Q1 2024 Humana Inc Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to the Humana First Quarter 2024 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 this session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Lisa Stoner, Vice President of Investor Relations. Please go ahead.
Good day, and thank you for standing by.
Welcome to the Humana first quarter 2024 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.
I'll ask a question during the session you will need to press star one one on your telephone.
You will then hear an automated message advising your hand is raised.
To withdraw your question. Please press star one one again.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to Lisa Stoner Vice President of Investor Relations. Please go ahead.
Lisa Stoner: Thank you and good morning. I hope everyone had a chance to review our press release and prepared remarks, both of which are available on our website. We will begin this morning with brief remarks from Bruce Broussard, Humana's Chief Executive Officer, and Jim Rechtin, Humana's President and Chief Operating Officer, followed by a Q&A session where Bruce and Jim will be joined by Susan Diamond, Humana's Chief Financial Officer. 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 involve a number of risks and uncertainties. The actual results could differ materially.
Lisa Stoner: Thank you and good morning, I hope everyone had a chance to review our press release and prepared remarks, both of which are available on our website. We will begin this morning with brief remarks from Bruce Broussard, Humana's, Chief Executive Officer, and Jim wrapped in Humana's, President and Chief operating officer, followed by a.
Lisa Stoner: Q&A session, where Bruce and Jim will be joined by Susan Diamond Humana's, Chief Financial Officer.
Lisa Stoner: 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 involve a number of risks and uncertainties actual results could differ materially investors are advised to read the detailed risk factors discussed in our latest Form 10-K R.
Lisa Stoner: Investors are advised to read the detailed risk factors discussed in our latest Form 10-K, our other filings with the Securities and Exchange Commission, and our first quarter 2024 earnings press release as they relate to forward-looking statements, along with other risks discussed in our SEC filings. We undertake no obligation to publicly address or update any forward-looking statements in future filings or communications regarding our business or results. Today's press release, our historical financial news releases, and our filings with the SEC are all also available on our Investor Relations site.
Lisa Stoner: Other filings with the Securities and Exchange Commission and our first quarter 2024 earnings press release as they relate to forward looking statements along with other risks discussed in our SEC filings, we undertake no obligation to publicly address or update any forward looking statement and future filings our communications regarding our business.
Lisa Stoner: Our results today's press release, our historical financial news releases and our filings with the SEC are all also available on our Investor Relations site call.
Lisa Stoner: Call participants should note that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles or GAAP. Management's explanation for the use of these non-GAAP measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. Any references to earnings per share or EPS made during this conference call refer to diluted earnings per common share. Finally, this call is being recorded for replay purposes. That replay will be available on the Investor Relations page of Humana's website, Humana.com, later today. With that, I'll turn the call over to Bruce Broussard. Thank you
Lisa Stoner: Call participants should note that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles or GAAP.
Management's explanation for the use of these non-GAAP measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release.
Lisa Stoner: Any references to earnings per share or EPS made during this conference call refer to diluted earnings per common share.
Lisa Stoner: Finally, this call is being recorded for replay purposes that replay will be available on the Investor Relations page of Humana's website Humana Dot com later today with that I'll turn the call over to Bruce Broussard.
Bruce Dale Broussard: Thank you, Lisa, and good morning, everyone, and thank you for joining us. I hope you had the opportunity to review our prepared remarks, which we posted this morning along with our earnings release. We will spend the majority of our time today on Q&A, but I'd first like to highlight a few key messages that we want you to take away from our discussion. First, we had a solid start to 2024.
Bruce Dale Broussard: Thank you Lisa and good morning, everyone and thank you for joining us.
Bruce Dale Broussard: I Hope you had the opportunity to review our prepared remarks, which we posted this morning, along with our earnings release.
Bruce Dale Broussard: We will spend the majority of our time today on Q&A.
Bruce Dale Broussard: But I'd first like to highlight a few key messages that we want you to take away from our discussion.
Bruce Dale Broussard: First we had a solid start to 2024 and we're pleased to reaffirm our full year adjusted EPS guidance of approximately $16, while increasing our individual MA membership growth outlook by 50000 to.
Bruce Dale Broussard: And we're pleased to reaffirm our full year adjusted EPS guidance of approximately $16 while increasing our individual MA membership growth outlook by 50,000 to 150,000 net growth. Early medical cost trend indicators in our individual MA business are largely in line to positive relative to expectations. And we have seen strong year-to-date patient growth in our primary care business, with 20% growth in our de novo centers and 7% growth in our more mature wholly owned. In addition, we are incredibly proud of our continued organic success, expanding our Medicaid platform with recent contract wins in Florida, Texas, and Virginia. And they're pleased that 2024 is trending in line with expectations.
Bruce Dale Broussard: 150000 net growth.
Bruce Dale Broussard: Early medical cost trends indicators in our individual MA business are largely in line to positive relative to expectations and we have seen strong year to date patient growth in our primary care business, but 20% growth in our de Novo centers and 7% growth in our more mature wholly owned.
Bruce Dale Broussard: Centers.
Bruce Dale Broussard: In addition, we are incredibly proud of our continued organic success expanding our Medicaid platform with recent contract wins in Florida.
Bruce Dale Broussard: Texas and Virginia.
Bruce Dale Broussard: We are pleased that 2024 is trending in line with expectations.
Bruce Dale Broussard: As we look ahead, we acknowledge that the industry is experiencing a dynamic and challenging time. We must navigate, and while the current environment will create disruption for the industry in the near term, continue to believe in the strong core fundamentals and growth outlook of the MA industry, and our ability to effectively compete in the MA market remains intact. Specific to 2025, we expect benefit levels, plan stability, and choice for seniors to be negatively impacted by the final MA rate notice, which is not sufficient to address the current medical cost trend environment and regulatory changes.
Bruce Dale Broussard: As we look ahead, we acknowledge that the industry is experiencing a dynamic and challenging time, we must navigate.
Bruce Dale Broussard: And while the current environment will create disruption for the industry in the near term.
Bruce Dale Broussard: We continue to believe in the strong core fundamentals and growth outlook of the industry and our ability to effectively compete in MA market remains intact.
Bruce Dale Broussard: Specific to 2025, we expect benefit levels plan stability and choice for seniors to be negatively impacted by the final MA rate notice, which is not sufficient to address their current medical cost trend environment and regulatory changes.
Bruce Dale Broussard: Considering the significant difference between the final rate notice and our previous funding, combined with the inherent pricing limitations imposed by the TBC change threshold, we no longer believe six to 10 hours of adjusted EPS growth is the appropriate target range for 2025.
Bruce Dale Broussard: Considering the significant difference between the final rate notice and our previous funding assumption <unk>.
Bruce Dale Broussard: Bind with Ian pricing limitations imposed by TBC changed thresholds.
Bruce Dale Broussard: No longer believe six to $10 of adjusted EPS growth is the appropriate target range for 2020.
Bruce Dale Broussard: Importantly, we believe the industry will adjust to the current funding regulatory over time, continuing to deliver strong top line growth and normalizing at an appropriate margin of at least 3%. In that context, we remain committed to margin recovery and profitable growth through a multi-year pricing action. Creating value for our shareholders over the long term. Our 2025 Adjusted EPS Growth Outlook will be impacted by several variables for which we will not have clear visibility until later this year.
Bruce Dale Broussard: Importantly, we believe the industry will adjust to the current funding regulatory over time.
Bruce Dale Broussard: Continuing to deliver strong topline growth and normalizing out at an appropriate margin of at least 3%.
Bruce Dale Broussard: In that context, we remain committed to margin recovery unprofitable growth through a multiyear pricing actions creating.
Bruce Dale Broussard: Creating value for our shareholders over the long term.
Bruce Dale Broussard: Our 2025 of adjusted EPS growth outlook will be impacted by several variables to which we will not have clear visibility until later this year.
Bruce Dale Broussard: Including the finalization of our MA bid pricing decision, continued evolution of the industry's crop cost trends, and the level of competitor pricing actions in 2025, which will impact our net membership growth. In addition, we continue to evaluate opportunities to drive growth and further productivity across all lines of business to support 2025 adjusted EPS. We appreciate your desire for more detail regarding our outlet for 2025, and we will therefore provide an update on our bid strategy post bid finalization.
Bruce Dale Broussard: Adding finalization of our MA bid pricing decisions.
Bruce Dale Broussard: Evolution of the industry.
Bruce Dale Broussard: Loss trends and the level of competitive pricing actions in 2025, which will impact our net membership growth.
Bruce Dale Broussard: In addition, we continue to evaluate opportunities to drive growth and further productivity across all lines of business support 2025, adjusted EPS correct.
Bruce Dale Broussard: We appreciate your desire for more detail regarding our outlook for 2025, and we will therefore provide an update on our bid strategy post bid finalization.
Bruce Dale Broussard: With further updates in the fall once we have visibility into our competitor plans and expected membership implications. Before turning it to Jim for a few remarks, I'd further emphasize that we continue to believe there is strong bipartisan support for the MA program and that the strong core fundamentals and growth outlook for MA and value-based care remain intact. In addition, Humana's platform, unique focus on MA, and expanding centerwell capabilities will allow us to compete effectively and deliver compelling shareholder value over the long term. With that, I turn it over to Jim.
With further update in the fall once we have visibility into our competitor plans and expected membership implications.
Bruce Dale Broussard: Before turning it to Jim for a few remarks at further emphasize that we continue to believe there is strong bipartisan support for the MA program and that the strong core fundamentals and growth outlook for MAA and value based care remain intact and.
Bruce Dale Broussard: In addition, humana's platform unique focus on M&A, and expanding center well capabilities will allow us to compete effectively and deliver compelling shareholder value over the long term.
Bruce Dale Broussard: With that turn it turn it over to Jim.
James A. Rechtin: I just want to echo your comments that the outlook for Humana specifically and for the MA industry more broadly remains strong, although the industry is navigating a challenging time. But it's important to recall that this is not the first time that we've had to navigate challenging times, and that we've seen difficult periods in the past. Humana has navigated this period, period successfully adjusting as needed and continuing. While we anticipate disruption in the near term, the sector fundamentals are sound. This includes favorable demographics, and a compelling value proposition relative to traditional Medicare.
Jim: Thanks Bruce.
Jim: I just wanted to echo your comments that the outlook for Humana, specifically and for the MAA industry more broadly remains strong.
Jim: The industry is navigating a challenging time, but it's important to recall that this is not the first time that we've had to navigate challenging times and we've seen difficult periods in the past Humana has navigated those periods periods successfully adjusting as needed and continuing to grow.
Jim: While we anticipate disruption in the near term this sector fundamentals are sound.
Jim: This includes favorable demographics, a compelling value proposition relative to traditional Medicare. We believe the industry will continue to grow and humana will be well positioned to remain a leader in the market.
James A. Rechtin: We believe the industry will continue to grow, and Humana will be well positioned to remain a leader in the market. I also want to reiterate that we are committed to pricing discipline and margin recovery in this bid cycle. We are actively evaluating plan-level pricing decisions and the expected impact on membership.
Jim: I also want to reiterate that we're committed to pricing discipline and margin recovery. In this bid cycle. We are actively evaluating planned level pricing decisions and the expected impact of membership.
James A. Rechtin: We are evaluating opportunities to drive productivity. We are focused on the levers to support adjusted EPS growth in 2025 and beyond. And as we have incremental data on 2025, we will share it. We appreciate everyone's ongoing support and look forward to providing additional updates on our performance and outlook throughout the year. 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. Operator, please introduce the first caller. As a reminder, please...
Jim: We are evaluating opportunities to drive productivity, we are focused on the levers to support adjusted EPS growth in 2025 and beyond.
Jim: And as we have incremental data on 2025, we will share. It. We appreciate everyone's ongoing support and look forward to providing additional updates on our performance and outlook throughout the year 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 operator please.
Speaker Change: Produced the first caller.
Operator: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your touchtone telephone. Our first question will come from the line of Ann Hynes with Mizuho. And your line is now open. Great, thanks. Good morning.
Speaker Change: As a reminder, if you'd like to ask a question at this time. Please press star one on your Touchtone telephone.
Speaker Change: Our first question will come from the line of Ann Hynes with Mizuho.
Ann Hynes: And your line is now open.
Ann Hynes: Great. Thanks, Good morning, So I just wanted to focus on cost trends did you see any change in cost trends versus four Q also in your prepared remarks. It sounds like the company believes they took a conservative approach to reserving just given the change healthcare situation, but you suggested that early indicators suggest trends were in line.
Susan Marie Diamond: Yeah, hi, Ann, this is Susan. So as we evaluate the first quarter cost trends, as you guys understand, we do have good visibility into inpatient utilization from their more real-time authorization data. On unit cost and non-impatient, we are more dependent on claims. And so, typically, in the first quarter, we have limited visibility, and given the change healthcare disruption, even more so this quarter. But as you might remember from our fourth-quarter commentary, one of the things we did experience was an unexpected uptick in inpatient utilization, which we believe was in some way related to the expected two midnight rule changes that went into effect in January.
Speaker Change: With better can you just elaborate on that comment that would be great.
Speaker Change: Yes, Hi, this is Susan.
Susan Marie Diamond: So as we evaluate the first quarter cost trends.
Susan Marie Diamond: Understand we do have good visibility to inpatient utilization from there more real time authorization data on unit costs and non inpatient we are more dependent on claims and so typically in the first quarter has limited visibility and given the change healthcare disruption even more so this quarter.
As you might remember from our fourth quarter commentary one of the things we did experience wasn't unexpected uptick in inpatient utilization, which we didn't believe was in some way related to the expected two midnight rule changes that went into effect in January as we said in the fourth quarter, we anticipated that those higher utilization levels would continue into the first quarter and then be fair.
Susan Marie Diamond: As we said in the fourth quarter, we anticipated that those higher utilization levels would continue into the first quarter and then be further impacted by the changes we had always anticipated in response to the changes to utilization management programs. So, as we evaluated first quarter inpatient utilization, I provided some commentary a couple weeks ago at a conference and acknowledged that for January and February, we did see slightly higher inpatient utilization where the ultimate impact of some of those program changes was a little bit different than we had expected.
Susan Marie Diamond: They're impacted by the changes we had always anticipated in response to the changes to utilization management programs.
Susan Marie Diamond: As we evaluated the first quarter inpatient utilization I had provided some commentary.
Susan Marie Diamond: Couple of weeks ago at our conference and acknowledged that for January and February we did see slightly higher inpatient utilization, where the ultimate impact of some of those program changes with a little bit different than we had expected, but we had commented that the results were improving week to week, we continue to see that such that while we were exiting February we would say that the last one.
Susan Marie Diamond: But we had commented that the results were improving week to week. We continued to see that, such that, while we were exiting February, we would say that the last week of February results were much more in line, and we saw that continue into March, and even some slight positive favorability, such that for the full first quarter, as we said in our posted commentary, inpatient utilization overall is in line with expectations. So, that's positive. We'll have to see how the non-inpatient trends and inpatient unit costs develop as we get more visibility into the claim maturation process. The other early indicator is how prior year development matures.
Susan Marie Diamond: February results were much more in line and we saw that continue into March and even some slight positive favorability. That's it for the full first quarter as we said in our postpaid commentary inpatient utilization overall is in line with expectations. So that's positive we'll have to see how the non impatient trend inpatient unit cost.
Susan Marie Diamond: Develop as we get more visibility into the claim maturation.
Susan Marie Diamond: The other early indicator is how prior year development matures in.
Susan Marie Diamond: In the first quarter, we feel like we have better visibility for incurred claims through the third quarter of 2023. We think that the healthcare disruption was more impactful for incurred periods of the fourth quarter and recent. So we felt comfortable relying on what we saw through the third quarter. And as we said in our commentary, we did see positive, favorable prior year development, particularly for the third quarter across both inpatient and non-inpatient. So we view that as positive.
Susan Marie Diamond: In the first quarter, we feel like we have better visibility for incurred claims through the third quarter of 2023, we think that the change healthcare disruption was more impactful to you incurred periods of the fourth quarter and more recent so we felt comfortable relying on what we saw through the third quarter and as we said in our commentary we did see positive favorable positive.
Susan Marie Diamond: Prior year development, particularly for the third quarter across both inpatient and non inpatient. So we view that as positive as it claims further mature our hope is that we'll see some further positively in the fourth quarter, but for purposes of quarter end reserving we did not contemplate that just because we recognize we had limited visibility as you said as we did our analysis for the first quarter we made in.
Operator: As the claims further mature, our hope is that we'll see some further positivity in the fourth quarter, but for purposes of quarter-end reserving, we did not contemplate that just because we recognize we have limited visibility. As you said, you know, as we did our analysis for the first quarter, we made an explicit adjustment for what claims we believe were missing due to the change healthcare disruption, and just based on those results, we would have seen some net positivity in the quarter all in.
Susan Marie Diamond: Explicit adjustment for what claims we believes we're missing due to the change healthcare disruption and just based on those results we would've seen some net productivity in the quarter all in.
Operator: Because we did recognize that we didn't have full visibility, we did go ahead and book additional claim reserves that ultimately reported our MLRs in line with expectations. So our hope is that, you know, we will see that that proves to have some conservatism. We will see how that continues to develop as all of those claims are received in the process, and we'll keep you guys updated on any inter-year developments. But otherwise, hopefully, that's helpful in understanding what's reflected in the first quarter.
Susan Marie Diamond: We did recognize that we didn't have full visibility. We did that go ahead and book additional claim reserves that ultimately reported our MLR was in line with expectations. So our hope is that we will see that that proves to have some conservatism. We will see how that continues to develop as all of those claims are received and processed and we'll keep you guys updated on any industry.
Susan Marie Diamond: Year development, but otherwise hopefully that's helpful in understanding what's reflected in the first quarter.
Susan Marie Diamond: Okay.
Susan Marie Diamond: Thanks.
Operator: Our next question will come from the line of Kevin Fischbeck with Bank of America.
Susan Marie Diamond: Our next question will come from the line of Kevin Fischbeck with Bank of America.
Operator: Great, thanks. I wanted to just maybe focus on the commentary around the 3% plus margin, which seemed to be orienting towards kind of the lower end of the 3 to 5% margin that many of your peers are talking about, and maybe a little bit lower than what you were talking about before. Is that, you know, if that's true, then why would that be the case for you guys? And I guess over the last couple of years, you've been trying to reorient us towards an enterprise margin. We'd love to just kind of hear how you think a 3% MA margin translates into what the implied enterprise margin might look like.
Kevin Mark Fischbeck: Great. Thanks.
I wanted to just maybe focus on the.
Kevin Mark Fischbeck: The commentary around the 3% plus margin, which seems to be orienting towards kind of lower end of the 3% to 5% margin that many of your peers are.
Kevin Mark Fischbeck: Talking about maybe a little bit lower than what you were talking about before is that if that's true then why would that be the case for you guys.
Kevin Mark Fischbeck: And then I guess over the last couple of years, you've been trying to reorient. This towards the enterprise margin would love to just kind of hear how you think a 3% margin translates into what the implied enterprise margin rate might look like.
Susan Marie Diamond: Thanks. Hey, Kevin. Yeah, so
Susan Marie Diamond: Hey, Kevin. Yes. So yes, we continue to be oriented to enterprise margin and maximizing that across the health plan and center well capabilities. And so I don't intend on a recurring basis to speak specifically to the health plan. But given the magnitude of the impact we're anticipating for 2023 and 2024 and our acknowledgement that the margins, you know, currently are sitting closer to break even, we felt it was important to reiterate our view of what the long-term margin potential should be minimally for individual MAs, not only for Humana, but the sector more broadly.
Kevin Mark Fischbeck: Hey, Kevin Yes, so.
Kevin Mark Fischbeck: Yes, we continue to be oriented to enterprise margin and maximizing that across the health plan and central capabilities.
Kevin Mark Fischbeck: And so don't intend on it on a recurring basis. It speaks specifically to the health plan, but given the magnitude of the impact we are anticipating for 2023, and 2024 and our acknowledgment that the margins.
Kevin Mark Fischbeck: We currently are sitting closer to breakeven we felt it was important to reiterate our view of what the long term margin potential should be minimally for individual MA not only for humana, but the sector more broadly and we do believe that 3% plus is a reasonable margin longer term now to the degree the industry ultimately normalize it to something higher than that.
Susan Marie Diamond: And we do believe that, you know, 3% plus is a reasonable margin longer term. Now, to the degree the industry ultimately normalizes to something higher than that, we're not trying to suggest we would intentionally suppress it. We would expect to have a margin on par with the industry and competitive, and we think that would be at least 3%. I would say as we think about the center well opportunity, as we've said before, there is, you know, a literal incremental opportunity from just further penetrating our center well capabilities by health plan members, which we continue to focus on.
Kevin Mark Fischbeck: I was trying to suggest we would anticipate the precedent and we would expect to have a margin on par with the industry and competitive and we think that would be minimally 3%.
Kevin Mark Fischbeck: I would say as we think about the center well opportunity as we've said before there.
Kevin Mark Fischbeck: Literally incremental opportunity from just further penetrating our center wall capabilities by Health plan members, which we continue to focus on and then in addition to that we do believe over time, if we can create differentiated experiences for our members who use those services that we can increase plain satisfaction and patient satisfaction increase engagement, which should ultimately.
Susan Marie Diamond: And then, in addition to that, we do believe over time, if we can create differentiated experiences for our members who use those services, we can increase plan satisfaction and patient satisfaction, increase engagement, which should ultimately lead to better SARS results, improved loyalty and retention, and overall improved total cost of care health outcomes, which can be driving further incremental margin and also reinvested back in the business to support further growth. So we remain as optimistic as ever about the long-term potential. And do just acknowledge, in light of the final rate notice, our progression back to that minimum 3% health plan margin will take a little bit longer than we can initially expect.
Kevin Mark Fischbeck: <unk> results improved loyalty and retention and overall improved telecast of carrier health outcomes, which can be driving further incremental margin and also reinvested back in the business to support further growth. So we remain as optimistic as ever about the long term potential and you just acknowledged in light of the final rate notice our progression back.
Kevin Mark Fischbeck: To that minimum 3% health plan margin will take a little bit longer than we had initially expected.
Operator: Our next question will come from the line of Gary Taylor with TD Cowan.
Kevin Mark Fischbeck: Our next question will come from the line of Gary Taylor with TD Cowen.
Operator: Hi, good morning. Two quick things I just want to make sure I understand. Back on the first quarter call, we asked about [inaudible] Margin Recovery for 25, and I think what's changed is that might have been true with the zero percent Funding Assumption, but at a negative 1.6, you're just more underwater, so to speak, from an underwriting perspective.
Kevin Mark Fischbeck: Yes.
Gary Taylor: Hi, good morning.
Gary Taylor: Two quick things I, just want to make sure I understand.
Gary Taylor: On the first quarter call, we asked about.
Gary Taylor: PBC and you felt it wasn't constraint too.
Gary Taylor: Margin recovery for 25, and I think what's changed is that might've been true with the zero percent funding.
Funding assumption, but at a negative.
Gary Taylor: One six youre just more.
Gary Taylor: Underwater so to speak from a underwriting perspective, and so now.
Susan Marie Diamond: And so now TBC is more relevant to 25. So I just want to confirm that. And then secondly, that $6 to $10 bridge, in our view, the final notice, you know, on paper, wipes out most of that bridge, but at our conference in March... You had suggested you would still expect to see some earnings growth for 25. So I just wanted to see if you could affirm that expectation today. Yeah, hi, Gary. And you were correct.
Gary Taylor: PBC is more relevant to 25, so I just wanted to confirm that and then secondly.
Gary Taylor: Yeah.
Gary Taylor: $6 to $10 bridge in our view the final notice.
Gary Taylor: On paper wipes out most of that bridge, but at our conference in March.
Gary Taylor: You had suggested you had still.
Gary Taylor: <unk> see some earnings growth for 25, so just wanted to see if you could affirm that expectation today.
Susan Marie Diamond: Yeah, hi, Gary. And you were correct. With where the final rate notice came in, it will require larger benefit reductions to achieve stable margins and approach the TBC thresholds in some cases. And so that's where, as we've said all along, we will be evaluating plan and county exits where the TBC limits impede our ability to price products at a reasonable margin. And then also look for opportunities within the bids to optimize benefit changes to support further margin improvement.
Speaker Change: Yes, Hi, Gary and you are correct.
Speaker Change: Where the final rate notice came in it will require larger benefit reductions to achieve stable margins and approach the TV <unk> thresholds in some cases and so that's where as we said all along we will be evaluating plan and county exits, where the PVC limit to impede our ability to price products at a reasonable margin.
Speaker Change: And then also look for opportunities within the bids to optimize benefit changes to support further margin improvement given the competitive bidding process, we're going to avoid sharing any specific details today on what that might look like but certainly as Jim suggested post spin we.
Susan Marie Diamond: Given the competitive bidding process, we're going to avoid sharing any specific details today on what that might look like. But certainly, as Jim suggested, post-bid, we'll be able to share a little bit more detail on how we approach the strategy for 25 plan designs. The final thing I'll say is, technically, as we sit here today, we do not have the TBC threshold for 2025. And so to the degree that moves, even a couple of dollars, positively or negatively, can impact, ultimately, what we think we can deliver for margin progression given where we are.
Speaker Change: We will be able to share a little bit more detail on how we approach. This strategy for 25 planned designs.
Speaker Change: We do recognize that in light of the final rate notice sort of net membership will be more impactful to you. What we can ultimately deliver for 25 earnings than it might have been in the previous thinking and so that's where we just feel like we need to have more visibility into competitor reactions to the final rate notice look where we can really evaluate that the final thing I'll say is.
Speaker Change: Technically as we sit here today, we do not have the TTC threshold for 2025, and so to the degree that maybe even a couple of dollars positively or negatively you can impact ultimately what we think we can deliver for margin progression given where we are so for all of those reasons. You know, we're just going to need some additional time.
Susan Marie Diamond: So for all of those reasons, we're just going to need some additional time. But, as we said, as we know more, we will be sure to update you and provide you with information as we become more confident in the information that we have out there.
Speaker Change: As we know more we will be sure to update you and provide you with information as we become more confident in the information that we have access to.
Operator: Our next question will come from the line of Justin Lake with Wolf Research.
Speaker Change: Our next question will come from the line of Justin Lake with Wolfe Research.
Operator: All right, sorry about that. First of all, I wanted to follow up on Kevin's question, and then I had one of my own.
Justin Lake: Hello can you hear me.
Justin Lake: Yes, Hi, Justin.
Justin Lake: Alright, sorry about that.
Justin Lake: So one I wanted to follow up on Kevins question, and then I got one by one 3% margin that 3% plus target.
Susan Marie Diamond: The 3% margin, the 3% plus target. My recollection is when I did the math for 2025, when you originally had the 37 box, I was getting to about a three and a half percent medic individual MA margin within that $37. Is that the right ballpark that you'd previously assumed just so we can compare or contrast? And then can you confirm that this doesn't include investment income, which I think makes it a little less comparable? And then my question is about 2025.
Justin Lake: My recollection is when I did the math for 2025 would you originally at the 37 box.
Justin Lake: I was getting to about a 3%.
Justin Lake: <unk> made a margin we didnt at $37 is that the right ballpark that you had previously assumed.
Justin Lake: <unk> contrast, and then can you confirm that this doesn't include investment income, which I think makes it a little less comparable and then my question is on 2024 at this point rates are known.
Susan Marie Diamond: At this point, rates are known, and the key, you know, I know TDC still has to come. You've got to make some decisions, but the key swing factor appears to be Medicare Advantage membership. I understand that there's less visibility here, but maybe you can walk us through it. I know I get a lot of questions on the P&L impact from MOASA members. Right, I'm thinking specifically beyond the lost margin, the leveraging on SG&A, whether you can offset that with efficiencies, and then any kind of downstream impacts from CenterWell. So maybe you could give us a framework to think about, like, every 1% decline in membership, the negative impact through the P&L X the lost margin might be X, you know, something. Thanks. OK, yeah.
Speaker Change: And the key.
Speaker Change: <unk> still got it Tom you've got to make some decisions, but the key swing factor appears to be Medicare advantage membership.
That theres less visibility, but maybe you could walk us through I know I get a lot of questions on the P&L impact.
Lost membership.
Speaker Change: Im thinking specifically beyond the loss margin deleveraging on SG&A, whether you can offset that with efficiencies and then any kind of downstream impacts some center well. So maybe you could give us a framework to think about like every 1% decline in Martin and membership.
Speaker Change: You'd have impact through the P&L ex the loss margin might be.
Speaker Change: Thanks.
Susan Marie Diamond: Thanks. Okay, yeah, so I think that was six questions in one, but I will do my best to hit them all. So your first comment about the $37, you are correct. Inherent in that initial modeling, you can think of it between 3 and 3.5% over that period, and we had always said that our belief was that, you know, any margin progression and improvement would largely come from productivity and efficiency, not MLR gains, and that any sort of revenue and claim trend would sort of support the product to remain competitive and continue to grow.
Speaker Change: Okay.
Speaker Change: So I think that was six questions in one but I will do my best to hit them all.
Speaker Change: To your first comment about the $37 you are correct inherent in that initial.
Speaker Change: Modeling you can think of it between three and three 5% over that period, and we had always said that our belief was that any margin progression and improvement with largely come from productivity and efficiency not MLR gains in that any sort of revenue and claim trend vendors when sort of support the product to remain competitive and continue to grow but yes, you are correct.
Susan Marie Diamond: But yes, you are correct in terms of where we would have been thinking in the previous guidance. And you are correct, the 3% plus that we referenced does not include investment income. And so that can sometimes vary in terms of how peers report their margin targets. But for us, that would exclude investment income.
Speaker Change: In terms of where we would have been thinking and the previous guidance.
Speaker Change: You are correct that 3% plus that we referenced does not include investment income and so that can sometimes vary in terms of how Peter's report their margin targets, but for us that would explain investment income.
Susan Marie Diamond: In terms of 25, as you said, TDC is going to be a huge factor, just given where we think we are in terms of expected benefit changes and net membership growth, as you said. The other thing I'll mention before coming back to membership is just the trend. You know, depending on how the trend develops in 2020, well, frankly, how 23 ultimately restates, and how 24 develops, that could be impactful on 25 as well. We are not pricing for any favorability to emerge in 2024.
In terms of 25 as you said <unk> is going to be a huge factor just given where we think we are in terms of expected benefit changes and the net membership growth as you said the other thing I'll mention before coming back to the membership is just trend.
Speaker Change: Depending on how the trend developed in 2020, well frankly, how 'twenty three ultimately restates, how 24 developed that could be impactful to 2005 as well and we are not pricing for any favorability to emerge in 2024, and so to the degree it does and that would be incrementally positive going into next year as well.
Susan Marie Diamond: And so to the degree it does, and that would be incrementally positive going into next year as well. When you think about the membership, I would say the absolute number is certainly important. And in light of the final rate notice and the expected changes that we expect, we think our ultimate result will be more sensitive to the net membership than it might otherwise have been. And then, in addition to that, I would say plan mix underneath.
Speaker Change: When you think about the membership I would say the absolute membership is certainly important and in light of the final rate notice any expected changes that we expect we think our ultimate result will be more sensitive to the net membership than it might otherwise have been and then in addition to that I would say planned mix underneath there are varying margin profiles across a deals versus non certain.
Susan Marie Diamond: There are varying margin profiles across, say, duals versus non-duals, certain geographies, and other factors. And so that mix ultimately will be important in how our plans are ultimately positioned relative to others. I would say right now, as we've said all along, we are anticipating net membership declines for 2025, largely because we do intend to exit certain plans in counties. Whether that is incrementally larger or smaller based on the other plans will be very dependent on what we see across the competitive landscape.
Speaker Change: Geographies and other factors and so that mix ultimately will be important and how our plans are ultimately position relative to others.
Speaker Change: I would say right now as we've said all along we are anticipating that membership declines for 2025, largely because we do intend to exit certain claims and counties, whether that is incrementally larger or smaller based on the other plans will be very dependent on what we see across the competitive landscape and as we know more we'll certainly keep you apprised of our thing.
Susan Marie Diamond: And as we know more, we'll certainly keep you apprised of our thinking. Depending on the level of membership change, we certainly will be mindful of driving the appropriate admin cost adjustments in light of that. We are currently, as I said, planning for membership losses, so we would be proactively anticipating that. The variable is certainly much easier to address than the normal course. We would just have to be very mindful of the targets we set across some of the non-variable items.
Speaker Change: King.
Speaker Change: Depending on the level of membership change, we certainly will be mindful of driving the appropriate admin cost adjustments in light of that we are currently as I said planning for membership losses that we would be proactively anticipating that the variable is certainly much easier to address the normal course, we would just have to be very mindful of the targets, we set across some of the non.
Susan Marie Diamond: But certainly, we're anticipating that, and we'll have strategies in place should we see differences in the membership than we're currently expecting. And then finally, I would say, generally speaking, the largest center of all business that's impacted by any net membership change is the pharmacy, just given the penetration within the Humana Pharmacy, that also is fairly sensitive to mix, less sensitive to dual changes who use mail order at a lower rate and more highly sensitive to, you know, consumers who are shopping on value in terms of those co-pays.
Speaker Change: And variable items, but certainly are anticipating that and we'll have strategies in place should we see differences in the membership and we're currently thinking.
Speaker Change: And then finally I would say generally speaking the larger one central business that's impacted by any net members to change is the pharmacy, just given the penetration within the Humana pharmacy that also is fairly sensitive to mix less sensitive to dual changes you use mail order at a lower rate and be more highly sensitive to <unk>.
Speaker Change: Mers, who are shopping on value in terms of those co pay so that's something we will continue to monitor but I would say, mostly we would be looking at the impact of pharmacy, the impact will be much smaller across primary care and home and primary care in particular, because they continue to have.
Susan Marie Diamond: So that's something we'll continue to monitor, but I would say mostly we would be looking at the impact of pharmacy; the impact would be much smaller across primary care and home, and primary care in particular, because they continue to have, you know, work on contracts with other providers, such that even if we see a member disappear on the health claim side, hopefully, they're positioned to retain them on the clinic side through their other payer contracts. Thanks. Our next question will come from the line of Stephen Baxter with Wells Fargo.
Speaker Change: Work on contracts with other providers such that even if we see a member it is around the health plan side hopefully they are positioned to retain them on the clinic side through their other payer contracts.
Speaker Change: Thanks.
Speaker Change: Our next question will come from the line of Stephen Baxter with Wells Fargo.
Operator: Our next question will come from the line of Stephen Baxter with Wells Fargo. Yes.
Stephen Baxter: Yeah, Hi, Thanks, just to clarify the PVC commentary our understanding is there are a lot of benefits that are not covered by TBC like flex cards, and it seems like you're suggesting that you're not comfortable making up the incremental rate headwind by cutting benefits that are outside of TBC. I was hoping you could elaborate a little bit on this dynamic and how youre thinking about.
Susan Marie Diamond: Yeah, sure, Steven. So, on the non-DSNP side, as we talk about benefits, most of the benefits are subject to TDC. So even things that are technically supplemental things like dental, Part B givebacks, and Part D. Those items are for the purposes of TBC accounting tools. There are some things that fall outside of TBC, things like transportation, OTC, fitness, and a few other things, but are relatively small versus those things that do apply to TBC.
Stephen Baxter: The sensitivities benefits that are outside of TBC thresholds. Thank you.
Speaker Change: Yeah sure. So I would say on the non <unk> side.
Speaker Change: As we talk about the damaged low.
Speaker Change: Our syndicate TVT, so even things that.
Speaker Change: Our technically supplemental things like dental.
Speaker Change: Pardon me give backs and shorten those items are a coker prism TV chief accounting tool.
Speaker Change: There are some items that fall outside of Mtbc's in things like transportation, OCC fitness and a few other things, but our relatively small versus those things that data point of TBC, we will be considering changes across both categories certainly and in some cases, we will be going above PVC in other cases, not and that will be you know as we are.
Susan Marie Diamond: We will be considering changes across both categories, certainly, and in some cases we will be going above TBC, in other cases not, and that will be as we evaluate just the current financial performance of the plan, even after some of these impacts and whether we believe it's situated in a way that can drive profitable growth in a sustainable way. For those plans, as we've said, that are not, we will go to, you know, the maximum that we can in order to ensure that the products are properly positioned.
Speaker Change: <unk> just the current financial performance of the plan.
Speaker Change: Even post some of these impacting whether we believe it is situated in a way that can drive profitable growth on a sustainable way for those plans as we said that or not we will go to the maximum that we can in order to ensure that the products are properly positioned.
Susan Marie Diamond: On the D-SNP side, technically, they don't apply TDC to the D-SNPs, and most of those benefits are going to be the supplementals, right? You've got the healthy options cards because it covers food, OTCs, and transportation. So technically, there is no limitation on that side. And so that is more, you know, thinking through how are those plans financially performing? What is the opportunity for further growth in those markets? Those are all things we will be considering.
Speaker Change: On the diesel side technically they don't apply to D. C to the D. SNP and most of those benefits are going to be the supplemental right. You've got the healthy options card because it covers food otc's transportation. So technically there is no limitation on that side and so that is more thinking through how are those plans financially performing what's the opportunity for further growth.
Speaker Change: Those markets those are all things, we will be considering we do expect benefit changes on the diesel side and the <unk> plans, we will see more impact from the IRA as well. So those are all things, we'll consider but technically don't have the same literal TBC limitations.
Susan Marie Diamond: We do expect benefit changes on the D-SNP side, and the dual plans will see more impact from the IRA as well. So those are all things we'll consider, but technically, they don't have the same literal TDC limit.
Operator: Our next question will come from the line of Ben Hendrix with RBC Capital Markets.
Speaker Change: Our next question will come from the line of Ben Hendrix with RBC capital markets.
Operator: Hi, thank you. I was wondering if you could provide a little bit more information on a previous utilization question. You mentioned earlier some measures you took to address the higher mix of short-stay inpatient volume versus observation stays you saw early in the year. I believe you've noted some training and other measures to bring those inpatient avoidance rates back in line. I'm just curious to what degree those measures impacted your APT performance for the quarter and if that could be a source of some outperformance through the balance of the year versus your 90% MBR guidance. Thanks. Yeah, Ben.
Benjamin Hendrix: Alright. Thank you I was wondering if you could provide a little bit more information on our previous high utilization question.
You mentioned earlier some measures you took to address the higher mix of short stay inpatient volume versus observation stays you saw early in the year and I believe you've noted some training and other measures to bring inpatient avoidance rates back in line I'm, just curious to what degree those measures impacted your <unk>.
Benjamin Hendrix: <unk> performance after the quarter end, if there could be.
Benjamin Hendrix: That could be a source of.
Benjamin Hendrix: Now performance through the balance of the year.
Susan Marie Diamond: Yeah, Ben, as we said on the fourth quarter call, you know, we were anticipating, in light of the two midnight rule changes, that we would see an increase in short stays, and things that under the old rules were built as an observation stay would now flip to an inpatient stay. And we saw that in the fourth quarter start to emerge and did continue to see that in the first quarter and fourth quarter incrementally.
Benjamin Hendrix: Versus your 90% MBR guidance. Thanks.
Speaker Change: Yes, Ben.
Speaker Change: So you are correct. So as we said on our fourth quarter call. We were anticipating in light of that do you mean night rule changes that we would see an increase in shorts days and.
Speaker Change: And things that under the old rules were built as an observation stay would now flip to an inpatient stay and we saw that in the fourth quarter start to emerge and did continue to see that in the first fourth quarter incrementally.
Susan Marie Diamond: You know, as we said at the Cowan Conference, initially, we did see the avoidance rates fall short, a bit short of what we had expected. But as we said, as the providers and our staff were sort of trained and became accustomed to the new rules, we did see those rates improve week over week, such that, you know, by the time we exited February, they were much more in line with what we expected. One thing we'll want to continue to evaluate is what the resulting unit cost is on those higher incremental APTs. In theory, they should be lower.
Speaker Change: You know as we said at the Cowen Conference. Initially we did see the avoidance rates fell.
Speaker Change: While short a bit short of what we had expected, but as we said as the providers and our staff, we're sort of trained and became accustomed to the new rules. We did see those rates improve week over week such that by the time, we exited February they were much more in line with what we expected. So as I said earlier, we did see some unfavorably and Apt's January two.
Speaker Change: But here in February but in March as we saw those rates came in line were actually slightly positive such that for the full first quarter largely in line on a utilization basis.
Susan Marie Diamond: That could provide a tailwind for the year. But, as we said before, we're reliant on the claims coming in and being paid to fully assess them. So we did not take that into our first quarter results, and it's something that we'll continue to evaluate over the second quarter. But I do think, potentially, it could be a tailwind relative to our expectations. The only thing I'll say is that you think about the 90%. If you remember earlier this year, we did acknowledge that the changes to physician payments that were implemented in February did present a headwind to our internal plan, and that was worth about $150 million for the year.
Speaker Change: One thing we want to continue to evaluate is what the resulting unit cost is on those.
Speaker Change: Incremental <unk> in theory, they should be lower that could provide a tailwind for the year, but as we said before we're reliant on the pay the claims coming in and being paid to fully assess that so we did not take that into our first quarter results and something that we'll continue to evaluate over the second quarter, but I do think potentially can be a tailwind relative to our expectations.
Speaker Change: The only thing I'll say is if you think about the 90%. If you remember earlier. This year. We did acknowledge that there are changes to the physician payments that were implemented in February did present, a headwind to our internal plan and that was worth about $150 million for the year, we did not change our MLR guidance.
Susan Marie Diamond: We did not change our MLR guidance, you know, this morning. And so you can assume that here we're assuming that we will cover the impact of that physician fee schedule change. And so some of this positivity would certainly help do that. But if, for some reason, we didn't see that emerge, you know, obviously with the admin cost favorability that we delivered in the first quarter, we certainly have confidence that, in any event, we'd be able to cover it through admin savings.
Speaker Change: This morning, and so you can assume that in that inherent in that we're assuming that we will cover the impact of that physician fee schedule change and so some of this positive anyway, certainly helped do that but if for some reason we didn't see that emerge you know obviously with the admin cost favorability that we delivered in the first quarter. We certainly have confidence that in any event, we would be able to cover it through admin say.
Susan Marie Diamond: But as we said in the commentary, we're cautiously optimistic about what we're seeing on the individual May side; we'll just need to be able to further evaluate paid claims from both the unit cost perspective and the non-inpatient trend. Thank you.
Speaker Change: <unk> butter as we said in the commentary cautiously optimistic about what we're seeing on the individual MA side, we'll just need to be able to further evaluate paid claims from a both a unit cost perspective, and then automation trend.
Speaker Change: Thank you.
Operator: Our next question will come from the line of A.J. Rice with UBS.
Speaker Change: Our next question will come from the line of a J rice with UBS.
Unknown Attendee: Unknown Speaker Hey, sorry, it just went dark there for a second, so I wasn't 100% sure.
Speaker Change: Yes.
Albert Rice: Hi can you hear me.
Albert Rice: Yes, Hi, Jay.
Albert Rice: Yes.
Albert Rice: John I just want to go.
Speaker Change: <unk> sure.
Unknown Attendee: Just two things real quick. You had talked about, I think, in the fourth quarter and even some of the year-end commentary, that the road to recovery on the margin was about, you know, you thought the market could absorb 100 to 150 basis points of annual improvement over the next few years. Going beyond that, Lisa said something about operating expenses having some timing impact in this quarter that might have been favorable. Can you comment on that and how that affects the rest of the year outlook?
Albert Rice: Yes.
Albert Rice: Just.
Speaker Change: Two things real quick.
Speaker Change: You had talked about I think with fourth quarter, and even some of the year and commentary.
Speaker Change: <unk> casualty Ani margin was about you talk the market could absorb 100 to 150 basis points of annual improvement over the next few years beyond.
Speaker Change: That would be disruptive to daily.
Speaker Change: Standpoint or from seniors.
Speaker Change: I get that I guess I am trying to understand is that is this sense about your ability to realize that from year to year over the next few years changed or are you just saying with the 25, starting point might be lower.
Susan Marie Diamond: Yeah, AJ, certainly. So in terms of our thinking on the trajectory to the 3% longer term expectation, you know, we would say that we do acknowledge this is going to be a multi-year process to recover margins. And the exact timing of that will be dependent on the funding environment, you know, regulatory environment, and then certainly the competitive environment. I would say relative to what we would have thought, you know, prior to the final rate notice coming out, you know, we would have anticipated, as our previous guidance suggested, that we would have more margin recovery in 2025 than we think is reasonable currently in light of the TDC threshold combined with the final rate notice, you know, also keep in mind for 25, we're dealing with not only a one third phase in for V28, but also significant Part D changes from the IRA, and then the higher than anticipated medical cost trend that largely developed post the filing of the 24 bids.
Did you still can't get that kind of gradual recovery to margin overcame any perspective on that and you have been asked but in your press release, you said something about operating expenses, having some timing impact in this quarter that might have been favorable.
Speaker Change: Can you comment on that.
Speaker Change: It's actually rest of the year outlook.
Speaker Change: Yes, certainly.
Speaker Change: So in terms of our thinking on the trajectory to the 3% longer term expectation.
Speaker Change: We would say that we view acknowledged there's going to be a multi year process to recover margin.
Speaker Change: And the exact timing of that will be dependent on the funding environment regulatory environment, and then certainly the competitive environment I would say relative to what we would've thought prior to the final rate notice coming out we would have anticipated as our previous guidance suggested that we would have more margin recovery in 'twenty five than we think is reasonable currently in light.
Speaker Change: Of the TBC threshold combined with the final rate notice.
Speaker Change: Also keep in mind for 25, we're dealing with not only one third phase in for the 28, but also significant part D changes from the IRA and then the higher than anticipated medical cost trend largely developed post the filing of the 24 beds. So that is going to limit to some degree the amount of margin recovery, we can get in 'twenty five when we think about 'twenty six.
Susan Marie Diamond: So that is going to limit to some degree the amount of margin recovery we can get in 25. When we think about 26, while we still have one more, the final one third of the V28 phase in, you know, we won't arguably have the Part D changes; we won't have the trend impact. So those headwinds will lessen with them, and that should give us more room to take additional pricing action for the purposes of margin recovery.
Speaker Change: While we still have one more final one third of the V 28 phase and we want arguably have the part D changes, we won't have that trend impact. So those headwinds will lessen with then that should give us more room to take additional pricing action for the purposes of margin recovery and then certainly post 'twenty six once <unk> fully phased in and assuming you know.
Susan Marie Diamond: And then certainly post 26, once V28 is fully phased in and assuming, you know, a reasonable rate environment, then we should have further incremental opportunities, which is why we've suggested that it's likely going to take a bit longer than the two years we had hoped previously. The other thing I would just remind you is that, to the degree that, you know, the trend develops differently than what CMS assumed in their 25 rate notice, which, if you remember, anticipated the trends would actually moderate from the current levels, then that ultimately should make it into the CMS rates as well and could potentially, you know, provide a slight tailwind as you think about the go forward rate environment.
Speaker Change: A reasonable rate environment than we should have a further incremental opportunity, which is why we've suggested that it's likely going to take a bit longer than the two years, we had hoped previously.
Speaker Change: The other thing I would just remind you is that to the degree you know the trend develops different then what CMS assumed in there 25 rate notice, which if you remember anticipated the trends would actually moderate from the current levels, then that ultimately should make it into the CMS rates as well and could potentially provide a slight tailwind as you think about that.
Susan Marie Diamond: So a lot for us to continue to monitor and assess, but we do believe that 26 and beyond provide an incremental opportunity for margin recovery relative to 25 for all the reasons I just mentioned. And then on the OPEX, as you said, we did see meaningful favorability for the quarter. As we evaluate that favorability, some of it, we believe, will continue and largely for the year. A portion of that, we would say, is one-time in nature where it's good news, but it's not going to repeat.
Speaker Change: Go forward rate environment, So a lot for us to continue to monitor and assess but do you believe that 26 and beyond provide incremental opportunity for margin recovery relative to 'twenty five mm for all the reasons I just mentioned.
Speaker Change: And then on the Opex as you said, we did see meaningful favorability for the quarter.
Speaker Change: Evaluating that favorability some of it we believe we will continue and largely for the year a portion of that we would say is onetime in nature, where it's good news, but it's not going to repeat and then there is a portion that is more timing. We're just it develop different than we had assumed in our budget and so things like marketing are often an example of that where it may come in differently the pacing of higher.
Susan Marie Diamond: And then there is a portion that is more timing where it develops differently than we had assumed in the budget. And so things like marketing are often an example of that, where it may come in differently. The pacing of hiring may be different. And so there's a variety of things that we would say are more timing-in-nature that won't, in fact, not only will not recur, but they'll actually reverse out in the balance of the year. But all in, still positive, we expect favorability for the year. For OPEX, it just wouldn't be appropriate to fully run at the rate in the first quarter.
Speaker Change: It may be different and so theres a variety of things that we would say are more timing in nature that won't in fact, not only will not recur, but they'll actually reverse out in the balance of the year, but all in still positive we expect favorability for the year for Opex. It just wouldn't be appropriate to fully run rate the first quarter.
Operator: Our next question will come from the line of Scott Fidel with Steven.
Speaker Change: Our next question will come from the line of Scott Fidel with Stephens.
Operator: Bye. Thanks. Can you hear me? Yep, he's got it. Okay, hey.
Scott J. Fidel: Hi, Thanks can you hear me.
Scott J. Fidel: Yeah, Hey, Scott.
Operator: You know, I was interested if you could maybe talk about how you would think about the value prop for seniors potentially comparing between MA and traditional Medicare in 2025. Obviously, we're all very focused on the headwinds to the MA value prop as it relates to the challenging reimbursement outlook, but it also feels like seniors in traditional Medicare are going to be facing some meaningful headwinds as well when we think about the IRA impacts on Part D. And then also, you know, just in terms of, you know, curious what you've been seeing on utilization in the MedSupp bulk-in, whether that may be leading to higher rate increases in Medicare supplement, you know, and also just thinking about the fact that CMS talked about not seeing utilization rising in Medicare fee-for-service, which clearly seems to contrast with everything we've seen out in the marketplace.
Scott J. Fidel: Okay.
I was interested if you could maybe talk about how you would think about the value prop for seniors potentially comparing between M&A and traditional Medicare in 2025, obviously, we're all very focused on the headwinds to the MAA value prop as it relates to the challenging.
Scott J. Fidel: Reimbursement outlook, but it also feels like seniors in traditional Medicare are going to be facing some meaningful headwinds as well when we think about the IRI impacts on part D. And then also just in terms of curious what you've been seeing on utilization in the med sup bulk and whether that may be.
Scott J. Fidel: Leading to a higher rate increases in Medicare supplement.
Scott J. Fidel: I would also just thinking about the fact that CMS talked about.
Not seeing utilization rising and Medicare fee for service, which which clearly seems to contrast with everything we've seen out in the marketplace, but ultimately I'm just trying to think about.
Operator: But, you know, ultimately, I'm just trying to think about whether there is the potential that MA enrollment growth relative to traditional Medicare may not necessarily moderate as much as feared because of some of these headwinds. Is it in traditional Medicare, or are the headwinds in MA just so significant that it is likely that we'll see that moderation?
Scott J. Fidel: Is there a potential that that M&A enrollment growth.
Relative to traditional Medicare may not necessarily moderate as much as feared because of some of these headwinds introduction of Medicare or are the headwinds and that may just so significant that it is likely that we will see that moderation.
Bruce Dale Broussard: God, thanks. I'm sure Susan's saying thank you to give her the break from all the questions that have been asked relative to the financial side. Relative to the value proposition for Medicare Advantage in MA, we continue to believe that we'll have a significant value proposition, and really for a number of reasons. First, just the economics itself.
Speaker Change: Got it thanks, and then I'm sure Susan's, saying, thank you to to give her the break of all the questions that have been asked relative to the financial side.
Speaker Change: Relative to the value prop proposition for Medicare advantage to M&A, we continue to believe it will.
Speaker Change: Have a significant.
Speaker Change: Our value proposition then it really for a number of reasons first just the economics itself today, we see about $2400 a year, we see that stepping back a little bit for 2025 as a result of the benefit changes, but not not material to make it something that we feel shopping to the Medicare fee for service side rule or <unk>.
Bruce Dale Broussard: Today, we see about $2,400 a year. We see that stepping back a little bit for 2025 as a result of the benefit changes, but not enough to make it something that we feel shopping on the Medicare fee-for-service side will increase. The second thing is all the benefits that they receive as a result of care coordination, things like transportation, other things like dental that they wouldn't get in a Medicare fee-for-service product. We just see not only the dollar value from an actuarial point of view but also the inherent additional benefits that they receive as a result of being a Medicare Advantage beneficiary.
Speaker Change: Increase the second thing is all the benefits that they receive as a result of care coordination things like transportation other things dental that they wouldn't get in a Medicare fee for service product and so we just see not only the dollar value from an actuarial point of view, but also the inherent additional benefits that they receive as a.
Speaker Change: A result of being a Medicare advantage beneficiaries. So we see that continuing to be the case, we've done a significant amount of analysis around where the value proposition is today, where it was three or four years ago and what we see is that the value proposition still will be greater than it was three or four years ago.
Bruce Dale Broussard: We see that continuing to be the case. We've done a significant amount of analysis around where the value proposition is today, where it was three, four years ago, and what we see is that the value proposition would still be greater than it was three or four years ago, a little less than today, but we feel confident that we'll see growth there. With that said, Susan, do you want to take the Medicare supplement question?
Speaker Change: A little lesser than today, but we feel confident that we will see the growth growth there.
Speaker Change: With that.
Susan Marie Diamond: Yeah, on MedSupp, interestingly enough, the change in healthcare disruption was particularly disruptive to our MedSupp business. And so I don't know if that's a function of just CMS not working with providers for redirection versus EMA plans. I'm not sure.
Speaker Change: Susan you want to take the Medicare supplement question, Yeah on med sub interestingly enough the change healthcare disruption was particularly disruptive to our med sup business and so I don't know if thats a function of just CMS not working with providers for redirection versus your MA plans I'm not sure, but we did see a disproportionate impact they messed up and so I would say that our current visit.
Susan Marie Diamond: But we did see a disproportionate impact on MedSupp, and so I would say that our current visibility is a little bit less than it would typically be. Otherwise, I would say, you know, the IRA impacts for 2025 will impact Part D, as you said, and we will see varying degrees of impact across the country, the standalone Part D plans, just recognizing the underlying mix is different for each of those plans. And so, to your point, those who are in MedSupp are also having to purchase a standalone Part D plan.
Susan Marie Diamond: He is a little bit less than it would typically be otherwise I would say the IRI impacts for 2025, all in impact part D. As you said and we will see varying degrees of impact across the plant and the Standalone part D plans just recognizing the underlying mix is different for each of those plans and so to your point those who are in med sup are also having a.
Susan Marie Diamond: And so that certainly should give them a different perspective in terms of as they evaluate the value proposition of EMA and will act as a bit of a mitigating factor in terms of what we see the impact on the EMA plan offerings. And Scott, I think your other question was just relative to
Susan Marie Diamond: Purchase a standalone part D plan, and so that certainly should give them a different perspective in terms of as they evaluate the value proposition of MAA and will act as a bit of a mitigate in terms of what we see the impact to you that the MA plan offerings himself and Scott I think your other question was just relative to the growth of Medicare advantage and just.
Bruce Dale Broussard: And Scott, I think your other question was just relative to the growth of Medicare Advantage and just how that looks. And we continue to see and believe that over the coming years, it will be mid-single digit growth, and that will be a combination of demographic growth, maybe slowing a little bit in the latter years of this decade, but we continue to see that, along with the penetration of more beneficiaries using Medicare Advantage.
Susan Marie Diamond: How that works and we continue to see and believe over the coming years it will be mid.
Susan Marie Diamond: Mid single digit growth and that'll be a combination of demographic growth may be slowing a little bit in the latter years of this.
Susan Marie Diamond: But we continue to see that along with the benefit of the penetration of more beneficiaries using Medicare advantage.
Bruce Dale Broussard: You know, Kaiser put out an estimate over the next few years that there will be about a 60 percent penetration with MA, and we continue to believe that's very achievable going forward. So we feel the value proposition is going to continue to be strong as a result of not only the actuary value, but also the additional benefits. We continue to believe that that's going to drive more penetration of Medicare Advantage for Medicare beneficiaries overall, and so we look at continuing to maintain mid-to-single-digit growth.
Susan Marie Diamond: <unk> put out.
Susan Marie Diamond: Estimate over the next few years that there'll be about a 60% penetration with M&A and we continue to believe thats very achievable going forward. So so we feel the value proposition is is going to continue to be strong as a result of not only the actuary value, but also the additional benefits. We continue to believe that thats kind of draw.
<unk> of <unk>.
Susan Marie Diamond: More penetration of Medicare advantage for Medicare beneficiaries overall.
Susan Marie Diamond: And so we look at continuing to maintain mid to single digit growth growth.
Operator: Our next question will come from the line of Joshua Raskin with Nefron Research.
Our next question will come from the line of Joshua Raskin with Nephron research.
Operator: Hi, thanks. Good morning.
Susan Marie Diamond: Just getting back to the 3%, I guess. How did you come up with this long-term industry margin of 3% plus? What does that mean for Humana relative to the industry? And what do you think that translates into in some form of return on invested capital? And then, just to follow up on the exits, I'm just curious what percentage of your membership is in areas that are even being considered for market exits. I'm not looking for a specific estimate of how many members you'll lose, but just a sense of how many markets are even in that bucket of consideration.
Susan Marie Diamond: Okay.
Hi, Thanks, good morning.
Joshua Raskin: Getting back to the 3% I guess, how did you come to this long term industry margin of 3% plus what does that mean for humana relative to the industry and what do you think that translates into in some form of return on invested capital and then just a follow up on the exits Im just curious what percentage of your membership is in areas that are even being considered for <unk>.
Joshua Raskin: Market exits I'm not looking for specific estimate of how many members you'll lose but just a sense of how many markets or even in that bucket of consideration.
Susan Marie Diamond: Hey, Josh. So as we think about the 3%, and as Justin had asked earlier, that, you know, even historically had been, you know, how the business had been performing, and an expectation that we would be able to continue to maintain that level of performance, and belief that the industry will minimally require that level of margin, just recognizing the inherent sort of risk in the insurance business, the regulatory capital that has to be established, that that just feels like, you know, an appropriate margin on a sustainable basis, and certainly reasonable, and still be able to provide a very strong value proposition to consumers.
Speaker Change: Hey, Josh.
Speaker Change: So as we think about the 3% and as Jason had asked earlier that you. Even historically had been you know how that business has been performing and an expectation that we'd be able to continue to maintain that level of performance and believe that the industry will minimally require that level of margin just recognizing the inherent sort of risk in the.
Speaker Change: Insurance business, the regulatory capital that has to be established that that just feels like an appropriate margin on a sustainable basis, and certainly reasonable and still be able to provide a very strong value proposition to consumers also as you look at the long term targets that most of the national here is having talked to it is in the 3% to 5%.
Susan Marie Diamond: Also, as you look at the long-term targets that most of the national peers have talked about, they are in the 3% to 5% range. And as we said earlier, there are some differences in what's included in those numbers across the peer set, but certainly, you know, everything that we have seen and believe, and others, I think, have reiterated, is a belief that the long-term margin is sound, an environment to navigate in the midterm to get back to that and have all of the health plans reflect not only the funding environment but then the higher, more recent trends that we've experienced.
Speaker Change: <unk> range and as we said earlier there are some differences in what's included in those numbers across the peers that but certainly you know everything that we have seen and believe and others. I think have reiterated is I believe that the long term margin is sound. We just have some.
Speaker Change: Environment to navigate in the near mid term to get back to that and have all of the health plans reflect not only the funding environment, but then the more the higher more recent trends that we've experienced.
Susan Marie Diamond: In terms of return on VISTA capital, because that, again, is similar to what we've historically or more recently performed, I would say there is no material change to how we would think about the expected returns for the business. In terms of market exits, again, just given the sensitivity of the issue, we haven't commented specifically on either the number of planes, as you said, or the percentage of eligibles covered, and would feel more comfortable sharing more information on that post-bid filing.
Speaker Change: In terms of and then I would say on that in terms of return on invested capital because that again is similar to what we've historically or more recently performed I would say no material change to how we would think about the expected returns for the business.
Speaker Change: In terms of market exits again, just given the sensitivity on bid we haven't commented specifically on either number of planned as you said our percentage of eligible is covered and would feel more comfortable sharing more information on that post spin filing and certainly we're happy to do that as we have in the past when we have executed larger scale planned exits.
Susan Marie Diamond: And certainly, we're happy to do that, as we have in the past when we have executed larger-scale plan exits, just don't feel comfortable doing that in advance of the bids being submitted for competitive return. And just on the return on capital, Josh.
Speaker Change: Just don't feel comfortable doing that in advance of the bids in submitted her for competitive reasons and just on the return on capital Josh as you look at the math, we've put about 10% statutory capital in the business and this is a 3% margin kind of kind of activity, which creates a significant amount of incremental return.
Bruce Dale Broussard: And just on return on capital, Josh, as you look at the math, we put about 10% statutory capital in the business, and this is a 3% margin kind of activity, which creates a significant amount of incremental return on capital for us. And since all this is organic growth and not any kind of acquisition growth, I mean, it's highly accretive to the overall cost of capital of the company.
Speaker Change: On capital for Us and all of this is organic growth.
Speaker Change: Any kind of acquisition growth in minutes highway accretive to that to the <unk>.
Speaker Change: Overall cost of capital of the company.
Speaker Change: Okay.
Operator: Our next question will come from the line of Nathan Rich with Goldman Sachs.
Speaker Change: Our next question will come from the line of Nathan Rich with Goldman Sachs.
Operator: Hi, good morning.
Operator: Thanks for taking the question. I have a few follow-ups. I guess first on utilization, you know, there's some thought that some of the March trend could be related to calendar dynamics, you know, around Easter versus, you know, more sustained change in the trend. I guess could you maybe just give us your view here?
Speaker Change: Hi.
Nathan Rich: Good morning, Thanks for taking the question.
I have a few follow ups I guess first on utilization.
Nathan Rich: Some of the March trend could be related to calendar dynamics around Easter.
Nathan Rich: Versus more sustained change in the trend I guess could you maybe just give us your view here and then I also would be curious if youre seeing any changes in the level of acuity.
Susan Marie Diamond: And then I'd also be curious if you're seeing any changes in the level of acuity of patients that are coming in for care. And then, Susan, could you maybe talk about what's driving the EPS seasonality this year? You know, I think you've got it for over 80% of earnings in the first half of the year. Is it mainly the result of that expense timing that you mentioned in response to AJ's question, or is there any other dynamic that we should consider? Yeah,
Nathan Rich: Patients that are showing up for care.
Nathan Rich: Susan could you maybe talk about what's driving the EPS seasonality. This year I think you've got it for over 80% of earnings in the first half of the year is it mainly the result of that expense timing that you mentioned in response to <unk> question or is there any other dynamic that we should consider.
Susan Marie Diamond: Yeah, Nathan, um, in terms of the first quarter and utilization and seasonality, I would say, um, Kimon, this is a leap year. So all other things being equal, you would have had a higher trend in February because of the leap year. But then there was other workday seasonality over the quarter, such that we would say, in total, there's really not a seasonality impact and it was relatively consistent with the prior year. And those are all things we would have anticipated in our initial plan.
Susan Marie Diamond: Yes, Nathan in terms of the first quarter and utilization and seasonality I would say.
Susan Marie Diamond: Kim Ann this is a leap year. So all other things being equal you would have had a higher trend in February because of leap year, but then there was other workday seasonality over the quarter such that we would say in total theres really not a seasonality impact and relatively consistent with the prior year and those are all things we would have anticipated in our initial plan and then the guidance.
Susan Marie Diamond: And then the guidance we gave for the first quarter. In terms of acuity, I would say aside from just, again, the impact of the utilization management changes, where we always anticipated that lower-severity short stay events would end up moving into the inpatient cost category versus the previous observation, which we reported as ER. So we certainly are seeing, as I said, we need some additional time to see how the unit cost ultimately develops.
Susan Marie Diamond: We gave for the first quarter.
Susan Marie Diamond: In terms of acuity I would say aside from just again the impact of the utilization management changes, where we always anticipated that effectively lower severity short stay events that would end up moving into the inpatient cost category versus the previous observation, which we reported E. R.
Susan Marie Diamond: So that we certainly are seeing as I said, we need some additional time to see how the unit cost ultimately develop some of the early indicators do suggest those are on average lower unit cost, which makes sense, but we need again because of the change disruption just some more time to fully evaluate that but aside from that I would say again limited visibility because of something like this.
Susan Marie Diamond: Some of the early indicators do suggest, you know, that these are, on average, lower unit costs, which makes sense. But we need, again, because of change disruption, just some more time to fully evaluate that. But aside from that, I would say, again, limited visibility because of some of the disruption to the more recent periods in terms of claims submissions. But with what we do have, I'd say nothing that has caused us any concern from an acuity standpoint.
Susan Marie Diamond: <unk> see the more recent periods in terms of claim submissions, but with what we do have I'd say nothing that has caused us any concern from an acuity standpoint.
Susan Marie Diamond: In terms of EPS seasonality, I would say the biggest driver of the differences you see every year and the disproportionate first half proportion is going to be, in general, the lower proportionate contribution of the MA and insurance business to the total than in prior years. And so you're going to have PPD, which is disproportionately higher in the first half of the year, obviously impacting the first quarter, investment income, and all those other things that are developing as they would in the normal course are just going to result in more earnings in the first half of the year, just because MA is proportionally much lower, obviously, given the overall EPS and earnings expectation for the year.
Susan Marie Diamond: In terms of EPS EPS seasonality I would say the biggest driver of the different disease area and the disproportionate first half proportion is going to be just in general the lower proportionate contribution of the MAA insurance business to the total than prior years, and so youre going to have PPD, which is disproportionately first half of the.
Susan Marie Diamond: Year.
Susan Marie Diamond: Obviously impacting the first quarter investment income and and all those other things that are developing as they went in normal course are just going to result in more earnings in the first half of the year, just because MMA proportionately is much lower obviously, given the overall EPS and earnings expectation for the year admin certainly has some seasonality to it but I would say nothing.
Susan Marie Diamond: Admin certainly has some seasonality to it, but I would say nothing unusual as we think about the year ahead. The only thing that we did see, because of the lower enrollment this year, you do see some positive impact on commissions. That is partly what we're seeing in the first quarter. And so, based on the level of growth we would expect, it could develop a little bit differently. Again, those are things we will plan for. But aside from that, I'd say nothing in particular to call out in terms of admin seasonality relative to Our next question will come from the line of Andrew Mock with Barclays. Hi.
Susan Marie Diamond: Usual as we think about the air the only thing that we did see because of the lower enrollment. This year you do see some positive impact on commissions that is partly what we're seeing in the first quarter and so that you know based on the level of growth. We would expect could develop a little bit differently again those are things, we will plan for but aside from that I'd say nothing in particular to call.
Susan Marie Diamond: Out in terms of admin seasonality relative to typical.
Susan Marie Diamond: Our next question will come from the line of Andrew Mok with Barclays.
Andrew Mok: Hi, Good morning, you revised your individual MA membership growth target up 50000 versus your initial expectations of growth for 100000, hoping you could elaborate on the drivers of that was that just conservatism on your end or did you see any unexpected changes in the distribution channel during the open enrollment period that resulted in higher <unk>.
Operator: Our next question will come from the line of Andrew Mock with Barclays.
Bruce Dale Broussard: I would say the main, main difference is just how we performed in OEP. And, and I think that's a combination of a few things.
Speaker Change: Membership thanks.
Speaker Change: I would say the main main difference is just how we performed in our EVP and and I think Thats a combination of few things I think.
Bruce Dale Broussard: I think it's Some of our competitors having challenges in servicing their growth has been a benefit to us, and we've seen some recovery from that. And the second thing is the actual performance that we've had in the non-duals area and the ability for us to continue to grow in markets that are both competitive. The third thing I would say is that even in times when we are less competitive in the marketplace, our brand stands out.
Because some of our competitors having challenges in servicing their their growth has been a benefit to us and we've seen some some recovery from that and the second thing is as the actual performance that we've had and then the non duals area and the ability for us to continue to grow in markets that we.
Speaker Change: That we have.
Speaker Change: That are both competitive the third thing I would say is that what we've seen even in times that we are less competitive in the marketplace that our brand stands out.
Bruce Dale Broussard: And the stability of our brand, both from our service point of view and from our quality point of view, overcomes a lot of the benefit differences that we have in the marketplace. And I think on the OEP side, we saw that. Yeah.
The stability of our brand both from our service point of view and from our quality point of view overcomes a lot of the benefit.
Speaker Change: Differences that we have in the marketplace and I think in the.
Speaker Change: OAP side, we saw that.
Susan Marie Diamond: Yeah, and just to add to what Bruce said, the increase was largely attributable to non-decent sales, while retention in total was largely in line.
Speaker Change: Yeah, and just the antibodies and the increase was largely attributable to non decent sales retention and antenna was largely in line. We saw an OUP higher volume than we had expected both in Asians and switchers from other MA and so as we think about the rest of the year some of that agent favorability drove the increase you know the switches obviously.
Susan Marie Diamond: We saw in the OEP, you know, higher volume than we'd expected, both in agents and switchers from other MAs. And so as we think about the rest of the year, some of that agent favorability, you know, drove the increase, the switchers, obviously, less so once the OEP ends. And then, as we've said, the progression from current to year end is also impacted by the redeterminations that will continue throughout the rest of the year.
Speaker Change: So once the OAP and and then as we said you know the progression from current to the year end is also impacted by the Redetermination that will continue throughout the rest of the year, there's a little bit of less visibility into that because of the change health care issue, where we rely on them for dual eligible status verification. So we'll continue to see how that develops but that's why you can see that.
Susan Marie Diamond: There's a little bit of less visibility into that because of the change healthcare issue where we rely on them for dual eligible status verification. So we'll continue to see how that develops. But that's why you can see the full OEP not fully run rating through the end of the year. Our next question will come from the line of Lance Wilkes with Burns. Yeah, thanks. Could you talk a little bit about the CEO transition? As Jim, what are your impressions of the opportunities?
Speaker Change: <unk> not not fully run rating through the end of year estimate.
Speaker Change: Our next question will come from the line of Lance Wilkes with Bernstein.
Lance Arthur Wilkes: Yeah, Thanks could.
Lance Arthur Wilkes: Could you talk a little bit with the CEO transition.
Lance Arthur Wilkes: Jim with your impressions of the opportunities or are there any value accretion opportunities that maybe are more structural or are larger in scale like outsourcing PVM or things like that and have you guys made any sorts of operational changes in leadership structure again contemplating both the market dynamics and the CEO transition.
Operator: Our next question will come from the line of Lance Wilkes with Bernstein. Yeah, thanks.
Operator: Hey, thanks for the question. This is Jim.
Lance Arthur Wilkes: Thanks.
James A. Rechtin: The No, there are not any changes to the team. So let me hit that one real quick. Second, are there opportunities? We're still in the process of evaluating opportunities. We certainly believe that there will be a continued need to drive efficiency. That's both on the operating side as well as continuing to get stronger in how we do medical cost management over time. We're still evaluating those opportunities, and the expectation is that by the end of the year, we will have more to say about where exactly the opportunities are and how we intend to go after them over time.
Lance Arthur Wilkes: Hey, Thanks for the question this is Jim.
Speaker Change: No there are not any changes to Jim So let me hit that one real quick second.
Jim: There are opportunities we are still in the process of evaluating opportunities we certainly.
Jim: I believe that there will be a continued need to drive efficiency.
Jim: That's both on the operating side as well as continuing to get stronger in how we do medical cost management over time, we're still evaluating those opportunities and the expectation is that by the end of the year.
Jim: We would have more to say about where exactly the opportunities are and how we intend to go after them overtime.
Operator: Our next question will come from the line of Lisa Gill with J.P. Morgan.
Jim: Our next question will come from the line of Lisa Gill with Jpmorgan.
Susan Marie Diamond: Susan, I want to go back to your comments around the PDP and the IRA for 2025. Can you talk about what you've seen for conversion over to MA in 24? And then how are you thinking about stand-alone PDPs in 2025? Will that become unprofitable on a stand-alone basis? And then, just secondly, I just want to understand, when you talk about the update for the bid strategy, will it be a separate press release, or are we waiting for a separate release? Or are we waiting for Q2 to get that update?
Lisa Gill: Hi, Thanks, very much and good morning, Jason I want to go back to your comments around the PDP and the IRR for 2025 can you talk about what you've seen for conversion over to MAA in 'twenty four and then how are you thinking about standalone PDP in 2025, well that Tom.
Lisa Gill: Unprofitable on a standalone basis, and then just secondly, I just want to understand when you talk about the update to the bid strategy will it be a separate press release or are we waiting for Q2 to get that update.
Susan Marie Diamond: Hi Lisa. Yes. So in terms of the IRA impacts and our thinking on standalone Part D, your first question around PDP to MA conversions, I would say we continue to see a disproportionate opportunity to capture movement from Humana PDP members to Humana MA. For those members that choose to convert to MA, and we have visibility, right, in terms of any MA offering they choose, we tend to get a higher market share of those individuals that are making that decision than we do in So that continues to be very positive.
Lisa Gill: Yes.
Speaker Change: Hi, Lisa yes.
Speaker Change: So in terms of the IRA impacting our thinking on Standalone part D <unk>.
Speaker Change: Your first question around PDP that you mean convergence I would say we continue to see a disproportionate.
Lisa: Opportunity to capture the movement from Humana PDP members to Humana Ma.
Lisa: Those members that choose to convert to MAA and we have visibility right in terms of any M&A offering they choose we tend to get a higher market share of those individuals that are making that decision than we do in just the overall individually I may say, so that continues to be very positive. The absolute volume is somewhat lower just because of the overall lower membership growth that we're seeing this year, but that sort of advair.
Susan Marie Diamond: The absolute volume is somewhat lower just because of the overall lower membership growth that we're seeing this year, but that sort of advantage continues to hold, as we've seen in the past. As we think about our standalone Part D strategy for 25, I would say we're very oriented to risk mitigation, just given the magnitude of the changes and the sensitivity that you will have in terms of the profitability of underlying membership based on the level of utilization and specialty utilizers in particular.
Lisa: <unk> continues to hold up as we've seen in the past.
Lisa: As we think about our senior loan partners strategy for 25, I would say, we're very oriented to a risk mitigation just given the magnitude of the changes and the sensitivity that you will have in terms of the profitability of underlying membership based on sort of the level of utilization and specialty utilize ours in particular, given how our plans are.
Susan Marie Diamond: Given how our plans are positioned today and the limitation of only having three plans, which we have in the market today, our goal will be to minimize sort of any risk inherent in our offerings and take probably a more cautious approach to see how the industry ultimately responds to the IRA changes, how the business, the health plan performs in light of those changes, and then reassess, frankly, for 2026. As we suggested, it is, you know, we will see some larger premium increases for sure on some Part D plans, while others may have less so, depending on their mix.
Lisa: <unk> today, and the limitation of only having three plans, which we have in market today, our goal will be to minimize sort of any risk inherent in our offerings and take probably a more cautious approach to see how the industry ultimately responds to the IRI changes how the business performs in light of those changes and then reassess frankly for 'twenty.
Lisa: 26.
Lisa: As we suggested it is.
Lisa: We will see some larger premium increases for sure on some part D plans, while others may have less though depending on their mix and so that could drive some opportunity as we said for MAA and that's something we'll continue to evaluate so.
Susan Marie Diamond: And so that could drive some opportunity, as we said, for MA, and that's something we'll continue to evaluate. So that's how we're thinking about 2025, just given the level of changes, and I'd say there is a lot for the industry to learn as we navigate through it. I can't remember if there was one final question at the end that I didn't address. Did that cover everything?
Lisa: So that's how we're thinking about 2025 I'm just given the level of changes and I would say a lot for the industry to learn as we navigate through it and I can't remember if there was one final question at the end that I didn't address does that cover everything yeah.
Susan Marie Diamond: Will it be a separate press release around your bid strategy, or is that something that you'll update in Q2? Yeah, I would imagine we will likely.
Speaker Change: Dr. <unk> will it be a separate press release around your bid strategy or is that something that you'll update on Q2.
Susan Marie Diamond: Yeah, I would imagine we will likely do that on the second quarter call. I don't know if we're scheduled at any conferences in between. My guess is no, but my guess is it would be the second quarter call.
Speaker Change: Yeah, I would imagine we will likely do that on the second quarter call I don't know if we're scheduled at any conferences in between my guess is no but my guess is it would be the second quarter call.
Speaker Change: Okay, great. Thank you.
Bruce Dale Broussard: Well, thank you for your time and interest today. In closing, I'd reiterate that Humana had a solid start to 2024. And while we acknowledge that the entire MA industry is navigating a difficult near-term environment, we continue to believe the strong fundamentals and growth outlook of MA and value-based care remain intact, and the strength and scale of our platform and differentiated capabilities will allow us to effectively manage through the uncertainty, compete effectively, and deliver compelling shareholder returns over the long term. We appreciate your continued support and look forward to providing updates on our performance and outlook throughout the year. Have a great day!
Speaker Change: So thank you for your time and interest today in <unk>.
Speaker Change: Closing I would reiterate that Humana had a solid start to 2024.
Speaker Change: While we acknowledge that the entire MAA industry is navigating a difficult near term environment. We continue to believe the strong fundamentals and growth outlook of MAA and value based care remain intact, and the strength and scale of our platform and differentiated capabilities will allow us to effectively manage through the uncertainty.
Speaker Change: Pete effectively and deliver compelling shareholder returns over the long term.
Speaker Change: We appreciate your continued support and look forward to providing updates on our performance and outlook throughout the year have a great day.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Goodbye.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: