Q1 2025 Humana Inc Earnings Call

Okay.

Operator: Good day and thank you for standing by.

Good day, and thank you for standing by welcome to Humana first quarter 2025 earnings call.

Operator: Welcome to Humana's first quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.

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

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.

Operator: To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your questions, please press star 1 1 again.

We'll then hear an automated message advising your hand is raised.

Withdraw your question. Please press star one one again.

Lisa Stoner: Please be advised that today's conference is being I would now like to hand the conference over to your speaker today, Lisa Stoner, Vice President of Investor Relations. Please go ahead. Thank you and good morning. I hope everyone had a chance to review our press release and prepared remarks, which are available on our website.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Lisa Stoner Vice President of Investor Relations. Please go ahead.

Speaker Change: Thank you and good morning, I hope everyone had a chance to review our press release and prepared remarks, which are available on our website.

Lisa Stoner: We will begin this morning with brief remarks from Jim Rechtin, Humana's President and Chief Executive Officer and Chief Financial Officer Celeste Mellet, which will be followed by a Q&A session where Jim and Celeste will be joined by George Renaudin, President of Humana's insurance segment.

Speaker Change: We'll begin this morning with brief remarks from Jim Roxane, Humana's, President and Chief Executive Officer, and Chief Financial Officer, Celeste, Morais, which will be followed by a Q&A session, where Jim and so that will be joined by George rather than President excuse me in our insurance segment.

Jim Rechtin: 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 risk and uncertainties. Actual results could differ materially.

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 investors are advised to read the detailed risk factors discussed in our latest Form 10-K R.

Jim Rechtin: Investors are advised to read the detailed risk factors discussed in our latest Form 10-K, our other filings with the Securities and Exchange Commission, and our first quarter 2025 earnings press release as they relate to forward-looking statements, along with other risks discussed in our SEC filings.

Speaker Change: Other filings with the Securities and Exchange Commission and our first quarter 2025 earnings press release as they relate to forward looking statements along with other risks discussed in our SEC filings, we undertake no obligation to publicly address or update any forward looking statements in future filings our communications regarding.

Jim Rechtin: We undertake no obligation to publicly address or update any forward-looking statements in future filings or communications regarding our business or results.

Jim Rechtin: Today's press release, our historical financial news releases, and our filings with the SEC are all also available on our Investor Relations site.

Speaker Change: Our business or results.

Today's press release, our historical financial news releases and our filings with the SEC are all also available on our Investor Relations site.

Jim Rechtin: Call participants should note that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles or GAAP. Management's explanation for the use of these non-GAAP measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. Any references to earnings per share, or EPS, made during this conference call refer to diluted earnings per common share.

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

Speaker Change: So that's the 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.

Operator: 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.

Jim Roxane: 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 call turn the call over to Jim.

Jim Rechtin: With that, I'll turn the call over to Jim. Thanks, Lisa. Good morning, everyone, and thanks for joining us. We are pleased with our start to 2025.

Jim Roxane: Thanks, Lisa good morning, everyone and thanks for joining us.

Jim Rechtin: We are reaffirming our four-year guidance. We came in ahead of plan for Q1. I will note that some of the outperformance in the quarter is timing related. It is also still early in the year, so we are continuing to monitor trends. This includes changes in consumer behavior due to the IRA.

Jim Roxane: We are pleased with our start to 2025, we are reaffirming our full year guidance. We came in ahead of plan for Q1.

Jim Roxane: I will note that some of the outperformance in the quarter is timing related. It is also still early in the year. So we are continuing to monitor trends. This includes changes.

Jim Roxane: In consumer behavior due to the higher rate.

Jim Rechtin: There's nothing new on our litigation related to CMS's 2026 star ratings. We are still waiting on a ruling. I think the best way to describe where we are at, at this moment, is that while there are still challenges to navigate, there are no surprises. The external environment is evolving as we expected, and we are executing against the things that we expect.

There's nothing new on our litigation related to CMS as 2026 star ratings were still waiting on a ruling.

Jim Roxane: I think the best way to describe where we're at at this moment is that while there are still challenges to navigate there are no surprises the external environment is evolving as we expected and we are executing against the things we control.

Jim Rechtin: We have scheduled an investor conference on June 16. We have three objectives. 1. Provide a clearer picture of the earnings power of the business. 2. Explain what it will take to unlock that earnings power. And 3. Give you clarity on how to track our progress.

Jim Roxane: We have scheduled an investor conference on June 16, we have three objectives.

Jim Roxane: One provide a clearer picture of the earnings power of the business to explain what it will take to unlock that earnings power and three give you clarity on how to track our progress.

Jim Rechtin: Now I will briefly describe the progress we are making operationally, and as usual I will frame my comments today around the four basic drivers of our business. That is product and experience which drive customer growth, clinical excellence, which delivers clinical outcomes and medical margin, a highly efficient back office, and capital allocation and growth in center well and Medicaid. Regarding our Medicare product and experience, there are no changes to our membership guidance for 2025. We had strong performance in OEP and the early outlook for the rest of the years, trending positively. As we head into the bid cycle, we believe the rate notice better reflects the trend environment and should enable greater industry stability.

Jim Roxane: Now I will briefly describe the progress, we're making operationally and as usual I will frame my comments today around the four basic drivers of our business.

Jim Roxane: That is product and experience, which drive customer growth clinical excellence, which delivers clinical outcomes in medical margin, a highly efficient back office and capital allocation and growth in center well in Medicaid.

Jim Roxane: Regarding our Medicare product and experience there are no changes to our membership guidance for 2025.

Jim Roxane: We had strong performance in <unk> in the early outlook for the rest of the year is trending positively as we head into the bid cycle. We believe the rate notice better reflects the trend environment and should enable greater industry stability.

Jim Rechtin: Regarding clinical excellence, operationally, we continue to make progress on STARS. We are closing gaps in care and driving both quality and experience for our customers. For example, through recent partnerships, we are better engaging members who don't have a primary care provider. We are doing this by pairing in-person home visits with virtual health. We expect this work will close gaps in care by 25 percent year over year.

Jim Roxane: Regarding clinical excellence operationally, we continue to make progress on Starz, we are closing gaps in care and driving the quality and experience for our customers. For example through recent partnerships. We are better engaging members. We don't have a primary care provider. We are doing this by pairing in person home visits with virtual health.

Jim Roxane: We expect this work will close gaps in care by 25% year over year.

Jim Rechtin: Another effort is through our medication adherence campaigns, in which we are seeing 30-50% reduction year-over-year in members with weight Regarding a highly efficient back office, our G&A costs for the quarter were slightly better than expectations. This was largely due to the timing of costs that will be incurred in the second and third quarter. However, we are also seeing good progress in our cost management efforts. One example is increased use of AI in our contact centers. This technology quickly surfaces complex information so our representatives can have more impactful interactions with our members while reducing call time.

Jim Roxane: Another effort is through our medication adherence campaigns in which we're seeing 30% to 50% reduction year over year and members with late retails.

Regarding a highly efficient back office, our G&A cost for the quarter was slightly better than expectations. This was largely due to the timing of the costs that will be incurred in the second and third quarter. However, we are also seeing good progress in our cost management efforts. One example is increased use of AI in our contact centers.

Jim Roxane: This technology quickly surfaces complex information. So our representatives can have more impactful interactions with our members while reducing call types.

Jim Rechtin: Regarding capital allocation and growth in our Centerwell and Medicaid businesses, we're seeing robust patient and membership growth in primary care and Medicaid, continued growth in our value-based models in home health, and volume growth in specialty pharmacies. Over the last year, we've added 30 new centers through acquisition and partnership, which are helping to fuel our growth in primary care. We received an intent to award notice from Illinois for their new dual eligible special needs program. Center Well Pharmacy has started its work as the fulfillment center for NovaCare's weight loss medication directed to cash pay customers. As you may have seen in the news yesterday, we have also reached fulfillment agreements with three other companies in the past few days.

Jim Roxane: Regarding capital allocation and growth in our center, while our Medicaid businesses, we're seeing robust patient and membership growth in primary care and Medicaid.

Jim Roxane: Growth in our value based models in home health and volume growth in specialty pharmacy.

Jim Roxane: Over the last year, we've added 30, new centers through acquisition and partnership which are helping to fuel our growth in primary care.

Jim Roxane: We received an intent to award notice from Illinois for their new dual eligible special needs program.

Jim Roxane: And central Pharmacy has started its work as the fulfillment center for Novo cares weight loss medication directed to cash paid customers. As you may have seen in the news yesterday. We have also reached fulfillment agreements with three other companies in the past few days.

Jim Rechtin: All in. I am encouraged by our recent performance and growth.

Jim Roxane: All in I am encouraged by our recent performance and growth and with that I will turn it turn it over to Celeste for a few remarks before we go to Q&A.

Celeste Mellet: And with that, I will turn it over to Celeste for a few remarks before we go to Q&A. Thank you, Jim. I would reinforce that while it remains early, we've had a solid start to the year. The underlying fundamentals of the business, including membership and patient growth, revenue and medical cost trends are developing as expected. And we have been doing substantial work around operating efficiencies with a focus on increasing flexibility and operating leverage. while also making incremental investments to improve member and patient outcomes and support operational excellence, positioning the company for long-term success. The EPS outperformance in the quarter was largely driven by a shift in the expected timing of certain expenses.

Celeste Morais: Thank you Jim I would reinforce that while it remains early we've had a solid start to the year.

Speaker Change: The underlying fundamentals of the business, including membership and patient growth revenue and medical cost trends are developing as expected.

Speaker Change: And we have been doing substantial work around operating efficiencies with a focus on increasing flexibility and operating leverage.

Speaker Change: Well also making incremental investments to improve member and patient outcome and support operational excellent positioning the company for long term success.

Speaker Change: The EPS outperformance in the quarter was largely driven by a shift in the expected timing of certain expenses.

Celeste Mellet: As a result, we are pleased to reaffirm our full-year outlook, including adjusted EPS guidance of approximately $16.25, an expected insurance segment benefit ratio of 90.1% to 90.5%. Looking ahead, we remain focused on managing the levers within our control, expanding margins, and realizing the earnings potential of the business. These levers include quality with a focus on delivering industry-leading stars results on a sustainable basis. Clinical excellence, operating efficiencies, and continued maturity of our Medicaid and CenterWell businesses through their respective J-curves. I am also spending time ensuring every dollar of the balance sheet drives value.

Speaker Change: As a result, we are pleased to reaffirm our full year.

Speaker Change: Outlook, including adjusted EPS guidance of approximately $16 25.

Speaker Change: The expected insurance segment benefit ratio of 91% to 95%.

Speaker Change: Looking ahead, we remain focused on managing the levers within our control expanding margins and realizing the earnings potential of the business.

Speaker Change: These levers include quality with a focus on delivering industry, leading stars results on a sustainable basis.

Speaker Change: Clinical excellence operating efficiencies and continuing maturity of our Medicaid and center well businesses through their respective J curves.

Speaker Change: I'm also spending time, ensuring every dollar of the balance sheet drives value.

Celeste Mellet: Given my background, this is something that has been a major focus for me in prior roles, and I see a real opportunity to continue to increase the efficiency of our balance All in, we believe there is substantial value to be unlocked at Humana over the mid and longer term, and we look forward to sharing more at our investor conference in June.

Speaker Change: Given my background. This is something that has been a major focus for me in prior roles and I see a real opportunity to continue to increase the efficiency of our balance sheet.

Speaker Change: All in we believe there is substantial value to be unlocked at humana over the mid and longer term.

Speaker Change: We look forward to sharing more at our Investor Conference in June with that I will turn the call back to Lisa to start the Q&A great.

Lisa Stoner: With that, I will turn the call back to Lisa to start the Q&A. Great. Thank you, Celeste.

Operator: Before starting the Q&A, just a quick reminder that, to fairness in those waiting in the queue, we ask that you please try to limit yourself to one question.

Speaker Change: Great. Thank you spill act before starting the Q&A just a quick reminder, that furnace and that was waiting in the queue. We ask that you. Please try to limit yourself to one question operator with that please introduce the first caller.

Sarah James: Operator, with that, please introduce the first caller. Our first question comes from Sarah James. Gerald Thank you.

Speaker Change: Our first question comes from Sarah James with Cantor Fitzgerald.

Speaker Change: Yeah.

Celeste Mellet: I was wondering if you could help us with how much of your investments moved out of 1Q, did it move into 2Q, and outside of the timing of that, did 1Q come in in line with your expectations?

Speaker Change: Thank you.

Speaker Change: I was wondering if you could help us with how much of your investments announced out of one Q did it move into to Q and I'll call. It the timing of that did <unk> come in in line with your expectations.

Speaker Change: Yeah.

Celeste Mellet: Hi, sorry, couldn't get my mic to work. So when we gave guidance for several hundred million dollars in investments earlier in the year, we said that the timing would be unclear. Most of the impact to the of the incremental investments flowed through the MLR in the first quarter, it was only about 10 basis points. That was in large part because many of the STARS investments that Jim spoke about ramped later in the quarter. And we would expect them to be higher in the second through the fourth. So still the same expectations for the level of investments in the air just later in later in the year versus the first quarter.

Speaker Change: Hey, sorry, it couldn't get might like to work.

Speaker Change: So when.

Speaker Change: When we gave guidance for several hundred million dollars in investments earlier in the year.

Speaker Change: And we said that the timing would be unclear.

Speaker Change: Most of the impact to the <unk> of the.

Speaker Change: The incremental investments flowed through the MLR in the first quarter. It was only about 10 basis points that was in large part because many of the stars investments.

Speaker Change: Jim spoke about ramped later in the quarter.

Speaker Change: We would expect them to be higher in the second through the fourth so still the same expectation for the level of investments in the air just later and later in the year versus the first quarter.

Ben Hendrix: Our next question comes from Ben Hendrix with RBC. Hey, thank you very much. I was wondering if you'd give us an update on your thoughts around the past 3% MA margin target.

Our next question comes from Ben Hendrix, with RBC capital markets.

Ben Hendrix: Hey, Thank you very much I was wondering if you could give us.

Speaker Change: Update on your thoughts around the past, 3% <unk> margin targets clearly the stars ruling will have a big impact there, but just anything changing on kind of the overall investment focused investment targets and then kind of the impact youre thinking.

Jim Rechtin: Clearly the STARS ruling will have a big impact there, but is anything changing on kind of the overall investment focus, investment targets, and then kind of the impact you're thinking against this better-than-expected MA rate update we're seeing for 2026? Thank you. Yeah, largely, we would describe things as we're in the same place that we've been. We're focused on getting back to a 3% margin. As you noted, the exact timing is tied to the outcome on stars.

Speaker Change: Against this better than expected.

Speaker Change: Update we're seeing for 2026, thank you.

Speaker Change: Yes.

Speaker Change: Largely.

Speaker Change: We would describe things as we're in the same place that we bet, we're focused on getting back to a 3% margin as you noted.

Speaker Change: The exact timing is tied to the outcome on starz.

Justin Lake: It's very much where we are focused, but there's no meaningful change or update from what we've communicated in Our next question comes from Justin Lake with Wolf Research. Thanks. Good morning.

Speaker Change: Very much where we are.

Speaker Change: But there's no meaningful change or update.

Speaker Change: From what we've communicated in the past.

Speaker Change: Our next question comes from Justin Lake with Wolfe Research.

Jim Rechtin: Just sticking on STARS for a second, was hoping to see if you had any update on timing. How you are expecting to handle bids, or how we should think you're going to handle bids if you don't get an answer by the time you have to submit. And then most importantly, I remember last quarter you talked about the fact that you had made some real progress coming out of 2024 on your STARS initiatives, or 2026 STARS, right? That'll come out in October. I'm just curious, I know it's impossible to say where you end up, obviously, given all the volatility in the cut points, but I was wondering if you could tell us, if the cut points don't change, Do you feel like you made enough progress that X cut points, you're gonna see enough underlying star performance improvement to get your stars back, right?

Justin Lake: Thanks, Good morning.

Speaker Change: Just sticking on Starz for a second.

Speaker Change: Was hoping to see if you had any update on timing.

Speaker Change: How you are expecting to handle bids.

Speaker Change: Or how we should think youre going to handle it.

Speaker Change: You don't get an answer by the time you have to submit and then most importantly.

Speaker Change: I remember last quarter, you talked about.

Speaker Change: The fact that you've made some real progress coming out of 2024 odd year star's initiatives for 2026 stores right that will come out in October.

Speaker Change: Just curious I know I know, it's impossible to say, where you end up obviously, given the given all the volatility in the cut points, but.

Speaker Change: I was wondering if you could tell us if the <unk> don't change.

Speaker Change: Do you feel like you've made enough progress.

Speaker Change: Ex Cup points Youre going to see enough underlying star performance improvement too.

Jim Rechtin: Or to be four stars and, you know, predominantly in 2026? Thanks.

Speaker Change: Yet you start back right.

Speaker Change: Alright are to be four stars in predominantly in 2020.

Jim Rechtin: Yeah, hey, this is Jim. Let me, let me hit a few things at a high level, and then I'll hand it off to George as well. There were multiple questions in there. So I'm going to try to hit each of them. As far as litigation, we really do not have insight into the timing. It really is. It really is the legal system that dictates what that timing is. And we do not have any more visibility than you do.

Speaker Change: Yeah.

Speaker Change: Jim Let me, let me hit a few things at a high level and then I'll hand, it off to George as well.

Speaker Change: There were multiple questions and Eric I'm going to try to hit each of them stars litigation, we really do not have insight into the timing it really is.

Speaker Change: It really is the legal system that dictates what that timing is and we do not have any more visibility than you do.

Jim Rechtin: You know, I will let George touch on bids here in a second and then on the outlook on Stars, you know, I'm going to continue to reiterate that we felt good about the progress we made in the fourth quarter of last year, and we feel good about the progress we're making this year. What we're really not going to do is speculate on what exactly that means and what if the cut points are this or that, you know, that's a level of speculation that we're just not really going to entertain. But we do feel good about the progress operationally, I think that's the most important thing.

George Ty: I will let George Ty.

George Ty: John bids here in a second and then on the outlook on Starz.

George Ty: I'm going to continue to reiterate that we felt good about the progress we made in the fourth quarter of last year and we feel good about the progress we're making this year.

George Ty: We're really not going to do is speculate on what exactly that means and what the cut points or this or that.

George Ty: Our level of speculation that we're just not really going to entertain but.

Speaker Change: But we do feel good about the progress operationally I think thats. The most important message at George do you want to talk.

George Renaudin: And George, do you want to talk about those? Sure. Thanks, Jim.

Speaker Change: Sorry about the bids sure.

George Renaudin: Hey, Justin. The places where we are right now in bids is actually very ongoing right now. We're actively working through the STARS strategy, and as we've talked about before, work through the mitigation diversification strategy, really with the idea of reducing the amount of concentration we have on certain contracts. As we've talked about, that's going to be a multi-year process as we work that through. We're currently working through that diversification. We're working through the bids. Given the competitive nature of the bids, we're not going to share our pricing strategy for competitive reasons, obviously, and we're not going to give any specifics there.

Speaker Change: Sure Thanks, Jim Hi, Joseph.

Joseph: Places, where we are right now in bids is actually they are ongoing right now.

Joseph: Actively working through the stars strategy and as we've talked about before work through the mitigation diversification strategy really with the idea of reducing the amount of concentration we have on certain contracts as we've talked about that's going to be a multi year process as we work that through.

Joseph: We're currently.

Joseph: Working through that diversification, we're working through the bids given the competitive nature of the bids were not going to share our pricing strategy for competitive reasons obviously.

George Renaudin: But I will tell you that what we're looking to do is balance membership and margins, focusing on maximizing long-term earnings power of the business, and we have to keep that in mind for the future as well. So that's our take going into it. With regard to some of the targets, as we've talked about before, we've set internal targets contemplating an appropriate buffer as we have our internal teams working towards ever-increasing performance. And so that's the take we're going to have there and that we have to have in order to make sure that we return to industry-leading STARS.

Joseph: And we're not going to give any specifics there, but I will tell you that what we're looking to do is balance membership and margins focusing on maximizing long term earnings power of the business and we have to keep that in mind for the future as well. So that's our take going into it with regard to some of the targets as we've talked about before we've set internal targets.

Joseph: <unk> contemplating an appropriate buffer as we have our internal teams working towards ever increasing performance and so that's the tape.

Joseph: Going to have there and that we have to have in order to make sure that we return to industry leading stars results.

Andrew Mok: Our next question comes from Andrew Mok with Barks . Hi, good morning.

Andrew Mok: Our next question comes from Andrew Mok with Barclays.

Celeste Mellet: Can you provide more color on your experience in Part D relative to expectations, and specifically, can you comment on the pace that seniors are tracking into the catastrophic phase, and are there any early indications for how senior behavior or manufacturer behavior is changing this year? Thanks. Hi.

Andrew Mok: Hi, Good morning can you provide more color on your experience in part D relative to expectations and specifically can you comment on the pace that seniors are tracking into the catastrophic phase and are there any early indications for how senior behavior or manufacturer manufacturer behaviors changing this year. Thanks.

Celeste Mellet: A few things. One, generally trends across our business are trending in line and consistent with our expectations. Our guidance contemplated on the medical side, mid-single-digit growth and trend, and that's consistent with what we're seeing. And on the pharmacy side, low double-digit growth, and that is also consistent with what we're seeing. We have seen some of the dynamics that have been called out, including higher trends in oncology. We did see that last year, and again, contemplated in our guidance. Everything is tracking in line, generally in line with our expectations.

Andrew Mok: Hi.

Speaker Change: A few things one.

Speaker Change: Generally trends across our business are trending in line and consistent with our expectations.

Speaker Change: Our guidance contemplated on the medical side mid single digit growth in trend and Thats consistent with what we're seeing and on the pharmacy side low double digits.

Speaker Change: Visit growth and that is also consistent with what we're seeing.

Speaker Change: We have seen some of the dynamics that.

Speaker Change: Have been called out including higher trends in oncology, but we did see that last year and again contemplated in our guidance.

Speaker Change: <unk> is tracking in line generally in line with our expectations.

Stephen Baxter: Our next question comes from Stephen Baxter with Wells Fargo. Hi, thanks. Just obviously, there's been a lot of membership change on the individual side of the business in particular. I guess, can you walk us through your visibility on risk adjustment at this point in the year and whether that, you know, needs to be thought about differently from a visibility point of view versus maybe the recent few years? And then, I imagine you've gone back and probably done some diligence on Group M.A. in light of some of the industry commentary over the past couple weeks. Let's get a better sense of kind of maybe what you've looked at on the Group M.A.

Stephen Baxter: Our next question comes from Stephen Baxter with Wells Fargo.

Stephen Baxter: Hi, Thanks, just obviously, there's been a lot of membership change on the individual side of the business and particularly I guess could you walk us through your visibility on risk adjustment at this point in the year and whether that.

Stephen Baxter: Needs to be thought about differently from a visibility point of view versus maybe the recent few years and then I imagine you've gone back and probably done some diligence on group M&A in light of some of the industry commentary over the past couple of weeks, we will just get better sense of kind of maybe what you've looked at on the group side and obviously the <unk> out there do you think about more than the individual books, just trying to make sure that you don't feel like Youre seeing some kind of.

George Renaudin: side. And obviously, the PMPMs are up there a decent amount more than the individual books just trying to make sure that you don't feel like you're seeing some kind of behavioral response to that. Thank you.

Stephen Baxter: <unk> response to that thank you.

George Renaudin: Hey, it's George. Thanks for the question. So I'll talk a little bit about the membership shifts we're seeing, then I'll hit on Group A real briefly. With regard to the membership shifts we're seeing, we're pleased with our membership changes to date, given the members that we gained versus those we exited. We are focused on the long-term earnings power of the business. And what we're seeing is a shift to higher lifetime value segments and membership. We're seeing strong year-to-date performance in markets with a high concentration of members in our best performing markets, including markets such as Florida, Illinois, and Texas.

Stephen Baxter: Hey, its Jordan. Thanks for the question, so I'll talk a little bit about the membership shifts, we're seeing and I'll hit on group a real briefly.

Stephen Baxter: With regard to the membership shifts we're seeing we're pleased with our membership changes to date given the members that we gain versus those we exited we are focused on the long term earnings power of the business and what we're seeing is a shift to higher lifetime value segments. In membership, we're seeing strong year to date performance in markets with a high concentration of members in our best per.

Stephen Baxter: Foreign markets, including markets, such as Florida, Illinois, and Texas were seeing a higher than historical percentage of our non D. SNP members coming.

George Renaudin: We're seeing a higher than historical percentage of our non-DSNP members coming from other plans, which has some good implications for the MRA question that you asked. We want members with sustainable margin that are pleased with the progress we've made there. So on the individual side, we're very pleased with our strategy thus far, and that's playing out as we had desired.

Stephen Baxter: From other plans, which has some good implications for the MRA question that you asked we want members with sustainable margin Theyre pleased with progress we've made there so on the individual side, where we're very pleased with our strategy, thus far and that's playing out as we had desired on the group MA side group in May is performing as expected.

George Renaudin: On the group MA side, group MA is performing as expected to date. Revenue and medical cost trim is developing in line with our expectations. You may recall that in past quarters, we've talked about the fact that the group segment is one that has had historical multi-year rate guarantees, and that has led to some degradation, as we have expected, and is in our earnings guidance. We remain focused on improving those MA margins through renewal cycles, and what I can say today is that we've not seen any changes in behavior concerning trends due to that repricing activity.

Stephen Baxter: <unk> revenue and medical cost trends developing in line with our expectations you may recall that in past quarters. We've talked about the fact the group segment is one that has had historical multiyear rate change guarantees and that has led to.

Stephen Baxter: Some degradation as we have expected and as in our earnings guidance, we remain focused on improving their MA margins through renewal cycles, and what I can say today is that we've not seen any changes in behavior concerning trends due to that repricing activity. So we're happy with where we are with group in may and that it is in line with our expectations.

Celeste Mellet: So we're happy with where we are with group MA, and that it is in line with our expectations. And if I could add, just to clarify, everything is in line with our expectations to date for both the health plan and Centermell as it relates to MRA and revenue. The V-28 impact is as expected as it was for 2024. And as a reminder, we did call out a pretty significant Humana health plan impact. From the 28 last year, we call that about 160 basis point impact for 2025.

Stephen Baxter: And if I could add just to clarify everything is in line with our expectations to date for both the health plan and center mall as it as it relates to MRI and revenue the <unk> 28 impact.

Stephen Baxter: As expected as it was for 2024.

Stephen Baxter: And as a reminder, we did call out pretty significant Humana health plan impact.

Stephen Baxter: From the 28 last year, we called out about 160 basis point impact for 2025 and that is playing out as expected.

A.J. Rice: And that is playing out as Our next question comes from A.J. Rice with UBN.

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

Jim Rechtin: Hi, everybody. Thanks for the comments so far. I guess I'm just trying to think through, you have reiterated that you still have a long-term target of 3% pre-tax margin in MA. There's a lot of moving parts, obviously, the OpenSTARS litigation, the Part D changes, and how that may play out next year, depending on how they do the demonstration project, etc. But you do have a better-than-expected rate update.

Stephen Baxter: Okay.

Speaker Change: Hi, everybody.

Speaker Change: Thanks for the comments, so far I guess I'm, just trying to think through or you have.

Speaker Change: Reiterated that you still have a long term target of 3% pretax margin.

Speaker Change: In EMEA.

Speaker Change: There's a lot of moving parts obviously.

The Star <unk> litigation.

Speaker Change: The part D changes.

Speaker Change: How that May play out next year, depending on how they do the demonstration projects et cetera, but you do have a better than expected rate update when you throw all of that and everything else into the mix the trajectory that you're on.

Jim Rechtin: When you throw all that and everything else into the mix, the trajectory that you're on, I know you'll give more detail at the investor day, but is there any high-level comments you can make about whether the trajectories changed your optimism about the progression you can make in 2026, 2027, and 2028, back toward your target margin?

Speaker Change: I know, you'll give more detail at the Investor day, but is there any high level comments, you can make about whether the trajectories changed your optimism about the progress you can make in 'twenty six 'twenty seven and 28 back towards your target margins.

Jim Rechtin: Yeah, hey, AJ. It's Jim. I'll start off here and then we'll see if there's anything to add.

Speaker Change: Yeah, Hey, Jay it's Jim I'll start off here and then we'll see if there is anything too.

Jim Rechtin: The headline is, if you set stars aside, we feel good about the underlying progress of the And then the challenge, of course, is then to reconcile that with the STARS outcomes that are unknown. And so we do feel good about the underlying progress of the business. And to your point, you know, one of our objectives at the investor conference is to be able to provide a little bit more color into what what does that mean and how can you see it? you hit all of the many variables that are largely external that we're having to navigate and yeah there's a whole bunch of puts and takes in there the rate notice does better reflect trend and there are regulatory headwinds that we're still navigating you know what they all are they're not new And we expect that to continue.

Speaker Change: AD.

Speaker Change: The headline is.

Speaker Change: If you set stars aside we feel good about the underlying progress of the business and then the challenge of course is then to reconcile that with the stars outcomes that are unknown.

Speaker Change: And so we do feel good about the underlying progress.

Speaker Change: Progress of the business and to your point.

Speaker Change: One of our objectives at the investor conferences to be able to provide a little bit more color into what does that mean and how can you see it.

Speaker Change: You hit all of the many variables that are.

Speaker Change: Largely external that we're having to navigate and yes. There is a whole bunch of puts and takes in there.

Speaker Change: The rate notice does better reflect trend and there are regulatory headwinds that we're still navigating unit now what they all are they are not new.

Speaker Change: And.

Speaker Change: And we expect that to continue theres going to be puts and takes in the external environment.

Jim Rechtin: There's gonna be puts and takes in the external environment.

Jim Rechtin: What we are really focused on are what are the things that we can control? And there are things that we can control around medical costs, around DNA, around obviously stars. And that really is differentially where we're focused and that's where we're gonna spend most of our time when we get to the investment.

Speaker Change: What we are really focused on are what are the things that we can control and there are things that we can control around medical cost around G&A around.

Speaker Change: Honestly stars and that really is differentially, where we're focused and that's where we're going to spend most of our time when we get to the Investor Conference.

Joshua Raskin: Our next question comes from Joshua Raskin with Nefron Research. Thanks. Good morning.

Speaker Change: Our next question comes from Joshua Raskin with Nephron research.

Jim Rechtin: Could you provide an overview of the integration strategies you have between the insurance segment and CenterWell? And within that, can you share performance trends on some of the cohorts and how those have been moving through CenterWell in recent years? I'm really just looking for an update on sort of levels of success you're having in these VBC arrangements and maybe how you plan to accelerate or not accelerate that in the future.

Speaker Change: Great. Thanks, Good morning could you provide an overview of the integration strategies you have between the insurance segment and central well and within that can you share performance trends.

Speaker Change: Some of the cohorts and how those have been moving through center well in recent years I'm really just looking for an update on sort of levels of success Youre, having in the CBC arrangements and maybe how you plan to accelerate or not accelerate that in the future.

Jim Rechtin: Yeah, I'll start and then George may add some pieces on the integration component of the question. At the highest level, what I would again say is we're seeing strong patient growth. We're seeing that both because we're adding clinics and we're seeing it within clinics. So we're seeing it on both sides. So that's a positive. The member growth within maturing clinics is largely in line with where we have been modeling it and expecting it and forecasting it. And so, again, we feel good about that. The V28 mitigation efforts are continuing to take hold and the V28 impact is not really much different at all from what we modeled a couple of years ago.

Speaker Change: Yes, I'll start and then George May add some pieces on the integration component of that question.

Speaker Change: At the highest level what I would.

Speaker Change: Again say is we're seeing strong patient growth, we're seeing that both because we're adding clinics and we're seeing it within clinics. So it we're seeing it on both sides. So that's a positive.

Speaker Change: Member growth within maturing clinics is largely in line with where we had been modeling it and expecting it in forecasting it.

Speaker Change: So again, we feel good about that.

Speaker Change: The 28 mitigation efforts are continuing to take hold in the <unk> 28 impact is not really much different at all from what we modeled a couple of years ago, it's almost spot on.

Jim Rechtin: It's almost spot on. And so in total, we feel very good about the primary care business and the direction it's headed in. Obviously, the J-curves are multi-year, it takes time to work through those, like this is a investment that you have to have some patience around, but we feel very good about the nature of the investment and where it's headed. And you're seeing each tranche of new centers performing pretty consistently in the J-curve as you would hope or expect. And so that's kind of where we're at broadly.

Speaker Change: And so in total.

Speaker Change: We feel very good about the primary care business and the direction. It's headed in obviously the J curves are multi year. It takes time to work through those like this is that.

Speaker Change: The investment that you have to have some patience around but.

Speaker Change: We feel very good about the nature of the investment and where it's headed.

Speaker Change: And.

Speaker Change: And youre seeing each tranche of.

Speaker Change: New centers performing pretty consistently in the J curve as you would hope or expect.

Speaker Change: And so that's kind of where we're at broadly and then I'm going to make one comment on integration and let George jump in.

Jim Rechtin: And then I'm going to make one comment on integration.

George Renaudin: I'm going to let George jump in. The main message across CenterWell, so this is not just primary care, this is across all three pieces of CenterWell, is that all three of those businesses have positive contributions to our STARS performance within the plan, to our accurate diagnosis and follow-up preventative care, and the impact that that has on the plan, and with retention of members. And so and so when you really think about, hey, how does that business help? It helps us with the core parts of how you deliver care effectively to M.A. members, and that's good for the plan.

Speaker Change: The main message across center, while so this is not just primary care. This is across all three pieces of center well.

Speaker Change: Is that all three of those businesses have positive contributions to our stars performance within the plan to our accurate diagnosis and follow up.

Speaker Change: Our preventative care.

Speaker Change: And the impact that that has on the plan and with retention of members.

Speaker Change: And so and so when you really think about hey, how does that business help.

Speaker Change: It helps us with the core parts of how you deliver care effectively two MMA members and that's good for the plant like that is it in a nutshell with that I'm going to hand, it to Georgia and give you a couple of specific examples hey, Jim. Thanks, So we're seeing a growing share of our members with <unk> with a prime.

George Renaudin: Like that is it in a nutshell.

George Renaudin: With that, I'm going to hand it to George. He can give you a couple of specific. Hey, Jim. Thanks. So we're seeing a growing share of our members with CenterWell PCO, with our primary care organization, which is a big positive. And in line with that, you also see the interaction with our CenterWell Pharmacy and CenterWell Home. And the general thing that we see there is better health outcomes, for example, reduced ER visits, better care in all sorts of medical adherence measures, better care as far as screenings go, and frankly, just more interactions with the patient and our member, which is all very positive, which leads to the STARS results that Jim just mentioned being positive and higher retention.

Speaker Change: Air Care organization, which is a big positive.

Speaker Change: And with that you also see the.

Speaker Change: The interaction with our central pharmacy, and <unk> home and the general thing that we see there is better health outcomes. For example, reduced ER visits better care and all sorts of medical adherence measures better care as far as screenings go and frankly, just more interactions with the pay.

Speaker Change: And our member which is all very positive which leads to the stars was also Jim just mentioned being positive and higher retention. So all in all the continuing strategy and the interaction between the insurance side of the business and are well some businesses very integrated.

George Renaudin: So all in all, the continuing strategy and the interaction between the insurance side of the business and our well side of business is very integrated. We are constantly figuring out how we can work better together to deliver better results for our members and their patients.

Speaker Change: We're constantly figuring out how we can work better together to deliver better results for our members and their patients.

Joanna Gajuk: Our next question comes from Joanna Gajuk with Bank of America. Hi, good morning. Thank you for the question. So on Centerville, actually, one question there, what drove outperformance in that segment earnings? You said something in the release along the lines of there's some timing. So I guess before you were talking about some shifts in timing around the investments you were making around stars, but was there something else that was maybe different in Centerville? So can you talk about the results in the quarter? Thank you.

Speaker Change: Our next question comes from Joanna <unk> with Bank of America.

Speaker Change: Hi, Good morning. Thank you for taking the question. So on centre, we'll actually have one question there.

Speaker Change: What drove outperformance in that segment earnings you said something in their release along the lines. If there is some timing.

Speaker Change: So I guess before you were talking about some shifts in timing around the investments Youre, making are all stars, but it was just something else that was maybe different than central to can you talk about the results in the quarter. Thank you.

Celeste Mellet: Hi, it's Celeste. So about a third of our beat in the quarter was driven by center well. And that beat was driven predominantly by PCO and pharmacy. So some is timing related in terms of admin expense, but there is a portion that could be durable, such as favorable pharmacy drug mix. Specifically, we saw favorability on the specialty side, including better than expected mix and strong agnostic sales. And then on the PCO side, we did have higher than expected patient growth. And then there was some PPD favorability, which we don't expect to repeat. So this could be durable, but it's early in the year and we're keeping an eye on that.

Speaker Change: Hi, it's left.

Speaker Change: So about a third of our beat in the quarter was driven by center well.

Speaker Change: <unk>.

Speaker Change: So that beat was driven predominantly by PCL on pharmacy. So some is timing related.

Speaker Change: In terms of admin expense, but there is a portion that could be durable.

Speaker Change: Such as favorable pharmacy drug mix specifically.

Speaker Change: Specifically, we saw favorability.

On the specialty side, including better than expected mix and strong agnostic sale.

Speaker Change: And then on the PCL side, we did have higher than expected patient growth.

Speaker Change: And then there was some PPD favorability, which we don't expect to repeat so this can be durable, but it's early in the year and we're keeping an eye on that.

Lance Wilkes: Our next question comes from Lance Wilkes with Burns. Great.

Lance Wilkes: Our next question comes from Lance Wilkes with Bernstein.

Celeste Mellet: Again, on CenterWell, can you talk a little bit about how the individual businesses within CenterWell are performing relative to your 25 and long-term kind of target margin expectations?

Speaker Change: Great.

Speaker Change: Again on center, well could you talk a little bit about.

Speaker Change: How the individual businesses within center well are performing relative to your 25 and long term kind of target margin expectations and within primary care can you talk a little bit about what drove the external.

Celeste Mellet: And within primary care, can you talk a little bit about what drove the external revenue growth there? And in general, maybe just a little color on the puts and takes on internal versus external patient growth? Thanks.

Speaker Change: Revenue growth there and in general maybe just a little color on the puts and takes on internal versus external patient growth. Thanks.

Celeste Mellet: Hey, it's, um... It's Celeste. So as I had called out We had about a third of our beat in the quarter was driven by center well. Home was in line, PCO was ahead of expectations, pharmacy was ahead of expectations. As I called out, some of the pharmacy and PCO components that specifically the specialty mix and the patient growth could be durable for the year and drive higher results for the year, but it's too early to call out or it's too early to call on that. In terms of Hopefully I'm answering your question the right way.

Speaker Change: Hey.

Speaker Change: <unk>.

Speaker Change: It's the last so as I had called out.

Speaker Change: We had.

Speaker Change: About a third of our beat in the quarter was driven by center well.

Speaker Change: Home was in line.

Speaker Change: <unk> was ahead of expectations pharmacy was ahead of expectations.

Speaker Change: As I called out.

Speaker Change: The pharmacy and PTO components, specifically, the specialty mix and the <unk>.

Speaker Change: Patient growth could be durable.

Speaker Change: For the year and drive higher results for the year, but it's too early to call out or it's too early to call on that.

Speaker Change: In terms of.

Speaker Change: I'm trying to make hopefully I'm answering your question the right way.

Celeste Mellet: The revenue growth in CenterWell was driven by a combination of the patient growth, the higher than expected patient growth, as well as some favorable PPD. So the patient growth could sustain itself, the PPD would not typically higher in the first quarter. Because of the outperformance in CenterWell, we did have variability in our benefit ratio in the quarter. Over the course of the year, we would expect the benefit ratio for insurance and the consolidated to be consistent. In this case, the consolidated was lower because of that outperformance. And that's really driven by intercompany elimination.

Speaker Change: The growth.

Speaker Change: The revenue growth in center why was why is driven by a combination of the piece the patient growth, yeah higher expectations higher than expected patient growth.

Speaker Change: As well as some favorable PPD.

Speaker Change: Patient growth.

Speaker Change: Sustain itself the PPD would not typically higher in the first quarter.

Speaker Change: Because of the outperformance in center, while we did have variability and our benefit ratio in the quarter over the course of the year, we would expect that.

Speaker Change: Benefit ratio for insurance and the consolidated to be consistent in this case, the consolidated was lower because of that outperformance and thats really driven by.

Speaker Change: Intercompany eliminations.

Erin Wright: Our next question comes from Erin Wright with Morgan Stanley. Great, thanks.

Erin Wright: Our next question comes from Erin Wright with Morgan Stanley.

George Renaudin: On the Medicaid side of the business, how do you how are you thinking now in terms of visibility into that state rate mismatch and how that's progressing now and in your confidence in terms of as we go into the second half and resolution of that and anything in terms of calling out in terms of utilization across Hey, hello, it's George. I'll take this one. So Medicaid's emerging, as we've talked about, is a pretty strong, scaled business with a lot of potential earnings contribution as we go forward. Right now, what we're seeing is Medicaid is performing in line with our expectations for the quarter.

Erin Wright: Great. Thanks on the Medicaid side of things how do you. How are you thinking now in terms of visibility into that state rate mismatch and how that's progressing now and your confidence in terms of as we go into the second half and resolution of that and anything in terms of.

Erin Wright: Calling out in terms of utilization across that business.

Erin Wright: Hey, Hello, It's George I'll take this one so Medicaid is emerging as we've talked about is pretty strong scaled business with a lot of potential earnings contribution as we go forward right. Now we are seeing is Medicaid is performing in <unk>.

George Renaudin: And we are prouder and prouder every day to serve an ever-growing group of Medicaid members working with our state partners. The Medicaid success is something that we're very proud of. We're presenting a fresh, new face on we were selected, as Jim talked about in his open remarks, for new Illinois contracts for the FIDI and LTSS business. That's pretty exciting because it opens up access to 450,000 duals in Illinois, which is a major win for us, and we're very excited about that. The expansion population continues to grow for us. Virginia implementation is on track and going well, and what we're seeing is modest improvement margins in 25 as our rates are adjusted to reflect recent trend experience.

Erin Wright: Your line with our expectations for the quarter and we are proud of and proud of everyday to serve an ever growing group of Medicaid members working with our state partners. The Medicaid success is something that we're very proud of.

Erin Wright: Representing a fresh new face on Medicaid through our company through the help of Horizons product that we have and we're excited about the success. We've had there. We continue to have strong growth. We've had approximately 100000 growth year to date in line with the 175 to 250000 growth we expected for the year.

Erin Wright: Very excited about it.

Erin Wright: Ending starting to get to our footprint of 13 states.

Georgia declined to rebid the contract, which we are glad to see and we were selected as Jim talked about in his opening remarks for a new Illinois contracts for the <unk> business.

Erin Wright: Thats pretty exciting because it opens up access to 450000 duals in Illinois, which is a major win for us and we're very excited about that the expansion population continues to grow for us.

Erin Wright: Virginia implementation is on track and going well and what we're seeing is modest improvement in margins in 25 years. Our rates are adjusted to reflect the recent trend experience. So overall, we're happy with where we are we're growing it as we've expected and we're seeing trends in line with our expectations.

George Renaudin: So, overall, we're happy with where we are. We're growing it as we've expected, and we're seeing trends in line with our expectations.

Jim Rechtin: Hey, I'm going to add just one thing. You had asked about visibility into state-level rate adjustments. One of the benefits of having now expanded into more states and more programs is that while you're not going to get every state right every year, the broader this program grows, the more you can forecast it across states. And so, you know, we did not get every single state right this last cycle, and I'm sure we will not get every state right in the next cycle. But across the state. It actually was, once again, pretty close to where we expected it to be, and we think we've built in pretty reasonable expectations for the back half of this year and the adjustments that we'll see there as well.

Erin Wright: And just one thing you would add asked.

Erin Wright: About visibility into kind of state level rate adjustments.

Erin Wright: One other.

Erin Wright: One of the benefits of having now expanded into more states and more programs.

Erin Wright: While you are not going to get every state right every year.

Erin Wright: The broader this program grows the more you can forecast it across states and so we did not get every single state right. This last cycle and I am sure. We will not get every stay right in that next cycle, but across the states.

Erin Wright: It actually was once again pretty close to where we expected it to be and we think we've built in pretty reasonable expectations for the back half of this year and the adjustments that we'll see there as well.

George Renaudin: Yeah, that's fair, Jim. I'd also add that our state partners have been very collaborative and working with us on those rates, and we do have visibility now to 76% of our ratings for this year. So again, we feel very good about where we are in our projections.

Erin Wright: Yes, that's fair Jim I'd also add that our state partners have been very collaborative in working with us on those rates and we do have visibility now to 76% of our ready to explore this year. So again, we feel very good about where we are in our projections.

Lisa Gill: Our next question comes from Lisa Gill with J.P. Morgan. Thanks very much and good morning.

Speaker Change: Our next question comes from Lisa Gill with J P. Morgan.

Celeste Mellet: Celeste, I want to go back to your comment around mid-single digit trend that you're seeing on the medical side. Can you maybe just talk about the level of visibility you have and, you know, did you see any variability as you were exiting the quarter?

Lisa Gill: Thanks, very much and good morning.

Lisa Gill: So, let's I want to go back to your comment around mid single digit trend that youre seeing on the medical side can you maybe just talk about the level of visibility you have and.

Lisa Gill: Did you see any variability as you were exiting the quarter and then just secondly, I just want to make sure I understand the cadence of earnings I think that you noted that 60% to 65% of part D is coming in Q1 because of the changes under IRI.

Celeste Mellet: And then just secondly, I just want to make sure I understand the cadence of earnings. I think that you noted that 60 to 65% of Part D is coming in Q1 because of the changes under IRA. Is there anything else we should be aware of as we think about the cadence of earnings throughout 2025? Sorry, mic issues again. Yeah, so as I called out, 25 trends are generally developing as expectations. As you know, the first quarter flu season was heavy. We did anticipate that because it started later. We didn't, it didn't scale up in the fourth quarter as it normally would.

Lisa Gill: Is there anything else, we should be aware of as we think about the cadence of earnings throughout 2025.

Lisa Gill: Okay.

Lisa Gill: Alright, Mike issue again.

Lisa Gill:

Speaker Change: Yes, so as I called out 25 trends are generally.

Lisa Gill: As expectations.

Lisa Gill: As you know the first quarter flu season with heavy we did anticipate that because it started later we didn't it didn't.

Lisa Gill: Scale up in the fourth quarter as it normally would and we also were in the middle of the Spike when we gave our guidance.

Celeste Mellet: And we also were in the middle of the spike when we gave our guidance. Beyond the flu, based on the data we have to date, trends are developing as expected. You know, we have data through the end of April and nothing that we've seen gives us pause. So, so far in line with our expectations and what's built into our guidance range.

Lisa Gill: Beyond the flu based on the data we have today trends are developing as expected.

Lisa Gill: We have data through the end of April and nothing that we've seen gives us pause. So so far in line with our expectations and what's built into our guidance range.

Celeste Mellet: In terms of the cadence of earnings, to your question, Our earnings will be front-loaded, predominantly driven by IRA, so higher in the first, lower in the second, lower in the third, lower in the fourth. You can see the opposite move, so lower in the first, higher in the second, higher in the third, higher in the fourth, in terms of the benefit ratio.

Lisa Gill: In terms of the cadence of our earnings.

Lisa Gill: To your question.

Lisa Gill: Our earnings will be front loaded.

Lisa Gill: Dominic <unk> driven by IRI so.

Lisa Gill: Higher than the first lower in the second lower and that there are lower than the four you can see the opposite move so lower than the first tier and the second hiring a third higher than the fourth in terms of the benefit ratio one other thing to consider as it relates to the end of the year is that our guidance does anticipate.

Celeste Mellet: One other thing to consider as it relates to the end of the year is that our guidance does anticipate a doc fix late in the third quarter or in the fourth quarter, and the impact of that, typically a full year, you get a full year impact, which you have to recognize in a very short period of time. That would be reflected possibly just in the fourth quarter, depending on when it comes through, so that would put pressure on the end of the year, but is contemplated within our guidance.

Lisa Gill: Dissipate a doc fix.

Lisa Gill: In late in the third quarter or in the fourth quarter and the impact of that typically a full years, you've got a full year impact what you have to recognize we're in a very short period of time that is that would be reflected possibly just in the fourth quarter, depending on when it comes through so that would put pressure on the end of the year, but.

Michael Ha: For more information visit www.fema.gov Our next question comes from Michael Ha with Bayard. Thank you. Just a quick clarification first. In your pair of remarks, you mentioned remaining committed to individual MA margins of at least 3% overtime. That change in wording from 27 to overtime, anything to read into there? Is that implying 27 is still the target? And I understand your 25 adjusted EPS guide unchanged, but GAP EPS revised lower by about $1.20 or 8%. It looks like there's a pretty large put-call valuation adjustment made for your center well primary care centers. Are you marking down a fair value of those centers?

Lisa Gill: As contemplated within our guidance.

Speaker Change: Our next question comes from Michael <unk> with Baird.

Speaker Change: Thank you just a quick clarification first in your prepared remarks, you mentioned remaining committed to individual MA margins of at least 3% overtime that change in wording from 2007 over time anything to read into there.

Implying 27 still the target and I understand you're 25, adjusted EPS guide unchanged with GAAP EPS revival over about $1, 28%. It looks like there's a pretty large call valuation adjustment made for your center well primary care centers are you marking down the fair value of those centers.

Jim Rechtin: Curious if you could talk us through that. And I know, Jim, you mentioned your confidence on V28 mitigation efforts, center well. So, just wanted to clearly ask, is there any change at all in this post-V28 world in your thinking, your viewpoint on the expected J-curve of these primary care centers, the overall cohort maturation story of value-based care, meaning all of your most mature cohorts are still expected to do the same targeted margin going forward as you had targeted pre-V28? So, basically, no structural impairment at all to value-based care because of V28. Thank you. Yeah, there are a bunch of pieces in there.

Speaker Change: Curious if you could talk us through that and I know Jim <unk>.

Speaker Change: You mentioned your confidence on the 28 mitigation efforts Genoa. So just wanted to clear the ask is there any change at all.

Speaker Change: Post 2008 World and Youre thinking your viewpoint on the expected J curve of these primary care general overall cohort maturation story.

Speaker Change: E based care, meaning all of your most mature cohorts are still expected to do the same targeted margins going forward as you had targeted BB 2008, so basically no structural impairment at all to value based care because of the 28. Thank you.

Speaker Change: Yes, there are a bunch of pieces in there I'll try to hit.

Jim Rechtin: I will try to hit a few and then see if the team wants to hit any of the others. Let me start with the 3%. I was not intending to make any change from past commentary. So we are still targeting 27%. We don't see any... reason that we would not be back to normalized margins in 27 at this point in time. And obviously, you know, it's 2027. But, but no change from what we've said historically on that front.

Speaker Change: I had a few and then.

Speaker Change: See if that team.

Speaker Change: <unk>, let's say hit any of the others.

Speaker Change: Let me start with the 3% I was not intending to make any change from past.

Speaker Change: Commentary, so we are still targeting 2007.

Speaker Change: We don't see any.

Speaker Change: The.

Speaker Change: Reason that we would not be back to normalized margins in 2007 at this point in time and obviously.

Speaker Change: It's 2027.

Speaker Change: But but no change from what we've said historically on that front.

Jim Rechtin: And then going back to the J-curves and the center well business, no structural impairment to the performance of those businesses. So once again, we have operationalized or are in the process of operationalizing things that will offset the impact of B-28. We expect those J-curves to mature as we would before and the team's doing really, really good work to make sure that that happens.

Speaker Change: And then the.

Speaker Change: Going back to the J curves and the <unk>.

Speaker Change: Center well business.

Speaker Change: <unk>.

Speaker Change: No structural impairment to the performance of those.

Speaker Change: <unk> businesses, so once again.

Speaker Change: We have.

Speaker Change: Operationalized or are in the process of operationalize in things that will offset the impact of the 28, we expect those J curves to mature as we would before.

Speaker Change: And.

Speaker Change: And the team is doing really really good work to make sure that that happens.

Celeste Mellet: Hey, Celeste, just to add first The ability to hit the MA margin will be partially dependent on stars, so that is a big, that will be a big important piece for 2027. Second, as it relates to the move and the put call, it's a pretty, it's a very complicated calculation. There's no implication that we are writing down those assets. It's unrelated to V28. It's just that there's a lot of ins and outs in that calculation. There's nothing to read into the adjustment in the GAAP EPS guidance. And can I just add as well that the disproportionate impacts of V28 for high acuity patients was something that was well understood and considered in our forecast, the bid work we've done, the bid work we're doing now.

Speaker Change: Hey, <unk>.

Speaker Change: Just to add first.

Speaker Change: The ability to hit the margin will be partially dependent on starz.

Speaker Change: That is a big.

Speaker Change: That will be a big important piece for 2027.

Speaker Change: Second as it relates to the move and the put call. It's a pretty it's a very complicated calculation. There is no implication that we are.

Speaker Change: <unk> down those assets that's unrelated to the 28.

Speaker Change: There is a lot of ins and outs of that that calculation.

Speaker Change: There is nothing to read into.

Speaker Change: And to the adjustment in the GAAP EPS guidance.

Speaker Change: And I would just add as well.

Speaker Change: Disproportionate impacts of <unk> 28 for high acuity patients was something that was well understood and considered in our forecast the bid work. We've done the bid work we're doing now and we have shared in the past is Celeste said I think early on the call that did impact on both health plans general side was.

Jim Rechtin: And we have shared in the past, as Celeste said, I think, early on in the call, that that impact on both the health plan, central side, was very well understood and it's trending as we've expected. As a reminder, we called out very early the significant health plan impact versus the industry where we had a higher impact because of a greater share of members with high performing value based providers. And that's been continuing to be true and is in line with our expectations.

Speaker Change: Very well understood and it's trending as we've expected as reminder, we called out very early the significant health plan impact and versus the industry, where we had a higher impact because of greater share members with high performing value based providers and that's been continuing to be true and is in line with our expectations.

David Windley: Our next question comes from David Windley with Jeff. Hi, good morning, thanks for taking my questions. I believe in, I wanna focus on membership, please. Included in the membership decline this year was, I think, about 140,000 duals. I'm wondering if you could comment on the magnitude of margin help you get this year from exiting that particular block of business. Would you aspire to try to get those back in future years? And does 2026 contemplate any more additional exits, or is that completely done? I think you said that in the past, but I don't remember your answer.

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

David Windley: Hi, good morning, Thanks for taking my questions I believe.

Speaker Change: Focus on membership please see.

Speaker Change: Included in the membership.

Speaker Change: Decline this year was I think about 140000 tools.

Speaker Change: Im wondering if you could comment on the magnitude of margin help you get this year from exiting that particular block of business would you aspire to try to get those back in future years.

Speaker Change: And do does does 2026 contemplate any more additional exits or is that completely done I think you said that in the past what I will remember your answer thank you.

Jim Rechtin: Hey. We have said without specifically getting into, you know, member cohorts, so the 100,000 level, is that we saw a material we targeted and have seen a material improvement in our margin . . through the plans and the markets that we exited.

Speaker Change: Hi.

Speaker Change: We have said without specifically getting into.

Speaker Change: Remember cohorts 101000 level is that we saw a material we targeted and have seen a material improvement in our margin.

Speaker Change: Through than that.

Speaker Change: The plans and the.

Speaker Change: The markets that we exited.

Jim Rechtin: And we're not going to get into more specifics. As it relates to duels, to the extent that pursuing those members drives sustainable long-term value for us, we will target them. But we are not going to chase. growth for growth's sake if it does not drive sustainable long-term value. The only thing I would add to that, Celeste, is that the additional recent wins we've had in Medicaid really is setting us up for a good grounding as we are preparing ourselves for success in that marketplace, which opens up many dual markets, just as the example I gave regarding Illinois earlier.

Speaker Change: And we're not going to get any more specifics as it relates to duals.

Speaker Change: To the extent that the.

Speaker Change: Pursuing those members drive sustainable long term value for us, we will target them, but we are not going to chase.

Speaker Change: Growth for growth sake, if it does not drive sustainable long term value.

Speaker Change: The only thing I would add to that Celeste is that the additional recent wins we've had in Medicaid really is setting us up for a good grounding as we are preparing ourselves for success in that marketplace, which opens up many dual markets just as the example, I gave regarding Illinois earlier.

Jim Rechtin: Hey, and I'm going to add one more thing. I believe you asked, how are we thinking about exits in 2026? Every year, there's some puts and takes on places where you're adding plans and stepping away from plans. But we expect it to be a normal year. We're not expecting an outsized level of exits the way that we did this past year. This past year largely did what we wanted and needed it to do. And so, again, we're looking at the normal puts and takes you would see in most years as we head into 2026.

Speaker Change: Hey, I'm going to add one more thing I believe you asked how are we thinking about exits in 2026.

Speaker Change: Every year Theres, some puts and takes on.

Speaker Change: Places, where you're adding plans and stepping away from plans, but we expect it to be a normal year, we're not expecting an outsized.

Speaker Change: Level of exits the way that we did this past year.

Speaker Change: This past year, largely did what we wanted that needed it to do and.

Speaker Change: And so again, we're looking at kind of the normal puts and takes you would see in most years as we head into 2026.

George Hill: Our next question comes from George Hill with Deutsche Bank. Yes, good morning, and thanks for taking the question. I wanted to follow up on the visibility to cost trend. Celeste, you said you had data through the end of April. I assume that you meant that was for pharmacy and not for core medical.

Speaker Change: Our next question comes from George Hill with Deutsche Bank.

George Hill: Yes, good morning, and thanks for taking the question I wanted to follow up on the visibility to cost trend for us.

George Hill: You said you had data through the end of April I assume that you meant that was for pharmacy in the four core medical so I'd be interested in your comments on kind of core medical visibility, where you are here and what do you think you are from the end of the year and then I kind of wanted to follow up quickly on Daves question on membership acuity and I guess, if you look at the total individual book, we know that you lost about 140 <unk>.

Celeste Mellet: So I'd be interested in your comments on kind of core medical visibility, where you are here and where you think you are from the end of the year. And then I kind of wanted to follow up quickly on Dave's question on membership acuity. And I guess if you look at the total individual book, we know that you lost about 140,000 dual members. I guess I would just love macro comments on how much member acuity the entire book came down and comments on how you think about that as it relates to profitability. And are you seeing, do you feel like you're seeing better member profitability pursuing a lower acuity book of business or a higher acuity book of business?

George Hill: Kelvin Duals members I guess I would just look macro comments on on how much remember acuity of the entire book came down and comments on how you think about that as it relates to profitability and are you seeing do you feel like Youre seeing better.

George Hill: <unk> profitability pursuing a lower acuity book of business or a higher acuity book of business.

Celeste Mellet: Thank you.

George Hill: Thank you.

Celeste Mellet: Hi. So in terms of data, we have authorization data, claims data, as well as insights from our center well assets, including SNF insights from one home, drug pipeline and authorizations from our pharmacy, which can be a very, very early indicator of challenges if they are arising, patient utilization from PCO. And we also spent a lot of time with other provider and vendor partners. And nothing we're seeing through the end of April suggests trends outside of our guidance. In terms of complete claims, we have fully completed claims, mostly fully completed claims through the end of February, but significant data through the end of April.

George Hill: Hey.

George Hill: So in terms of data we have.

George Hill: <unk> claims data.

George Hill: As well as insights from our center, well assets, including sniff insights from one home.

Speaker Change: Hi, John pipeline and authorizations from our pharmacy, which can be a very very early indicator of of of challenges. If they are a rising patient utilization from tcl and <unk>.

George Hill: We also spent a lot of time with the other provider and vendor partners.

George Hill: And nothing we're seeing through the end of April suggests suggest trends outside of our guidance.

George Hill: In terms of complete claims we have fully completed claims mostly fully completed claims through the end of.

George Hill: February brought significant data through the end of April.

Celeste Mellet: And then, Celeste, with regard to your other question about member acuity, I'll just repeat what I said before regarding we're seeing a shift to higher lifetime value segments. We have strong in-year performance in markets where we have very good performing value-based partners like Florida and Illinois and Texas. And we continue to see that develop as we would like it to as this year goes on. And we're also seeing an interesting thing that we're seeing right now is higher overall member bounce back rates in OEP than we are expecting, which is all very positive to our performance.

George Hill: Then with regard to your other question about member acuity I'll, just repeat what I've said before regarding we're seeing a shift to higher lifetime value segments. We have strong in year performance in markets, where we have very good performing value based partners, like Florida, and Illinois and Texas.

George Hill: And we continue to see.

George Hill: That develop as we.

George Hill: We would like it too as this year goes on and we're also seeing an interesting thing that we're seeing right now is high.

George Hill: Higher overall member bounce back rates in <unk>, and we are expecting which is all very positive to our projections.

Ann Hynes: Our next question comes from Ann Hynes with Mizzou. Hi, good morning. Thank you.

Speaker Change: Our next question comes from Ann Hynes with Mizuho.

Ann Hynes: Hi, good morning, Thank you.

Celeste Mellet: What is the V-28 headwind in 2026 MA rates versus the 160 base shifts in 2025? Thanks. Yeah, I'm not sure exactly where that question, how to answer it, other than to say that, you know, V-28 was phased in over three years. And so when we gave our guidance and when we talked about what we thought the impact was going to be for V-28, it is exactly in line with what we talked about at the time. We called out that significant impact versus the industry that CMS released in their note. And we're seeing it develop, just as we said, where for us, it's about 160 basis points higher than what CMS has said the industry impacts.

Ann Hynes: Is that the 28 of headwind in 2026 and May right.

Ann Hynes: 160 basis, perhaps in 2025.

Ann Hynes: Yes.

Ann Hynes: Not sure exactly where that question.

Ann Hynes: To answer it other than to say that <unk> 28 was phased in over three years and so when we gave our guidance and when we talked about what we thought the impact was going to be for <unk> 28. It is.

Ann Hynes: It is exactly in line with what we talked about at the time, we called out that significant impact versus the industry is that CMS released their note and we're seeing it develop just as we said we're for US it's about 160 basis points higher than what CMS has said the industry impact.

Jim Rechtin: Hey, I want to thank everybody for joining us today, and I want to thank you for your interest in Humana. I also want to thank our 65,000 associates who serve our members and patients every day. We appreciate everybody's support, and we hope you have a great day. Thank you.

Ann Hynes: Hey, I want to thank everybody for joining us today and I want to thank you for your interest in Humana.

Ann Hynes: Also want to thank our 65000 associates, who serve our members and patients every day, we appreciate everybody's support and we hope you have a great day. Thank you.

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

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

Ann Hynes: Okay.

Ann Hynes: [music].

Operator: Thanks for watching!

Ann Hynes: Yeah.

Ann Hynes: Yes.

Ann Hynes: [music].