Q2 2024 Humana Inc Earnings Call

Lisa: Please be advised that today's conference is being I would now like to hand the conference over to Lisa. Vice President, Investor Relations. Thank you and good morning. I hope everyone had a chance to review our press release and prepared remarks as well as the letter from the CEO, all of which are available on our website. We will begin this morning with brief remarks from Jim Rechtin, Humana's President and Chief Executive Officer, followed by a Q&A session with Jim and Susan Diamond, Humana's Chief Financial Officer.

Lisa Stoner: I would now like to hand the conference over to Lisa Stoner, Vice President and Investor Relations.

Unknown Attendee: Please go ahead.

Lisa Stoner: Thank you and good morning. I hope everyone had a chance to review our press release and prepare remarks, as well as the letter from the CEO, all of which are available on our website.

Lisa Stoner: We will begin this morning with brief remarks from Jim Reckton, Humana's President and Chief Executive Officer, followed by a Q&A session with Jim and Susan Diamond, Humana's Chief Financial Officer.

On our website, we will begin this morning with brief remarks from Jim racked in Humana's, President and Chief Executive Officer, followed by a Q&A session with Jim and 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 for 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, our other filings with the Securities and Exchange Commission, and our second quarter 2024 earnings press release as they relate to forward-looking statements, along with other risks discussed in our SEC filings.

Lisa: Before we begin our discussion, I need to advise all 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, our other filings with the Securities and Exchange Commission, and our second quarter 2024 earnings press release, as they relate to forward-looking statements along with other risks discussed in our SAC filings.

Speaker Change: 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.

Speaker Change: 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 second 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.

Lisa Stoner: 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 is historical financial news releases, and our filings with the SEC are also available on our investor relations site.

Lisa: 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 also available on our investor relations site.

Speaker Change: Or update any forward looking statements in future filings, our communications regarding our business or results.

Speaker Change: <unk> press release, our historical financial news releases and our filings with the SEC are all also available on our Investor Relations site.

Lisa Stoner: Call participants to note that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles or gaps. Management explanations 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 deleted earnings per common share.

Lisa: 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. Additionally, 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.

Speaker Change: Call participants should note that today's discussion include financial measures that are not in accordance with generally accepted accounting principles or GAAP.

Speaker Change: 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.

Speaker Change: 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.com, later today.

James A. Rechtin: 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 Jim rectum.

Lisa: 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 Jim Rechtin. Thanks, Lisa. And good morning, everyone.

Jim Reckton: With that, I'll turn the call over to Jim Recton. Thanks, Lisa, and good morning, everyone. Thank you for joining us.

Jim: Thanks, Lisa and good morning, everyone. Thank you for joining us.

James A. Rechtin: Thank you for joining us. Let me start by just saying that it's a privilege to be able to serve as Humana's President and Chief Executive Officer. And I want to say thanks to the Humana Board of Directors for providing me with this opportunity. I also just want to say thanks to Bruce for the last six months of his mentorship and partnership. It's been really, really great.

Jim Reckton: Let me start by just saying that it's a privilege to be able to serve as Humanist president and chief executive officer. And I would say thanks to the Humanist Board of Directors for providing me this opportunity. I also just want to say thanks to Bruce for the last six months of his mentorship and partnership. It's been really, really great. And I actually look forward to continue to work with him over the next year. So Bruce and our 65,000 teammates have built a great company here. And it's pretty exciting to be a part of it.

James A. Rechtin: I'll start by just saying that it's a privilege to be able to serve as humana's, President and Chief Executive Officer, and I will say, thanks to the Humana Board of directors for providing me this opportunity.

James A. Rechtin: And I actually look forward to continuing to work with him over the next year. Bruce and our 65,000 teammates are building a great company, and it's pretty exciting to be a part of it. I shared some thoughts on Humana and the industry and the opportunity ahead in the letter that I posted on our investor relations website this morning. I encourage everyone to take a moment to read the letter.

James A. Rechtin: I also just want to say thanks to Bruce for.

James A. Rechtin: The last six months of his Mentorship and partnership it's been it's been really really great.

Speaker Change: And I actually look forward to continuing to work with him over the next year. So.

Speaker Change: Bruce and our 65000 teammates to build a great company here and it's pretty exciting to be a part of it.

Jim Reckton: I shared some thoughts on Humana and the industry and the opportunity ahead, and the letter that I posted on our investor relations website this morning. I encourage everyone to take a moment to read the letter. I that goes along with our second quarter prepared remarks in the earnings release. I'm not going to repeat what is in the letter, but I do want to hit a couple of themes.

Speaker Change: I shared some thoughts on humana and the industry and the opportunity ahead in the letter that I posted on our Investor Relations website. This morning, I encourage everyone to take a moment to read the letter.

James A. Rechtin: That goes along with our second quarter prepared remarks and the earnings release. I'm not going to repeat what is in the letter, but I do want to hit a couple of themes. So let me start by just reinforcing what I think is a basic truth about the business. It's a good business. It's good for our members, and it's good for our patients. This is well documented, in my opinion. CMS and the federal government, the state government, and, by extension, even taxpayers are also our customers. I think we need to constantly remind ourselves of that.

Speaker Change: That goes along with our second quarter prepared remarks in the earnings release Im not going to repeat what is in the letter, but I do want to hit a couple of themes.

Jim Reckton: So let me start by just reinforcing what I think is basically truth about the business. It's a good business. It's good for our members, and it's good for our patients. This is well documented in my opinion. CMS and the federal government, state government, and by extension, even taxpayers are also our customers. I think we need to constantly remind ourselves of that. What we do creates value for those customers as well.

Speaker Change: So let me start by just reinforcing what I think is.

Speaker Change: The truth about the business is a good business. It's good for our members and it's good for our patients. This is well documented in my opinion.

Speaker Change: CMS and the federal government and state government and by extension even taxpayers are also our customers I think we need to constantly remind ourselves of that what we do creates value for those customers as well.

James A. Rechtin: What we do creates value for those customers as well. We need a regulatory environment that allows that value to be fully realized, and that requires constant collaboration and adjustment. We need to be a proactive partner with CMS in that process. And we need to do this to make sure that we've got a long-term stable Medicare and Medicaid.

Jim Reckton: We need a regulatory environment that allows that value to be fully realized, and that requires constant collaboration and adjustment. We need to be a proactive partner with CMS in that process, and we need to do this to make sure that we've got a long-term stable Medicare Medicaid program. This is also good for investors for all of you, and I think you guys know that the sector fundamentals have not meaningfully changed. They're still attractive, and we still have differentiated cases. There's a lot of capabilities to compete in that space.

Speaker Change: We need a regulatory environment that allows that value to be fully realized and that requires constant collaboration and adjustments.

Speaker Change: We need to be a proactive partner with CMS in that process and we need to do this to make sure that we've got a long term stable Medicare and Medicaid programs.

James A. Rechtin: This is also good for investors, for all of you, and I think you guys know that the sector fundamentals have not meaningfully changed; they're still attractive, and we still have differentiated capabilities to compete in that space.

Speaker Change: This is also good for investors for all of you and I think you guys know that the sector fundamentals have not meaningfully changed they are still attractive and.

Speaker Change: We still have differentiated capabilities to compete in that space.

Jim Reckton: We understand that there is frustration with the volatility that we've been experiencing. I want you to know that we also acknowledge that right now we are not achieving our full potential. The external environment has certainly been difficult. However, the message that I want to keep driving home is that we need to see the external environment for what it is. It's context. We need to shape it to the degree that we can. And we otherwise need to be focused on the things that we control within that context: that's our product, it's our pricing, it's our clinical capabilities, it's admin costs, and it's growing our business.

James A. Rechtin: We understand that there is frustration with the volatility that we've been experiencing. I want you to know that we also acknowledge that right now, we are not achieving our full potential. The external environment has certainly been difficult.

Speaker Change: We understand that there is frustration with the volatility that we've been experiencing.

Speaker Change: I want you to know that we also acknowledge that right now we are not achieving our full potential.

Speaker Change: The external environment has certainly been difficult.

James A. Rechtin: However, the message I want to keep driving home is that we need to see the external environment for what it is, its content. We need to shape it to the degree that we can, and we otherwise need to be focused on the things that we control within that context. That's our product, it's our pricing, it's our clinical capabilities, it's admin costs, and it's growing our business. To execute well against the things that we do control, we need to be incredibly focused on operating.

Speaker Change: However, the message I want to keep driving home is that we need to see the external environment for what it is it's context, we need to shape. It to the degree that we can and we otherwise need to be focused on the things that we control within that context, that's our product, it's our pricing as our clinical capabilities, it's admin costs and it's growing our business.

Jim Reckton: To institute well against the things that we do control, we need to be incredibly focused on operating discipline. We're good at operating discipline, but we need to be reminding ourselves that day in and day out as the external environment changes. We also can do a better job with multi-year planning in order to deliver consistency and performance over time. We got great teams. We know how to do this. It's simply about maintaining focus on the things that we control, even when the environment around us is shifted.

Speaker Change: To execute well against the things that we do control we need to be incredibly focused on operating discipline.

James A. Rechtin: We're good at operating discipline, but we need to be reminding ourselves of that day in and day out as the external environment changes. We also can do a better job with multi-year planning in order to deliver consistency and performance over time. We have great teams.

Speaker Change: We're good at operating discipline, but we need to be reminding ourselves of that day in and day out as the external environment changes.

Speaker Change: We also can do a better job with multiyear planning in order to deliver consistency and performance over time.

James A. Rechtin: We know how to do this. It's simply about maintaining focus on the things that we control, even when the environment around us is changing. Now let me turn to the second quarter performance. I'm going to give you a quick headline. I'm going to give some examples to support that headline, and then I'm going to come back with some implications on our outcome. The headline today is that our second quarter results exceeded expectations. We feel good about where we are at midyear.

Speaker Change: We got great teams, we know how to do this it's simply about maintaining focus on the things that we control even when the environment around us is shifting.

Jim Reckton: Now, let me turn to second quarter performance. I'm going to give a quick headline. I'm going to give some examples to support that headline, and then I'm going to come back with some implications on our outlook.

Speaker Change: Now, let me turn to second quarter performance I'm going to give a quick headline I'm going to give some examples to support that headline and then I'm going to come back with some implications on our outlook.

Jim Reckton: The headline today is that our second quarter results exceeded expectations. We feel good about where we are at mid-year, but we did experience some medical cost pressure in the quarter. So let me expand on that a little bit. Much of the good news comes from our Medicare business, which is outperforming the expectations that we had at the beginning of the year. Our member growth is better than we expected. We raised our forecast by 75,000 members. That means that we should grow at just over 4% for the year. Our benefit ratio for the quarter was lower than we anticipated.

Speaker Change: The headline today is that our second quarter results exceeded expectations, we feel good about where we are at mid year.

James A. Rechtin: But we did experience some medical cost pressure in the quarter. So, let me expand on that a little bit. Much of the good news comes from our Medicare business, which is outperforming the expectations that we had at the beginning. Our member growth is better than we expected. We raised our forecast by 75,000 members. That means that we should grow at just over 4% for the year. Our benefit ratio for the quarter was lower than we anticipated.

Speaker Change: We did experience some medical cost pressure in the quarter.

Speaker Change: So let me expand on that a little bit.

Speaker Change: Much of the good news comes from our Medicare business, which is outperforming the expectations that we had at the beginning of the year.

Speaker Change: Our member growth is better than we expected we raised our forecast by 75000 members that means that we should grow at just over 4% for the year.

Speaker Change: Our benefit ratio for the quarter was lower than we anticipated.

Jim Reckton: That was driven by claims development and higher-than-expected revenue. And that was also offset by the higher inpatient cost that I referenced earlier. More specifically, inpatient admissions were higher than we expected in the back half of the second quarter. That pressure has continued into July. For now, we believe that planning for continued pressure within our guidance is the right approach. That we also feel good that this pressure ultimately can be mitigated. We've taken several measures to mitigate that pressure. So, for example, we're continuing to ensure clinical appropriateness of admissions, especially in light of the two-midnight rule.

James A. Rechtin: That was driven by claims development and higher-than-expected revenue, and that was also offset by the higher inpatient costs that I referenced earlier. More specifically, inpatient admissions were higher than we expected in the back half of the second quarter, and that pressure has continued into July.

Speaker Change: That was driven by claims development and higher than expected revenue and that was also offset by the higher inpatient costs that I referenced earlier.

Speaker Change: More specifically inpatient admissions were higher than we expected in the back half of the second quarter that pressure has continued into July for now we believe that planning for continued pressure within our guidance is the right approach.

James A. Rechtin: For now, we believe that planning for continued pressure within our guidance is the right approach, and we also feel good that this pressure can ultimately be mitigated. We've taken several measures to mitigate that pressure. So, for example, we're continuing to ensure clinical appropriateness of admissions, especially in light of the two midnight rule.

Speaker Change: Now we also feel good that this pressure ultimately can be mitigated.

Speaker Change: We've taken several measures to mitigate that pressure. So for example, we're continuing to ensure clinical appropriateness of admissions, especially in light of the two midnight rule. We are enhancing claims audits and we are negotiating with provider partners to achieve better clinical and contractual alignment.

Jim Reckton: We are enhancing claims audits, and we are negotiating with provider partners to achieve better clinical and contractual alignment.

James A. Rechtin: We are enhancing claims audits, and we are negotiating with provider partners to achieve better clinical and contractual outcomes. In Medicaid, we're excited about our continued growth through both contract wins and member growth, and we continue to wait for additional RFPs. We have some modest claims pressure in Medicaid, but we do not expect it to impact our full-year results. In Centerwell, primary care is delivering strong clinic and patient growth, and we're confident that we're on track to mitigate V28 as it phases in.

Jim Reckton: In Medicaid, we're excited about our continued growth through both contract wins and member growth. And we continue to wait for an additional hour. P's. We have some modest claims pressure and Medicaid, but we do not expect it to impact our full year results. In Center Well, primary care is delivering strong clinic and patient growth, and we're confident that we're on track to mitigate V28 as it phases in. Overall, our pharmacy volumes are in line with plan, and we continue to drive lower cost to fill, particularly in our less mature, especially pharmacy business. The home business has generated high single-digit admission growth, and the team continues to improve their cost structure, anticipating continued rate pressure in that space.

Speaker Change: In Medicaid we're excited about our continued growth through both contract wins and member growth.

Speaker Change: And we continue to wait for additional Rfps.

Speaker Change: We had some modest claims pressure in Medicaid, but we do not expect it to impact our full year results.

Speaker Change: In center, well primary care is delivering strong clinic inpatient growth and we're confident that we're on track to mitigate the 28 as it phases in.

James A. Rechtin: Overall, our pharmacy volumes are in line with plan, and we continue to drive lower cost to fill, particularly in our less mature specialty pharmacy business. The home business has generated high single-digit admission growth, and the team continues to improve their cost structure, anticipating continued rate pressure in that space. We continue to make progress managing our admin costs and how to plan for these. Broadly, we are focused on automation. This is in reducing our cost to fill prescriptions in our pharmacy business.

Speaker Change: Overall, our pharmacy volumes are in line with plan and we continue to drive lower cost to fill particularly in our less mature specialty pharmacy business.

Speaker Change: Home business has generated high single digit admission growth and the team continues to improve their cost structure anticipating continued rate pressure in that space.

Jim Reckton: We continue to make progress, managing our admin costs, and where had a plan for you.

Speaker Change: We continue to make progress managing our admin costs and we're ahead of plan for these broadly we are focused on automation.

Jim Reckton: Broadly, we are focused on automation. This is in reducing our cost to fill in our pharmacy business, and it's also in lowering member service costs within our insurance segment, and give just a few examples of the type of work, actually really good work that our teams are doing. We're seeing an increased Medicare claims auto adjudication rate by about 70 basis points. This does improve the provider experience that it does also reduce claim processing costs. We've optimized logistics across our specialty pharmacy facility in a way that reduces transit times and also lowers average delivery costs. We've improved our digital enrollment experience.

Speaker Change: This is in reducing our cost to fill in our pharmacy business and it's also in lowering member service costs within our insurance segment.

James A. Rechtin: And it's also in lowering member service costs within our insurance segment. I'll give just a few examples of the type of work, actually really good work, that our teams are doing. We're seeing an increased Medicare claims auto adjudication rate by about 70 basis points. This does improve the provider experience, and it does also reduce claim processing costs. We've optimized logistics across our specialty pharmacy facility in a way that reduces transit times and also lowers average delivery costs.

Speaker Change: Just a few examples of the type of work actually really good work that our teams are doing.

Speaker Change: We're seeing an increased Medicare claims auto adjudication rate by about 70 basis points.

Speaker Change: This does improve the provider experience and it does also reduce claim processing costs.

Speaker Change: The optimized logistics across our specialty pharmacy facility in a way that reduces transit times and also lowers average delivery costs.

James A. Rechtin: We've improved our digital enrollment experience. This is leading to higher conversion rates. And again, it's lowering our distribution. Finally, we're making good progress on multi-year initiatives. We recently announced a partnership with Google.

Speaker Change: We've improved our digital enrollment experience this is leading to higher conversion rates and and again, it's lowering our distribution costs.

Jim Reckton: This is leading to higher conversion rates, and again, it's lowering our distribution costs.

Jim Reckton: Finally, we're making good progress on multi-year initiatives. We recently announced a partnership with Google. This will help accelerate our AI efforts. That will in turn help reduce cost and improve the consumer experience.

Speaker Change: Finally, we're making good progress on multiyear initiatives, we recently announced the partnership with Google This will help accelerate our AI efforts.

James A. Rechtin: This will help accelerate our AI effort, and that will, in turn, help reduce costs and improve the consumer experience. We're excited about a recent investment that we made in HealthPilot, which uses AI to make the consumer purchasing experience better when shopping for Medicare Advantage plans.

Speaker Change: That will in turn help reduce cost and improve the consumer experience. We're excited about our recent investment that we made in health pilot helped pilot uses AI to make the consumer purchasing experience better when shopping for Medicare advantage.

Jim Reckton: We're excited about a recent investment that we made in Health Pilot. Health pilot uses AI to make the consumer purchasing experience better when shopping for Medicare Advantage.

Jim Reckton: And we just entered into a lease agreement with Walmart that should help accelerate our primary care clinic.

James A. Rechtin: And we just entered into a lease agreement with Walmart that should help accelerate our primary care clinic. The implication as we look forward is that we're reaffirming our full year 2024 adjusted EPS and benefit ratio guidance. This prudently assumes that the higher inpatient costs will continue, even as we work to mitigate that pressure. We're looking ahead to 2025. We continue to, Unknown Attendee, Gary Taylor, Scott Fidel, Andrew Mok, George Hill, Stephen Baxter, Ann Hynes, Joshua Raskin, Benjamin Mayo, Andrew Mok, George Hill, Steven Valiquette, Nathan Rich, Susan Smith, Nathan Raskin, Benjamin Hendrix, Andrew Mok, George Hill, Stephen Mayo, and we will now open up the lines for your questions. Operator, please introduce the first call Our first question comes from the line from Ann Hynes with Mizzou: Hi, can you hear me?

Speaker Change: And we.

Speaker Change: We just entered into a lease agreement with Walmart that should help accelerate our primary care clinics.

Jim Reckton: The implication as we look forward is that we're reaffirming our full year 2024 adjusted EPS and benefit ratio guidance. This brutally assumes that the higher inpatient costs will continue even as we work to mitigate that pressure.

Speaker Change: The implication as we look forward is that we are reaffirming our full year 2024, adjusted EPS in benefit ratio guidance.

Speaker Change: This prudently assumes that the higher inpatient costs will continue even as we work to mitigate that pressure. We're looking ahead to 2025.

Jim Reckton: We're looking ahead to 2025. We continue expansion and adjusted EPS growth as a first step on what will be a multi-year path to a normalized margin. We continue to feel good about our bid assumptions and our product portfolio as we had in AEP. I'm excited about all of the momentum and the opportunity.

Speaker Change: We continue.

Speaker Change: Expansion and adjusted EPS growth as a first step on what will be a multi year path to a normalized margin. We continue to feel good about our bid assumptions and our product portfolio as we head into AEP I'm excited about all of the momentum and the opportunity ahead.

Jim Reckton: And so with that, I'll just remind you that we posted the prepared remarks to our Investor Relations website so that we can spend most of our time on Q&A today.

Speaker Change: And so with that I'll, just remind you that we posted the prepared remarks to our Investor Relations website. So that we could spend most of our time on Q&A today.

Unknown Attendee: And we will now open up the lines for your questions, operator.

Speaker Change: And we will now open up the lines for your questions. Operator, please introduce the first caller.

Unknown Attendee: Please introduce the first caller.

Anne Hynes: Our first question comes from the line of Anne Hines with Mizzouho. Hi, can you hear me? Yes, I'm ringing in. Oh, hi, sorry about that. She cut out.

Speaker Change: Our first question comes from the line of Ann Hynes with Mizuho.

Speaker Change: Yes.

Ann Kathleen Hynes: Hi can you hear me.

Operator: Yes, Maureen. Oh, hi. Sorry about that. She cut out.

Ann Kathleen Hynes: Yes, good morning, Hi, sorry about that she cut out.

Jim Reckton: So maybe go into the inpatient trends. Is it really only the two midnight, will you seeing pressure or are there other areas of pressure that you're seeing? Thanks. Yeah, hi, Anne. Happy to take that. So yes, and as we described in our previous commentary, both in the first quarter, and then at conferences in the second quarter, we have seen some variation in our month-to-month inpatient results for, and then also the avoidance rates as we implemented the two-midnight roll requirements, which if you remember that was a meaningful change and made some assumptions around how it impact our historical patterns.

Ann Kathleen Hynes: So maybe go into the inpatient trends is it really only the two midnight rule youre seeing pressure or are there other areas of pressure that youre seeing.

Ann Kathleen Hynes: So maybe go into the inpatient trends. Is it really only two midnight? Will you see pressure? Are there other areas of pressure that you're seeing? Thanks. Yeah, hi, Anne, happy to take that.

Speaker Change: Yeah happy to take that so yes, and as we described in our previous commentary both in the first quarter and then a conferences in the second quarter, we have seen some variation in our month to month in patient results.

Speaker Change: And then also the avoidance rates as we implemented the two midnight rule requirements, which if you remember that was a meaningful change.

Speaker Change: Make some assumptions around how it impact our historical pattern.

Susan Diamond: As we described in the first quarter, our avoidance rates initially were lower, but then ultimately did come in line with our expectations by the end of the first quarter. Those have remained stable and continue to be in line with what we would have expected. The inpatient absolute level, however, has seen some more variation and was higher in the back half of the second quarter, in particular. As Jim mentioned, that has continued into July at relatively similar levels. Based on everything that we are seeing, including the fact that these continue to be lower acuity and lower average cost, as well as the fact that we continue to see corresponding reductions in non inpatient observation side, it does all point to and believe that it is likely largely due to further impacts from the two midnight roll implementations.

Susan Marie Diamond: So, yes, and as we described in our previous commentary, both in the first quarter and then at conferences in the second quarter, we have seen some variation in our month-to-month inpatient results and then also the avoidance rates as we implemented the two midnight rule requirements, which, if you remember, that was a meaningful change, and we had to make some assumptions around how it would impact our historical patterns. As we described in the first quarter, our avoidance rates initially were lower, but they ultimately did come in line with our expectations by the end of the first quarter.

Speaker Change: As we described in our first quarter, our avoidance rates initially were lower but then ultimately did come in line with our expectations by the end of the first quarter. Those have remained stable and continue to be in line with what we would've expected.

Susan Marie Diamond: These have remained stable and continue to be in line with what we would have expected. The inpatient absolute level, however, has seen some more variation and was higher in the back half of the second quarter in particular.

Speaker Change: Inpatient absolute level. However has seen some more variation and was higher in the back half of the second quarter in particular.

Speaker Change: Jim mentioned that has continued into July.

Susan Marie Diamond: As Jim mentioned, that has continued into July at relatively similar levels. Based on everything that we are seeing, including the fact that these continue to be lower acuity and lower average cost as well as the fact that we continue to see corresponding reductions in non-inpatient observation. It does all point to a belief that this is likely largely due to further impacts from the two midnight rule implementation. We would say this is also consistent with what we've seen reported from the hospital systems regarding their results in terms of volume and revenue per patient. So, we do believe it's all consistent with respect to July. It is relatively stable.

Jim: Relatively similar levels based on everything that we are seeing including the fact that these continue to be lower acuity and lower average costs as well as the fact that we continue to see corresponding reductions in non inpatient on observation side. It does all point to and I believe that it is likely largely due to further impacts from the two midnight rule implementation.

Susan Diamond: We would say this is also consistent with what we've seen reported from the hospital systems with their results in terms of volume and revenue per patient, so we do believe it's all consistent with respect to July. It is relatively consistent.

Jim: When you say it and it is also consistent with what we've seen reported from the hospital systems with their results in terms of volume and revenue per patient. So we do believe it's all consistent with.

Susan Marie Diamond: We are seeing just a slight amount of covet as well on top of that, but otherwise consistent. So, as far as everything we have visibility on right now, it does seem to have stabilized, but is higher than we had anticipated entering the second quarter. Our next question comes from the line of Sarah James with Cantor Fitzgerald. Thank you.

Jim: With respect to July it is relatively consistent we are seeing just a slight amount of COVID-19 as well on top of that but otherwise consistent so as far as <unk>.

Susan Diamond: We are seeing just a slight amount of COVID as well on top of that, but otherwise consistent. So, as far as you know, everything we have visibility right now, it does seem to have stabilized but is higher than we had anticipated entering the second quarter.

Jim: Everything we have visibility right now it does seem to have stabilized but is higher than we had anticipated entering the second quarter.

Sarah James: Our next question comes from the line of Sarah James with Cantor Fitzgerald. Thank you. The science implies a good step up in second half MLR. Can you speak to how much of that is seasonality versus assumed continuation of the July trend? And is there a way to break out the impact of the increased inpatient in July on the 2Q MLR?

Jim: Our next question comes from the line of Sarah James with Cantor Fitzgerald.

Susan Marie Diamond: The guidance implies a good step up in second half MLR. Can you speak to how much of that is seasonality versus the assumed continuation of the July trend? And is there a way to break out the impact of the increased inpatient admissions in July on the 2Q MLR? Hey Sarah.

Sarah Elizabeth James: Thank you.

Sarah Elizabeth James: The guidance implies a good step up in second half MLR can you speak to how much of that is seasonality versus.

Sarah Elizabeth James: Assuming continuation of the July trend is there a way to break out the impact of increased in patient in July on the <unk> MLR.

Susan Diamond: Hey Sarah, yes. So, in terms of the second half MLR, as we said, it does anticipate that the higher inpatient volumes, which are partially offset by lower averaging at cost, and then those lower observation stays, will continue into the third quarter in the back half of the year. So that is fully accounted for. To your point, there is some workday seasonality that impacts the quarterly progression as well. For the third quarter specifically, it is contributing about 80 basis points to the expectation for the third quarter MLR. So that is accounted for as well. The offset to that is largely in the fourth quarter where we expect to see favorable workday seasonality relative to last year.

Susan Marie Diamond: Yes. So in terms of the second half MLR, as we said, it does anticipate that the higher inpatient volumes, which are partially offset by lower average unit costs, and then those lower observation stays will continue into the third quarter of the back half of the year. So that is fully accounted for. To your point, there is some workday seasonality that impacts the quarterly progression as well. For the third quarter specifically, it is contributing about 80 basis points to the expectation for the third quarter MLR, so that is accounted for as well.

Speaker Change: Hey, Sir.

Speaker Change: Yes, so in terms of the second half MLR as he said it does anticipate that the higher inpatient volumes, which are partially offset by lower average unit costs and then there's lower observations Dave will continue into the third quarter in the back half of the year. So that is fully accounted for it to your point there is some workday seasonality that impacts the quarterly.

Dave: Progression as well for the third quarter, specifically it is contributing about 80 basis points.

Susan Marie Diamond: The offset to that is largely in the fourth quarter, where we expect to see favorable workday seasonality relative to last year. I think your second question asked whether the higher July activity impacted second quarter results, which obviously it wouldn't. That would be considered in our third quarter results. Right, sorry, is there a way to quantify the July impact on MLR? Oh, no.

Speaker Change: To the expectation for the third quarter MLR. So that is accounted for as well the offset to that is largely in the fourth quarter, where we expect to see favorable workday seasonality relative to last year. I think your second question asked whether the higher July activity impacted second quarter results, which obviously it wouldnt and that would be considered in our third quarter results.

Susan Diamond: I think your second question asks whether the higher July activity impacted second quarter result, which obviously it wouldn't; that would be considered in our third quarter result. Right, sorry, it's a way to quantify the July impact on MLR. Oh, thank you. Sorry. So I say again, the core admission volumes is in line with what we had anticipated based on the second quarter performance. There is a slightly higher amount due to COVID, which again, I wouldn't say that's overly concerning to us, and given it's clearly COVID-related, we would expect it not to persist for the full balance of the year, but something will certainly continue to last.

Speaker Change: Alright, sorry.

Speaker Change: The way to two.

Speaker Change: Quantify the July impact.

Speaker Change: On MLR nature.

Susan Marie Diamond: No, so I would say again, the core admission volumes are in line with what we had anticipated based on the second quarter performance. There is a slightly higher amount due to COVID, which again, I wouldn't say that's overly concerning to us. And given it's clearly COVID-related, we would expect it not to persist for the full balance of the year.

Speaker Change: So I would say again the core admission volumes in line with what we had anticipated based on our second quarter performance. There is a slightly higher amount due to COVID-19, which again I wouldn't say that's overly concerning to us and given its clearly COVID-19 related we would expect it not to persist for the full balance of the year, that's something we'll certainly continue to loss.

Operator: But something will certainly continue. The next question comes from the line of Andrew Mok with Barker. Hi, good morning.

Andrew Mok: Our next question comes from a line of Andrew Mock with Barclays. Hi, good morning. Hoping you give a little bit more color on the MLR progression this year. You're guiding 3Q insurance MLR up about 100 basis points sequentially, but it sounds like you're leaving that assumption relatively flat. Is that right? Because I would think 4Q MLR would be even higher than 3Q MLR just based on normal seasonality. I just want to understand those two points. Yeah. When you think about the back half of the year, we do anticipate higher MLRs for the third quarter relative to the last year, relatively consistent, which again, includes that workday impact I just mentioned.

Speaker Change: Our next question comes from the line of Andrew Mok with Barclays.

Andrew Mok: Hoping to give a little bit more color on the MLR progression this year. You're guiding 3Q insurance MLR up about 100 basis points sequentially, but it sounds like you're leaving that assumption relatively flat. Is that right?

Andrew Mok: Hi, Good morning, hoping you can give a little bit more color on the MLR progression. This year youre guiding <unk> insurance MLR up about 100 basis points sequentially, but it sounds like you're leaving that assumption relatively flat is that right because I would think <unk> MLR would be even higher than <unk> MLR just based on normal seasonality.

Susan Marie Diamond: Because I would think 4Q MLR would be even higher than 3Q MLR just based on normal seasonality. Just want to understand those two points. Thanks.

Speaker Change: Wanted to understand those two points.

Susan Marie Diamond: Yeah, when you think about this, the back half of the year, we do anticipate higher MLRs for the third quarter relative to last year, relatively consistent, which again includes that workday impact I just mentioned. For the fourth quarter, we obviously saw that very high utilization in the fourth quarter last year. Obviously, we've jumped off of that in terms of expectations for this year.

Speaker Change: Yeah, when you think of.

Speaker Change: The back half of the year, we do anticipate higher MLR for the third quarter relative to last year relatively consistent which again includes that workday impact I just mentioned for fourth quarter. We obviously saw that very high utilization in the fourth quarter last year.

Susan Diamond: For fourth quarter, we obviously saw that very high utilization in the fourth quarter last year. Obviously, we jumped off of that in terms of expectations for this year. These seem to be some slightly higher incremental pressure just because of the expectation that I have normal trend on top of last year's jumping off point. But because of that favor, workday seasonality that I just mentioned, it will positively impact the fourth quarter MLR, which is going to offset some of that.

Susan Marie Diamond: We see some slightly higher incremental pressure just because of the expectation of a normal trend on top of last year's jumping off point. But because of that favorable workday seasonality that I just mentioned, it will positively impact the fourth quarter MLR, which is going to offset some of that. Our next question will come from Justin Lake with Wolf Research. Thanks. Good morning.

Speaker Change: Obviously, we jumped off of that in terms of our expectations for this year.

Speaker Change: Some slightly higher incremental pressure just because of the expectation of abnormal trend on top of last year's jumping off point, but because of that favorable workday seasonality that I just mentioned it will positively impact our fourth quarter, MLR, which is going to offset some of that.

Justin Lake: 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.

Justin Lake: First, the inpatient, the higher inpatient clause. If I just run some simple math, the, you know, your typical seasonality, first half, the second half on MLR, typically pretty flat to up slightly, let's call it, you know, zero to 50 basis points. So it looks like you're up, you know, closer to 125. So am I right in thinking that this inpatient pressure is about 100 basis points to MLR.

Justin Lake: Thanks.

Justin Lake: Good morning. First, the inpatient, the higher-man patient cause. If I just run some simple math, your typical seasonality first half, the second half on MLR, typically pretty flat to up slightly. Let's call it zero to 50 basis points. So it looks like you're up close to 125. So am I right in thinking that this inpatient pressure is about 100 basis points to MLR.

Justin Lake: Thanks, Good morning.

Speaker Change: <unk>.

Speaker Change: The inpatient.

Speaker Change: Higher inflation costs.

Speaker Change: If I just run some simple math.

Speaker Change: Your typical seasonality first half the second half.

Speaker Change: <unk> typically pretty flat to up slightly let's call. It zero to 50 basis points. So it looks like Youre up closer to 125, So am I right in thinking that the student patients pressure.

Susan Marie Diamond: In general, if not, can you quantify it somehow for us in terms of, you know, the level of pressure that this is specifically putting on MLR? And then, you know, what's embedded in the second half relative to what you expected previously? And then, you talked in the prepared remarks about being comfortable with your 2025 bid. This came in the back half of the quarter, so that's, you know, the second half of May.

Speaker Change: It's about 100 basis points to MLR.

Justin Lake: In general, if not, can you quantify it somehow for us in terms of the level of pressure that this is specifically putting on MLR and then what's embedded in the second half relative to what you expected previously. And then you talked in the prepared remarks about being comfortable with your 2025 bid.

Speaker Change: If not could you quantify it somehow for us in terms of the level of pressure that this is specifically putting on MLR.

Speaker Change: What's embedded in the second half relative to what you expected previously and then.

Speaker Change: Your you talked on the prepared remarks about.

Speaker Change: Being comfortable with your 2025 bids.

Justin Lake: Davis. You said this came in the back half of the quarter, so that's, you know, second half of May. Those vids are due in the beginning of June.

Speaker Change: <unk> said this came in the back half.

Speaker Change: For the quarter. So that's second half of May those bids are due in the beginning of June.

Susan Diamond: How do you get investors comfortable with the fact that your vision, you know, are, would be able to absorb this type of pressure, given that you didn't see it until right with bits where we're being submitted. Yeah, hi, Justin. So, in terms of the MLR seasonality, there are some impacts year over year, just because we continue to see increasing pressure last year, so it sort of impacted the progression we saw last year, with respect to this year when you think about first half and second half. You know, there is some favorability in the first half of the year that, you know, offset some of the higher cost that we did see beneficial impacting the benefit ratio.

Susan Marie Diamond: Those bids are due at the beginning of June. How do you get investors comfortable with the fact that your bids would be able to absorb this type of pressure, given that you didn't see it until right when bids were being submitted? Yeah, hi Justin.

Speaker Change: How do you get investors comfortable with the fact that your bids.

Speaker Change: Or would be able to absorb this type of pressure given that you didn't see it until right with bids were.

Speaker Change: We're being submitted.

Susan Marie Diamond: So in terms of the MLR seasonality, there are some impacts year over year just because we continued to see increasing pressure last year. So it sort of impacted the progression we saw last year. With respect to this year, when you think about the first half and the second half, you know, there is some favorability in the first half of the year that offsets some of the higher costs that we did see beneficially impacting the benefit ratio. And those are some of which are one-time in nature where they won't run rate.

Justin Lake: Yeah, Hi, Justin so in terms of the MLR seasonality there are some impacts year over year, just because we continue to see increasing pressure last year. So it sort of impacted the progression you saw last year with respect to this year. When you think about first half and second half.

Speaker Change: There is some favorability in the first half of the year that you know.

Speaker Change: Offsetting some of the higher cost that you did see beneficially impacting the benefit ratio and those are some of which are onetime in nature, where they wont run rate. Some are unique to the first quarter or the first half of the year typically things. If you think of like prior claim airplanes development, which you've acknowledged has been favorable versus our expectations. It was also mentioned that we saw favorability in our 'twenty three.

Susan Diamond: And those are some of which are one time in nature where they won't run rate, some are you know, you need to the first quarter or the first half of your typically things you think of like prior to your claims development, which we've acknowledged has been favorable versus our expectations. We've also mentioned that we saw favorability in our 23 final MRA payment, which is more one time in nature, still positive, but won't run right into the back half of the year. So some of those things are disproportionately impacting our first half MLR this year, relative to some prior years.

Susan Marie Diamond: Some are, you know, unique to the first quarter or the first half of the year, typically things you can think of like prior year claims development, which we've acknowledged has been favorable versus our expectations. We've also mentioned that we saw favorability in our 23 final MRA payment, which is more one-time in nature, still positive, but won't run right into the back half of the year. So some of those things are disproportionately impacting our first half MLR this year relative to some prior years, and so obviously won't repeat in the back half, which can create some differences between what we're expecting in the first half and second half.

Speaker Change: <unk> MRA payment, which is more onetime in nature, so positive, but won't run rate into the back half of the year. So some of those things are disproportionately impacting our first half MLR this year relative to some prior years and so obviously wont repeat in the back half, which can create some differences in what were expecting first half and second half so within our second half assumptions as we've said we have assumed that the.

Susan Diamond: And so obviously won't repeat in the back half, which can create some differences in what we're expecting first half and second half. So within our second half assumptions, as we've said, we have assumed that the higher absolute level of inpatient volumes plus the naturally offsetting unit cost and observation stays that we've experienced, those are all assumed to continue for the balance of the back half of the year. And then, as we said, there are some seasonal work they see the nality impacts that are a little bit different this year; they're also embedded in that as well.

Susan Marie Diamond: So within our second half assumptions, as we've said, we have assumed that the higher absolute level of inpatient volumes, plus the naturally offsetting unit costs and observation stays that we've experienced, those are all assumed to continue for the balance of the back half of the year. And then, as we've said, there are some workday seasonality impacts that are a little bit different this year. They're also embedded in that as well.

Speaker Change: A higher absolute level of inpatient volumes plus the naturally offsetting cost and observation stays that we've experienced those are all assumed to continue for the balance of the back half of the year and then as we said there are some fees that workday seasonality impacts that are a little bit different. This year. There are also embedded in that as well.

Susan Diamond: As far as 25 bids, you know, well, to your point, we submitted these bids prior to some of the development of this inpatient pressure, so that is not explicitly contemplated in the bids, but we would say some of the offsetting positive news, the higher risk scores in the final MRA payment, as well as the lower inpatient unit cost, the lower observation stays, and some of our other favorable prior year development coming from things like plain cost management and audits were also not contemplated in the bids and some were durable. And so, all told and considering all of those factors, we continue to feel good about the bid assumptions and the aggregate and the ability to deliver the margin and earnings expansion that we had always contemplated.

Susan Marie Diamond: As far as 25 bids, you know, well, to your point, we submitted these bids prior to some of the development of this inpatient pressure, so that is not explicitly contemplated in the bids. But we would say some of the offsetting positive news, the higher risk scores in the final MRA payment, as well as the lower inpatient unit cost, and the lower observation phase. And some of our other favorable prior year developments coming from things like plain cost management and audits were also not contemplated in the bids, and some were durable.

Speaker Change: As far as 25 bids.

Speaker Change: Well to your point, we submitted these beds prior to some of the development of inpatient pressure. So that is not explicitly contemplating it is but we would say some of the offsetting positive news the higher risk scores and the final MRA payment as well as the lower inpatient unit costs below observations days and some of our other favorable prior year development coming from things like claim cost management and audits.

Susan Marie Diamond: And so, all told, and considering all of those factors, we continue to feel good about the bid assumptions and the aggregate and the ability to deliver the margin and earnings expansion that we had always contemplated. Our next question comes from the line of David Windley with Jeff. Hi, thanks for taking my question. I wanted to ask a clarification question and then a broader question. The clarification is, Susan, I think you had previously said that the two midnight rule was worth about 50 to 75 basis points in the MLR.

Speaker Change: We're also not contemplated in our beds and some more durable and so all told and considering all of those factors. We continue to feel good about the beta assumptions in the aggregate and the ability to deliver the margin and earnings.

Speaker Change: I mentioned that we had always contemplated.

David Windley: Our next question comes from the line of David Windley with Jeffries. Hi, thanks for taking my question. I wanted to ask a clarification and then a broader question.

David Howard Windley: I wondered if you could give us an updated number on that. And then the broader question I have is: Now, over multiple years of value creation plan activity, the company's endeavored to, you know, drive efficiency and take cost out. I'm wondering if, Essentially, you've cut the muscle if you've cut so much cost that your kind of anticipatory mechanisms and ability to react and act quickly on elevated cost activity have been hampered by the depth to which you've cut costs. Thanks. Yeah, David, so I'll take the first question on the two-midnight rule and then hand it off to Jim for your second question.

Speaker Change: Our next question comes from the line of David Windley with Jefferies.

Speaker Change: Hi.

David Howard Windley: Thanks for taking my question I wanted to ask.

Susan Diamond: The clarification being. Susan, I think you had previously said that the two midnight rule was worth about 50 to 75 basis points in the MLR. I wondered if you could give us an updated number on that.

David Howard Windley: Clarification, and then a broader question on clarification being.

David Howard Windley: I think you had previously said the two midnight rule.

Speaker Change: It was worth about 50 to 75 basis points in the MLR I wondered if you could give us an updated number on that and then the broader question I have is.

Jim Reckton: And then the broader question I have is, you know, over multiple years of value creation plan activity, the company's endeavored to drive efficiency and take cost out. I'm wondering if essentially you've cut the muscle, if you've cut so much cost that your kind of anticipatory mechanisms and ability to react and act quickly on elevated costs activity has been hampered by the depth to which you've cut costs.

Speaker Change: Over multiple years of value creation plan activity.

Speaker Change: The company has endeavored to drive efficiency and take cost out I'm wondering if.

Speaker Change: Essentially you've cut to muscle.

Speaker Change: You've cut so much cost that you're.

Speaker Change: Kind of anticipatory mechanisms and ability to.

Speaker Change: React and act quickly on elevated costs activity has been hampered by the depth to which you've cut costs. Thanks.

Susan Diamond: Yeah, David, so I'll take the first question on the team night rule and then hand it off to Jim for your second question. So yes, I think the impact that you referenced was what we anticipated going into the year relative to the team in night rule. Obviously, is what we've seen. If the higher inpatient costs are, in fact, attributable to the team in night rule, which, again, the information we have would seem to suggest that it generally is, then that would obviously have a higher impact than we'd expected. All told, you know, when you consider the positive prior year development as it respects claims, and the unit cost and the observation stage, when you take all of that in total, we're able to mitigate a significant portion of that, but not all of it.

Speaker Change: Yeah, David I'll take the first question on the two midnight rule, and then hand it off to Jim for your second question. So yes, I think the impact that you referenced was what we anticipated going into the year relative to the two midnight rule, obviously as what we've seen is the higher inpatient costs are in fact attributable stated two midnight rule, which again the information we have would seem to suggest that it generally is.

Susan Marie Diamond: So, yes, I think the impact that you referenced was what we anticipated going into the year relative to the two-midnight rule. Obviously, as we've seen, if the higher inpatient costs are in fact attributable to the two-midnight rule, which, again, the information we have would seem to suggest that it generally is, then that would obviously have a higher impact than we'd expected. All told, you know, when you consider the positive prior year development as it respects claims and the unit cost and the observation stage, when you take all of that in total, we are able to mitigate a significant portion of that, but not all of it.

Speaker Change: Then that would obviously have a higher impact than we had expected.

Speaker Change: All told when you consider the positive prior year development as it respects claims and the unit cost and the observation stays when you take all of that in total we were able to mitigate a significant portion of that but not all of it and so intra year. The remaining offset is coming from that favorable MRA, which again, we expect to continue which is why we continue to feel good about the $16 for this year and.

Susan Marie Diamond: And so, entry year, the remaining offset is coming from that favorable MRA, which, again, we expect to continue, which is why we continue to feel good about the $16 for this year and $25 for next year. But we haven't sized the incremental impact of the two-midnight rule, and I don't have that information sitting here today that I'd be prepared to do that on. Yeah, hey, I can jump in on the cost management question. First of all, it's a good question.

Susan Diamond: And so, in your year, the remaining office that is coming from that favorable MRA, which, again, we expect to continue, which is why we continue to feel good about the $16 for this year and $25 for next year.

Susan Diamond: But we have inside the incremental impact for the team in night rule, and I don't have that information sitting here today that I'd be prepared to do that on this call.

Speaker Change: <unk> 25 for next year, but we haven't sized that the incremental impact for the two midnight rule and I don't have that information sitting here today that would be prepared to do that on this call.

Jim Reckton: Yeah, hey, I can jump in on the cost management question. First of all, it's good questions. One of the questions that I was asking and staring at when I first came in here seven months ago, the short answer is, I don't see any evidence that we've done anything that has cut into muscle today. I think that's the most important thing. Anytime you get through a cost transformation like this, you've got some low hanging fruit up front, and then you have a lot of harder work that is tied to the things that we talked about earlier: automation, using technology to do process redesign, et cetera.

James A. Rechtin: One of the questions that I was asking and staring at when I first got in here seven months ago. The short answer is, we, I don't see any evidence that we've done anything that has cut into muscle today. I think that's the most important thing. Anytime you go through a cost transformation like this, you've got some low-hanging fruit up front, and then you have a lot of harder work that is tied to the things that we talked about earlier, automation, using technology to do process redesign, etc. The quick hits you get quickly, and the rest of it takes real planning and investment over multiple years.

Speaker Change: Yes, Hey, I can jump in on that.

Speaker Change: Cost management question.

Speaker Change: First of all it's good questions one of the questions that I was.

Speaker Change: Asking and staring out when I first came in here seven months ago.

Speaker Change: Short answer is.

Speaker Change: I don't see any evidence that we've done anything that is cut into muscle today.

Speaker Change: And I think that's the most important thing.

Speaker Change: Anytime you go through our cost transformation like this you've got some low hanging fruit upfront and then you have a lot of harder work that is tied to the things that we talked about earlier automation using technology to do process redesign et cetera.

Jim Reckton: The quick hits you get quickly, and the rest of it takes real planning and investment over multiple years. The company has done a nice job of planting the seeds for that multi-year cost management, and there's more to do when you think about the nature of this business and what technology can do to take cost out over time. There is still more opportunity that opportunity is just going to be phased in over multiple years. It's not going to be the big jump that we saw a year, year and a half ago.

Speaker Change: The quick hits, you get quickly and the rest of it takes real planning and investment over multiple years.

James A. Rechtin: The company has done a nice job of planting the seeds for that multi-year cost management. And there's more to do when you think about the nature of this business and what technology can do to take costs out over time. There is still more opportunity; that opportunity is just going to be phased in over multiple years; it's not going to be the big jump that we saw a year, year and a half ago. Our next question comes from A.J. Rice with UBS.

Speaker Change: The company has done a nice job of planting the seeds for that multiyear cost management and there is more to do when you think about the nature of this business and what technology can do to take cost out over time. There is still more opportunity that opportunity is just going to be phased in over over multiple <unk>.

Speaker Change: Years, it's not going to be the big jump that we saw year year to Africa.

AJ Rice: Our next question comes from AJ Rice with UBS.

Speaker Change: Yeah.

Speaker Change: Our next question comes from AJ Rice with UBS.

Jim Reckton: Hi, everybody. Maybe just stepping back. I know Jim and your lighter; you talk about multi-year opportunity for margin recovery and some of the discussions we've had with the company earlier in the year. The thinking was given the market competitive environment, given some of the restrictions on tweaking benefits, that we should think of it in terms of 100 to 150 basis points. We're going to be able to do that in terms of margin recovery, MLR, and then margin maybe each year for the next few years. I wonder if you have any updated thoughts on how fast we can see that margin recovery.

Albert J. William Rice: Hi, everybody. Unknown Speaker. I may be just stepping back. I know, Jim, in your letter, you talk about the multi-year opportunity for margin recovery and some of the discussions we've had with the company earlier in the year. The thinking was, given the market competitive environment. You know, some of the restrictions on tweaking benefits that we should think of them in terms of 100 to 150 basis points of margin recovery, MLR, and then margin, maybe each year for the next few years.

Albert J. William Rice: Hi, everybody.

Speaker Change: Maybe just stepping back I know Jim in your letter you talk about the multiyear.

Albert J. William Rice: Opportunity for margin recovery and some of the discussions we've had with the company earlier this year.

Speaker Change: Taking one given the market competitive environment given.

Speaker Change: Some of the restrictions on tweaking benefits.

Speaker Change: We should think of it in terms of 100 to 150 basis points of margin recovery.

Speaker Change: MLR in the margin maybe.

Speaker Change: Maybe each year for the next few years I Wonder if you have any updated thoughts on how fast we can see that margin recovery I know you reiterated long term you think it could be 3% target I think thats before investment income.

Albert J. William Rice: I wonder if you have any updated thoughts on how fast we can see that margin recovery. I know you reiterated long-term that you think it could be a 3% target. I think that's before investment income. Can you give us any updated thoughts on how the progression looks over the next two or three years? Yeah, let me hit a couple of things here.

Jim Reckton: I know you reiterated long term; you think it could be 30% target. I think that's before investment income. Can you give us any updated thoughts on how the progression looks over the next two or three years.

Speaker Change: Can you give us any updated thoughts on how the progression looks over the next two or three years.

James A. Rechtin: So first of all, I want to separate two concepts; we have talked about the multi-year margin recovery, which is really driven by the regulatory environment, what you can do in any one year with TBC, etc., and we really don't have any change to the commentary that we have made on that previously. The second thing that I mentioned is multi-year planning. And when you think about multi-year planning, I'm going to go back, in a way, to the comment that I just made.

Jim Reckton: Let me hit a couple of things in there. So first of all, I want to separate two concepts. We have talked about the multi-year margin recovery that is really driven by the regulatory environment, what you can do in any one year with TBC, et cetera. And we really don't have any change to the commentary that we have made on that previously. The second thing that I referenced is multi-year planning. And when you think about multi-year planning, I'm going to go back actually in a way to the comment that I just made. If there's a place that we're going to have to be more disciplined over the coming years, it's really in how we're measuring and evaluating the return on the expenses, whether it's capital or whether it's operating expense that we have in any given year, so that we're optimizing those decisions.

Speaker Change: Yes, let me hit a couple of things in there so.

Speaker Change: First of all.

Speaker Change: Our separate two concepts, we have talked about.

Speaker Change: The multiyear margin recovery that is really driven by the regulatory environment. What you can do in any one year with TBC et cetera, and we really don't have any change to the commentary that we have made.

Albert J. William Rice: On that previously.

Albert J. William Rice: The second thing that I referenced is multiyear planning.

Albert J. William Rice: And when you think of our multiyear plan I'm going to go back actually in a way to the comment that I. Just made if there is a place that we're going to have to be more disciplined over the coming years.

James A. Rechtin: If there's a place that we're going to have to be more disciplined over the coming years, it's really in how we're measuring and evaluating the return on the expenses, whether it's capital or whether it's operating expense that we have in any given year, so that we're optimizing those decisions and then making sure that we've got the processes in place, that we're not just operating with discipline in a one-year period of time, but we're driving the accountability over, years 2, 3, 4, and 5 that go back to that investment you made in year one, that's the place where I think that there's more opportunity. And the benefit of that is just getting to more consistent performance year over year over year over year.

Albert J. William Rice: It's really in how we're measuring and evaluating the return on the expenses, whether it's capital or whether it's operating expense that we have in any given year.

Jim Reckton: And then, making sure that we've got the processes of place, that we're not just operating with discipline in a one-year period of time, but we're driving the accountability over years two, three, four, and five that go back to that investment you made in your one. That's the place where I think that there's more opportunity, and the benefit of that is just getting to more consistent performance year over year over year over year. That is, you know, kind of really grounded in how do you optimize shareholder value over multiple years. So that's a different concept or a different thing that I am commenting on in the letter from the margin recovery that we need to make sure that we're building into our benefits and repricing.

Albert J. William Rice: So that we're optimizing those decisions and then making sure that we've got the processes in place that we're not just operating with discipline and over one year period of time, but we are driving the accountability over.

Speaker Change: Years, 234, and five that go back to that investment you made you won.

Speaker Change: That's the place where I think that there's more opportunity in the benefit of that is just getting to more consistent performance year over year over year over year.

James A. Rechtin: That is, you know, kind of grounded in how you optimize shareholder value over multiple years. So that's a different concept or a different thing that I am commenting on in the letter from the margin recovery that we need to make sure that we're building into our benefits and our pricing. Our next question comes from a line from Kevin Fischbeck, Bank of America.

Albert J. William Rice: That is kind of really grounded in how do you optimize shareholder value over multiple years.

Speaker Change: So that's a different concept or a different thing that I am commenting on in.

Speaker Change: In the letter.

Speaker Change: From the margin recovery that we need to make sure that we're building into our benefits in our pricing.

Jim Reckton: Sam.

Speaker Change: Sam.

Kevin Fischbeck: Our next question comes from a line of Kevin Fishbeck with Bank of America. Great. Thanks.

Speaker Change: Our next question comes from the line of Kevin Fischbeck with Bank of America.

Kevin Mark Fischbeck: Great, thanks. Maybe two quick questions, maybe just to wrap up that last point, Jim, would you say that this is a change for Humana that you're bringing to this, that maybe this was a shortfall relative to multi-year planning with a shortfall relative to historical? Or are you just saying that this is something you always have to do, and you're just going to continue to do it.

Speaker Change: Okay.

Jim Reckton: Maybe two quick questions. Maybe just to wrap up that last point, Jim, would you say that this is a change for humanity that you're bringing to this? Maybe this was a shortfall relative to multiple year planning with a shortfall relative to historical, or you're just saying this is on the you always have to do and you're just going to continue to do it.

Kevin Mark Fischbeck: Great. Thanks.

Kevin Mark Fischbeck: Two quick questions, maybe just to wrap up that last point, Jim would you say that this is a <unk>.

Speaker Change: Change for Humana that youre, bringing to this that maybe this was a shortfall relative to the multiyear planning with the shortfall relative to historical or you're just saying.

Speaker Change: You always have to do and just to continue to do it and then I guess second on the.

James A. Rechtin: And then I guess second on that. On the provider business, can you comment a little bit more about the MLR trend there? Are you seeing the same inpatient pressures there, or is there anything else that you would spike out on that side of the business? Yeah, I had the first one and then I'll hand this over to Susan to comment on the second.

Susan Diamond: And then I get second on the provider business. If you come in a little bit more about the MLR trend there, are you seeing the same impatient pressures there, or is there anything else that you would spike out on that side of the business. Thanks. Yeah, I had the first one, and then I'll hand this over to Susan to comment on the second. It's not so much that it's a change as it is something that we can get more disciplined about and we can get better at the nature of this business, Medicare Advantage in particular.

Speaker Change: On the provider business can you talk a little bit more about the MLR trends there or are you seeing the same inflation pressures there or is there anything else that you would spike.

Speaker Change: Spike out on that side of the business. Thanks.

Susan Marie Diamond: It's not so much that it's a change as it is something that we can get more disciplined about and better at. The nature of this business, Medicare Advantage in particular, is that it's an annual cycle business. You guys know that. We talk about it all the time.

Albert J. William Rice: Yes.

Albert J. William Rice: First one and then I'll hand, it over to Susan to comment on the second.

Susan: It's not so much that it's a change as it is something that we can get more disciplined about and we can get better at that nature of this business Medicare advantage. In particular is that it's an annual cycle business you guys know that we talk about it all the time annual repricing annual rate notice annual.

Jim Reckton: Is that it's an annual cycle business? You guys know that we talk about it all the time: annual repricing, annual rate notice, annual. AP and member growth, and in that environment, it can be challenging to really be disciplined about how you think about three, four, or five year investments. And, and again, that's not just capital investments; that's operating operating investments that you're making in any given year. And so it's, it is something that the company thinks about; it's also something that the company can get better at.

James A. Rechtin: Annual repricing, annual rate notice, annual AEP, and member growth. And in that environment, it can be challenging to really be disciplined about how you think about three, four, and five-year investments. And again, that's not just capital investments. That's operating investments that you make in any given year. And so it is something that the company thinks about. It's also something that the company can get better at. Yeah, and Kevin, on your second question about our provider business, I would say, at the highest level, similar results to the health plan, although on the claims side, I would say not quite as much inpatient pressure as we've seen.

Albert J. William Rice: AEP and member growth and in that environment, it can be challenging to.

Albert J. William Rice: Really be disciplined about how you think about 345 year investments and again, that's not just capital investments that's operating operating investments that youre, making in any given year.

Albert J. William Rice: So it is something that the company thinks about its also something that the company can get better at.

Susan Diamond: Yeah, and Kevin, on your second question with our provider business, I would say the highest level. Similar results to the health plan, although on the plain side, I would say not quite as much impatient pressure as we've seen, and we that's consistent. I think was what we talked about earlier, where we weren't seeing as much pressure in the risk book from some of that impatient activity when it started to emerge. They've also, as I've said before, consistently demonstrated a better impact to work with the hospital assistance on these authorization requests and determine the appropriate level of care, which oftentimes, you know, results in not needing an inpatient stay.

Speaker Change: Yeah on your second question with our provider maintenance I would say at the highest level similar results to the health plan, although on the claim side I would say not quite as much inpatient pressure as we've seen and we that's consistent I think with what we talked about early in the year, where we weren't seeing as much pressure in their risk book.

Susan Marie Diamond: And that's consistent, I think, with what we talked about earlier in the year, where we weren't seeing as much pressure on the risk book from some of that inpatient activity when it started to emerge. They've also, as I've said before, consistently demonstrated a better impact on working with the hospital systems on those authorization requests and determining the appropriate level of care, which oftentimes results in not needing an inpatient stay, and again, just better than what we see on average within the health plan.

Albert J. William Rice: Some of that inpatient activity when it started to emerge they've also as I've said before consistently demonstrated a better impact to work with the hospital assistance on these authorization requests and determining the appropriate level of care, which oftentimes.

Albert J. William Rice: Our results in not needing an inpatient stay and again just better than what we see on average that within the health plan.

Susan Diamond: And again, just better than what we see on average within the health plan. They've also seen some several MRA, and they're 23 final payment, but then we also acknowledge that CenterWell because they do have an agnostic platform. They don't get the same level of real-time information as we do. And so we are taking a little bit of a cautious approach as we think about their performance to harden it to estimate the impact of change that's still running through this system. So I would say generally not inconsistent with the health plan, but not quite the same.

Susan Marie Diamond: They've also seen some favorable MRA in their 23 final payment, but then we also acknowledge that CenterWell, because they do have an agnostic platform, they don't get the same level of real-time information as we do. And so we are taking a little bit of a cautious approach as we think about their performance because it's harder to estimate the impact of change that's still running through the system.

Speaker Change: <unk> also seen some payroll MRA INR 23 final on payment, but then we also acknowledged that center, while because they do have an agnostic platform. They don't get the same level of real time information as we do and so we are taking a little bit of a cautious approach as we think about their performance to harden it to estimate the impact of change Thats still running through the system. So I would say generally.

Albert J. William Rice: Not inconsistent with the health plan, but not quite at the same level.

Unknown Attendee: Hello.

Joshua Raskin: Our next question comes from a line of Joshua Raskin with Neffron Research.

Susan Marie Diamond: So I would say, generally, not inconsistent with the health plan, but not quite the same. Our next question comes from Joshua Raskin with Nefron Research. Hi, maybe just shifting gears, can you speak about your expectations for the PDP segment in 2025, including expectations for membership and then profit and margin? And then, maybe, based on that benchmark data that we saw this week, what should we take away from the industry bids? And maybe lastly, any commentary on expectations of participation in that demonstration project? So, hey, Josh.

Albert J. William Rice: Our next question comes from the line of Joshua Raskin with Nephron research.

Joshua Raskin: Hi, maybe just shifting gears. Can you speak about your expectations for the PDP segment in 2025, including expectations for membership and then profit and margin? And then maybe based on that benchmark data that we saw this week, you know, what should we take away from the industry bids, and maybe lastly any commentary on expectations of participation in that demonstration project? So, hey, Josh. So yeah, there's a lot going on, obviously, in the Part D side, particularly PDP. As we said, you know, it is hard to really understand how everyone might have approached their bid for 2025, particularly in the standalone Part D space.

Joshua Richard Raskin: Hi, maybe just shifting gears can you speak about your expectations for the PDP segment in 2025, including expectations for membership and then profit and margin and then maybe based on that benchmark data that we saw this week what should we take away from the industry bids and maybe lastly, any commentary on.

Joshua Richard Raskin: Expectations of participation in that demonstration project.

Albert J. William Rice: Okay.

Joshua Richard Raskin: So yeah, there's a lot going on, obviously, in the Part D side, particularly PDP. As we said, it is hard to really understand how everyone might have approached their bids for 2025, particularly in the standalone Part D space. As we said before, selection in terms of your underlying membership is really important.

Albert J. William Rice: So hey, Josh so yeah, there's a lot going on obviously in the part D side, particularly PDP.

Speaker Change: It is hard to you.

Speaker Change: Really understand what how everyone might've approach their bids for 2025, particularly in the Standalone part D space as we said before selection in terms of your underlying membership is really important and we each have a little bit of a different product strategy, which may have caused us to approach it a bit differently I would say broadly I think the industry is focused on mitigating some of that increased exposure and.

Joshua Raskin: As we said before, selection in terms of your underlying membership is really important, and we each have a little bit of a different product strategy, which may have caused us to approach the bid differently. I would say broadly, I think the industry was focused on mitigating some of the increased exposure and liability risk that we all have in the way that the program will be constructed for 25. With the information that was released this week on the benchmarks, you know, as we've all seen, it does suggest that the direct subsidy maybe is going to be higher than what certainly analysts had expected.

Susan Marie Diamond: And we each have a little bit of a different product strategy, which may have caused us to approach the bids differently. But, broadly, I think the industry was focused on mitigating some of the increased exposure and liability risks that we all have in the way that the program will be constructed for 25. With the information that was released this week on the benchmark, you know, as we've all seen, it does suggest that the direct subsidy maybe is going to be higher than what certainly analysts had expected. It's impossible to know what each company might have anticipated.

Speaker Change: Any risks that we all have in the way that the program will be constructed for 25.

Speaker Change: With the information that was released this week on the benchmark.

Speaker Change: We've all seen it does suggest that the direct subsidy maybe is going to be higher than what certainly analysts had expected it's impossible to know what each company might have anticipated, but what is nice to say that is more reflective of some of those higher costs that we've been saying the industry is going to have to deal with in 2025.

Joshua Raskin: It's impossible to know what, you know, each company might have anticipated, but what is nice to say is that it is more reflective of some of those higher costs that we've been saying the industry is going to have to deal with in 2025.

Susan Marie Diamond: But it is nice to say that it is more reflective of some of those higher costs that we've been saying the industry is going to have to deal with in 2025. As far as the demo, honestly, there are still a lot of questions about how the demo will work that we're all, you know, awaiting additional guidance from CMS on that. And so it's too early to say whether we're going to be able to participate or not.

Joshua Raskin: As far as a demo, honestly, there's still a lot of questions about how the demo will work, that we're all, you know, awaiting additional guidance from CMS on that. And so too early to say whether we're going to be able to participate or not. And as far as the direct impact of the direct subsidy in some of the benchmarks, again, as always, the case, we aren't going to comment on that specifically, recognizing these visits still open and people will be making changes in light of that. So certainly we'll talk more, you know, as we get past the dissimission timeline. But right now, for competitive reasons, we just, we won't be commenting specifically.

Speaker Change: As far as the demo honestly theres still a lot of questions about how the demo work that we're all awaiting additional guidance from CMS on that and so too early to say, whether we're going to be able to participate or not and.

Susan Marie Diamond: And as far as the direct impact of the direct subsidies and the benchmarks, again, as always the case, we aren't going to comment on that specifically, recognizing that new bids are still open, and people will be making changes in light of that. So certainly we'll talk more, you know, as we get past the bid submission timeline, but right now, for competitive reasons, we just, we won't be commenting. Our next question comes from the line of Ben Hendrix with RBC Capital Markets. Thank you very much.

Speaker Change: And as far as the direct impact of the direct subsidies from the benchmarks again as always the case, we arent going to comment on that specifically recognizing theres.

Speaker Change: There is still open and people will be making changes in light of that so certainly we will talk more.

Speaker Change: As we get past the installation timeline, but right now for competitive reasons, we just we won't be commenting specifically.

Ben Hendricks: Our next question comes from a line of Ben Hendricks with RBC Capital Markets. Thank you very much. Switching over to Medicaid seems like a lot of your peers saw some utilization and acuity had wins in those books, but you noted some favorability in Florida. And seems like you might have been a little bit better forecasted there. Could you talk about kind of what you're seeing specifically in that key market? And then maybe what you're noticing in some of your newer Medicaid markets in terms of utilization? Thank you. Yeah, Ben.

Speaker Change: Our next question comes from the line of Ben Hendrix with RBC capital markets.

Benjamin Hendrix: Switching over to Medicaid, it seems like a lot of your peers saw some utilization and acuity headwinds in those books, but you noted some favorability in Florida and seem like you might have been a little bit better forecasted there. Could you talk about kind of what you're seeing specifically in that key market and then maybe what you're noticing in some of your newer Medicaid markets in terms of utilization? Thank you.

Benjamin Hendrix: Thank you very much.

Speaker Change: Switching over to Medicaid It seems like a lot of your peers saw some utilization and acuity headwinds.

Speaker Change: In those books, but.

Benjamin Hendrix: Noted some favorability in Florida, and it seems like you might have been a little bit better forecasted there could you talk about kind of what youre seeing specifically in that key market and then maybe what you are noticing in some of your newer Medicaid markets in terms of utilization. Thank you.

Susan Marie Diamond: Yeah, Ben, so as you pointed out, we do think our results are probably a little bit different than some others have reported, and that is because, you know, we tried to take a conservative approach to how we thought about the impact of redetermination, assuming that, ultimately, we would only retain 20% of the members who gained access through the PHE and assumed that the acuity of those members that were retained would look more like the historical Medicaid performance I would say that it is all largely proven to be true.

Susan Diamond: So, as you pointed out, you know, we do think our results are probably a little bit different than some others have reported on. That is because I think we've always said we tried to take a conservative approach to how we thought about the impact of re-determination, you know, assuming that ultimately we would only retain 20% of the members who gained access through the PHE and made the assumption that the acuity of those members that were retained would look like more like the historical Medicaid performance versus the lower acuity we saw through the PHE. I'd say that is all largely proven to be true.

Ben: Yeah, Ben So as you pointed out.

Ben: We do think our results are probably a little bit different than some others have reported and that is because I think we've always said we tried to take a conservative approach to how we thought about the impact of Redetermination you know assuming that ultimately we would only retained 20% of the members who gained access through the phe and made the assumption that the acuity of those members that were retained would look.

Ben: Like more like the historical Medicaid performance versus the lower acuity, we saw through the Phe I'd say that is all largely premium <unk>, so and we called out Florida, specifically because it is the best representation of that we're obviously the largest membership and would be impacted most significantly from Redetermination and Florida is performing slightly better than our expectations. So that.

Susan Marie Diamond: So, and we called out Florida specifically because it's the best representation of that. We're obviously the largest membership and would be impacted most significantly from redeterminations, and Florida is performing slightly better than our expectations. So that is positive. We did call out in our remarks that we are seeing in our newer states, you know, discrete pressure. It's a little bit different in each one. Oklahoma is an example.

Susan Diamond: So, and we caught out Florida specifically because it's the best representation of that. We're obviously the largest membership and would be impacted most significantly from re-determinations, and Florida is performing slightly better than our expectations. So that is positive. We did call out in our remarks. We are seeing in our newer states, you know, discrete pressure. It's a little bit different in each one. Oklahoma is an example. It's pharmacy related. We understand it. Everybody's seeing that there are risk corridors in place that mitigate the exposure on that, which is good. In Kentucky, it's behavioral related, which again, I think others have called out as well.

Ben: Is positive we.

Speaker Change: We did call out in our remarks, we are seeing in our newer states discrete pressure, it's a little bit different in each one Oklahoma as an example, the pharmacy related as I understand that everybody has seen that there are risk orders in place that mitigate the exposure on that which is good and Kentucky, its behavioral related which again I think others have called out as well.

Susan Marie Diamond: It's pharmacy related. We understand everybody is seeing that there are risk corridors in place that mitigate the exposure on that, which is good. In Kentucky, it's behavioral related, which again, I think others have called out as well. We have the teams working hard, and there are mitigation opportunities across each of those states that they're working on. And then ultimately, we do feel good about our discussions with our state partners and that, ultimately, they will adjust the rates to be reflective of those trends.

Susan Diamond: We have the teams working hard and has mitigation opportunities across each of those states that they're working on. And then ultimately we do feel good about our discussions with our state partners. And then ultimately that they will adjust the rates to be reflective of those trends. So all things being considered, we still feel good about the Medicaid performance in 24 for relative expectations. And then also on a go-forward basis given all the items, as I mentioned.

Speaker Change: The team is working hard and has mitigation opportunities across each of those states that they are working on and then ultimately we do feel good about our discussions with our state partners and that ultimately that they will adjust their rates can be reflective of those trends. So all things being considered we still feel good about the Medicaid performance in 2004 relative to your expectations and then also.

Susan Marie Diamond: So all things being considered, we still feel good about the Medicaid performance in 20 fall relative to expectations and then also on a go forward basis, given all the items. Our next question comes from a line from Stephen Baxter with Wells Fargo. Hi, thanks.

Ben: So on a go forward basis, given all the items I just mentioned.

Stephen Baxter: Our next question comes from a line of Stephen Baxter with Wells Fargo. Hi, thanks. Just a quick clarification first and an actual question.

Ben: Our next question comes from the line of Stephen Baxter with Wells Fargo.

Stephen C. Baxter: Just a quick clarification first and then an actual question. Susan, I think in an earlier response, you said you feel good about the $16 VPS this year and then feel good about 2025. I think some misheard the comment on 2025 as a specific value you are offering as an EPS expectation. Can you just confirm first if you were offering any kind of comment on 2025?

Stephen C. Baxter: Hi, Thanks, just a quick clarification first and then an actual question Susan I think in an earlier response, you said you feel good about the $16 of EPS. This year and then feel good about 2025, I think some misheard. The comment on 2025 is a specific value your offerings and EPS expectation can you just confirm first if you will.

Susan Diamond: Susan, I think in an earlier response, you said you feel good about the $16 VPS this year and then feel good about 2025. I think some has heard the comment on 2025 as a specific value you are offering this VPS expectation. Can you confirm first if you were offering any kind of comment on 2025?

Susan Marie Diamond: And then my actual question is, as we think about the MLRs and incremental margins on the few hundred thousand members and planning county exits, any sense you can give us on that? Just wondering if it's actually an EPS driver for you year on year, or is this something that could, gradually, be something you just have to manage through in context of everything else you're trying to achieve with bids and profitability next year? Thanks.

Speaker Change: And then you kind of comment on 2025, and then my actual question is as we think about the MLR and the incremental margins on a few hundred thousand members and planning County exits.

Susan Diamond: And then my actual question is, as we think about the MLRs and incremental margins on the few hundred thousand members in planning county access. And any sense you can give us on that, just trying to wonder if that's actually an EPS driver for you year on year. Or is this something that incrementally could be, you know, something you just have to manage through wind context, everything else you're trying to achieve with bids and profitability next year. Thanks. Yeah, so yes, definitely want to clarify. Here's what's interesting. So yes, we feel good about the 16, and yes, we feel good about our 2025 assumptions.

Ben: If you can give us on that just trying to wonder if that's actually an EPS driver for you year on year or is this something that incrementally could be something we just have to manage through in context of everything else. We're trying to achieve with bids in profitability next year. Thanks.

Susan Marie Diamond: Yeah, so yes, definitely want to clarify. Here's what's interesting. So yes, we feel good about the 16. And yes, we feel good about our 2025 extensions. I did not mean to suggest that we were sharing an EPS target for 2025. Obviously, we've been clear, we haven't given any forward guidance for 2025 and would expect to do that on our normal timeline. So I was just making the point that based on everything we know, we continue to feel good about the 2024 results and what we're planning for for 25.

Speaker Change: Yeah. So yes definitely to clarify here is what's interesting. So yes, we feel good about 2016 and yes, we feel good about our 2025 assumptions I did not mean to suggest that we.

Susan Diamond: I did not mean to suggest that we were; we're sharing an EPS target for 2025. Obviously, we've been clear. We haven't given any for guidance for 25 and would expect to do that on our normal timeline. So I was just making the point, the base on everything we know we continue to feel good about the 2024 results and what we're planning for for 25. As far as exit specifically, so as we've been saying, you know, given the TDC limitations and the trend in IRA and V28 that we're having to price for in 25, that a lot of that would fully sort of be offset by the benefit changes you could make and not leave much incremental room for margin recovery in the aggregate.

Speaker Change #100: We're starting an EPS target for 2025, obviously, you've been clear we haven't given any forward guidance for 25, and we would expect to do that on a normal timeline. So I was just making the point that based on everything we know we continue to feel good about the 2024 results and what we're planning for for 25.

Susan Marie Diamond: As far as exit specifically, so as we've been saying, you know, given the TDC limitations and the trend and IRA and V-28 that we're having to price for in 25, a lot of that would be fully sort of offset by the benefit changes you could make and not leave much incremental room for margin recovery in the aggregate. So there are cases where we'll do that, and that will be incrementally positive for our earnings progression. But ultimately, as we've said, the absolute level of earnings growth is, you know, very dependent on our ultimate membership change for next year.

Speaker Change: As far as exit specifically, so as we've been saying given the TBC limitations and the trend in IRA and V 28 that were having to price for in 'twenty five that a lot of that would fully sort of be offset by the benefit changes you can make and not leave much incremental room for margin recovery in the aggregate the planned exits, though do you provide.

Susan Diamond: The plan exits, so do provide an opportunity to actually get margin expansion in terms of percent and actually earnings because we do have plans that are running at a loss. And so, as you said before, we, you know, studied the performance of our plans in each market very closely, and if they were performing at a loss and did not have a reasonable path to getting to at least break-even performance in a reasonable period of time, we did, you know, consider an exit as a better solution there. So there are cases where we'll do that, and that will be incrementally positive to our earnings progression.

Speaker Change: An opportunity to actually get margin expansion in terms of percent and absolutely earnings because we do have planes that are running at a loss and so as we've said before we studied the performance of our plans in each market very closely and if they were performing at a loss and did not have a reasonable path to getting to at least breakeven performance in a reasonable period of time.

Speaker Change: Good.

Scott J. Fidel: And in this environment, we've acknowledged there's a wider range of potential outcomes. And so we'll need to see the landscape before we can comment further on member growth and, certainly, EPS expectations. Our next question comes from the line of Scott Fidel with Stephen. Hi, thanks. Good morning.

Speaker Change: <unk> and exit is a better solution. There. So there are cases, where we will do that and that will be incrementally positive to our earnings progression, but ultimately as we said the absolute level of earnings growth is very dependent on our ultimate membership change for next year in this environment. We've acknowledged there is a wider range of potential outcomes and so we'll need to see the landscape before we can comment further on.

Susan Diamond: But ultimately, as we said, the absolute level of earnings growth is, you know, very dependent on our ultimate membership change for next year.

Susan Diamond: And in this environment, we've acknowledged there's a wider range of potential outcomes, and so we'll need to see the landscape before we can comment further on member growth and certainly ETS expectations for next year.

Speaker Change: <unk> member growth and certainly Etfs expectations for next year.

Scott Siddell: Our next question comes from the line of Scott Siddell with Stevens. Hi, thanks. Good morning.

Speaker Change: Our next question comes from the line of Scott Fidel with Stephens.

Susan Marie Diamond: I was hoping you could maybe just sort of catalog or walk us through the different inputs into the $3 billion raise to the revenue guidance. Obviously, I saw the updates to the MA and PDP membership changes, but in isolation, those one, you know, sort of amount to anything really close to $3 billion. So no, there's probably some other drivers there, whether it's Medicaid or CenterWell, just to be helpful. You just walked us through those different pieces, thank you. Yeah, hey, Scott.

Susan Diamond: We hope you can maybe just sort of catalog or walk us through the different inputs into the $3 billion race to the revenue guidance. Obviously, so the updates to the MA and PDP membership changes, but in isolation, those, those weren't, you know, sort of amount to put anything really close to $3 billion. So now there's published mother drivers there, whether it's Medicaid or Centerwell, just to be helpful. Susan, if you just walked us through those different pieces, thanks.

Scott J. Fidel: Alright. Thanks. Good morning, I was hoping you could maybe just sort of catalog or walk us through the different inputs into the $3 billion raised the revenue guidance. Obviously, you saw the updates to the MA and PDP membership changes spot.

Speaker Change #109: Isolation, those dose one sort of amount to anything.

Scott J. Fidel: Anything really close to $3 billion. So there's probably some other drivers there whether it's Medicaid or center well just to be helpful. Susan If you could just walk us through those different pieces. Thanks.

Susan Diamond: Yeah, I hate Scott. So, yes, the revenue, the change to the revenue guidance is the largest driver, is by far the membership. When you consider the magnitude of the increase in expected membership for the year, that will drive both revenue and claims, right? And we said before, new members on average, you can think of as having little contribution, particularly, you know, added membership in the back half of the year where the commission costs were in higher for that first year. So the main driver is membership, but as we said, we could see some favorable outperformance on our 23 final year MRA and some entry year, you know, positivity on our revenue risk estimates as well. That's included, but I would say the majority by far is related.

Susan Marie Diamond: So yes, the revenue, the change to the revenue guidance is the largest driver by far, the membership. When you consider the magnitude of the increase in expected membership for the year, that'll drive both revenue and claims.

Susan: Yeah, Hey, Scott So yes, the revenue the change to the revenue guidance is the largest driver is by far the membership when you consider the magnitude of the increase in expected membership for the year that will drive both revenue and claims right and you said before new members on average you can think of it as having little contribution, particularly added members.

Susan Marie Diamond: And we've said before, new members, on average, you can think of as having little contribution, particularly, you know, added membership in the back half of the year where the commission costs run higher for that first year. So the main driver is membership, but as we said, we did see some favorable outperformance on our 23 final year MRA and some entry year positivity on our revenue risk estimates as well. That's included, but I would say the majority, by far, is membership related. Our next question comes in the line of Lance Wilkes with Burnett.

Speaker Change #102: Keep in the back half of the year, where the commission costs were in higher for that first year. So the main driver as membership and as we said we did see some favorable outperformance on our 23 final year MRA and some intra year positivity on our revenue risk or estimates as well thats included but I would say the majority by far is membership related.

Lance Wilkes: Our next question comes to the line of Lance Wilkes with Bernstein.

Scott J. Fidel: Our next question comes from the line of Lance Wilkes with Bernstein.

Jim Reckton: Yes, Jim, could you describe a little bit of how you're morphing the management process of a company and any sort of org and talent changes you're making there and any sort of timing related to a strategic review and then maybe as part of that, what are your top priorities for taking operating expenses out both in light of the member reductions and then just obviously as part of trying to recover your margin. Thanks. Okay, so there's a lot in there. We see a light cap for this. Management process, strategic review, cost management, I miss anything, and margin recovery.

Lance Arthur Wilkes: Yes, Jim, could you describe a little bit of how you're morphing the management process of a company? And any sort of Oregon talent changes you're making there? Any sort of timing related to a strategic review? And, and then maybe as part of that, what are your top priorities for taking operating expenses out, both in light of the member reductions and then, obviously, as part of trying to recover your margin? Thanks. Okay, so there's a lot in there. Let me see if I can capture this.

Scott J. Fidel: Yes.

Lance Arthur Wilkes: Could you.

Lance Arthur Wilkes: Describe a little bit of how you're morphing the management process of the company and any sort of Oregon talent changes youre, making there.

Lance Arthur Wilkes: And any sort of timing related to a strategic review in and then maybe as part of that what are your top priorities for taking operating expenses out both in light of the member reductions and then just obviously as part of trying to recover your margins. Thanks.

James A. Rechtin: Management process, strategic review, cost management, did I miss anything on, uh, oh, margin recovery? Yeah, so I'll try to hit each of those succinctly here.

Speaker Change #104: Okay. So there's a lot in there.

Speaker Change #106: See if I capture this.

Speaker Change #101: Management process strategic review.

Speaker Change #107: Cost management I Miss anything.

Speaker Change #112: Our margin recovery, yes.

James A. Rechtin: Management process. I think that the biggest thing that we're doing around management processes is actually what I referred to earlier. It's trying to take our discipline of looking out multiple years, how we're measuring performance over multiple years against the investments and the expenses and the things we're doing in any given year. And then how do we make sure that we're driving accountability over those multiple years? I mean, that is the single biggest change that obviously then dovetails into strategic review. We're in the midst of that.

Jim Reckton: Yeah, so I'll try to hit each of those succinctly here. Management process, I think that the biggest thing that we're doing around management process is actually what I referred to earlier. It's is trying to take up to the next level are discipline of looking out multiple years, how we're measuring performance over multiple years against the investments and the expenses and the things we're doing in any given year. And then how do we make sure that we're driving accountability over those multiple years? I mean, that is the single biggest change that obviously then dovetails into a strategic review.

Speaker Change #101: Yes so.

Speaker Change #101: To hit each of those are simply here.

Speaker Change: Management process I think the.

Speaker Change: The biggest thing that we're doing around management process is actually what I referred to earlier is.

Speaker Change: Trying to take up to the next level, our discipline of looking out multiple years, how were measuring performance over multiple years against the investments and the expenses and the things we're doing in any given year and then how do we make sure that we're driving accountability over over those multiples.

Speaker Change #105: Years, I mean that is the single biggest change that obviously then dovetails into strategic review, we're in the midst of that we're going a little deeper than I think we would a normal year, largely because I'm new to the team.

James A. Rechtin: We're going a little deeper than I think we would in a normal year, largely because I'm new to the team and we're really trying to use that process to implement those management processes that I just described. So, we're in the middle of that process. We will have more to say about the exact timing and the exact outcomes of that sometime early to mid next year. The cost management, there are two different things in there. One question is, how do we manage the variable cost?

Jim Reckton: We're in the midst of that. We're going a little deeper than I think we would in a normal year, largely because I'm new to the team. And we're really trying to use that process to implement those management processes that I just described.

Ben: And we're really trying to use that process to implement those management processes that I just described.

Jim Reckton: So, so we're in the middle of that process. We will have more to say about the exact timing and the exact outcomes of that sometime early to mid next year. The cost management; there are two different things in there. One is how do we manage variable cost. And so the team actually has good processes around that. Of course, we're tightening them up given the range of membership outcomes that we could have this year. But that is a pretty standard process that you're simply honing, taking variable cost out with membership. And then we are diving deeper and deeper into how do you actually drive real process redesign with automation technology. I'd point back to the partnership we've got with Google around AI, what we're thinking about even in things like distribution costs by being able to drive more efficient digital distribution.

Ben: <unk>.

Ben: So we're in the middle of that process.

Ben: We will.

Ben: Have more to say about the exact timing and the exact outcomes of that.

Ben: Sometime early to mid next year.

James A. Rechtin: And so the team actually has good processes around that. Of course, we're tightening them up, given the range of membership outcomes that we could have this year. But that is a pretty standard process that you're simply honing, taking variable costs out with membership. And then we are diving deeper and deeper into how do you actually drive real process redesign with automation technology?

Ben: The cost management.

Ben: There are two different things in there one is how do we manage variable costs and so the team actually has good processes around that of course, we're tightening them up given the.

Ben: Range of membership outcomes that we could have this year.

James A. Rechtin: I'd point back to the partnership we have with Google around AI, and what we're thinking about even in things like distribution costs by being able to drive more efficient digital distribution. All of those things are about driving long-term cost management, which hits both fixed and improves variable over time. And then I'll hit everything.

Ben: But that is a pretty standard process that youre simply honing taking variable cost out with membership.

Ben: And then we are diving deeper and deeper into how do you actually drive real process redesign with Automd automation technology I'd point back to the partnership we've got with Google around AI, what we're thinking about even.

Ben: In things like distribution costs by being able to drive more efficient.

Jim Reckton: And all of those things are about driving long-term cost management, which hits both fixed and improves variable over time. And then that hit everything.

Ben: Digital distribution.

Ben: All of those things are about driving long term.

Ben: Cost management, which hits, both fixed and improves variable over time.

James A. Rechtin: Oh, margin recovery. I'm gonna go back to the same place that we've been in margin recovery. It's going to take, We expect to be at least 3% in our Medicare Advantage business. It's gonna take multiple years to get there.

Ben: And then.

Jim Reckton: Oh, margin recovery. I'm going to go back to the same place that we've been on margin recovery. It's going to take. We expect to be at least 3% in our Medicare Advantage business. It's going to take multiple years to get there. That is largely driven by the regulatory environment, TBC, etc. And that is based on some basic assumptions, kind of reasonable assumptions about how rate and trend is going to develop over that period of time. We think we'll be back to normal in 2027, back to a normalized margin. And you know, that's what it communicated in the past; been pretty deep into those numbers.

Speaker Change #116: I hit everything margin recovery margin recovery I'm going to go.

Ben: Back to the same place.

Ben: So we've been a margin recovery, it's going to take.

Speaker Change #127: We expect to be at least 3% and our Medicare advantage business, it's going to take multiple years to get there that is largely driven by the regulatory environment, TBC et cetera, and that is based on some basic assumptions kind of reasonable assumptions about how rate and trend is going to develop over that period of time.

James A. Rechtin: That is largely driven by the regulatory environment, TBC, etc., and that is based on some basic assumptions, kind of reasonable assumptions, about how rates and trends are gonna develop over that period of time. We think we'll be back to normal in 2027, back to a normalized margin. And, you know, that's what we've communicated in the past, been pretty deep into those numbers. And, you know, I feel good about the direction that the team has given. Our next question comes from the line of Michael Ha with Bear. Thank you. Just a quick clarification on OPEX first and my real question.

Ben: We think we'll be back to normal in 2027 back to a normalized margin and that's what we've communicated.

Speaker Change #118: <unk> in the past been pretty deepen into those numbers and I.

Jim Reckton: And, you know, I feel good about the direction that the team has given.

Speaker Change #114: I feel good about that.

Speaker Change #115: The direction that the team has given.

Michael Haugh: Our next question comes from the line of Michael Haugh with Baird.

Speaker Change #120: Our next question comes from the line of Michael Hall with Baird.

Susan Diamond: Thank you. Just a quick clarification on Optex first and my real question. I know your press release mentioned some of your lower than planned admin expenses were considered timing in nature, but wasn't that also mentioned in one view?

Michael Hall: Thank you just a quick clarification on Opex first then my real question is I know your press release, you mentioned some of your lower than planned admin expenses were considered timing in nature, but wasn't that also mentioned in <unk>. So are there timing items expected to flip back into the third quarter and fourth quarter and then my real question coming back to Justin.

Michael Ha: So I know your press release mentioned some of your lower than planned admin expenses were considered timing in nature, but wasn't that also mentioned in 1Q? So are those timing items expected to flip back into the third quarter and fourth quarter? And then my real question, coming back to Justin's question on bids. Apologies, I may have missed part of the answer, but it sounds like this elevated inpatient utilization was not embedded in 25 bids.

Susan Diamond: So are those timing items expected to slip back into third quarter and fourth quarter? And then my real question coming back to Justin's question on bid, apologies, I may have missed part of the answer, but it sounds like this elevated implementation utilization was not embedded in 25 bid. So if it were to purchase this through to 25 and presumably if it is an industry wide dynamic, then I imagine your relative competitive position wouldn't theory the unchanged, but I imagine this would also then impact your own expected MA margin recovery for next year.

Speaker Change #111: On bids apologies I may have missed part of the answer but it sounds like just elevated inpatient utilization not embedded in 25 bids.

Michael Ha: So if it were to persist through to 25, and presumably if it is an industry-wide dynamic, then I imagine your relative competitive position would, in theory, be unchanged. But I imagine this would also then impact your own expected MA margin recovery for next year. So all in all, if it were to persist, wondering if you could discuss how this could incrementally impact your MA margin progression next year versus your prior. Yeah, Michael.

Ben: If it works.

Speaker Change #110: 3% to 25, and presumably if it is an industry wide dynamic than I imagine your relative competitive positioning within theory unchanged, but I imagine. This would also then impact your own expected MA margin recovery for next year. So all in all if it were to persist I'm wondering if you can discuss how this could incrementally in pasture.

Susan Diamond: So all in all, if it were to purchase, wondering if you could discuss how this could incrementally impact your MA margin progression next year versus your prior citations. Thank you. Yeah, Michael, so on the Optex, yes, we did mention those in the first quarter and then second, but some of the favorability we've seen in administrative cost is timing in nature. And that's just the difference in when we projected we would have certain spend and when it's now expected to be incurred. Some of the areas where it's natural that you might say it is marketing and just the timing and the opportunity they see in the AEP versus OEP versus Roy and then going to next year, IT is also one that can be difficult to predict the exact progression of when products will be completed.

Speaker Change #117: EMEA margin progression next year versus your prior expectations. Thank you.

Susan Marie Diamond: So on the object, yes, we did mention both in the first quarter and then second, that some of the favorability we've seen in administrative costs is timing in nature. And that's just a difference in when we projected we would have certain spend and when it's now expected to be incurred. Some of the areas where it's natural that you might say it is marketing and just the timing and the opportunity they see in the AEP versus OEP versus ROI and then going into next year. IT is also one that can be difficult to predict the exact progression of when projects will be completed.

Speaker Change: Yeah, Michael so on the Opex, Yes, we did mention both in the first quarter and then secondly, some of the favorability we've seen and administrative cost is timing in nature and that's just a different than when we projected we would have certain spend and when it is now expected to be incurred some of the areas, where it's natural that you might say, there's marketing and just the timing and the opportunity they see.

Speaker Change: And the AEP versus IEP versus ROI, and then going into next year. It is also one that can be difficult to predict the exact progression of wind projects will be completed. So there are a number of things we're while it's favorable in the quarter. We would expect that it's still going to be spent for the full year and so then we'll flip out in the third or fourth quarter.

Susan Marie Diamond: So there are a number of things where while it's favorable in the quarter, we would expect that it's still going to be spent for the full year. And so then we'll flip out in the third or fourth quarter. On the bids, what we want to try to convey is, you know, we did not anticipate this higher utilization in our bids given when it develops relative to the deadlines for filing those bids.

Susan Diamond: So there are a number of things where, while it's favorable in the quarter, we expect that it's still going to be spent for the full year and so then we'll flip out in the third or fourth quarter. On the bids, what we wanted to try to convey is we did not anticipate the prior utilization in our bids, given when it develops relative to the deadlines for filing those bids. So that will be incremental pressure relative to our discrete medical cost assumptions in the bids. However, we also did not incorporate the lower unit cost, the lower observation stays, nor the higher risk scores that we've seen developed in the first half of the year either.

Speaker Change: On the bids what we wanted to try to convey is we did not anticipate this higher utilization in our bids given when it develops relative to the deadline for filing those beds, so that will be incremental pressure relative to our discrete medical cost assumptions in the bids. However, we also did not incorporate the lower unit costs, the lower observations days, nor the higher risk scores that we see.

Susan Marie Diamond: So that will be incremental pressure relative to our discrete medical cost assumptions and bids. However, we also did not incorporate the lower unit costs, the lower observation stays, nor the higher risk scores that we've seen develop in the first half of the year either.

Susan Marie Diamond: And because those have largely offset, those are expected, and also expected to be durable into 2025, all considered, we still feel good about the MLR expectations that we have within the collective assumptions in our 2025 bids. So we are at this point, you know, much like we're assuming it'll continue in the back half of the year, we've looked at our 2025 assumptions, and if that continues through the big duration of 2025 with those other offsets, again, we should be back to a similar position as it respects MLR that we had planned for within. Our next question comes from Jessica Taft. Hi, thanks very much for taking my question.

Speaker Change: <unk> developed in the first half of the year, either and because they're they have largely offset those are also expected to be durable into 25, all considered we still feel good about the MLR expectations that we have within the collective assumptions in our 2025 bids. So we are at this point much like we're assuming it will continue in the back half of the year, we've looked at our two.

Susan Diamond: And because those have largely offset and also expected to be durable into 25, all considered, we still feel good about the MLR expectations that we have within the collective assumptions in our 2025 bid. So we are at this point, much like we're assuming it'll continue in the back half of the year.

Susan Diamond: We've looked at our 25 assumptions, and if that continues through the duration of 25 with those other offsets, again, we should be back to a similar position as it respects the MLR that we had planned for within our 25 bid.

Speaker Change: Five assumptions and if that continues through the big duration of 25 with those other offsets again, we should be back to a similar position as it respects. The MLR that we had planned for within our 25 years.

Jessica Tassen: Our next question comes from a line of Jessica Tassen with Piper Sandler. Hi, thanks very much for taking my question. So I wanted to follow up on that.

Speaker Change: Our next question comes from the line of Jessica <unk> with Piper Sandler.

Jessica <unk>: Hi, Thanks, very much for taking my question. So I wanted to follow up on that how are the higher than anticipated risk scores that you referred to in the prepared remarks impacting your view of the V 28 headwinds in 'twenty four and 'twenty five.

Jessica Taft: So I wanted to follow up on that. How are the higher than anticipated risk scores that you referred to in the prepared remarks impacting your view of the V28 headwinds in 24 and 25? And is the favorability related to any kind of specific efforts like IHEs or any reason why it wouldn't compound or effectively double year over year in 2025? Thanks.

Jessica Tassen: How are the higher than anticipated risk scores that you referred to in the prepared remarks impacting your view of the V28 headwinds in 24 and 25? And is the favorability related to any kind of specific efforts like IHE's, and any reason why it wouldn't compound or effectively double your year in 2025? Thanks. Yeah, Jessica. So the favorably we saw in the 23 file is primarily related to new members in 2023. And that's where, based on their date, we just don't have the full claim history in order to know specifically what their subsequent year risk score will be because we just don't have the benefit of the claim.

Speaker Change #122: Is the favorability related to any kind of specific efforts like IHS and any reason why it wouldn't compound are effectively double year over year in 2025.

Susan Marie Diamond: So the favorability we saw in the 23 file is primarily related to new members in 2023. And that's where, based on their data, we just don't have the full claims history in order to know specifically what their subsequent year risk score will be because we just don't have the benefits of the claim. So that typically, if we do see favorability, that's the source of it.

Speaker Change #123: Yes, it does it get.

Speaker Change #103: Generally we found that <unk> 23 file is primarily related to new members in 2023.

Speaker Change #151: Where based on their data and know what we just don't have the full claims history in order to know specifically what their subsequent year your risk where it will be because we just don't have the benefit of the claim so that typically if we do see favorability is the source of it.

Jessica Tassen: So that, obviously, if we do see favorability, is the source of it. And so that's what we've seen; it's largely within the membership growth as well as they concentrate on those LPPO plans. So that's where we've largely seen it.

Speaker Change #103: So that's what we've seen it's largely within the membership growth was largely concentrated as oppo plans. So that's where we've largely seen it it.

Jessica Tassen: It would have, I would say, the V28 impact is sort of unchanged in terms of our thinking. It's outperformance on the 23 final MRI doesn't have a literal impact in terms of our V28 thinking, but proportionately, because we have more members, it'll just be accounted for within that. In terms of the outperformance we did see, like I said, because it was related to the new members, where we didn't have the full visibility. And that was not contemplated in our 25 bids, which the visibility we now have, we would expect to see that recur into 2025 and, you know, be another midagent to offset higher inpatient utilization if it also happens to maintain throughout.

Susan Marie Diamond: And so that's what we've seen. It's largely within, you know, the membership growth was largely concentrated in those LPTO plans. So that's where we've largely seen it. It would have, I would say, the V-28 impact is sort of unchanged in terms of our thinking.

Speaker Change #138: It would have I would say the V 28 impact.

Speaker Change #103: Is sort of unchanged in terms of our thinking is now on higher membership, but I would say the outperformance on the 23 final MRI doesn't have a literal impact in terms of our V 28, thinking but proportionately because we have more members it'll just be accounted for within that.

Speaker Change #103: In terms of the outperformance we did see like I said, because it was related to the new members, where we didn't have the full visibility and that was not contemplated in our 25 bid with the visibility. We now have we would expect to see that recur in 2025 and be another mitigate to offset higher inpatient utilization. If it also happens to you maintained throughout.

Speaker Change #103: 25.

John Ransom: Our next question comes from a line of John Ransom with Raymond James.

Susan Marie Diamond: It's not now on higher membership, but I would say the outperformance on the 23 final MRA doesn't have a literal impact in terms of our V-28 thinking, but proportionately, because we have more members, it'll just be accounted for within that. In terms of the outperformance we did see, like I said, because it was related to the new members where we didn't have the full visibility and that was not contemplated in our 25 bids, with the visibility we now have, we would expect to see that recur into 2025 and, you know, be another mitigant to offset higher inpatient utilization if it also happens to maintain throughout. Our next question comes from a line by John Ransom with Raymond J. Hey, good morning. Two kind of super high-level questions. It looks to me like this.

Speaker Change #103: Our next question comes from the line of John Ransom with Raymond James.

John Ransom: Hey, good morning. Two kinds of super high level questions. It looks to me like the industry is losing the argument in Washington. You've seen a couple of things that suggest, you know, taxpayers are spending, you know, 13 or so percent more on Medicare Advantage than they would be on straight Medicare fee-for-service. So I wonder if you think your advocacy efforts are sufficient. And, you know, what is the kind of elevator pitch to a senator when he or she asked is them a good deal for the taxpayers apples to apples because it seems like there's a split question.

John Ransom: Hey, good morning, two kind of Super high level questions.

John Ransom: The industry is losing the argument in Washington here. You've seen a couple of things that suggest, you know, taxpayers are spending 13 or so percent more on Medicare Advantage than they would on straight Medicare fee-for-service. So, I wonder if you think your advocacy efforts are sufficient, and, you know, what is the kind of elevator pitch to a senator when he or she asks if M.A. is a good deal for the taxpayers, apples to apples, because it seems like there's a split question.

John Ransom: It looks to me like the.

Speaker Change #113: The industry is losing the argument in Washington, there you've seen a couple of.

Speaker Change #126: Thanks suggests taxpayers are spending 13, or so percent more on Medicare advantage than they would be on straight Medicare fee for service.

Speaker Change #129: So I wonder if you think youre advocacy efforts are.

Speaker Change #113: Sufficient and what is the kind of elevator pitch to a senator.

Speaker Change #113: When he or she asks them a good deal for the taxpayers apples to apples because it seems like there is a split question. The second high level question is.

Jim Reckton: The second high level question is, if you just look at your GNA long term opportunity incorporating all the tools of AI and everything you know today, what is the kind of floor on how far how low you think you could drive GNA over say the next five years.

John Ransom: The second high-level question is... If you just look at your GNA long-term opportunity incorporating all the tools of AI and everything you know today, what is the kind of floor on how far and how low you think you could drive GNA over, say, the next five years? Thank you.

Speaker Change #125: If you just look at your G&A longterm opportunity incorporating all the tools of AI in everything you know today, what is the kind of floor on how for how long do you think you could drive G&A over say the next five years. Thank you.

Jim Reckton: Thank you. So DC policy advocacy, how do we make the elevator pitch and then comment on GNA. Let me just hit the GNA one real quick. That was a little bit easier. We are working through that, you know, that question among others right now through the strategic review that we're doing, etc.

James A. Rechtin: Yeah. So, DC policy advocacy, how do we make the elevator pitch and then comment on GNA? Let me just hit on the GNA one real quick.

Speaker Change #125: Yes.

Speaker Change #128: So D C policy advocacy, how do we make the elevator pitch and then comment on G&A.

James A. Rechtin: That one's a little bit easier. We are working through that, you know, that question among others right now through the strategic review that we're doing, etc. We'll have more to say about that next year, early to mid next year. And so I'm going to defer on that question for the moment on D.C. policy.

Speaker Change #128: Let me just hit the G&A one real quick.

Speaker Change #124: That was a little bit easier.

Speaker Change #103: We are.

Speaker Change #103: Working through that that question among others right now through.

Jim Reckton: We'll have more to say about that next year, early to mid next year. And so I'm going to defer on that question for the moment on the DC policy. So we've had a lot of conversation about that internally, and what I would keep going back to is, you know, number one, we know that we deliver value to our members and our patients. That is very well documented. We get better outcomes. We deliver better health security by lowering the cost to members for the care that they receive and giving them access to more benefits. We also know, and it's pretty well documented, that we deliver like-for-like benefits at a lower cost than what original Medicare does.

Speaker Change #103: Strategic review that we're doing et cetera, we'll have more to say about that.

Speaker Change #103: Next year early to mid next year, and so I'm going to defer on that question for the moment.

James A. Rechtin: So we've had a lot of conversation about that internally, and what I would keep going back to is, number one, we know that we deliver value to our members and our patients. That is very well documented.

Speaker Change #103: On the DC policy. So we've had a lot of conversation about that internally.

Speaker Change #130: And what.

Speaker Change #130: What I would keep going back to his number.

Speaker Change #103: One we know that we deliver value to our members and our patients that is very well documented we get better outcomes.

James A. Rechtin: We get better outcomes. We deliver better health security by lowering the cost to members for the care that they receive and giving them access to more benefits. We also know, and it's pretty well documented, that we deliver like-for-like benefits at a lower cost than original Medicare. Those two things mean that there is a value proposition for members and for tax. What we can do a better job of, and part of what I think the entire industry needs to be focused on, is building the case for the second of those two things even more tightly, and then better explaining and understanding what of that value does accru None of that should be.

Speaker Change #103: We deliver better health security by lowering the cost to members for the care that they receive and giving them access to.

Speaker Change #103: To more benefits.

Speaker Change #103: We also know and it's pretty well documented that we deliver like for like benefits.

Speaker Change #103: At a lower cost than what original Medicare does.

Jim Reckton: Those two things mean that there's a value proposition for members and for taxpayers. What we can do a better job of, and part of, you know, what I think the entire industry needs to be focused on, is building the case for the second of those two things even more tightly. And then better explaining and understanding what of that value does accrue back today to taxpayers, what doesn't, and how do we actually collaborate with CMS to make sure that the regulatory environment allows that value to accrue back or some of that value to accrue back. None of that should, should be harmful to the MA sector.

Speaker Change #103: Those two things mean that there is a value proposition for members and for taxpayers.

Speaker Change #103: What we can do a better job of and part of what I think the entire industry needs to be focused on.

Speaker Change #103: Is building the case for.

Speaker Change #103: The second of those two things even more tightly.

Speaker Change #103: And then better explaining and understanding what of that value does accrue back today to taxpayers what doesn't.

Speaker Change #103: How do we actually collaborate with CMS to make sure that the regulatory environment allows that value to the crew back or some of that value to accrue back <unk>.

Speaker Change #135: None of that.

Speaker Change #103: Should it should be.

James A. Rechtin: Harmful to the MA sector. In fact, I would argue that it helps the MA sector by getting tighter and better and understanding the impact on taxpayers, how the regulatory environment shapes that, and what we can do to create a long-term value proposition for taxpayers that creates real stability for the Medicare and Medicaid programs over time. That's good for everybody.

Speaker Change #103: Harmful to the MAA sector in fact, I would argue that it helps the MAA sector are getting tighter in better in understanding the.

Jim Reckton: In fact, I would argue that it helps the MA sector, arguing tighter and better and understanding the impact on taxpayers, how the regulatory environment shapes that what we can do to create a long term value proposition for, for taxpayers that creates real stability for the Medicare and Medicaid program over time. That's good for everybody. It's good for the MA sector. It's good for the member. It's good for taxpayers.

Speaker Change #103: The impact on taxpayers, how the regulatory environment shapes that what we can do to create a long term value proposition for <unk>.

Speaker Change #103: For taxpayers that creates real stability for the Medicare and Medicaid program over time, that's good for everybody. It's good for the gourmet sector. It is good to remember it's good for taxpayers and that's what we've got to focus on getting back to.

James A. Rechtin: It's good for the MA sector. It's good for the member. It's good for taxpayers.

Jim Reckton: And that's, that's what we've got to focus on getting back.

James A. Rechtin: And that's what we've got to focus on getting back. Our next question comes from the line of George Hill with. Yeah. Good morning, guys.

Unknown Attendee: Thank you.

George Hill: Our next question comes from the line of George Hill with Deutsche Bank. Yeah, good morning, guys. Thanks for taking the question.

Speaker Change #134: Our next question comes from the line of George Hill with Deutsche Bank.

George Robert Hill: Thanks for taking the question. I guess the question has to relate to the 2025 bid strategy. I guess, first of all, is there a way to characterize the approach to, like, for how many beneficiaries did you guys kind of want to remove the plan or exit a plan as a way to preserve margin or pursue margin, and to what degree, I guess, on the other side, are you guys just looking to restructure plan benefits?

George Robert Hill: Yes. Good morning, guys. Thanks for taking the question I guess a question as it relates to the 2025 bid strategy.

Jim Reckton: I guess the question has related to the 2025 bid strategy. I guess, first of all, is there a way to characterize the approach to like how much for how many beneficiaries did you guys kind of want to remove the plan or exit a plan as a way to preserve margin or pursue margin and to what degree? I guess on the other side, are you guys just looking to restructure plan benefits? And I think even at a higher level, the question I want to ask is like, are you guys willing to quantify like how many individual M.A.

George Robert Hill: First of all is there a way to characterize the approach to like how much how many beneficiaries did you guys kind of want to remove the plan or exit of plan as a way to preserve margin or pursue margin.

Speaker Change #144: To what degree I guess on the other side are you guys just looking to restructure plan benefits.

George Robert Hill: And I think even at a higher level, the question I want to ask is, like, are you guys willing to quantify, like, how many individual MA members you provide plans for now that will not have that plan offered in 2025? Yeah, let me jump in on this one.

Speaker Change #136: And I think even at a higher level of question I wanted to ask because like are you guys willing to quantify like how many individual MA members you provide plans for now.

Jim Reckton: members you provide plans for now that will not have that plan offered in 2025?

Speaker Change #148: Not have that plan offered in 2025.

Jim Reckton: Yeah, let me jump in on this one. So the question, well, some of this is going to be a repeat of things that we've said in the past. So we've got a set of plans that are not profitable, that we don't see a path to making them profitable. We have exited those; that impacts. A number of our members, in most cases and the vast majority of cases, those members will have access to another Humana plan. So there's very few actual geographies will fully exit. We have another set of plans that is either marginally profitable or marginally unprofitable, but we see a path to recovering the profitability of those plans, and we are working on that through reducing benefits and changing our pricing.

James A. Rechtin: So the question, well... Some of this is going to be a repeat of things that we've said. So we've got a set of plans that are not profitable, that we don't see a path to making them profitable. We have exited those that are impacting. A number of our members, in most cases, and in the vast majority of cases, those members will have access to another Humana plan. So there are very few actual geographies we'll fully access.

Speaker Change #137: Yes, let me jump in on this one so.

Speaker Change #139: The question well.

Speaker Change #150: Some of this is going to be a repeat of things that we've said in the past. So we've got a set of plans.

Speaker Change #134: <unk>.

Speaker Change #134: That are not profitable that we don't see a path to making them profitable we have exited those that impacts.

Speaker Change #134: A number of our members in most cases in the vast majority of cases those members will have access to another humana plan. So theres very few actual geographies were fully exited.

James A. Rechtin: We have another set of plans that are either marginally profitable or marginally unprofitable, but we see a path to recovering the profitability of those plans, and we are working on that through reducing benefits and changing our pricing. And then we have a set of plans that are actually quite attractive in how they perform today, and we are protecting those plans. That is how we have approached this. Today, for competitive reasons, we're not prepared to give specific numbers of members that fall into each of those categories.

Speaker Change #103: We have another set of plans that is either marginally profitable or marginally unprofitable, but we see a path to recovering the profitability of those plans and we are working on that through.

Speaker Change #103: Reducing benefits and changing our pricing and then we have a set of plans that are actually quite attractive how they perform today and we're protecting those plants that is how we have approached this today for competitive reasons, we're not.

Jim Reckton: And then we have a set of plans that are actually quite attractive, how they perform today, and we are protecting those plans.

Susan Diamond: That is how we have approached this today for competitive reasons. We're not prepared to give specific numbers of members that fall into each of those categories. Yeah, and I think George, just to add to what Jim said, you know, we've given you the overall expectation that we'll reduce membership of a few hundred thousand members, primarily related to plan exit. So you can assume, right, it's not a small number. Within that, there is an assumption that obviously we will retain some of those members, because, as Jim said, in almost virtually all of the counties where we're having plan changes, there is another plan option available to urban fisheries.

Speaker Change #103: Prepared to give specific numbers of members that fall into each of those categories.

James A. Rechtin: Yeah, and I think, George, just to add to what Jim said, you know, we've given you the overall expectation that we'll reduce membership by a few hundred thousand members, primarily related to plan exit. So you can assume, right, it's not a small number. Within that, there's an assumption that obviously we will retain some of those members because, as Jim said, in virtually all of the counties where we're having plan changes, there is another plan option available to our beneficiaries. So there's an inherent assumption.

George: Yeah, and I think George just to add to what Jim said, we've given you. The overall expectation that will reduce membership a few hundred thousand members primarily related to planned exits. So you can assume right. It's not a small number within that there is an assumption that obviously, we will retain some of those members because as Jim said in almost virtually all of the counties, where we're having claims.

Speaker Change #141: There is another plan option available to a beneficiary. So there is an inherent assumption as Jim said, we don't want to give details right now because again, there's still changes being made to bid submissions through the normal process as we get later into the quarter. There may be an opportunity in another public forum. Once bids are filed on where we can provide some detail.

Susan Marie Diamond: As Jim said, we don't want to give details right now because, again, there are still changes being made to bid submissions through the normal process. As we get later into the quarter, there may be an opportunity at another public forum once bids are filed where we can provide more details. Our next question comes from the line of Aaron Wright with Morgan. Great, thanks for taking my question.

Susan Diamond: So there's an inherent assumption. As Jim said, we don't want to give details right now because, again, there are still changes being made to bid submissions through the normal process.

Susan Diamond: As we get later into the quarter, there may be an opportunity in another public forum once things are filed where we can provide some details.

Aaron Wright: Our next question comes from a line of Aaron Wright with Morgan Stanley. Great, thanks for taking my question. And in light of the discipline approach that you're talking about and the ongoing strategic review.

Speaker Change #141: Our next question comes from the line of Erin Wright with Morgan Stanley.

Aaron Wright: In light of the disciplined approach that you're talking about in the ongoing strategic review, how are you thinking now about capital deployment from here, whether it's prioritizing the alignment with the Medicaid book and ability to service tools, or is it more on the care delivery assets? And what is your level of focus or thinking even on the organic opportunities, I guess, generally speaking, across at this point? Yeah, so let me start by characterizing where we believe the growth opportunity is over and above what's in the Medicare book.

Erin Wright: Great. Thanks for taking my question.

Erin Wright: In light of the disciplined approach that you're talking about and the ongoing strategic review.

Jim Reckton: How are you thinking now about capital deployment from here, whether it's prioritizing the alignment with the Medicaid book and ability to service tools or is it more on the care delivery access and what is your level of focus or thinking even on the organic opportunities, I guess generally speaking across at this point. Thanks. Yeah, so, so let me start by characterizing where we believe growth opportunity is over and above what's in the Medicare book. And, and again, this is largely consistent with what the company has done in the past. We believe that there's growth opportunity center well, we believe there's growth opportunity to Medicaid and to your point there is significant.

Erin Wright: How are you thinking now about capital deployment from here, whether it's prioritizing the alignment with the Medicaid book and.

Speaker Change #132: <unk> ability to service tools or is it more on the care delivery assets and what is your level of focus are thinking even on the organic opportunities I guess generally speaking across at this point. Thanks.

Speaker Change #132: Yes.

Speaker Change #140: So let me start by characterizing where we believe growth opportunity is over and above what's in the Medicare book and again. This is largely consistent with what the company has done in the past.

Aaron Wright: And again, this is largely consistent with what the company has done in the past. We believe that there's growth opportunity at CenterWell; we believe there's growth opportunity at Medicaid, and to your point, there is significant..., you know, kind of synergy or interrelated benefits between the Medicaid growth and the Medicare book because of duals and between CenterWell and the Medicare book because of the ability to impact quality and total cost of care.

Speaker Change #140: We believe that there is growth opportunities sooner well, we believe there is growth opportunity in Medicaid and to your point there is significant.

Jim Reckton: You know, kind of synergy or interrelated. There are a lot of benefits between the Medicaid growth and the Medicare book because of tools and between CenterWell and the Medicare book because of the ability to impact quality and total cost of care. So we actually think that combination works, and we continue to lean into it. When we think about capital deployment, the simple rubric that we're kind of staring at is strategically does it align with driving lower total cost to care and or quality? Does it offer a track to return on capital? And when you look at the array of opportunities to invest, what drives the best return over time, right? What drives shareholder value over time.

Speaker Change #140: You know kind of synergy or interrelated benefits between the Medicaid growth and the Medicare book because of duals.

Speaker Change #140: And between center well in the Medicare book, because of the ability to impact quality and total cost of care. So we actually think that combination works and we continue to lean into it when we think about capital deployment.

Aaron Wright: So we actually think that combination works, and we continue to lean into it. When we think about capital deployment, the simple rubric that we're kind of staring at is, strategically, does it align with driving lower total cost of care and or quality? Does it offer an attractive return on capital? And when you look at the array of opportunities to invest in, what drives the best return over time? What drives shareholder value over time?

Speaker Change #132: Yeah.

Speaker Change #132: The simple rubric that we're kind of staring at is strategically does it align with driving lower total cost of care and ore quality does it offer attractive return on capital and when you look at the array of opportunities.

Speaker Change #132: To invest what drives the best return overtime right what drives shareholder value over time those are the things that we're looking at.

Jim Reckton: Those are the things that we're looking at, and, you know, we're looking at the same spaces that we've been looking at in the past.

James A. Rechtin: Those are the things that we're looking at, and we're looking at the same spaces that we've been looking at in the past. Our last question will come from the line of Ryan Langston with TD Caltech. Hi, good morning.

Speaker Change #132: <unk>.

Speaker Change #132: And.

Speaker Change #132: Looking at the same spaces that we've been looking at it in the past.

Unknown Attendee: Our last question will come from the line of Ryan Langston with TD Cowan.

Speaker Change #132: Our last question will come from the line of Ryan Langston with TD Cowen.

Ryan Langston: Hi, good morning. On the inpatient activity, just in the prepared remarks, you said performing higher levels of appropriateness checks and potential mitigation activities. I guess is there a potential maybe download road for maybe larger than normal amount of revisions on these claims for medical necessity or the like, or at this vantage to those kind of claims and masks look largely to be adjudicated as they are. And then I think you said that you were negotiating with providers for, you know, closer alignment. Can you elaborate on exactly what that means. Thanks.

Ryan Langston: On the inpatient activity, just in the prepared remarks, you said performing higher levels of appropriateness checks. I guess there is potential maybe down the road for, Unknown Attendee, Gary Taylor, Scott Fidel, Lance Wilkes, Stephen Baxter, Andrew Mok, And then I think you said that you were... Negotiating with providers for, you know, closer alignment. Can you elaborate on exactly what that means? Thanks. Hey, Ryan.

Ryan Langston: Hi, good morning on the inpatient activity just in the prepared remarks, you said performing higher levels of appropriate checks and potential mitigation activities I.

Ryan Langston: I guess is there a potential maybe down the road for maybe a larger than normal amount of revisions on these claims for medical necessity or the like or disadvantage to those kind of claims and mass look largely to be adjudicated as they are and then I think you said that you were negotiating.

Speaker Change #145: Negotiating with providers for closer alignment can you elaborate on exactly what that means.

Ryan Langston: Hey, Ron. Yeah, I'll take the first part of that and then hand it over to him for the second on the inpatient. I think, as you guys are, we do, within our utilization management programs, have what we call a front end review process that we are reviewing those authorizations in real time as they come in for things like medical necessity and site of service effectively. And as I said, those, you know, we did have some, you know, changes to our expectations and how those programs would impact under new to midnight rules. So that is operating as intended, and as we said, largely having the results we expected.

Susan Marie Diamond: Yeah, I'll take the first part of that and then hand it over to Jim for the second. On the inpatient, I think, as you guys know, we do, within our utilization management programs, have what we call a front-end review process. So we are reviewing those authorizations in real time as they come in for things like medical necessity and site of service. And as I said, those we did have some changes to our expectations and how those programs would impact under the new midnight rules.

Speaker Change #145: Hey, Ron Yeah, I'll take the first part of that and then hand it region for the second on the inpatient I think you guys are we do within our utilization management programs have a what we call a front end review process that we are reviewing those authorizations in real time as they come in for things like medical necessity and site of service effectively and as I said those we did have some.

Speaker Change #146: <unk> changed.

Speaker Change #146: Changes to our expectations and how those programs would impact under Newton two midnight rule. So that is operating as intended and as we said largely having the results. We expected. There is also activity that we do after the claimant is comes in which we call a postpaid review where there are some incremental opportunities to just review again, the more specificity on that claim to make.

Susan Marie Diamond: So that is operating as intended, and as we said, largely having the results we expected. There is also activity that we do after the claim comes in, which we call a post-pay review, where there are some incremental opportunities to just review, again, the more specificity of that claim to make sure it's appropriate.

Jim Reckton: There is also activity that we do after the claim comes in, which we call post pay review, where there are some incremental opportunities to just review again the more specificity on that claim to make sure it's appropriate and we get value from both sides of that. But I would say we have really good information and tracking of the impact those programs are having, and I would not expect a material change to happen relative to our current expectations as a result of some of those long-standing programs. Yeah, and then on the contracting, if you think about the way that contracting works at a high level, you're essentially aligning on a rate and you're aligning on a set of initiatives or incentives around how to manage appropriate utilization.

Susan Marie Diamond: And we get value from both sides of that. But I would say we have really good information and tracking of the impact those programs are having, and I would not expect a material change to happen relative to our current expectations as a result of some of those longstanding programs.

Speaker Change #146: Sure, it's appropriate and we get value from both sides of that but I would say, we have really good information and tracking of the impact of these programs are having and I would not expect a material change to happen relative to our current expectations. As a result of some of those long standing programs.

James A. Rechtin: Yeah, and then on the contracting, if you think about the way that contracting works at a high level, you're essentially aligning on a rate, and you're aligning on a set of initiatives or incentives around how to manage appropriate utilization. And we have contracts that align those incentives very well, and we have contracts where there's an opportunity to improve that alignment around utilization and appropriate care, and so we are really looking at the contracts that Hey, so with that being our last question, let me just say a couple quick things.

Speaker Change #131: And then on.

Speaker Change #131: The contracted if you think about the way that contract works at a high level you are essentially aligning on a rate and you're aligning on a set of initiatives or incentives around how to manage appropriate utilization.

Susan Diamond: and we have contracts that align those incentives very well, and we have contracts where there's an opportunity to improve that alignment around utilization and appropriate care. And so we are really looking at the contracts that perform best, and we're trying to figure out how you begin to move more of the network in that direction.

Speaker Change #131: And we have contracts that align those incentives very well and we have contracts.

Speaker Change #131: Where there is an opportunity to improve that alignment around utilization inappropriate care and so we are really looking at the contracts that performed best and we're trying to figure out how you begin to move more of the network in that direction.

James A. Rechtin: I'm going to come back to we, we do feel good about where we are at midyear; we feel good about the performance that we've seen and where it's at relative to the beginning of the year. I am going to reinforce that, you know, we are seeing inpatient pressure; we saw that in particular in the back half of the second quarter and now, obviously, a little bit into July. We're taking a cautious approach in reaffirming our 16 guidance, and we continue to feel good that we're gonna have Margin Expansion EPS growth heading into 2025.

Jim Reckton: If that being our last question, let me just say a couple quick things. I'm going to come back to; we do feel good about where we're at mid-year. We feel good about the performance that we've seen and where that's at relative to the beginning of the year. I am going to reinforce that we are seeing inpatient pressure. We have seen that in particular in the back half of the second quarter and now obviously a little bit into July, we're taking a cautious approach in reaffirming our 16 guidance, and we continue to feel good that we're going to have a margin expansion EPS growth heading into 2025.

Speaker Change #153: So with that being our last question question. Let me just say a couple of quick things I'm going to come back to.

Speaker Change #152: We do feel good about where were at mid year, we feel good about the performance that we've seen and where that's at relative to the beginning of the year.

Speaker Change #152: I am going to reinforce that we are seeing inpatient.

Speaker Change #131: Pressure.

Speaker Change #131: Have seen that in particular in the back half of the second quarter and now obviously a little bit into July we're taking a cautious approach in reaffirming our <unk> guidance and we continue to feel good that we're going to have.

James A. Rechtin: And so that is where we're at. We feel good. I do want to just thank our teams. They put a lot of work into getting us where we are here at midyear.

Operator: And I continue to look forward to working with all of you on this phone call and our teams here at Humana. So, thank you. This concludes today's conference. Thank you for participating. You may now disconnect. Goodbye.

Speaker Change #131: Margin expansion EPS growth heading into 2025, and so that that is where we're at we feel good I do want to just thank our teams. They put a lot of work into getting us where we're at.

Jim Reckton: And so that, that is where we're at. We feel good. I do want to just thank our teams. They've put a lot of work into getting us where we're at here at mid year, and I continue to look forward to working with all of you on the phone call and our teams here at Humana.

Speaker Change #131: Here at mid year, and I continue to look forward to working with all of you on this phone call and our teams here at Humana. So thank you.

Unknown Attendee: So thank you.

Unknown Attendee: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change #143: This concludes today's conference call. Thank you for participating you may now disconnect.

Unknown Attendee: Goodbye. Thank you.

Speaker Change #143: Goodbye.

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Speaker Change #131: [music].

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Speaker Change #131: Hum.

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