximately 25 million members, in line with CBO estimates. In 2016 the overall marketplace was about half of the expected size. It has only grown to roughly 10 million to 11 million members. And subsequently, we have grown…

Due to limited time and in fairness of other listeners, we ask that you please limit yourself to one question. And our first question will come from the line of Ana Gupte from Leerink Partners. Please go ahead.

Yeah, hi, thanks. Good morning. My question was about the Individual book. You said that there were losses this year, and they continued into the quarter. Sequentially speaking, what were the losses in – that you estimated in second quarter? And have they gone up since then? And why are you expecting that'll improve next year when the reinsurance phases out? Are you getting adequate pricing to do that?

Yeah. Hi, Ana, this is John. So thank you for the question. Associated with our Individual exchange business, we certainly did in the second quarter indicate losses. And that we expect that our operating margins are going to be on the mid-single digit loss for the year. Now during the third quarter, the reserve development was okay. The trend had been moderated a bit. And we still expect those losses in the same general range of what we said, maybe just a little bit better than we had indicated. In terms of 2017 reinsurance is obviously a very important factor, but it's only one aspect of pricing and one aspect of the overall structure of the program. We've got rate increases that average in excess of 20% across the country. I think there's been studies that have been published that have stated that our rate increases are a little bit higher than the average rate increases. We've made adjustments to product offerings, we've changed networks, we've enhanced product designs. We've done many, many things to improve affordability of the specific product mix. So we feel very good about the previous guidance that we provided that we're really targeting a small profit margin in 2017. And then returning to more closely related to target margins in 2018 and beyond.

Thank you. And our next question is from Christine Arnold from Cowen. Please go ahead. Christine Arnold - Cowen & Co. LLC: Hi, there. Couple things. On Iowa, your language there suggests that you got a rate increase, but it may not be adequate. And that you're disciplined. And you're only going to be in markets that are actuarially sound. Is there an out to get out of that if in fact, we can't get to actuarially sound rates? And then with respect to Individual, what do you think you need to see in order to feel that there's sustainability into 2018? What legislatively or administratively do you want to see there?

Yeah. Christine, good morning, this is Joe Swedish. Yeah. First question regarding I guess the out possibilities. As you know the contract went live earlier this year. And obviously we're very concerned, because it has experienced a deterioration that certainly exceeded our forecast expectations regarding the medical loss ratio. We are in the process of having deep discussions with the state regarding the possibility of adjustments. I commented in our discussions just a moment ago that we have realized some positive effect from that discussion. And quite frankly, we're hoping for more. Unfortunately, the recent rate increase is still inadequate. And again we're hoping for a better outcome with respect to more discussion. With respect to the legal construct of the contract, we are examining our position. We quite frankly are waiting for the state to respond to the inquiries that we've submitted to them. And I think it's a little early for us to maybe put commentary out regarding our legal position, given the fact that there's still administrative considerations that are working their way through the system. And we're hopeful for a very positive outcome at the end of that review. We are concerned about the actuarial soundness of the rates. And that's been expressed by all the MCOs from the get go. We are engaged in an extensive process of meetings, as I've mentioned. And we'll continue to be deeply concerned until we get a resolution to this. And then we'll weigh our options with respect to the end point of those negotiations with the state. I think the second question dealt with the exchange, Christine? I wonder if you could restate that for me. I'm sorry.

One moment please. Christine Arnold - Cowen & Co. LLC: Sure. And then it sounded like your language suggests that if 2017 doesn't go well, you could change your strategy for 2018. What do you need to see administratively or legislatively in order to fix this and in order for you to feel that this is where you're going to stay for 2018?

Right. Well on or about mid-year 2017 obviously, we'll be maybe coming to a conclusion on our review about how the adjustments have played out that we're expecting. To your point, what we're looking for are a variety of fixes, such as elimination of the health insurance tax or at least extending the 2017 moratorium. Another one that you probably heard quite a bit about is updating the risk adjustment model substantially to address existing imbalance that we believe deteriorates the overall risk pool. We are also looking at additional adjustments in the special enrollment periods, which we believe need to be continually narrowed with respect to the variety and number of special enrollments. We also believe that we need to have the flexibility to develop innovative products that should go to market to meet the needs of our customers. Modify the grace period is another great example. And finally, we want to work very closely with the states to ensure actuarial justified rates being approved. Now what I just specified for you, let me just put a characterization to it that I think it is very important. And that is this is a specific recipe for solutions. And we believe these recipe characteristics represent a form of long-term, sustainable, and an affordable marketplace. So as I said earlier in my commentary, we believe we must see adjustments such that we can easily map to a 2018 situation of sustainability in this marketplace. And quite frankly given what may or may not happen, we'll be evaluating the regional engagement across our markets moving into 2018.

And, Joe, I'd just like to say, obviously everything there is very appropriate. But, Christine, we will be watching margins, trends, performance on a state-by-state and region-by-region basis in 2017 as well. So certainly the decision in 2018 could be a piecemeal decision as opposed to an altogether decision.

Yeah. I think thus far we've been very surgical in our approach, and we'll continue that theme. And so again we have a hope that the sustainability that's expected and commented on quite a bit by leadership of administration actually will occur during the early stages of 2017.

Thank you. And our next question is from A.J. Rice from UBS. Please go ahead.

Hello, everybody. And I just want to follow – I appreciate the comments on the headwinds and tailwinds and the comment about modest growth. I guess there are three variables I just want to throw on the table. You're saying you'll go from a mid-single digit loss on the exchanges or in the Individual book to a positive. We got I guess about a – that would represent I think about a $0.70 swing, roughly 6% to 7% growth in and of itself. I just also wondered are you including anything in your comments about capital deployment when you talk about modest growth or anything on the PBM and what's the latest thinking on that? And then just to make sure the $10.80 is the baseline number upon which you're assuming modest growth? Or is it some other number that you would adjust for as the starting point for 2016?

Yeah. Sure. No, A.J., thank you for the question. And in terms of capital, we do expect to resume capital deployment in 2017. However, that won't be until after the pending Cigna acquisition process is completed. And so the timing and the magnitude of the capital deployment is still somewhat of an unknown. Associated with the starting point, yeah, very clearly $10.80 we believe is the appropriate starting point. That's our guidance. That's been our expectations now for some time. And that's our 2016 – approximately $10.80 is our 2016 guidance number. And then of course you have the tailwinds that offset that. But in terms of the PBM, we don't have any of the upside baked in. I think, Joe, maybe some comments, just about the PBM situation in general might be helpful.

Yeah, A.J., thanks for question on that. As I've repeatedly stated, we're hopeful we can negotiate a settlement to our concerns, our dispute. And I don't need to restate what we've said repeatedly about our perspective on our contractual rights. But let me say that we do believe that we are continually focused on improving the pharmacy pricing on behalf of our customers. We expect to issue a new RFP during the year, that's early 2017, to understand the impact of various pharmacy options available to us, as we migrate to potential of a new agreement. And I have to underscore that it's critical that we engage with a really trusted partner with aligned interests in advancing cost effectiveness and quality for our membership. I guess we've not ruled anyone in or out in this process of securing an RFP. And I think with respect to any other comments made by ESI or others, we prefer not to comment on that. We do believe that a period of negotiations is still possible. And again, I'll underscore I'm hopeful that we can resolve our differences moving into the future.

Thank you. Our next question is from the line of Matt Borsch from Goldman Sachs. Please go ahead. Matthew Borsch - Goldman Sachs & Co.: Yes, thank you. Maybe on a slightly different topic. One of your peer companies has talked in considerable length about pressure in this Small Group ACA compliant book. I know you've alluded to that some. Can you just give us an update on how you see that business? Maybe breakdown in size and breakdown your Small Group between what's ACA compliant and what's grandmothered, grandfathered? And how you see that transition happening, working going into next year?

Yeah. Sure. Thank you for the question. Very good question. And that really is a meaningful headwind. And I think I did try to highlight it in the script. But in terms of the specificity of the question, we don't talk about a lot of this information for competitive reasons. But maybe two-thirds of our block is non-ACA compliant today. The grandmothering expires here at the end of the year. And we fully expect to be very aggressive in pursuing and renewing that block of business. The margin aspect of it may be slightly different, slightly lower as the ACA compliant blocks typically have a slightly lower margin compression. So but we'll ensure that we renew it at appropriate prices and have it to be profitable business on a go-forward basis. But we did want to spike it out as a headwind in 2017.

Thank you. Our next question is from Kevin Fischbeck with Bank of America. Please go ahead.

Okay, great, thanks. I guess two questions. First a clarification. You mentioned that as far as the Cigna lawsuit, they're going to break it up in two pieces, and that they're going to do National Accounts first. Just wondering if you had a timeframe for when we'd hear that? But then specifically on the Medicaid business, sounds like Iowa should get better next year. Medicaid expansion should get worse. Are you looking for net margin improvement or margin pressure on the Medicaid business as a whole in 2017?

Yeah. Let me comment on Cigna hearings. Beyond the December judicial process, which we're anticipating a decision sometime on or about mid-December, we would expect that moving forward from there, that's possible then a trial would begin shortly thereafter, probably early January. And our hope is that that would be resolved with a judicial decision by the end of January.

And then on the Medicaid question, just provide a little clarity. So certainly Iowa is going to be a tailwind into 2017. Yeah. We experienced significant upfront losses in Iowa. And even with the rebalancing of the portfolio and the retroactive rate increase, it still we do not believe is actuarially sound. And the expectation is that there will be improvement in 2017. However, associated with the remainder of the Medicaid block, we are seeing some slight margin pressure. We were phenomenally successful the past couple years with our margins. And specifically our expansion margins have been very, very, very good. And then as those get repriced throughout the balance of the year, they're going to be repriced at more of a target margin ratio – or target profit ratio, I'm sorry. And that will create a bit of headwind or margin pressure for us in 2017.

Thank you. Our next question is from Justin Lake from Wolfe Research. Please go ahead.

Thanks. A couple things. First, I remember back when we were going into the ACA, and there was concerns around Small Group. You guys had put out a number of about a $400 million headwind for next year for the coming couple of years in terms of a Small Group margin pressure. Is there any way for you to do something similar here? Just to give us an idea of as you go through this repricing, is there a number you can point to say here's – sounds like Small Group's going to be a pretty big prefer (42:26) next year as expected, maybe a little larger than we thought. Is there a way to put a number on that for us? And then on SG&A, it's been shifting around a bit here. And wanted to get your thoughts for the fourth quarter and how we should think about this for 2017 when we add in the – when we add back some of these one-time benefits that you had this year? Thanks.

Yeah. Sure, Justin, great questions. In terms of the Small Group we're still working through it. And I really am hesitant to provide an answer until our planning process is done and some of the grandmothering associated with the early renewals that exist. We actually have several of our – many of our Small Group plans renewed early on December a couple years ago in order to maintain their non-ACA compliant plans. And I think it'd probably be premature to throw a number out until we work through that process. So we will update that and provide more clarity on our fourth quarter call. Associated with the general administrative expenses, yeah. I think maybe I'll just repeat sort of the commentary from last time. It's down quite substantially in 2016. And a little more than half of it is a good sustainable run rate, meaningful decrease in SG&A expense. That has to do with more efficient processes, better performance in some of the administrative and core areas of the company. And we grew into our membership. We had a really good membership year from both a membership and premium perspective, raising guidance on that. And we're able to do that by maintaining our administrative expense levels. Obviously then the ratio went down. The other half, or a little less than the other half, were more one-time items. And those are nonsustainable. And the most significant part of those other – less than the other half is our incentive compensation plans. As we've stated, we're a pay-for-performance company. And we had our promises to Wall Street and what we expected earnings to be. And we ensured that we delivered those earnings. And unfortunately, we had to lower our incentive compensation expense as part of that process. But so a little less than half come back in 2017.

Our next question is from Michael Newshel from Evercore ISI. Please go ahead.

Thanks, good morning. Does your expectation for slight profitability in the ACA compliant business next year assume that the National enrollment is going to be stable or growing? And how would you frame the downside risk to margins if enrollment declines and the risk pool deteriorates? And also I mean it looks like your relative pricing versus competitors is generally higher in 2017 than it was – than it is this year after the price hikes and market exits, at least on healthcare.gov. Do you think that provides you any buffer against adverse selection next year?

Well there's quite a few questions in there. Hopefully I can address all of them. But I think maybe the most simple is that we expect that overall Individual ACA compliant membership on a National basis will be slightly down next year. And that our membership will reflect that. We still have many, many competitors in our markets. I just do want to point out that some of the exits that have been very widely publicized, very few of them impact our market specifically. So like for instance, California still has 11 competitors, Virginia still has eight competitors, just to rattle off a couple of our states. In terms of the risk pool we believe that we understand the risk pool. We're very good at the Individual marketplace. We've been number one in Individual market carrier for years and years prior to the ACA. Our products are designed in such a way to really get a good risk pool that allows us to maximize on risk adjustors and then be a risk adjustor collector. So we feel good about our assumptions at this point in time.

John, let me add that there are a few key points I think we really need to consider and keep in front. Number one, on average our price point for targeted bronze/silver plans in the marketplace is higher than our competitors. We certainly recognize that and acknowledge it. And while the number of competitors in our markets has declined overall versus 2016, for the most part those declines are in less populated areas, such as the rural market where we have had historically high market share. There's – on the flipside there's really still substantial competition across all of our markets, those served markets, most notably in these highly dense urban markets. And finally, some of the largest markets you'll not see any significant reduction in competition. For example, California still has 11 competitors, down one from last year. Virginia still has eight. Georgia still has five. So we know we're in highly competitive markets. And we believe we will compete very effectively. But again I think we very effectively managed the price points with respect to the products that we've offered in the marketplace. And so we have a fairly good outlook, as John commented earlier in his remarks, about our expected margins. And as I said then, follow on to that we'll be evaluating our situation in those markets – all of our markets through the beginning of the year to see how well we perform and how well the regulatory adjustments play out leading up to mid-year.

Thank you. Our next question is from Lance Wilkes from Sanford Bernstein. Please go ahead. Lance Arthur Wilkes - Sanford C. Bernstein & Co. LLC: Morning. Just wanted to follow-up on a question with respect to self-insurance margin strategy. Wanted to understand how the progress was going on specialty penetrations, looking at 2017? And what your 2018 and beyond strategies were there? How much upside you saw with respect to self-insurance margins. And then in particular right now with PBM, how does that fit into how you're looking at penetrations?

Yeah. Great question. And certainly that's one of our growth areas for the future, as we look out into our long-term outlook. We believe that the opportunity to enhance the EBITDA associated with our ASO members is meaningful. We are developing – we have ongoing efforts to drive penetration, specialty products, various ancillary-type products, other add-ons. We think that we are under penetrated right now and believe that we have incredible amount of upside. We've been the number one company in growing the ASO Large Group National membership over the last several years. And we've made quite a nice margin percentage on that business. But it's very small dollars. And so now the focus is to take the fact that we do have best in class discounts. And the most sophisticated purchasers of coverage are picking us. And so now it's our opportunity to really penetrate that better and enhance the EBITDA associated with that membership block.

Thank you. Our next question is from Gary Taylor from JPMorgan. Please go ahead.

Hi, good morning. Just a couple more questions on the Individual business. First, just wanted to follow up. I know you had just said you're anticipating exchange enrollment to decline heading into 2017. I know you also thought that would be the case heading into 2016. So is just your rate positioning why you still believe that might play out in 2017 versus what happened this year? And then just secondly, could you just comment on any PDRs used in the Individual business this quarter? And your experience with the special enrollment period enrollment this year versus last year?

Sure, Gary, great question. And 2016 was interesting, because what we ended up seeing was a flight to safety. And that was one of the reasons that our 2016 Individual exchange membership grew more than expectations. And so if you go backwards a year, and then you look at the number of co-ops who were in our markets that failed, it was a significant impact on our membership. And then as those customers then went into the marketplace, they – as I said, it was a flight to safety. They went for Blue. I think the real key difference in the expectations in 2016 and the expectations in 2017 is really the amount of exits within our markets of carriers and who the exits were and how much membership those that exited had. So long story short, the co-ops in certain markets were – had extremely high market share. Then they went insolvent, and their market share of – when then (52:09) was absorbed. Where in 2017, while we certainly have some exits of carriers in our markets, they do not have the breadth or the magnitude of the market share that the ones who actually a year ago had. Associated with the premium deficiency reserves, we have none recorded. We had none recorded in 2015. We have none recorded in 2016. It's a very easy question, which means that our results are pure, our results are clean in that we don't have the puts and takes that maybe you have in some of the other companies that you're modeling.

Thank you. Our next question is from Josh Raskin from Barclays. Please go ahead.

Hi, thanks. Question – a short term and a long term. Short term, I heard the commentary. I think, John, you said the results were very consistent with your expectations. And just looking at sort of the cadence of earnings, you saw some mid to high single digit growth in the first half, a big decline of double digit percentage on EPS in 3Q, and now an expected increase back in 4Q. And so I guess if that's all very expected, what changed this year from a seasonality perspective? And then on the long term, from a strategic perspective when you guys announced the Cigna deal – and I know we're going back a year and a half now – you talked about Cigna bringing commercial expertise and exposure to Medicare, the strong specialty, and then the international segment. And so I'm curious kind of where those priorities sit today? And in the case that the judge disagrees with you guys and the transaction does not move forward, how do you guys think about the reaction? Is there a need for scale? Is there an appetite to do other stuff? Thanks.

Sure. Thank you. I'll take the first question, then turn it over to Joe for the second. Yeah. I did say that our results were very consistent with expectations. When you're looking at the seasonality of 2015 to 2016, yeah, 2016 is a bit challenged. The MLR is a little bit higher in the fourth quarter than it was last year. There's a lot of variables associated with that. Clearly the Iowa variable, the Individual exchange variable. Please note that we do have the G&A offset that allows us to enjoy the growth in EPS year-over-year. But it's not that there was a significant change in seasonality patterns or a huge business flux, as much as it was some of the very specific items that we pointed out to as headwinds for 2016 continue to be headwinds throughout the fourth quarter. On the – I think Joe wants to address your Cigna question.

Yeah, let me take that for a moment, Josh. First of all, to your point about, call it, pivoting in the event of an adverse decision. We're going to focus very heavily on what we talked about earlier regarding our tailwinds. Obviously, in the MA growth space a very strong focus on our Government business across the entire spectrum and a variety of other initiatives that I've already mentioned. I think it's really important to underscore that we'll be coming to you at the time of that announcement whenever, we will then share with you our outlook in terms of pivoting the company to tackle some of those opportunities, tailwinds, as well as quite frankly address the headwinds as robustly as we would anyway. But certainly we believe ameliorating some of that risk would be a great opportunity to us as well.

Yeah. I would just add to that that we believe that we have long-term sustainable growth opportunities regardless if the deal closes or not. Cigna may help accelerate those. But we're very confident about our future under either scenario.

Thank you. Our next question is from the line of Chris Rigg with Susquehanna Financial Group. Please go ahead.

Yeah. Good morning, guys. John, I know you commented earlier about the dynamic of compliant versus noncompliant in the Small Group book. But it looks like in the Individual side, you still have about 20% of your membership that's noncompliant. Are most of those, the plans for the noncompliant individuals going to remain in force through or until December 2017? And then more of a macro question. Do you guys have a sense for how many grandmothered – how many people have grandmothered plans in your markets at this point? Thanks.

Yeah. No, great question. First of all, in the compliant versus noncompliant, the majority of those will not be noncompliant through 2017. So that the headwind/tailwind that I talked about with that, that would include both the Small Group and the Individual commentary. In terms of how many grandmothering are in our markets, including what our competitors have, we actually do not have the specificity of that. But obviously, all the dynamics that we're experiencing and the changes in the laws they're experiencing. So, there's really not a – if your question is, is there an opportunity to get someone else's grandmothered business, answer is really no. It would have to be – we would have to get it as part of an ACA compliant product.

Thank you. Our next question is from the line of Ralph Giacobbe from Citi. Please go ahead.

Thanks. Good morning. First, just wanted to clarify the comments on the exchange again. Joe, you mentioned 2017 as a critical year. And if there was no clear evidence that you'd sort of modify your strategy in 2018. I mean does that mean market exit or willingness to exit if you're unprofitable again in 2017? And then also separately, was hoping you could parse out the pressure from Iowa? I know one of your peers took a PDR in that book, while you're absorbing the losses through the P&L. So just hoping to get a sense of margins and maybe magnitude of loss this year? And what the improvement would be next year even on sort of the inadequate rate bump? Thanks.

Great. Thanks. I will pivot the second part of the question to John, so he can get into some of the technical aspects of it. But with respect to the first question, let me just underscore that as I said a moment ago, we're going to be very surgical. And let me define market. For those that define market to be state. But I want to be very clear that we deal with a significant array of regions. So we will look at both regional impact as well as state impact, and then make determinations with respect to what I call the surgical assessments and then decisions and execution that are necessary in order for prudent engagement in that marketplace. I believe that probably covers what you were asking. Yeah.

Okay, yes. And then in terms of Iowa and the headwind for 2016, which becomes a tailwind for 2017 with the Medicaid block there. We did get a retroactive rate increase. Unfortunately, we think it's still not actuarially justified. We really are not providing an exact number at this point, as we continue to work with the state and don't want to get out ahead of the state and negotiate this publicly. But just as Joe said, consistent with the Individual exchange business, we need to partner with states that want to be partners. And we believe that we need actuarially justified rates. And if – we will continue to negotiate it. We feel very good about that fact. But if we don't get it, then we'll have a decision to make in Iowa as well.

Thank you and our last question this morning will come from the line of Peter Costa. Please go ahead.

Thanks for squeezing me in. Just a couple of clarifications on things you said. You said you'd put out an RFP for your PBM in early 2017. So presumably that means we'd see an answer sometime in mid-2017. What sort of things are you going to be looking for besides the $3 billion in savings that you already talked about? And then are you specifically coming off the $100 billion revenue target that you set out in 2014 for 2018?

Why don't I do the second one first, Peter, while I've got the line. In terms of the headwinds, tailwinds for 2018 in Joe's commentary, it's highly unlikely that we would be able to achieve that number at this point in time. Just look at our guidance for 2016 and roll that forward and roll our membership forward. It all boils down to the exchanges. And the CBO had estimated, what, 25 million, 26 million lives to be insured through the exchanges. When we did our 2018 plan, we relied on some of the CBO estimates as part of our estimation process. And we're still maintaining our market share. We still believe that we can hit the target margins that we had for those things. But when the entire country has just over 10 million versus that other, that's a significant delta. And that goes straight into our numbers. And I think you'll see that the revenue shortfall can be entirely explained with that dynamic.

Yeah, let me pick it up now regarding the PBM question. Yes, that RFP goes to market early 2017. I've said repeatedly that our intention is to be able to deliver to you a solution with respect to ongoing analytics, which obviously in the current state is significantly impacted by our discussions and of course potential legal proceedings with ESI. We were hopeful to bring you a meaningful commentary and maybe solution by the end of 2017. We've never diverged from that commitment. And our hope is that we sort of will be able to put all the parts and pieces together to give you clarity in and around the decisions we're going to execute specific to the termination of the contract by 2019.

Thank you. And please go ahead with any closing remarks.

Well again, thank you, everybody, for your questions. They're always very, very good. As a company, we do remain committed to tackling our healthcare system challenges head on, as evidenced by the work that we've communicated to you today. And we believe that we can and will deliver greater value to consumers by expanding access to high quality affordable healthcare. We've stood by that repeatedly. This is why we are committed to challenging the DOJ's recent decision to block Anthem's acquisition of Cigna in court. Speaking to my associates, I want to also thank all of them for their continued commitment to serving our nearly 40 million members every day. To all of you on the phone, please accept our thanks for your interest in Anthem. And we look forward to speaking with you soon at upcoming conferences. Have a great day.

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