Q3 2023 Humana Inc Earnings Call

Good day, and thank you for standing by welcome to the Humana third quarter of 2023 earnings call.

At this time all participants are in a listen only mode.

After the speaker's presentation there'll be a question and answer session.

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I would now like to hand, the conference over to your Speaker today. Please a stoner vice president of Investor Relations. Please go ahead.

Thank you and good morning.

Oh, sorry give me the President and Chief Executive Officer is Susan Diamond Chief Financial Officer will discuss our third quarter 2023 resolved in our financial outlook for 2023. Following these prepared remarks, we will open up the line for a question and answer session with industry.

We encourage the investing public and media to listen to both management prepared remarks, and the related Q&A with analyst. This call is being recorded for replay purposes that replay will be available on the Investor Relations paid excuse me in his website <unk> dot com later today.

Before we begin our discussion I need to advise carpeted.

Statement certain of the matters discussed in this conference call are forward looking and involve a number of risk and uncertainty actual results to differ materially investors are advised to read the detailed risk factors discussed in our latest Form 10-K or other filings with the Securities and Exchange Commission and our third square 20th.

Three earnings press release.

<unk> to the forward looking statement along with other risks discussed in our M. P T.

We undertake no obligation to publicly address or update any forward looking statements and teacher finally or communications regarding our business will resolve.

Today's press release or historical financial news releases, and our filings it'd be S. A D. R. I'll also available on our Investor Relations.

Call participant to note that today's discussion include financial measures, they're not in accordance with generally accepted accounting principles for gas management explanation for these <unk>.

And reconciliations of gap to non-GAAP financial measures are included in today's press release.

Finally, any references to earnings per share or E. P. S made during this conference call refer to diluted earnings per comments here with that I'll turn the call over to a brief regard.

Thank you Sir good morning, everyone. Today, you made a report financial results for the third quarter of 2023 with adjusted earnings per share of $7.78 slightly above our expectations.

Results for the quarter include outperformance under Medicare's primary care businesses and a continued focus on driving sustainable operating efficiencies.

I'll set by the impact with a modest higher than anticipated realization in our Medicare advantage business.

We reaffirm our phone you're 22 23 adjusted P. P S guidance of $28.25.

Definitely a 12% increase over 2022.

In addition, we are please.

To raise our gardens for for your individual membership growth an additional 35000 members to pay 860000, driven by continued higher than expected and your sales.

Or pull your membership groceries.

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Okay My account pacing the industry.

That'd be sure previously our ability to deliver on our targeted earnings growth rates in 2023.

Also achieving this impressive membership for the supported by the strength and stay all of our organization.

Underpinned by a continued focus on disappointed investments driving sustainable productivity improvement and deliver inconsistent fundamentals, including industry, leading starves results.

Customer satisfaction is reflected in her neck promoters.

Further a strong membership growth create significant momentum as with advanced towards our 2025, adjusted Dts target of $37.

Excuse me will provide additional details on our third quarter performance or pull your expectations in a moment.

Well now provide an update on our operations in outlook, including a view of the 2024 Medicare advantage landscape and exciting grocery scene in our primary care business before.

<unk> turned into an update on our underlying productivity initiatives.

Beginning with Medicare advantage, we took a thoughtful approach to 20 to 24 bits.

I'm going to need to balance the right environment with our commitment to achieve industry average or better membership correct.

Or 2024 strategy was informed by extensive consumer and broker research and ended up <unk> regarding what Medicare eligible consumers prefer.

<unk> be preserved or enhance keep benefits across our portfolio that were identified as most important to consumers and continue to breath differentiating offices office offerings that focus on improving health outcomes and remember experience.

More specific coins to continue to prioritize zero premium offerings.

Low cost share for highly utilized services, including primary care of heartbeat maintained highly valued supplemental benefits like magenta and partly goodbye.

From a dual eligible special needs plan or a Z Smith perspective all.

Plans include zero co pays uncovered parts of the prescriptions and offer help me options clouds were they rollover feature a key differentiator in the marketplace.

Our products and answers are coupled with tomatoes, leading position in quality and experience.

May I continue to deliver exceptional quality to our members isn't measured by our <unk>.

Four six consecutive years <unk> has been paying the highest percentage of members and four star or higher rated contracts on my National Health plan.

<unk> 24, 94 per cent of our members will be enrolled in plan for this four stars or higher and 61%. Some plans rated four and a half stars or higher.

For a few minutes contracts covering approximately 790000 members nationwide receive a perfect five star right.

More than doubling our five star membership from 20 to 23, enabling year round enrollment in these plans.

In addition for the third year in a row throw Humana has been ranked number one among health insurance for a customer.

And foresters proprietary 2023, <unk> customer experience benchmark Sir.

And it's also ranked number one in customer satisfaction with tomato plants in Florida based on a comprehensive 2023 studies five J D back and.

And we're proud of that tomato once again has been named the best overall Medicare advantage insurance company.

U S News and World report, which created Adderall based on C. M. S's newly released star ratings shortly made plans <unk>.

Additionally, humana rank as the best company remember experience and was declared the best company for low premium plan available.

Collectively these results are testament to our commitments, putting that health and wellness of our customers first.

From a distribution and sales perspective, we are building upon our Omnichannel strategy. In 2023 are we seeing a 50 per cent thing <unk> you today, which is our wife highest lifetime value channel.

Our goal is to do whoever best in class agents and customer experience and have made investments in hey, I power tools, and telephonics infrastructure to reduce consumer hold times and transfers.

Finally, we're excited about the strong growth of our internal pay right now for channel, which is expected to double its sales production year over here. This is mucus.

Oh, and we expect our balanced approach to our 2024 product strategy positions as well.

We anticipate 2024 individuals have a membership growth <unk> four or five the overall industry Gregory.

We look forward to sharing more in the coming months.

Within our center well segment her primary care platform experienced significant growth in the quarter now operating 296 centers, serving here with 285000 patients representing a year over year growth is 33% and 17% respectively.

This includes the impact of the 24 centres recently acquired from kind of health approximately 12 of which are expected to consolidated into existing centers for clothes as we integrate the business by year end.

As a result of the 2023, the Nova Bill Sir M&A activity, we expect you in the year with net growth.

60 to 65 or above or previously communicated annual center <unk> target of 32 50.

Susan will provide additional detail or central primary care performance in a moment.

Turning to arrive going productivity offers for spam their organization, our focus and productivity continues to drive sustainable value for the enterprise for creating more streamlined processes better experiences for members patient and provider partners and driving best in class quality and <unk>.

Customer service results.

Let me share a few examples of this important work.

Our primary care organization is executing on a multi prong plan to mitigate the ultimate impact of the risk model changes that will be phased in over the next three years, including numerous operational efficiencies such as centralizing and streamlining administrative functions standardizing the clinic proper enema and I'm proving.

Clinician productivity.

As an example, we are in enhancing our use of prospective restrike justification of our patient base offering new and enhanced clinical programs and care team interventions to our highest reservations, which.

Which we expect a further reduced avoidable hospitalizations and re admission.

Optimizer preventative touch points with lower risk patients to increase capacity.

And the home as a complement to developing Zoe based home health payments and watched a comprehensive initiative to re imagine our scale health operations.

<unk> will be deployed across her more than 350 branches are all included automation consolidation and implementation.

Technology solutions.

Which will minimize the minute administrative task, while I'm proving condition productivity, including Optimising the reschedule.

We believe these initiatives some of which required incremental investment ultimate streamlining our operations and lead to increased clinical condition productivity and satisfaction.

As an example center well home health is introducing innovative AI unable digital wound management solutions, which allows our clinicians to effectively captured <unk> details with a simple picture.

You're pleased to report a notable 18 per cent improvement in does it efficiency enhancing the experienced both clinicians and patients.

It has been instrumental in clinical decision, making contributing to an accelerated wound healing time by 35%.

Finally within central Pharmacy, we've been focused on investments in digital channels and I've seen greater that 800 basis points frequent and scratched received through our digital channels here today.

Now representing approximately 38% of our total scripts.

Increase your some digital channels provides an efficient and user friendly experience for patients.

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The cost of a cost saving alternatives in real time.

In addition to our ongoing productivity initiatives remained committed to identifying additional sources of area for the enterprise the cost.

Cost savings.

That way your acceleration from previous investments.

Oh your driver's include areas such as streamlining our real estate for color as we continue to refine new ways of working post COVID-19.

I've also identified operate she's to rationalize our I T Port Polarize, we focus on building and leveraging enterprise capabilities, providing the opportunity to move away from and or consolidate certain stay on the line of business specific systems and applications that will meet the business needs of the future.

In addition, there are certain initiatives kicked off as a part of our <unk>.

<unk> value creation plan in 2022 that required implementation of technology to improve processes and drive efficiencies and.

Therefore, it takes time to realize the full benefit.

As we continue to focus on advanced these initiatives, we've identified additional value to be extracted.

Anticipate activities related to the additional value creation initiatives continued throughout 2024 resolve it started in one time charges that will be adjusted for nine gas purposes.

Collectively are ongoing productivity and value creation initiatives are driving sustainable value for the enterprise.

We expect this word will create how're you beyond the 20 basis points of annual operating leverage our business mixed it just the basis that we committed to our at.

At our 20th 22 Investor day, aiding in our efforts to offset the near term utilization.

Utilization in reimbursement headwinds currently impact in the industry.

Before turning it over to Susan I'd like to touch on a recently announced leadership transition plan.

We are pleased to announce that the health care industry veteran Jim Redfin was joined him as a president and Chief operating Officer on January 2024, as part of a long plans for Yo transition.

So I'm Gonna report to me until the latter half of 2024 at which time after leaving Humana for over a decade I'll step down on <unk>.

As we work to make the seamless transition in the coming months I'll look forward to partnering with Jim.

It brings a collaborative thoughtful on innovative leadership style to our organization taken him a natural fit for the culture of today and the future.

Jim brings a strong combination of operational and just in the street and see our expertise.

His first hand experience bleeding through challenges and opportunities of changing health care services continue helping to accelerate or integrate is carris strategy.

We look forward to introducing them to our stakeholders wanted to join the team is currently 2024.

With that I'll turn the call over decision.

Thank you breathe on good morning, everyone could I recorded address would easily S. Ah $7 in front of me a plan for the third quarter.

Unknown Attendee: Good day, and thank you for standing by.

Unknown Attendee: Welcome to the Humana 3rd quarter 2023 earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star-1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-1-1 again. Please be advised to your day's conference is being recorded.

Resolved in a corner were slightly positive slightly about initial expectations. During my outperformance and are medically primary care business days and continued focus on driving sustainable credit so new game.

All set by modestly higher than anticipated utilization and our Medicare advantage fitness.

I will provide additional detail unreasoning utilization trying for a moment.

Harper for me today continues to reflect a strength and agility any enterprise demonstrating our ability to successfully navigate the higher than anticipated email or by phone.

Lisa Stoner: I would now like to hand the conference over to your speaker today, Lisa Stoner, Vice President of Investor Relations. Please go ahead. Thank you, and good morning. In a moment, Bruce Broussard came in as president and Chief Executive Officer and Susan Diamond Chief Financial Officer will discuss our third quarter 2023 results and our financial outlook for 2023. Following these prepared remarks, we will open up the line for a question and answer session with industry analysts.

Delivering on our earnings and driving only reason on Medicare advantage number so crowded but significantly outpaces the industry.

It looks like the at approximately 860000 numbers I'm 2023, reflecting a 19 per cent growth right.

Further for the full year, we have reaffirmed our address that E. P. S guidance of at least $28 and 25 pounds.

Lisa Stoner: We encourage the investing public and media to listen to both management's prepared remarks and the related Q&A with analysts. This call is being reported for replay purposes. That replay will be available on the Investor Relations page at www.humana.com later today.

Reflect the 12% increase over 2022.

I will now provide additional details on our third quarter performance until.

While you're out with my son, <unk> did you want like a science.

This morning, we recorded that our insurance that you want to finance that ratio exceeded expectations by 40 basis points higher medical costs, and our Medicare balance statements.

Unknown Attendee: Before we begin our discussion, I need to advise call participants of our cautionary statement. Certain of the matters discussed in this conference call are forward looking and involved a number of risk and uncertainty. Actual results to differ materially. Investors are advised to read the detailed risk factors discussed in our latest form, 10K, our other filings with the Securities and Exchange Commission and our third quarter 2023 earnings press release as they relate to the forward looking statement along with other risks discussed in our MVP filings.

We continue to experience will increase in perverted nations in the third quarter of our forecast previously, saying this would occur in the fourth quarter.

Date, we have not seen an offer and non currently utilization, which the emergence from the 2% patterns been previously.

Is it reflects not inpatient <unk> <unk>, let me start with the higher plan for reporting and a second order to continue throughout the back half of the year, reflecting a moderating year over year training percentages.

Unknown Attendee: We undertake no obligation to publicly address or update any forward looking statement in future filings or communications regarding our business or results. Today's press release are historical financial news releases and our filings with the SEC are also available on our Investor Relations site.

The most recent paid claims data suggested a <unk> for the third quarter versus the state of levels, we anticipated.

Considering that most recent <unk>, we are planning for the higher level of elimination senior my third quarter to continue for the remainder of the year.

Unknown Attendee: Call participants to note that today's discussion includes financial measures. They're not in accordance with similarly accepted accounting principles or gaps. Management explanations for the use of these non-gap measures and reconciliation of gap to non-gap financial measures are included in today's press release. Finally, any references that earnings per share or EPS may during this conference call refer to diluted earnings per common share.

As a result, we are increasing our phone ear insurance pregnant benefit ratio bodies to approximately 87.5%, which implies that fourth quarter ratio of 89.5%.

If that is also reflects the increased individual and my number is described which continues to include a higher than expected proportionate agents.

Bruce Broussard: With that, I'll turn the call over to Bruce Rossard. Thank you, Lisa.

As we've previously discussed agents initially ran a higher benefit expense ratio and the average remember which leg. It really affects the current your benefit ratio resolved in a larger margin expansion opportunity onions number debit card.

Bruce Broussard: Good morning, everyone. Today, humanity recorded financial results for the third quarter of 2023 with the adjusted earnings per share of $7.78. Slightly above our expectations results for the quarter include out performance and are Medicaid in primary care businesses and a continued focus on driving sustainable operating efficiencies offset by the impact of the modest higher than anticipated. We reaffirmed our full year 2023 adjusted EPS guidance of 28 hours and 25 cents reflecting a 12% increase over 2022.

We anticipate that the higher 2023, and sharing segment benefit ratio will be offset by additional administrative expense reductions driven in part by the sustainable productivity English is breached discuss it.

<unk>, let me back from out of town and other business outperformance.

Turning to Medicaid the business exceeded expectations and recorder, primarily driven by favorable membership Nida Redetermination timing, which continues to track slightly favorable to our expectations.

By with discipline medical cough management initiatives and lowered unexpected utilization.

Bruce Broussard: In addition, we are pleased to raise our guidance for four-year individual N.A, membership growth by an additional 35,000 members to 860,000 driven by continued higher than expected new sales. Our four-year membership growth rate has cemented now reflects a 19% growth rate significantly outpacing the industry. As we share previously, our ability to deliver on our targeted earnings growth rate in 2023, while also achieving this impressive membership growth, is supported by the strength and scale of our organization, underpinned by continued focus on this point investment, driving sustainable productivity improvement, and delivering consistent fundamentals, including industry leading startups results, and higher customer satisfaction, as reflected in our net promotion groups. Further, our strong membership growth creates significant momentum as we advance towards our 2025 adjacent EPS target of $37.

Leaving that it's been around the signatures needed solid performance same throughout the year outperforming expectations in the corner.

Our primary care or you've reached the results exceeded expectations during my better than expected patient volume and revenue combined with lower than anticipated utilization.

Thank you and cruise medical Marvin and are holding them centers.

We continue to see better than expected patient <unk>, adding over 17000 patients ordinary 89 per cent growth and hard to Nova Center since December 31st.

15000 patients in our Holy Hell Center, representing 90 per cent grabbed here today.

Now it's like the faithful your patient <unk> approximately 34000 to 36000 as compared to our original estimate of 20000 to 25000 patients more than doubling the patient grabbed achieved in 2022.

Our primary care organization also continues to improve the operating and financial perform pulling them centers. We continue to positively impact patient <unk> like hospitalization level is training down here over here and it.

Bruce Broussard: Susan will provide additional details on our third quarter performance in our four-year expectations in a moment.

Addition, and parts of it are these who are pretty efforts to engage our patients potentially <unk> 270 days disappoint you every year up from a 220 biggest my infrequent as of the second quarter.

Bruce Broussard: I'll now provide an update on our operations and outward, including a view of the 2024 Medicare Advantage landscape and exciting growth we've seen in our primary care business, the four-year 2022 and update on our ongoing productivity initiatives. Beginning with Medicare Advantage, we took a thoughtful approach to 2024 VIDS, recognizing the need to balance the rate environment with our commitment to achieve industry, average, or better membership growth. Our 2024 strategy was informed by extensive consumer and broker research and in-depth analytics regarding what Medicare and eligible consumers prefer.

Patient satisfaction scores continue to reflect the quality of care delivered with net promoters worth averaging 82 nationally.

And you're proud of our call your score which are tracking ahead of last year's trajectory, but that 4.5 star performing your today on provider influence measured Friday station.

We now expect to increase the number of calling him centers that our contribution margin causes from 110 at the end of 2022 to approximately 130 at you on 2023, an increase from our previous expectations of 125, and representing an 18 per cent increase you over here.

Bruce Broussard: It preserved or enhanced key benefits across our portfolio that were identified as most important to consumers and continue to provide differentiating offers that focus on improving health outcomes and member experience. More specifically, we continue to prioritize zero premium offerings, low cost share for highly utilized services, including primary care and part D, and maintain highly valued supplemental methods like dental and part D givebacks. From a dual eligible special needs plan or a D-Snet perspective, all plans include zero co-pays, uncovered part D prescriptions, and offer healthy options to clowns where they roll over a feature, a key differentiator in the marketplace.

In addition, we expect to increase the number of centers that every sorry, three nine contribution margin target from 31 and 2022 to approximately 44 at the end of 2023, an increase from our previous expectation of 40, and representing a compelling 42 per cent increase year over year.

The better than expected primary care earnings and a quarter results in an extra salt I needed benefit expense ratio in 100 basis points lower than our insurance segment benefit expense ratio is compared to our previous expectations. I mean, 40 to 50 basis point reduction as.

As a reminder, on a consolidated basis, we report from the perspective of a health plan and as such in our company earnings from the services are eliminated against benefit expense.

Bruce Broussard: Our product enhancements are coupled with humanity leading position and quality and experience. Medicare continues to deliver exceptional quality to our members, measured by our CMS star ratings. For six consecutive years, humanity has maintained the highest percentage of members in four star or higher rated contracts among national health plans. In 2024, 94% of our members will be enrolled in planned rated four stars or higher, and 61% in planned rated four-and-a-half stars are high.

At this time do not anticipate that the primary care outperformance will run right into the fourth quarter. Therefore, we continue to coin cheese that 40 to 50 basis point reduction that you have insurance and consolidated benefit expense ratios for the fourth quarter with a reduction of approximately 60 basis points for the full year.

Turning to the mom and our core fee for service business ear to date episodic admissions are up 8.6%, while total emissions or at 5.1% tracking in line with our full your expectations of mid single digit you're being your inquiries.

Bruce Broussard: Power. Four of Humana's contracts covering approximately 790,000 members nationwide received a perfect five-star rating, more than doubling our five-star membership from 2023, enabling year-round enrollment in these plans. In addition, for the third year in a row, Humana has been ranked number one among health insurance for customer quality enforcers for prior to 2023, U.S, customer experience benchmark serving. Minus also ranked number one in customer satisfaction with M.A, plans in Florida based on a comprehensive 2023 study by J.D.

Bruce discussed we are working diligently to identify critical and operating efficiencies to offset industry headwinds, including write reductions declining original Medicare of nations and increasing any sanitation and ongoing labor pressures.

From a capital deployment perspective.

Has completed approximately 1 billion in repurchases today in case, you need to anticipate share repurchases of approximately 1.5 billion in 2023.

Before commenting on 2024, I would like to take a moment to highlight the significant progress we have made for the mid term targets. We started our investor day, one year ago.

Bruce Broussard: Bauer. And we're proud that Humana once again has been named the best overall Medicare-vanished insurance company by U.S. News and World Record, which created an honor roll based on CMS's newly released star rating for M.A, planning. Additionally, Humana ranked as the best company for member experience as it was declared the best company for low premium plan availability. Collectively, these results are testament to our commitment to putting the health and wellness of our customers first.

As a reminder, 2025 Jackson easiest target of $37 represents a 14 per cent <unk> I'm 2022, and is expected to be some fries at the 10% or enterprise earnings growth largely driven by the conservation for my Medicare membership 12.

20 basis points improved operating leverage and a two per cent contribution from capitals appointment on an annual basis.

While allowing for continued growth and investment and our Medicaid and sat around businesses is the high quality assets are expected to meaningfully contribute turn longterm earnings growth is that continue to stay on my chair.

Bruce Broussard: From a distribution of sales perspective, we are building upon our omnichannel strategy in 2023, where we've seen a 50% increase in our internal sales year-to-date, which is our highest lifetime value channel. Our goal is to deliver best-in-class agent and customer experience and have made investments in A.I, power tools and telephonic infrastructure to reduce consumer hold times and transfers. Finally, we are excited about the strong growth of our internal payer analysis channel, which is expected to double its sales production year-over year this AEP. All in, we expect our balanced approach to our 2024 product strategy positions as well. And we anticipate 2024 individual M.A, membership growth to B.S, or above the overall industry growth rate.

Over the last year, we have outperformed virtually all of these calls including above industry average number subscribed and our Medicare advantage business significant outperformance of our productivity loss.

And increase your by Max <unk> stock price dislocation earlier this year.

We continue to invest in and grow our Medicaid and center of all businesses outperforming Coca farming top line growth goes across these businesses as well.

At the same time, we've experienced hired unexpected medical costs <unk> Medicare advantage business and work hard to mitigate the impact of these trends in order to deliver on our enterprise earnings and ETS minutes.

<unk>, we are proud of the significant progress we have made and remain committed to the targets, we shared last year, including our 2025 adjusted EPS target of $37.

Bruce Broussard: We look forward to sharing more in the coming month. Within our center-well segment, our primary care platform experience significant growth in the quarter, now operating 296 centers serving nearly 285,000 patients, representing a year-over-year growth of 33% and 17% respectively. This includes the impact of the 24 centers recently acquired from Kano Health, approximately 12 of which are expected to be consolidated into existing centers or closed as we integrate the business by year-end.

Oh, no I'll take a few moments to provide additional color on our early outlets for 2024, starting with membership.

<unk> well, it's still early in the 18th we expect that our balance approach to our 20th 24 beds physicians is to grout individual Medicare advantage membership at or above the overall industry great great. While planning for my for higher attrition rate given the benefit design changes we implemented in response to the right environment.

And you always caution this time of year is early in the eighties Dawn Stevens <unk> provide today to change depending on how sales and voluntary to swirling ultimately <unk>.

Bruce Broussard: As a result of the 2023 de novo bills and M.A, activity, we expect it in the year with net growth of 60 to 65 above our previously communicated annual center growth target of 30 to 50. Susan will provide additional detail on our center-well primary care performance in a moment.

Broadly speaking 2024 competitor plain design it looks like the last benefit degradation than anticipated, which will likely lead to fewer consumers shopping and therefore less opportunity for two minutes and meaningfully outpaced named Mr. <unk>.

Specific to you may I ask performance relative to the market initial feedback from Burger just positive supporting our expectation of at or above industry average crap.

Bruce Broussard: Turning to our ongoing productivity efforts, which span the organization, our focus and productivity continues to drive sustainable value for the inner, and Dr. Rice, while creating more streamlined processes, better experiences for a number of patients and provider partners, and driving best in class quality and customer service results. Let me share a few examples of this important work. Our primary care organization is executing on a multi-pronged plan to mitigate the ultimate impact of the risk model changes that will be phased in over the next three years, including numerous operational efficiencies, such as central high housing and streamlining administrative functions, standardizing the clinic operating model and improving clinician productivity.

Finally recall that we have limited visibility into number just enrollment data. This early any a T. Steven if those results take longer to complete and it looks forward to providing further commentary on our foursquare calm.

And our great Medicare advantage business, we expect numbers of credit of approximately 45020 24 during my small and midsize account wins and remain committed to discipline pricing and a competitive group Medicare advantage market.

Bruce Broussard: As an example, we are in the hands of our use of prospective risk stratification of our patient base, offering new and enhanced clinical programs and care team interventions to our highest risk patients, which we expect to further reduce avoidable hospitalizations and re-emissions, while we optimize our preventative test points with lower risk patients. In the home, as a complement to developing value-based home health payments, we've launched a comprehensive initiative to reimagine our scale home health operations.

With respect that thing on T. T V over all P. D T. Margaret continues to decline and Medicare beneficiaries select Medicare advantage over original Medicare N T T.

In addition, we remain discipline in the pricing of our PDT product is cost trends continue to arrive.

As a result, or Walmart value plan will not be as competitive on price as it has been historically and our basic claim will exceed the lowington benchmark and 16 regions and 2024, we currently expect and Netflix line of approximately 760000 T. T members in 2024, including a loss of approximately two and.

20000 number as a result of exceeding the Lowington benchmarks.

You must be on 2024, we will evaluate the impact of the various propose regulatory changes, which are likely to resolve an hierarchy can claim premiums broadly and could lead to further industry wide movement from staying alone part he plans to Medicare advantage plans, given the strong Medicare advantage value proposition.

Bruce Broussard: The additional be deployed across more than 350 branches and will include automation, consolidation and implementation, technology and AI solutions. This will minimize administrative tasks while improving clinician productivity, including optimizing their schedule. We believe these initiatives, some of which require incremental investment, will ultimately streamline our operations and lead to increased clinical clinician productivity and satisfaction. As an example, central home health has introduced an innovative AI-enabled digital wound management solution, which allows our clinicians to effectively capture vital wound details with a simple picture.

Our focus remains on creating enterprise my for my P. P plan by driving increase mail or penetration and conversions to Medicare advantage.

Finally, and our Medicaid business. He made a continues to demonstrate the ability to deliver unique value in taking any by building a strong operating model that integrates physical and behavioral health and develop meaningful partnerships and generations to address Hoffman equity and social determinants of health.

After successfully implementing the Ohio in Louisiana contracts and early 23, we look forward to beginning disturbed member in <unk>, Indiana in Oklahoma in 2024, and continue to expect to bring our total Medicaid footprint to nine states in approximately 1.59 number by year end of 2024.

Bruce Broussard: Here, please report a notable 18% improvement in visit efficiency, thus enhancing the experience, both clinicians and patients. It has been instrumental in clinical decision-making, contributing to an accelerated wound healing time by 35%. Finally, within center-well pharmacy, we've been focused on investments in digital channels, and have seen the rate of that 800 basis point driven in scripts received through our digital channels year-to-day, now representing approximately 38% of our total scripts. Increase use of digital channels provides an efficient and user-friendly experience for patients, allowing for real-time formal error, larry and edge junction of the ability to cost proper cost saving alternatives in real-time.

Turning now to our expected 2024 financial performance.

Reiterate that expect to grow 2024, adjusted ETS within our targeting longterm range of 11% to 15% <unk>.

Recognizing any increased utilization we have now seen in 2023 and frequently assuming this level of utilization continues into 2024, we currently anticipate growth at the low end of this range Wheeler.

We look forward to providing more specific 2024, guys on our fourth quarter earnings call in February.

Looking ahead to 2025 as previously mentioned, we remain committed to our 2025 adjusted EPS target of $37, reflecting a 14% CAGR from 2022 2025.

Bruce Broussard: In addition to our ongoing productivity industry, we remain committed to identifying additional sources of value for the enterprise through cost saving and value acceleration from previous investments. Value drivers include areas such as streamlining our real-state portfolio as we continue to refine new ways of working post-COVID. We've also identified operations to rationalize our IT portfolio as we focus on building and leveraging enterprise capabilities, providing the opportunity to move away from and-or consolidate certain standalone business-specific systems and applications that will meet the business needs of the future.

Is important to note that are 2025 adjusted earnings growth will benefit from the maturation of our robust individual M. A membership grabbed expected in 2023, and 2024 and the answer to the mitigation activities are primary care and home organizations are implementing to offset the impact of their revenue headwind.

Capital deployment activity as well as a sustainable productivity and value creation initiatives discuss today.

In addition, we anticipate certain industry pricing actions to be taken across our individual and group Medicare Bugs in response to the higher generalization and trying to experience.

Bruce Broussard: In addition, there are certain initiatives kicked off as a part of our ongoing hard value creation plan in 2022 that required implementation of technology to improve processes and drive efficiencies. And when, therefore, take time to realize the full benefit as we've continued to focus on and advance these initiatives, we've identified additional value to be extracted and anticipate activities related to the additional value creation initiatives that continue throughout 2024, and result in certain one-time charges that will be adjusted for non-gal purposes.

In closing I want to say, thank you are over 65000 teammates or successive enabled by your dedication to putting our members in patients at the centre of everything we do I would also like to thank our shareholders for their continued support.

Finally, I'll reiterate the humane, it's fundamentals are strong and we remain well positioned to drive compelling earnings breath in the mid and longer term.

With that we will open the lines of your questions is there answer those waiting in the queue. We ask that you limit yourself to one question.

<unk> please introduce the first caller.

Bruce Broussard: Collectively, our ongoing productivity and value creation initiatives are driving sustainable value for the enterprise. We expect this work will create value beyond the 20 basis points of annual operating leverage of business mix just the basis that we committed to our 2020 investor day. Aiding in our efforts to offset the near term utilization and reimbursement headwinds currently impacting the industry.

Our first question comes from the line of Kevin Fischbeck with Bank of America.

Oh, great. Thanks.

My question would be on the.

Four months and the physician business, which is just a little bit counter to I guess with some of your competitors have done over the higher.

M a trend environment surprising that the physicians are seeing better medical members my medical performance.

Bruce Broussard: Before turning it over to Susan, I'd like to touch on our recently announced leadership transition plan.

Disconnect.

Through.

Bruce Broussard: We are pleased to announce that the healthcare industry veteran Jim Rick was joined, he met as a president and chief operating officer on January 8th, 2024 as part of a long planned CEO transition. Jim will report to me until the latter half of 2024, at which time after leading humanity over a decade, I'll step down and Jim will assume the CEO role. As we work to make this seamless transition in the coming months, I look forward to partnering with Jim.

Side of the equation.

And I guess, the fact that you keep growing membership faster.

Why is it that the same kind of pressure.

And that to me in my business.

And expected.

Sure Hi, Kevin Uhm, so yeah. So you're correct, we did see outperformance in their primary care business. The first thing I would point out as we've been consistently saying all year and it's some of the higher trends. We are seeing on the health plan side has been disproportionately impacting online <unk> plans verses reached providers and some of that is reflect.

Bruce Broussard: He brings a collaborative, thoughtful and innovative leadership style for our organization, making him a natural fifth of the culture of today and the future. Jim brings a strong combination of operational industry and CEO expertise. His first hand experience leading true challenge is an opportunity to change health care services continuum, but help them accelerate or integrates care strategy.

N as in the product next we're seeing more pressure on our L. P. P O offerings versus R. H M O and our center, while primary care business, particularly the hole in center are gonna disproportionately in next to H M. O plans in a geographically, obviously in Florida, and some of our higher performing markets as well with respect to the specific app for pharmacy.

<unk> primary care of this year, there's a variety of factors contributing to that they've been positive prior to your development as well as on the current in your development and recorder and both being outperformance across revenue and medical costs. So it's really a variety of factors uhm. The last thing I would say is some of the information that they rely on comes from Vietnam.

Bruce Broussard: We look forward to introducing Jim to our stakeholders when he joins the team in early 2024.

Susan Diamond: With that, I'll turn the call over to Susan. Thank you, Bruce and good morning, everyone. Today we recorded adjusted EPS of $7.78 for the third quarter. Results in the quarter were slightly positive, slightly above initial expectations during my outperformance and our Medicaid and primary care businesses, and it continued focus on driving sustainable code of city gains, offset by modestly higher than anticipated utilization in our Medicare Danish business. I will provide additional detail on recent utilization trends in a moment.

Provider and then you'll get some of that information on a bit of a lie uhm. So you can just be a little bit more leoni or a P. P. D. C. P D. As they receive updated information I would say from the Ignostic bug, it's mostly I would say revenue related where they seem to positive pick ups English towards an MRI reimbursement relative to our internal expectations.

Susan Diamond: Our performance today continues to reflect the strength and agility of the enterprise, demonstrating our ability to successfully navigate the higher than anticipated utilization, while delivering on our earnings commitment and driving individual Medicare advanced membership growth that significantly affects the industry. We now expect to add approximately 860,000 members in 2023, reflecting in 19% growth rate. Further, to the full year, we have reaffirmed our adjusted EPS guidance of at least $28.25, which reflects a 12% increase over 22%. 22.

Our next question will come from the line of Stephen Baxter with Wells Fargo.

Yeah, Hi effects. So in terms of the higher insurance company guidance the 20th at this point fire them.

The appointment to does any of that increase related Nicole bidders COVID-19 just won't be purely apply to ensure from Q4 in the queue. Three and then just in terms of the modest step up and Dot Covid cough.

Thoughts about thank you two to three could you just like that out a little bit the charge. So you know what category to drive in that category.

Susan Diamond: I will now provide additional details on our third quarter performance and full year outlook by segment beginning with insurance. This morning, we reported that our insurance segment benefit ratio exceeded expectations by 40 basis points due to higher medical costs in our Medicare range business. We continue to experience an increase in targeted missions in the third quarter, whereas our forecast previously seemed just would occur in the fourth quarter. To date, we have not seen an offset in non-COVID utilization, which diverges from the consistent patterns being previously.

In the other direction as well that'd be helpful. Thank you.

Sure I see yeah, so Edward <unk> called out the commentary.

This was missing some of our combo commentary during the quarter, we have seen an uptick in COVID-19 uhm within the <unk> as we mentioned our internal forecasts for the year initially anticipated and up taking that fourth quarter versus third uhm. So initially we said will that could be just the timing and a full forwarded that we have started to see COVID-19 started declines what is coming down.

<unk>, but as you mentioned, we have today not in an offset and they would resolve within just net incremental utilization uhm within a quarter versus what we might've otherwise expected based on historical trends.

Susan Diamond: As it respects non-inpatient trends, we previously communicated that we expected the higher p.m, p.m, reported in the second quarter to continue throughout the back half of the year, reflecting a moderating year over year trend percentage. The most recent pain-planned data suggested a modest uptick in p.m, p.m.s, for the third quarter versus the stable levels we anticipated. Considering the most recent trends, we are planning for the higher level of utilization seen in the third quarter to continue for the remainder of the year.

As we thought about the year Uhm, what we decided to you in an attempt to just become more conservative to assume that the COVID-19 that we anticipated in the fourth quarter Uhm from my initial standpoint would remain so we did not take that out of the forecast and May eventually show up as non COVID-19 ultimately, but we did keep that in network access that are ATT expectations.

Uhm are two different with what we would have expected previously uhm and didn't take that out on the non impatient side I would say the drivers are that are consistent with what we've been saying since the turn developed on our second quarter call.

Susan Diamond: As a result, we are increasing our full year insurance segment benefit ratio values to approximately 87.5%, which imply the fourth quarter ratio of 89.5%. This guidance also reflects the increased individual enemy membership growth, which continues to include a higher than expected proportion of agents. As you have previously discussed, agents initially run a higher benefit expense ratio than the average new member, which negatively impacts the current year benefit ratio, but results in a larger margin explanation opportunity on the human residual time.

The discretionary sort of orthopedic surgical procedure some of the E. R and observations that we've seen uhm, there's a continued and I'll take the drivers remain consistent there wasn't anything you. They came up it's just a dry driving Mexico insulin for Ya.

Our next question comes from the line of Scottsdale, which Stevens.

Oh, hi, Thanks, Good morning would be interested if you could give us some of your initial observations on the 2024 a E P. As it relates to your marketing and distribution strategy is James where you feel bad things, maybe resonating the most job definitely saying the Humana guide for exam.

Susan Diamond: We anticipate that the higher 2023 insurance segment benefit ratio will be offset by additional administrative expense reductions driven in part by the sustainable productivity initiatives through success, improved net investment incomes, and other business outperformance. Turning to Medicaid, the business exceeded expectations in the quarter, primarily driven by favorable membership due to re-determination timing, which continues to track slightly favorable to our expectations. Combine with disciplined medical cost management initiatives and lower than expected utilization.

<unk> I'm plenty badge recently, but more broadly just in your distribution strategies. What do you think you know it seems to be working to bastion and then any areas, where you may even be making some.

Adjustments to the strategy here, you know sort of inside it'd be a P. I should continue to look to drive yourself.

Susan Diamond: Moving out of center well, the segment continued its solid performance seen throughout the year outperforming expectations in the quarter. Our primary care organization results exceeded expectations during by better than expected patient volume and revenue combined with lower than anticipated utilization, resulting in improved medical margin and our fully on centers. We continue to see better than expected patient growth out of over 17,000 patients, or nearly 89% growth in our denobo centers since December 31 plus 15,000 patients in our holy own centers, representing 9% growth here today.

There are a few things there.

What is.

We are getting is Susan says positive feedback to destroy our position is and the channels with this and this and the various broker channels.

Call Center and in addition to the.

The field. So I would just say in general people seem to be very concerned with our position votes from a benefit point of view, but also just from our quality.

Scores, obviously I received both an stars, but also our customer service sauce.

The second thing is we do have to continue to have a balanced approach and how we are going to market with our distribution from continuing to support a bill our relationships with our call centres are external call centers and in addition, our field.

Susan Diamond: We now anticipate school year patient annual growth of approximately 34,000 to 36,000 compared to our original estimate of 20,000 to 25,000 patients, more than doubling the patient growth achieved in 2022. Our primary care organization also continues to improve the operating and financial performance of our holy own centers. We continue to positively impact patient outcomes with hospitalization levels turning down year over year. In addition, in part due to our continued efforts to engage our patients, retention is now in free of 270 basis points year over year, up from a 220 basis point improvement as of the second quarter.

Alright representatives that are external.

External silver representative so we do continue this is good engagement with them. We continued to say working with them not only from a sales point of view, but also from our attention point of view, which is consistent from last year as we continue to make proper investments with our partners there.

We do see good good results coming out of our field external field June.

Continue to see really strong results, there and probably there over to choosing from our budget.

Susan Diamond: Patience satisfaction scores continue to reflect the quality of care delivered with net promoter scores averaging 82 nationally. And they are proud of our quality scores which are tracking ahead of last year's trajectory with a 4.5 star performance year-to-date on provider influence measures for age patients. We now expect to increase the number of podium centers that are contribution margin positives from 110 at the end of 2022 to approximately 100 30 at year and 2023 and increase from our previous expectations of 125 and representing an 18% increased year-over-year.

And in addition, we continue to see good results from our agnostic channel as I mentioned, what specific things, so I'll listen to double our our sales there.

We're not making much adjustment today and I mean, we continue we're only two and a half weeks into the into a P. R.

Oh.

Like were consistent with what our expectations are.

So we're gonna continue to next to but.

Maybe in a few weeks, we might adjust accordingly, but today I think it's really.

We set out to do last year.

Okay. Thank you.

Susan Diamond: In addition, we expect to increase the number of centers that have reached our 3 million contribution margin target from 31 in 2022 to approximately 44 at the end of 2023 and increase from our previous expectation of 40 and representing a compelling 42% increased year-over-year. The better than expected primary care earnings in the quarter resulted in our consolidated benefit expense ratio being 100 basis points lower than our insurance segment benefit expense ratio as compared to our previous expectation of a 40 to 50 basis point reduction.

Our next question comes from the line of a J rice.

Yes.

Hi, <unk>, maybe just following up on some of the MLR related questions. I think last quarter, you said with what you're seeing on the utilization front.

You are comfortable that you, it's sort of incorporated that in your expectations around 24 pricing given the incremental commentary today are you so comfortable or do you need to have some level of offsetting efficiencies to submit.

Susan Diamond: As a reminder, on a consolidated basis, we report from the perspective of the health plan and its such intercompany earnings from these services are eliminated against benefit expense. At this time, we do not anticipate that the primary care app performance will run right into the fourth quarter. Therefore, we continue to point you to a 40 to 50 basis point reduction between our insurance and consolidated benefit expense ratios for the fourth quarter with the reduction of approximately 60 basis points for the full year.

<unk> Ah Ah Ah Ah Ah Ah.

Sequential off chicken utilization that you're assuming will continue next year and I guess, just part of that as well is obviously part of what's it back to your.

Medical loss ratio of this year is all the enrollment growth you've got so you've got utilization being a little higher but you've also got the drag of all these new members can you is there any way to parse out how much are the variance that you're saying is utilization versus the drag of the new members, who can give us some flavor on that.

Susan Diamond: Turning to the home and our core fee for service business, year-to-date episodic admissions are up 8.6% while total admissions are up 5.1% tracking in line with our full year expectations of a mid-single-digit year-over-year increase. As brief discussed, we are working diligently to identify clinical and operating efficiencies to offset industry headwinds including rate reductions, declining original Medicare admissions, due to increasing M.A, penetration, and ongoing labor pressures.

But the one might start to ease next year [noise].

Hi, <unk>, yeah, it looks like great questions and they also can I get all of them I would say you know.

In terms of this incremental trying we're announcing that third quarter and then stepping up to for the full year. Obviously this would not have been down at the time of pricing will be incremental uhm mitigation that we need to do to offset that in 24 Uhm. If you recall the second quarter call. We did reaffirm that we include me with an art longterm historical range of 11 to 15 per cent.

Susan Diamond: From a capital deployment perspective, we have completed approximately 1 billion and repurchases today and continue to anticipate shared repurchases of approximately 1.5 billion in 2023. Before commenting on 2024, I would like to take a moment to highlight the significant progress we have made for the midterm targets we shared in our investor day one year ago. As a reminder, our 2025 Adjustment ETS target of $37 represents a 14% tagger from 2022 and is expected to be comprised of 10% or enterprise earnings growth largely driven by the contribution from our Medicare membership.

And we were reaffirm that today all the knowledge that is resolved with the tire trend that we would expect to be in the low end of that uhm is our initial thinking I would say you know if you saw the turned available you certainly recognize that we would need to identify conditional mitigation I would say you know our ongoing efforts around productivity.

Susan Diamond: 20 basis points to improved operating leverage and a keep-percent contribution from capital deployment on an annual basis. While allowing for continued growth and investment in our Medicaid and central businesses, as the high-quality assets are expected to meaningfully contribute toward long-term earnings growth, is a continue to scale and mature. For the last year, we have out-performed and inversely all of these goals, including above industry average membership growth in our Medicare-Admitted Business, significant out-performance of our productivity goals, and increased share buybacks as we saw stock price dislocation earlier this year.

Continued since I work, we kicked off the 22 and as you said before I continue to identify more opportunity than you might've anything anticipated, which is spelled a nice pipeline uhm of opportunity that will certainly mitigated to the trend. This year and will continue to do so next year uhm to your coin to higher enrollment growth, particularly Asian.

Uhm component of that which we have seen a nice uptick in market share their does put some pressure on mlr's anything simply pre tax because we said they run about 100 per cent <unk> typically in the first two years before slipping too so diagnose it space for suggesting I typically more so than the 30 year. We said before you can think of.

[noise] about with the level of Enron Uhm hire redfin agents. This year you can think about on a full year basis that that would impact to enlarge about 20 basis points. Instead that is contemplated uhm in our 24 thinking obviously you know one of the things will start to assess as we refine and thank you for 24 will be this year's membership growth in the composition of that.

Susan Diamond: We continue to invest in and grow our Medicaid and Citadel businesses, out-performing top-line growth goals across these businesses as well. At the same time, we've experienced higher than expected medical cross-trend within our Medicare-Admitted Business, and have worked hard to mitigate the impact of these trends in order to deliver on our enterprise earnings and EPS commitments.

And the new enrollment versus retention and those are all things will continue to assess and comment on further <unk> uhm provider updated guidance on a 24 foot square to call.

Okay. Thanks, a lot.

Our next question will come from the line of Justin Lake.

Research.

Susan Diamond: All in, we are proud of the significant progress we have made and remain committed to the target we shared last year, including our 2025 Adjustment EPS target of $37.

Thanks, Good morning, I wanted to ask you about several well just given a P. D. P losses some of the pressures that we're hearing about the home health and that'd be physician business can you talk about with her directly from 23 to 24. The 24 to 25 first is kind of what you would previous.

Susan Diamond: I will now take a few moments to provide additional color on our early outlook for 2024 starting with membership. As Rich shared, while it's still early in the AEP, we expected our balance of growth toward 2024 bids, positions us to grow individual medical-revanaged membership out or above the overall industry growth rate, while planning for a monthly higher attrition rate given the benefit design changes we implemented in response to the rate environment.

We all laid out to be a doctor day in terms of those improvements that were before you know some of these headwinds.

Yeah, I hate Justin So yes, you are pregnant the central pharmacy is going to be impacted by the M. A growth as well as the decline in TDP drive let me see previously that in the mail or penetration rates for those populations and the P. D. P does run significantly lower than the M. A book and part of that is the.

Susan Diamond: As we always cautioned this time of year, early in the AEP balance season, the outlook we provide today could change depending on how sales and voluntary disinrollments ultimately come in. Broadly speaking, 2024 competitor plan designs reflect less benefit degradation than anticipated, which will likely lead to fewer consumers shopping and therefore less opportunity for humanity to meaningfully outpace the industry growth rate. Specific to humanity's performance, relative to the market, initial feedback from Grover's positive, supporting our expectation of att or above industry average growth.

Disproportionate percentage of <unk> and the P. P O, which tend to use mail order is significantly lower rate uhm. So some of the losses in 24 will be disproportionately low income because of exceeding a benchmark uhm. So that would have less impact than average certainly but those are certainly things were contemplating in our thinking for 24 Uhm.

I would say in addition to that you're Gonna is it got a lot of amusement that can help line and the pharmacy. Both in 24, and then certainly in 25 to you as we continue to see the pharmacy changes implemented so for 24, you're gonna have things like the D. I R. Changes. It is only 22, so that will happen in fact between the two they're gonna be more changes in too.

Susan Diamond: Finally, recall that we have limited visibility into member disinrollment data this early in the AEP seasons as those results take longer to complete and look forward to providing further commentary on our fourth quarter call. In our Groot Medicare Advantage business, we expect membership growth of approximately 45,000 in 2024 during by small and midsize account wins and remain committed to discipline pricing and a competitive Groot Medicare Advantage market. With respect to single and PDT, the overall PDT market continues to decline as Medicare beneficiaries elect Medicare Advantage over original Medicare and PDT.

25, but frankly, we're still working through Uhm, we would anticipate you know, we're looking at formularies, which might've pack drug <unk> pharmacy, how do you think about pricing between helping and the pharmacy will also have to be considered in light of some of the shifting liability <unk>. The changes going for 25. So we'll certainly plan to provide more commentary as we work for Ya.

<unk> and I'm more detailed guidance, but there are a lot of changes to your point, but we are contemplating that number should shifts with teaching over the last number of years.

Susan Diamond: In addition, we remain disciplined in the pricing of our PDT products, its cost turns continue to rise. As a result, our Walmart value plan will not be as competitively priced as it has been historically and our basic plan will exceed the low-income benchmark in 16 regions in 2024. We currently expect a neck decline of approximately 750,000 PDT members in 2024, including a loss of approximately 220,000 members as a result of exceeding the low-income benchmarks.

Our next question will come from the line of Joshua Raskin.

Research.

Hi, Thanks. Good morning, Uhm first question is just are the new members coming in at higher than expected Mlr's. Even for first your members or is it just the Mexicans, they're mostly agents and then if you could just refresh the MLR trends for members that are in fully capitated arrangements versus those that are in you know started.

Susan Diamond: As we look beyond 2024, we will evaluate the impact of the various proposed regulatory changes, which are likely to result in higher PDT plan premiums broadly and could lead to further industry-wide movement from standalone part B plans to Medicare Advantage plans, given the strong Medicare Advantage value proposition. Hynes. Our focus remains on creating enterprise values from our PDP plans by driving increased male order penetration and conversions to Medicare Advantage. Finally, in our Medicaid business, we need to continue to demonstrate the ability to deliver unique values to communities by building on a strong operating model that integrates physical and behavioral health and develops meaningful partnerships and innovations to address health inequities and social determinants of health.

Fee for service providers and it has that delta changed much in the last year.

Hey, Josh for your first question Uhm, we are seeing that new members are running higher than <unk> than you would expect to make me would say that is a trivial to the overall trend that we're saying we have looked at any members versus with concurrent members to see what variation we're seeing at various text plain level geographic and what would you say it's relatively can.

<unk> and so we continue to believe that'd be in fact that we're seeing Ah Bromley industry related <unk> for 15 minutes specific with the exception of some of the things we pointed out uhm previously, which we continue to see like so the download that since we've made me are seen some higher utilization uhm, but beyond that I would say that the other impacts are relatively consistent across.

Susan Diamond: After successfully implementing the Ohio and Louisiana contract in early 23, we look forward to beginning to serve members in both Indiana and Oklahoma in 2024, and continue to expect to bring our total Medicaid footprint to nine states and approximately 1.5 million members by year in 2024.

From you and concurrent uhm, but obviously driving higher melodically, we'd expected across the board in terms of the progression of numbers in the restaurant is we can follow up on any specific question you have what I would say in general I would say the trends haven't changed significantly uhm over the last one root beer, but with nothing that we've we've seen or call back.

Susan Diamond: Turning now to our expected 2024 financial performance, I would reiterate that expected growth of 2024 adjusted EPS within our targeted long term range of 11 to 15%. Recognizing the increased utilization we have now seen in 2023, and frequently assuming this level of utilization continues in 2024, we currently anticipate growth at the low end of this range. We look forward to providing more specific 2024 guidance on our fourth quarter earnings call in February.

Okay, Thanks, and I'd be remiss without congratulating Bruce on the on the pending change me and welcoming gym as well.

Josh.

Our next question will come from the line of Gary Taylor with Cowan.

[noise] hi, good morning.

A couple maybe one question one clarification you know in the last year at this time you get very.

Susan Diamond: Looking ahead to 2025, as previously mentioned, we remain committed to our 2025 adjusted EPS target of $37, reflecting a 14% tager from 2022 to 2025. It is important to note that our 2025 adjusted earnings growth will benefit from the maturation of our robust individual M.A, membership growth, expected in 2023 and 2024. In addition to the mitigation activities, our primary care and home organizations are implementing to offset the impact of their revenue headlines, capital deployment activities, as well as the sustainable productivity and value creation initiatives discussed today. In addition, we anticipate certain discrete pricing actions to be taken across our individual and group Medicare books in response to the higher utilization and trend of experience.

Precise enrollment growth guidance, perhaps perhaps that was because of the.

The the shortfall for 22 enrollment, but I guess, maybe an absence of that are you still generally anticipating.

Would you say you would grow at industry are better that'd be industry would grow high single digit is that still your general expectation and then just a slight.

Clarification, I guess to the to the back half of <unk>.

Gotcha question.

Talk about.

Design change.

Impacting MLR certainly some of that was attentional when you're that coming into the your benefit it's estimates.

Made you know C. B S. This morning was talking about more O T C benefits et cetera, I just wondered if you were to date.

Given a pretty substantial investment you made an O T C at flex and that sort of thing if you're learning anything about how members are using those benefits over the course of the year is the is the monthly utilization of those allowances uhm accelerating as the years go by et cetera. Thanks.

Susan Diamond: In closing, I want to say thank you to our over 55,000 team mates, our success is enabled by your dedication to putting our members and patients at the center of everything we do. I would also like to thank our shareholders for their continued support. Finally, I would reiterate that the community's fundamentals are strong and we remain well positioned to drive some talent earnings growth in the mid and longer term.

I'll take the first question is your stomach.

Gross guidance.

Unknown Attendee: With that, we will open the line for your questions. In fairness to those waiting in the queue, we ask that you limit yourself to one question.

Susan and take the second question.

It's kind of gross guidance. We continued as we've mentioned believe it will grow at area code to the industry.

Unknown Attendee: Operators, please introduce the first caller.

<unk> of what the industry estimate will be.

Kevin Fishbeck: Our first question comes from a line of Kevin Fishbeck with Bank of America. Oh, great, thanks. I guess maybe my question would be on the outperformance in the physician business, which is just a little bit counter to I guess what sort of your competitors have done in a higher M.A, trend environment, surprising that the physicians are seeing better medical performance.

Rent is trung, 6% to 8% or so, but you feel really comfortable with that and that comfort. During this coming from our continued feedback from our brokers message, we're aware positioning and in the market price for contingency in both the brand and.

And.

The benefits to continue to be competitive whenever the cheapest to be competitive.

Bruce Broussard: Please talk a little bit about why there's that disconnect there, why it's not flowing more through that side of the equation. And I guess the fact that you keep growing membership faster, on the clinics. Why isn't that the same kind of MLR pressure there that you see in the MA business when that grows faster than expected? Thanks. Sure. Hi, Kevin. So, yeah, here you're correct. We did see out performance in the primary care business.

<unk>. So we're getting really good feedback there that's what I just said.

We just feel that today.

The growth of the industry, we do feel you know we're not as.

Uhm competitive with US as we were last year, and you were with physicians or product and therefore, that's part of it back a little bit off a convenient disproportional to being the right out to industry or greater crib.

<unk> is it reset your second question. So if you if you think about the benefit and my soon to be made there was obviously would've been contemplating in our pricing in our initial guidance any kind of color in our initial email address as you seem a higher utilization, particularly enjoy the benefits you mentioned like <unk> or more related to the matches like Mcdonnell and reflects.

Bruce Broussard: The first thing I would point out is we've been consistently saying all year that some of the higher trends we are seeing on the health plan side has been disproportionately impacting our non-rich plans versus risk providers. And some of that is reflections in the product mix. We're seeing more pressure in our LTPO offerings versus our HMO and our center well primary care business, particularly the Holian Center's organizes proportionally index to HMO plans and a geographically obviously explore and some of our higher performing markets as well.

As we spoke with you I would say we are seeing uhm I didn't hire utilization on some of those benefit in wrestling thing you would've expected, but again it we're seeing a property the same membership base as well as on the new members. Once again not a selection issue. We're just attracting people that are tied to that then I think we're seeing existing number you now have access to those Richard and it is also.

Bruce Broussard: With respect to the specific out performance we've seen in primary care this year, there's a variety of factors contributing to that. They've seen positive prior year development as well as positive current year development in the quarter. And both seeing out performance across revenue and medical costs. So really a variety of factors. The last thing I would say is some of the information that they rely on comes from the agnostic providers and if you get some of that information on a bit of a lot.

Utilizing them at a higher rate as well could you get a dental side I would say, but also the vision, we're seeing across both just more <unk>.

Dollars being utilized versus more utilizes over also sort of the cost per visit did you can think about is going up where I'm sure. You know, but then isn't the optometrist to you and when they got a patient and they're they're trying to maximize that sort of revenue per patient. So we're seeing some higher cost procedure our services like to enter your system other things routine.

Bruce Broussard: So you can just see a little bit more later in the years or PPD as they receive updated information. I would say from the agnostic book it's mostly I would say revenue related where they see some positive pickups in risk towards an MRI reimbursement relative to our internal excitation.

Late within that utilization with the way some of those benefits are designed for Jamie to flag cause we do have less opportunity injuring year to try and mitigate some of that and it does require adjustments to your benefit development. So as we stomach saw some of that particularly on the flex benefits early in the year, we did make some adjustments in our 24 clean designs too account.

Stephen Baxter: Our next question will come from the line of Steven Baxter with Wells Fargo. Yeah, hi, thanks. So in terms of the higher insurance company guidance, you know, the 20 basis point higher than the high end of the range pre-lead point and two.

For that and and implement some additional restrictions and benefit reductions that is one thing you'll see uhm. So we'll continue to monitor your <unk> broader utilization just relative to what we should expect it off of that benefit and rest of your day and a few of those specific category.

Susan Diamond: Is any of that increase related to COVID or is COVID is indeed purely a high-ning shift from Q4 into Q3. And then just in terms of the modest step up and not COVID cost PM PM, so you talked about from Q2 to Q3. Can you just point that out a little bit in terms of, you know, what categories are driving that many categories to move in in the other direction as well. That would be helpful enough. Thank you.

Thank you.

Our next question will come from the line of George Hill, which Deutsche Bank [noise].

Does that does that charge health, so I'll I'll talk yes can address.

Susan Diamond: Sure. I see. Yeah. Okay, so I think it's like to go right as we caught up in the commentary and we just slow this into more public commentary during the quarter. We have seen an up to get in to a bit within the quarter. As we mentioned our internal forecast for the year initially anticipated an up to get in the fourth quarter versus third. So initially we said, well, that should be just a timing and a full quarter that we have started to see COVID start to decline.

<unk> the end of the operator cut off of mind I, just Wanna make sure I heard you right, where you said roofing higher MLR pressure in P. P. O vs. H M O plans and I guess, that's my my question I want to make sure I heard that right. Now my question would be is very meaningful difference typically between the H M O and the P. P O plans and kind of how should we think about that going forward.

You know you're kind of thing brought a demand for the P. P O plan.

Susan Diamond: So it's coming down. But as we mentioned, we have today not seen an offset and so it's resulted in just net incremental utilization within the quarter versus what we might have otherwise expected based on historical trends. As we thought about the year, what we decided to do and in a chance to just be somewhat conservative to assume that the COVID that we anticipated in the fourth quarter from the admission standpoint would remain so we did not take that out of the forecast.

It kind of that sure is expected to increase in Mexico going forward.

Yes, Uhm he didn't hear me correctly that we are seeing more pressure on our P. P M, which is R. H M O.

<unk> that is a reflection of a lotta the newer plan designs, we've implemented uhm, it'll actually you're having more P. P O and he saw the introduction of coffee industry zero dollar I'll keep you know as an example.

Do you tend to have a lower margin profile than our legacy HMO products. Some of that sounds sort of reflection of this geographic next differences, obviously <unk> penetration an HMO products into my life.

Susan Diamond: And they eventually show up as non-COVID ultimately, but we did keep that in the forecast that our HTTP expectations are consistent with what we would have expected previously and didn't take that out. On the non-intention side, I would see the drivers of that are consistent with what we've been saying since the term developed on our second quarter call. And the discretionary sort of orthopedic and surgical procedures, some of the ER and observations that we've seen those have continued. And I think the drivers remain consistent. There wasn't any venue. They came up. That's the drive drive.

Florida and highly risks.

Okay.

[noise] historically, although we're seeing more and more of our more sophisticated look provider take <unk>.

[noise] I'm allergic.

[noise] see better financial results, including lower MLR as in higher contribution P. M. P M.

Scott Fidel: Our next question comes from a line of Scott Fidel with Stephen. Hi, thanks. Good morning.

Bruce Broussard: Would be interested if you could give us some of your initial observations on the 2024 AEP as it relates to your marketing and distribution strategies and where you feel that things may be resonating the most, definitely seeing the humana guy, for example, on plenty of ads recently, but more broadly, just in your distribution strategies, what you think seems to be working the best in and then any areas where you may even be making some adjustments to the strategy here, you know, sort of inside of the AEP as you continue to look to drive yourselves. Thanks.

Our next question comes from the line of Sarah James which Cantor Fitzgerald.

Thank you so that the hospitals this quarter has pretty consistently and talking about.

Pressure on the claims review process for a physician fees, especially in the E T E and.

<unk> impatient person monitoring and I'm wondering if you're seeing any savings on this on your claims review process for those in twenty-three or what you expect in 24 and if there are some areas that you're looking to improve.

Bruce Broussard: Yeah, a few things there. One is we are getting as soon as the public feedback to just where our positioning is in the channels, in the various broker channels, so both the call center and in addition, the field, so I would just say in general people seem to be very content with our position, both from a benefit point of view, but also from our quality scores that we obviously receive both in stars, but also our customer service side.

<unk> process on in 24.

[laughter].

<unk> would you mind repeating that question, we didn't get done with today I'm sorry.

Check so the.

The hospitals have pretty consistently been.

Talking about some pushback on the claims review process for physicians physician fees physicians and E D as well as the impatient versus monitoring.

Bruce Broussard: The second thing is we do have continued to have a balanced approach in how we are going to market with our distribution from continuing to support and build our relationships with our call centers, our external call centers, and in addition our field, our representatives that are external field representatives, so we do continue to see good engagement with them. We continue to see working with them, not only from a sales point of view, but also from our intention point of view, which is consistent from last year as we continue to make proper investments with our partners there.

Vacation I'm wondering if that's an area that you're seeing any savings in an twenty-three are <unk> 24, if not those areas. If there are some areas that you're focused on for claims review as you approach 24, and managing Emmeline Gotcha.

Got it thank you Sarah see I think <unk>.

I'm, referring to him that utilization management practices and those are typically done on the front and we do that wherever possible, where we will have the opportunity review for medical necessity and appropriate setting so whether that's a full in patient admission or an observation today, we've had those programs in place for many many years there are some changes coming in 22.

Bruce Broussard: We do see good results coming out of our field, external field channel. We continue to see really strong results there, and probably they're overachieving from our budget. And in addition, we continue to see good results from our agnostic channel, as I mentioned, we're predicting to double our sales there. We're not making much adjustment today. I mean, we continue around the two and a half weeks into the AEP. We feel like we're consistent with what our expectations are. And so we're going to continue to execute, but maybe in a few weeks, we might adjust accordingly, but today I think it's what we just fed up to do last year. Okay, thank you.

24, Uhm based on some new C. M S regulations and those do change the way some of those programs will work uhm, but those don't take effect until January 24, So I would say no meaningful changes uhm experienced in 23, but we are anticipating those changes in 24, those did represent a headwind to us uhm recognizing.

That we won't be able to have as much impact as we have historically from those efforts and we did account for that in the days, but that is one of those things will certainly want to watch next year, how that develops relative to our expectations I'm recognizing there may be some behavior change that we see within the provider community as they adapt to those changes so that something will continue to watch it.

It is something we anticipated and include it in our 24 pricing.

AJ Rice: Our next question will come from the line of AJ Rice with UBS.

Our next question will come from the line Lance Wilkes, which Bernstein.

AJ Rice: Hi, everybody. Maybe just following up on some of the MLR related questions. I think last quarter, you said with what you were seeing on the utilization front, you were comfortable that you had incorporated that in your expectations around 24 pricing. Given the incremental commentary today, are you so comfortable or do you need to have some level of offsetting efficiencies to mitigate a sequential uptick in utilization that you're assuming will continue next year?

Yeah.

Hopefully you can hear me ear operated set out on me too just a quick question you made you made a comment about.

Tricia and you're expecting in 24 I was wondering if you could maybe just get a little more color on the drivers are bad if it has to do with.

Distribution channels or maybe the proportion nodules or something like that and then also you can just remind us for the 37 dollar targets at 25, what's.

What's the kind of implicit M. A rate increase so you're expecting that we ought to be starting to see in February that's kind of baked into that thanks a lot.

AJ Rice: And I guess just part of that as well, is obviously part of what's impacting your medical loss ratio this year is all the enrollment growth you've got. So you've got utilization being a little higher, but you've also got the drag of all these new members. Can you, is there any way to parse out how much of the variance that you're seeing is utilization versus the drag of the new members and give us some flavor on that, assuming that the one might start to ease next year?

Okay I'll take the first one on Susan can take a second one on the modestly higher attrition related is just coming from what we are a history of when there are changes significant changes in benefits, where we do see is people shopping more and result, when they're shopping more though.

Increased Patricia so it's really more the environment, we're in as opposed to a dramatic changes in the in our distribution channel or or benefits.

Susan Diamond: Hi, Angie. Yeah, looks like great questions, and they'll try to get all of them. I would say, you know, in terms of the thinker-mile trend, we are nodding the third quarter and then stepping up to you for the full year. Obviously, this would not have been known at the time of pricing. There would be incremental mitigation that we need to do to offset that in 24. If you would call, the second quarter call, we did reaffirm that we intend to be within our long-term historical range of 11 to 15% and we were reaffirmed today, although acknowledged that it is a result of this higher trend that we would expect to be in the low end of that, is our initial thinking.

Yeah, and then <unk> the $37 I would say in general is we've commented we we've been anticipating that the right environment would not continue to be as favorable as we'd seen the last number of years, obviously for 2024 and the industry you know absorbing been more negative right environment and with the phase in of the risk adjustment model changes, we anticipate that that will be implemented.

The next the remaining over the next few years that will certainly have an impact your primary care business, which we've talked about uhm, while the business has a mitigation plan and they believe they can fully mitigate the impact. They do think it will take time. So we are anticipating a hand went in 24 there'll be somewhat lessened in 25 as they continue to mature in scale.

Susan Diamond: I would say, you know, as we saw the trend developed, we certainly recognize that we would need to identify conditional mitigation. I would say, you know, our ongoing efforts around productivity, you know, have continued since the work we kicked off in 22. And as we said before, continue to identify more opportunities and you might have initiated, which is built a nice pipeline of opportunity that was certainly mitigated in the trend this year.

<unk> mitigation plan initiatives, and then fully offset by 26 within the health plan I would say, we obviously know what the impact of the the risk adjustment model change bathing will be but we'll have to obviously see what the core right adjustment looks like in light of some of the tire trend in theory, you would see some positive restatement embedded in there. So I'll have to see what that looks like an <unk>.

Susan Diamond: And we'll continue to do so next year. To your point, the higher enrollment growth, particularly agents, component of that, which we have seen a nice up-sick in market share there, does put some pressure on MLRs and even some take this pre-tax, because we said they run about 100% MLR, typically in the first two years, before slipping to full diagnosis phase for suggestions, typically more so in the third year. We said before, you can think about with the level of enrollment, higher enrollment from agents this year, you can think about on a school year basis that that would impact the MLRs about 20 basis points.

Other it's sufficient to cover normal horse trend.

The way, we generally think about it though is that is going to impact the industry broadly and so in theory, we should be on par with everyone else in assuming everyone react rationally then it wouldn't put you in an advantage or disadvantage. We are very pleased though again just have it you know really strong stars resolve that were published recently and and that again is a nice gerbil advantage for us where we do.

You know some others will have some challenges to do on their while others may have some improvement and so those are all things that we consider them as we plan for 25 I'm just reiterate we remain committed to delivering the $37 uhm commuting to to continue to grow at or around the industry right for M. A membership growth and wanted to highlight recognizing it it.

Susan Diamond: And so that is contemplated in our 24 thinking. Obviously, you know, one of the things we'll still have to assess is we refine the thinking for 24 will be this year's membership growth and the composition of that, you know, the new enrollment versus retention, and those are all things we'll continue to assess and comment on further when we provide our update again.

AJ Rice: Okay, thanks a lot.

Requires an accelerated growth rate for earnings in 25 wanted to make sure. We highlighted some of those more unique tailwinds that we will benefit from in 25, uhm that allow us to achieve that higher than typical rate uhm in order to deliver the $37 and we'll certainly share more on our first sparkle.

Justin Lake: Our next question will come from the line of Justin Lake with Wolf Research. Thanks. Good morning. I wanted to ask about Center Well, just given the PDP losses, some of the pressures that we're hearing about, you know, both in the home health and the physician business. Can you talk about the trajectory from 23 to 24 and then 24 to 25 versus kind of what you would previously laid out at the investor day in terms of those improvements that were before, you know, some of these head wind setting.

Perfect.

Our next question will come from the line of Nathan Rich with Goldman Sachs.

Hi, Good morning can you hear me yes.

Great maybe just building off of that last comment there on on the 2025 target you know how should we think about the margin progression for the Medicare advantage business between 24 and 25. It seems like you know maybe a bit of a bigger step up then what you didn't anticipate it previously and you also made reference to some additional earnings.

Justin Lake: Yeah, I hate Justin. So yes, you're correct. The central pharmacy is going to be impacted by the MA growth as well as the decline in PDP growth. We've shared previously the MLR penetration rates for those populations, and the PDP does run significantly lower than the MLA book and part of that is the disproportionate percentage of duels in the PDP book, which can be used. We may be able to significantly lower rate to some of the losses in 24 will be disproportionately low income because of exceeding the benchmark.

Like pricing actions could you just go into a little bit more detail on what you're considering there.

Yeah, absolutely and so it's you know I got caught up in my prepared remarks, there are some <unk> that will benefit from in 25, you know as we said the outsize membership grows in the progression you will typically see in the margin profile others, New member coverage improves everytime uhm hire agents in particular as I mentioned, they typically don't see the.

Justin Lake: So that would have less impact than average, certainly, but those are certainly things we're contemplating in our thinking for 24. I would say in addition to that, you're going to need just got a lot of movement between helping the pharmacy both in 24 and then certainly in 25 to as we continue to see the pharmacy changes implemented. So for 24, you're going to have things like the DIR changes going to 20 sale, so that will have an impact between the two.

The real step up in performance until your three when they fully convert to risk adjustment. So the member menu agents, we got an archway twenty-three book well then see disproportionate improvement in 2025, Uhm that will help <unk>.

<unk> to that higher earnings growth it would be required to get to the 37 Uhm. We have continued to see you know favorable net invested in count as you've seen as our in our resolve since there's some of those things are improving relative to what we would've thought I'm going to 24 and will continue to 25 and then certainly our continued focus on productivity Uhm, it's something that has continued.

Justin Lake: There are going to be more changes in 25 that frankly, we're still working through. We would anticipate, you know, we're looking at formulas, which might impact drug mix and the pharmacy. How you think about pricing between the health and the pharmacy will also have to be considered in light of some of the shifting liability in the changes plan for 25. So we'll certainly plan to write more commentary as we work through some of those in our more detailed guidance. But there are a lot of changes to your point when we are contemplating that membership shift, which we see in real life.

To to to prove to be a mitt again for the near term pressure and then we expect to continue to see more than the 20 basis points of operating it uhm leverage that we committed to you Uhm and then some in the capital deployment will benefit as well so the way I think about it you know when you try to isolate some of everything sort of been what's left is what you say is more normal <unk>.

Aggression within our historical targeted range Uhm, we do acknowledge that I've given what we're seeing in the trends and also in some of the discrete uhm utilization we've seen in some of the benefits. We discuss we do expect that we will take some discrete pricing action for 25, we will certainly be targeted and then way we do that so that we're addressing some of those spots that are <unk>.

Joshua Raskin: Our next question will come from the line of Joshua Raskin with nephron research. Hi, thanks. Good morning.

Joshua Raskin: First question is just are the new members coming in at higher than expected MLRs even for first year members or is it just the mix because they're mostly agents and then if you could just refresh the MLR trends for members that are in fully-capitated arrangements versus those that are in, you know, sort of fee for service providers and has that delta changed much in the last year? Hey, Josh, for your first question, we are seeing that new members are running higher than all ours than than you would expected that we would say that is a trivial to the overall trend that we're seeing.

Driving uhm, let's earnings progression and we would have expected at the time of pricing and so while they might have some impact of membership uhm. We would say you know we're <unk>, we would plan to target in a way where that's okay, but it's it's the appropriate thing to do to balance a membership and and the earnings progression that we'd be looking for and you still feel confident that more broadly.

You know, we should be well positioned such that we should be able to continue to to generate membership growth uhm at or above the industry right.

[noise] our last question will come from the line up Mayo with Leerink partners.

Joshua Raskin: We have looked at new members versus concurrent members to see what variation we're seeing at various times plain level geographic and what we say is relatively consistent. So we continue to believe that the impacts that we're seeing are broadly industry-related trends versus we may not specific with the exception of some of the things we point out previously, which we continue to see like some of the demo investments we've made, we are seeing some higher utilization.

Okay.

Did you say with Mayo, Yeah <unk> [laughter].

Consistent theme today [laughter] just one one clarification just on the last topic of the the agents can you quantify Susan.

Joshua Raskin: But beyond that, I would say that the other impacts are relatively consistent across from you and concurrent, but obviously driving higher and larger we would expect it across the board. In terms of the progression of members in the risk derives, we can follow up on any specific question you have, but I would say in general, I would say the trends haven't changed significantly over the last few years, but with nothing that we've seen or called out. Okay, thanks.

You're seeing this year inside of the 19 per cent per cent growth in what you're thinking for next year and then I'm. Just wondering where you are on the evolution of the delegation of risk on one home how much of the medical spin you've transitioned and maybe how much of that is driving the groups on your home solution specifics.

Okay I got the first one would you mind repeating the second question. So the first question is that agents what was the second question.

Joshua Raskin: And I'd be remiss without congratulating Bruce on the pending change and welcoming Jim as well. Thanks, Josh.

Just one home and how much you've delegated the risk on that business today in terms of like the post acute or to be of me and how much of that is driving growth on your palm solutions business.

Gary Taylor: Our next question will come from the line of Gary Taylor with Cowan. Hi, good morning. Just a couple, maybe one question, one clarification. You know, I know last year at this time you gave very precise enrollment growth guidance, and perhaps that was because of the shortfall in the 22 enrollment. But I guess maybe in absence of that, are you still generally anticipating when you say you would grow at industry or better that the industry would grow high single digit?

As far as the agents Uhm I think there's some of the information shared about the increased penetration that we've seen you can think of that is about 250000 additional sales for agents for the full year and then you see the incremental benefit of the margin progression on that like I said, it's disproportionately weighted to your three by the time they've <unk>.

Gary Taylor: Is that still your general expectation? And then just a slight clarification, I guess, to the back half of Josh's question. You do talk about benefit design change as impacting the MLR, and certainly some of that was intentional when you that coming into the year, or benefit investments made, you know, CVS this morning was talking about more OTC benefits, et cetera. I just wondered if year-to-date given the pretty substantial investment you made in OTC and Flex, and that sort of thing, if you're learning anything about how members are using those benefits over the course of the year, is the monthly utilization of those allowances accelerating as the year has gone by, et cetera. Thanks.

<unk> ultimately convert in terms of one home uhm, it's about 15% of M. A membership I.

I think it was an answer to your question.

Okay, but but how much of like the if I take all of your <unk>. Your post acute spin how much of that have you fully rolled out in terms of the full delegation of risk.

Yeah, why don't we we can get back to you with a specific answer on that uhm, let us look at that and when we talk late tomorrow. We can have an answer for Ya.

That's fine thanks, Alright.

That concludes our question and answer session I'd like to turn the call back to <unk> for closing remarks. Thank you operator.

<unk>, Thanks for 60 private.

And employers are truly appreciate it and their hard work and dedication.

<unk> each day to serve our members in patients.

I'd also right reiterate the thanks to our shareholders for their continued support.

Man, it's fundamentals are strong and we remain committed to leveraging the strengths and scale of our enterprise to navigate near term challenges, while continuing to advance our strategy.

Bruce Broussard: I'll take the first question, just on the growth guidance, and I'll excuse me and take the second question. On the growth guidance, we continue, as we mentioned, believe that we'll grow at or equal to the industry. I think there's ranges of what the industry estimate will be. And the benefits continuing to be competitive, never the cheapest, but to be competitive in the marketplace. So we're getting really good feedback there. So I would just say, you know, we just feel that today we will follow the growth of the industry.

Importantly, we remain committed to our 2025 adjusted EPS target of $37, reflecting a 14% compound annual growth rate from 20 to 22 to 20 to 25.

I hope everyone has a great day.

This concludes today's conference call. Thank you for participating you may now disconnect.

Mmm Mmm.

[music].

Bruce Broussard: We do feel, you know, we're not as competitive as as we were last year in the way we've positioned our product in there. That's why we backed a little bit off of being disproportional to being right at the industry or greater growth.

Susan Diamond: I think it's a refresher second question. So as you think about the benefit and lessons we made, there was obviously within contemplation and our phrasing and our initial guidance and kind of toward our initial and the logad. As you've seen the higher utilization, particularly through the benefits you mentioned, like the more we raise the lessons like this down on the flex as we spoke with you. I would say we are seeing this higher utilization on some of those benefit investments than you would have expected.

Susan Diamond: But again, we're seeing across the existing membership base as well as in the new members. It's again, not a selection issue or we're just attracting people that are attracted to that benefit. We're seeing existing members. We now have access to those which are benefits also utilizing them in the higher rate as well. So you're going to the dental side, I would say, but also the vision we're seeing across both. Just more, you dollars being utilized versus more utilization overall.

Susan Diamond: So sort of the cost per visit, as you can think about it going up where I'm sure the dentists in the autonomous regime when they got a patient in there they're trying to maximize that sort of revenue per patient. So we're seeing some higher cost procedures or services like dentures and some other things routinely within that utilization. With the way some of those benefits are designed to trigger the flex, we do have less opportunities in three years to try and mitigate some of that and it does require adjustments to the benefit design.

Susan Diamond: And so as we saw some of that particularly on the flex benefits earlier in the year, we did make some adjustments in our 24 plane designs to account for that and implement some additional restrictions and benefit reductions that is one thing you'll see. So we'll continue to monitor if I would say broad broader utilization, just relative to what we expected off of that benefit and risks that we implemented in a few other specific categories.

George Hill: Thank you.

Bruce Broussard: Our next question will come from the line of George Hill with Deutsche Bank. Was that George Hill? So I'll talk. Yes. Sorry Susan, at the end of the offer you're coming off of mine. I just want to make sure I heard you right where you said were you seeing higher MLR pressure in PPO versus HMO plans. And I guess my question I want to make sure that right now my question would be, is there a meaningful MLR difference typically between the HMO and the PPO plans and kind of how should we think about that going forward?

Bruce Broussard: It is, you know, you're kind of seeing broader demands for the PPO plans and kind of that shares expected to increase and mix going forward. Hi, George. Yes. You did hear me correctly that we are seeing more pressure in our PPO versus our HMOs. Some of that reflection of a lot of the newer plan designs we've implemented over the last year has been more PPO and you saw the introduction across the industry of the zero dollar LPPO as an example.

Bruce Broussard: If you tend to have a lower margin profile, then our legacy HMO products. Some of that also reflection of this geographic mix differences. Obviously, we have strong and deep penetration in HMO products into the market. Like Georgia and Hollywood initiative market. . Although we're seeing more and more of our more sophisticated risk providers, take risks on to see. . Yeah, hopefully you can hear me here, operator cut out on me too.

Bruce Broussard: Just a quick question, you made a comment about obviously higher attrition you're expecting in 24. I was wondering if you could maybe just give a little more color on the drivers of that if it has to do with distribution channels or maybe the greater proportion of non-duals or something like that. And then also if you could just remind us for the $37 target in 25, what's the kind of implicit any rate increase that you're expecting that we ought to be starting to see in February that's this kind of baked into that. Thanks a lot.

Bruce Broussard: Okay, I'll take the first one on Susan can take the second one on the modestly higher attrition really is just coming from what we are history when there are changes significant changes and benefits what we do see is people shopping more. And in result when they're shopping more though, you know, we've we've seen the increased attrition so it's really more the environment we're in as opposed to dramatic changes in the in our distribution channel or benefits.

Bruce Broussard: Yeah, and then let's restrict the $37 I would say in general as we commented we we have been anticipating that the rate environment would not continue to be as favorable as we've seen the last number of years. Obviously for 2024 the industry is, you know, absorbing the more negative rate environment and with the phase in of the risk of just that model changes we anticipate that that will be implemented over the next the remaining over the next two years.

Bruce Broussard: That will certainly have an impact to our primary care business which we've talked about while the business has a mitigation plan and they believe they can fully mitigate the impact they do think it will take time. So we are anticipating ahead when in 24 that will be somewhat lessened in 25 as they continue to mature and scale some of their mitigation plan initiatives and then fully offset by 26 within the health plan I would say we obviously know what the impact of the the risk adjustment model change phase and will be but we'll have to obviously see what the core rate adjustment looks like in light of some of the higher trend in theory you would see some positive restatement embedded in there.

Bruce Broussard: So what to see what that looks like and whether it's sufficient to cover normal course trend. The way we generally think about that was that is going to impact the industry broadly and so in theory we should be on par with everyone else and assuming everyone reacts rationally then it wouldn't put you in an advantage or disadvantage. We are very pleased though again to have the really strong stars results that were published recently and that again is a nice, durable advantage for us where we do know some others will have some challenges to deal with there while others may have some improvement and so those are all things that we consider as we plan for 25.

Bruce Broussard: I'm just to reiterate we remain committed to delivering the $37 committing to continue to grow at or above the industry rate for M.A membership growth and wanted to highlight recognizing it requires an accelerated growth rate. For earnings in 25 wanted to make sure we highlighted some of those more unique tailwinds that we will benefit from in 25 that allow us to achieve that higher than typical rate in words to deliver the $37 and will certainly share more on our fourth quarter call. Thanks.

Nathan Rich: Our next question will come from a line of Nathan rich with Goldman Sachs. Hi, good morning. Can you hear me? Yes. Great. Susan, maybe just building off of that last comment there on the 2025 target.

Susan Diamond: How should we think about the margin progression for the Medicare Advantage business between 24 and 25? It seems like maybe a bit of a bigger step up than what you anticipated previously. And you also made reference to some additional earnings levers, pricing actions. Could you just go into a little bit more detail on what you're considering there? Yeah, absolutely. And so as I call out in my prepare remarks, there are some kill wins that will benefit from in 25.

Susan Diamond: As we said, the outsides membership growth and the progression you will typically see in the margin profile of those new member cohorts improves over time. The higher agents in particular, as I mentioned, they typically don't see the real step up in performance until years three when they fully convert to risk adjustment. So the member, the new agents we've got in our 2023 book will then see disproportion improvement in 2025 that will help contribute to that higher earnings growth that would be required to get to the 37.

Susan Diamond: We have continued to see, you know, favorable net investment income as you've seen as our in our results. And so some of those things are improving relative to what we would have thought going into 24 and will continue to 25. And then certainly our continued focus on productivity. It's something that has continued to prove to be a mitigate for the near term pressure. And then we expect to continue to see more than the 20 basis points of offering leverage that we committed to. And then some of the capital deployment will benefit as well.

Susan Diamond: So the way I think about it, you know, when you try to isolate some of those things, sort of then what's left is what you say is more normal progression within our historical targeted range. We do acknowledge that given what we're seeing in the trends and also in some of the discrete utilization we've seen in some of the benefits we discussed. We do expect that we will take some discrete pricing action for 25.

Susan Diamond: We will certainly be targeted in the way we do that so that we're addressing some of those spots that are driving less earnings progression than we would have expected at the time of pricing. And so while they might have some impact on membership, we would say, you know, we're taught we would plan to target in a way where that's okay, but it's the appropriate thing to do to balance the membership and and the earnings progression that we'd be looking for. And still so confident that more broadly, you know, we should be well positioned such that we should be able to continue to generate membership growth at or above the industry rate.

Benjamin Mayo: Our last question will come from a line of Mayo with learing partners. Did you say what Mayo? Yes, I went hard. It's consistent theme today. Just one clarification just on that last topic of the agents. Can you quantify Susan the growth that you're seeing this year inside of the 19% percent growth and what you're thinking for next year. And then I'm just wondering, you know, where you are on sort of the evolution of the delegation of risk on one home, how much of the medical spend you've transitioned and maybe how much of that is driving the growth on your home solutions business.

Benjamin Mayo: Thanks. Okay, I got the first one. Would you mind repeating the second question to the first question about agents? What was the second question? Just one home, and how much you've delegated the risk on that business today in terms of the post-ecutor, the DME, and how much of that is driving growth on your home solutions business. Sure. As far as the agents, I think with some of the information we've shared about the increased penetration that we've seen, you can think of that as about 250,000 additional sales for agents for the full year.

Benjamin Mayo: And then we see the incremental benefit of the margin progression on that. Like I said, it's disproportionately weighted to year three. By the time those members ultimately converge. In terms of one home, it's about 15% of MA membership, I think is an interest to your question. Okay, but how much of like the, if I take all of your post-ecutes then how much of that have you fully rolled out in terms of the full delegation of risk?

Benjamin Mayo: Yeah. Why don't we, we can get back to you with a specific answer on that. Let us look at that and when we talk later tomorrow we can have that answer for you. That's fine. Thanks. Okay.

Unknown Attendee: That concludes our question and answer session.

Bruce Broussard: I'd like to turn the call back to Bruce Broussard for closing remarks. Thank you, operator. In closing, I'd echo Susan's thanks to our 65,000 employees. We're truly appreciated their hard work and dedication. We bring each day to serve our members and patients. I'd also reiterate the thanks to our shareholders for their continued support. Amanda's fundamentals are strong and we remain committed to leveraging the strength and scale of our enterprise. Navigate near term challenges while continuing to advance our strategy. And importantly, we remain committed to our 2025 adjusted EPS target of 37 hours. Reflecting a 14% compound annual growth rate from 2022 to 2025.

Unknown Attendee: Hope everyone has a great day.

Unknown Attendee: Disconclus today's conference call. Thank you for participating.

Unknown Attendee: You may now disconnect.