Q2 2025 Humana Inc Earnings Call
Good day, and thank you for standing by.
Welcome to the Humana, second quarter earnings call.
At this time, all participants are in listen-only mode.
After the speaker's presentation, there will be a question-and-answer session.
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Please be advised that today's conference is being recorded.
I would now like to hand the conference over to Lisa Stoner, Vice President of Investor Relations. Please go ahead.
Thank you and good morning. I hope everyone had a chance to review. Our press release and prepared remarks which are both available on our website. We will begin this morning with brief remarks from Jim rechtin humana's, president and chief executive officer and Chief Financial Officer Celeste mallay.
Following these remarks, we will host a question and answer session where Jim and Celeste will be joined by George Renard in president of humanas insurance segment.
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
Investors are advised to read the detailed risk factors discussed in our latest form 10K or other filings with the Securities and Exchange Commission. And our second quarter 2025 earnings press release is they relate to Ford. Looking statements, along with other risk discussed in our SEC filings.
We undertake no obligation to publicly address or update any forward-looking statements in future filings or communications regarding our business or results.
Today's press release, our historical financial news releases, and our filings with the SEC are all available on our Investor Relations site.
Call participant to 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 referred to diluted earnings per common share. Finally, the 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 will turn the call over to Jim Rechtin.
Thank you Lisa. Good morning, everyone and thank you for joining us.
As you've already seen, we delivered a good second quarter and first half relative to our expectations. The outperformance was driven primarily by centerwell Pharmacy, as well as better than expected individual. AMA membership.
Our second quarter medical cost Trends were in line with expectations and given these results and our solid first quarter. We are raising our full year 2025 EPS Outlook from approximately 16.25 to approximately 17 dollars.
While we still have challenges to navigate the external environment. This year, continues to evolve largely in line with our expectations and we are executing against our plan.
There's actually a lot happening and I have a great deal to cover today. So let me just remind everybody that I'll frame my comments as I typically do around the 4 basically.
The first driver is our product and experience, which drive customer growth and retention. Second is clinical excellence, which delivers clinical outcomes and medical margin. Third is delivering a highly efficient back office. Fourth is capital allocation and growth in both Medicare and Medicaid.
Let me start with our Medicare product and experienced individual ma membership as I mentioned before, has declined less than we expected.
Part of this improvement is that we've seen more bounce-back members. These are members who chose another plan last autumn during AP but have come back to us during OEP and ROY.
These members typically have better year 1 economics because we know them and we can provide better clinical care.
As you may remember from investor day, our retention strategy is an important lever for us on our path to a more sustainable and reliable margins. And so we're excited to see these members returning to Humana.
We're also taking aggressive steps to continue to improve the experience for our members, in an effort, to build upon this performance.
There's a couple of examples. The first is last week. Humana announced new actions to simplify and streamline the prior authorization process.
Made by multiple Health Plans including humanim that were, that were announced by a had been June.
Human is actions which go even further than our initial commitment through Ahab will help ensure our members get the right care in a timely manner, while also reducing administrative burdens for physicians, as well as improving the experience for our members.
I think it's important that we remind everyone that we believe that prior authorization is an important check and balance to ensure appropriate care.
It's just that it should be invisible to our members.
In another example of our focus on experience, we have entered into a new partnership with the healthcare software company Epic.
This partnership makes you man of the First Health insurer to integrate Health Plan information directly into my charts accounts.
Why is this important?
This brings health plan coverage information into the same place where members frequently go to manage their care decisions.
In essence, it provides increased transparency to the cost of care.
We know that visibility into the cost of care when care decisions are being made, is a big deal for our members and we want to do everything we can to provide that visibility and transparency.
Now, let me turn to clinical excellence. We are going to focus today almost exclusively on Stars. We'll hit by 27 and 28, along with the Stars litigation.
I'll start with the Stars, litigation the court dismissed, our case a couple of weeks ago on administrative grounds, they did this because we had not exhausted, the optional appeals process with CMS. When we originally filed our lawsuit,
the appeals process with CMS is now over. And so we have refiled our Stars case in the same court.
As we wait for a new ruling, our path forward Remains the Same. We are continuing to press ahead with urgency on by 27, and by 28,
Operationally. We are continuing to make strong progress. We are closing gaps in care, and driving both quality and experience for our customers. And so there's no change in our message or our tone here today.
As a reminder for by 27 results, we will be entering a quiet period when we receive plan preview data. So after today's call, we will not be discussing by 27 Stars until the final results are released by CMS in October.
Shifting to the area of a highly efficient back office. We have a lot of activity happening in this area right now.
During Investor Day, we shared that we were focused on transforming the organization.
Transforming the organization to enable scalable growth and drive operating Leverage.
This is a multi-year transformation and it will include both near-term tactical cost programs. But also longer-term efforts that change how we operate through increased Automation and use of Technology.
This week we notified eligible employees of an early retirement program to help accelerate efforts with our operating model and to streamline costs.
In the next few months, we will also be expanding our efforts to contract out additional aspects of our shared services functions.
We are doing this in an effort to streamline and optimize Outsourcing capabilities.
We will also be able evolving, some of our employee benefits to bring them in line with industry standards.
I really want to emphasize that. While these changes will reduce costs, the intent is to enable our broader strategy. This will be a multi-year transformation.
It will be taken at a measured pace.
And the objective is to create a more Nimble, technology-enabled organization that can respond more quickly to Consumer needs and expectations.
Now let me turn to Capital allocation and the growth of our Medicaid and Cinderella businesses. We're seeing exciting progress in in both businesses right now.
Strategic expansion of Medicaid continues with the launch of the Virginia contract. This brings our active footprint to 10 states with 3 more States, awarded and pending
I know there's been a lot of curiosity about the impact of the big, beautiful Bill. Uh our footprint in Medicaid is largely in non-expansion States and it tends to be skewed towards the ltss or long-term Support Services population.
These geographies in this population are less impacted by the bill. So while the bill will certainly have some impact, we expect it to be more muted for US versus Medicaid broadly.
We remain committed to our Medicaid strategy and the assumptions we made at investor day, about margin progression.
Favorability in Specialty, Pharmacy, which is seeing higher volumes, and more favorable drug mix than expected.
So to conclude all in, we are pleased with our solid performance here today and our improved full year 2025 Outlook.
As we look ahead, we remain focused on delivering a more stable and compelling MA margin. We continue to have conviction that the strong core fundamentals and growth outlook for MA allow us to deliver compelling shareholder value over the long term.
And with that, I will turn to Celeste for a few remarks before we get to Q&A.
Thank you, Jim.
Our second quarter results, reflects solid execution across the Enterprise as
on returning the business to its full earnings power.
And while we remain appropriately prudent in our assumptions, heading into the back, half of the year.
To date, the underlying phenomenon of the business, including membership and patient growth, revenue, and medical cost trends, are developing in line to better than expected.
We are pleased that our performance and Outlook support our improved full year adjusted EPS Outlook of approximately 17 dollars.
And it is important to note that this Outlook contemplates, an additional approximately 100 million dollars in incremental Investments to improve member and patient outcomes and support operational excellence.
The additional Investments are focused in areas where we have seen strong returns today, such as pairing, in-home visits with virtual Health to better, engage members who don't have a primary care provider and closing gaps in care.
Turning to the balance sheet and capital deployment, we continue to execute on our efforts to increase the efficiency of our balance, sheets and fortify our foundation, and are making the progress on the sale of non-for assets and optimizing our Capital requirements.
We will share more on these efforts that plans finalized in the coming months.
With respect to Capital deployment, we will remain prudent in our near-term approach taking a balanced view to evaluating Capital investments in returns.
As I shared with you at our recent investor day, we intend to focus on maximizing shareholder value by executing on share, BuyBacks to offset dilution from stock-based compensation.
Growing individual growing dividends in line with earnings as they recover and over the long term, executing on a creative M&A for which we have a proven track record.
Accordingly, we completed approximately $100 million of share repurchases in the second quarter to offset dilution from employee issuance and do not have additional repurchases contemplated for 2025.
During the quarter, we also opportunistically bought back approximately $200 million of debt due in 2027 using the proceeds from our bond issuance earlier this year.
Looking ahead, we will continue to manage the levers within our control.
Focused on delivering best-in-class clinical Excellence transforming the company to enable scalable growth.
and driving enhanced operating Leverage
We believe that these efforts will allow us to expand margins and realize the earnings potential of the business while driving better outcomes for members, patients and Associates.
With that, I will turn the call back to Lisa to start the Q&A.
Great. Thank you, Celeste, and Jim before, starting the Q&A, just a quick reminder. Um,
For fairness to those waiting in the queue, which we do have a long list in the queue. We ask that you please limit yourselves to 1 question. So operator with that if you'll please introduce the first caller,
Our first question comes from Anne Hines with mizuho.
Hi. Good morning. Um, in the your preferred remarks, you highlighted that cost Trends were in line or better than your expectations. Can you talk about what cost trend is actually better than your expectations and within that? Can you just talk about how Medicaid is doing? Since some of your peers, are having some Trend problems, um and that book of business. Thanks.
Uh, yeah. Thank thanks. Ian. Um, we called out that our
The the results we are seeing generally are in line to better than our expectations. So, um, on the revenue side, we are seeing better than expected performance. Um, on, you know, in centerwell we saw
Higher than expected patient growth earlier in the year. And as Jim called out, we have seen better than expected revenue growth in turn on the pharmacy side of things.
On the insurance side, our membership growth, also with Sim called out, is going to be better than expected. Our guidance now assumes.
Uh, up to 500,000 versus 550,000 before that is driving higher Revenue with an inline mlr in terms of our overall medical and operating costs with the exception of the Investments, we called out earlier. Um the those are trending in in line within the range of our expectations and some cases on the on the better end of our expectations.
And then to your last question uh, on Medicaid, Jim talked a bit and I'll turn it over to George about
The states we're in and the programs that we're in, which are really allowing our business to deliver on what we expected for the year. I'll turn it over to George to talk more about that.
Yeah, thanks Celeste. So as you think about our Medicaid business is, Jim said, he talked about the footprint, but there really a few reasons, why you can't extrapolate across the whole industry that the Medicaid performance. And really, that's, uh, the result of 3 significant differences that you have to think about with Medicaid 1, is the products that we're in. And so, as Jim said, we're much more oriented towards the ltss population than the traditional Medicaid population. So that's 1 factor that you have to think about the second is the state footprint.
And if you think about those State Footprints and where we are, we are in states, that um, we have worked very well with the states on the rate development and things are moving well there. Now, 1 of the things you may say is well, your large in Florida.
I think that one of our competitors did acknowledge that their Florida problem was really specific to a population that we don't have exposure to. So again, you have to think about product first, you have to think about the state footprints, and then a third part that is really important to think about with Medicaid is the network structure. We believe that our network structure, with our heavy emphasis on value-based care, creates a differentiator versus where we are elsewhere. So, with regard to Medicaid,
we're really proud of the development. We've had in the expansion we've had in to now 10 full States and 3 more coming online 1 Thing uh that we should also mention is, for example, we now have a new Illinois contract that will be coming on. It's a big opportunity for us that emphasizes our prioritization of Medicaid where we're focusing, very hard in states. That are linked where the Medicaid and D Snips are linked and where human has an outsized dual membership to protect. So we feel good about development. We've seen Medicaid today
Yeah, I think just to sum it up for you. An Medicaid is running in line with our expectations. We continuing to make progress.
On, uh, new states, and we feel good about where we are.
Thanks.
Our next question comes from Kevin Fishbach with Bank of America.
Great, thanks. Um, I was wondering if you could talk a little bit more about the, um, the Part D performance, and then any comments you have on the, uh, the CMS regulations that were just released a couple of days ago. Um, and how you're thinking about that for 2026. Thanks.
hey, I I will, uh,
First. Um not a lot to say about Part D. The member mix and RX Trends are tracking in line with our expectations today. If you recall we did have um, we were expecting low, double digits, uh Trend and on the RX side of things and it's you know, in line with our expectations
Um, we haven't seen any unexpected behavioral changes today, and members are hitting their moves so far in line with expectations. So the ramp over the course of the year, as members work through that, will be turned over to George for additional comments.
Um, given the uncertainty of the IRA for 26. We did. Did that conservative? Give them the changes in the risk orders. It's come in the way the risk orders are worked, and the way that the national average bid has worked is a little bit better than we expected, which is positive. Um, from what we are seeing in the direct subsidy the industry Part. D appears to be more consistent next year and within the range of our expectations to slightly better.
Our next question comes from, Andrew mock with Barclays.
Hi, good morning. One of your peers noted a pretty meaningful pullback in the individual PPO market next year. Just curious how you're thinking about the implications of that on your own membership growth and margins for next year. Thanks.
Yeah, hey! Let me make a couple of quick comments, and then I'm going to hand off to George to walk you through some of the specifics.
The.
The, uh, first of all, I big question. I know for the entire industry right now given, um, uh, all the discussions that are out there
And that there's really, I think, two questions underneath the question. One is...
Uh, we recognize that there's a lot of talk about. Hey
Is there a unattractive population from a risk standpoint that tends to bounce around from?
Plan to plan and then second, why do we seem to feel good about where we're at?
uh, as we both this year and as we had in the next year and the, you know, that the high level response to that is
Yeah, and we try to convey this at the investor day is we don't see bad membership. We see bad benefit packages and product.
And so, if your product and your benefit structure are in the right place.
All members can be good profitable, attractive membership. And we feel like we have taken good steps in the last 2 years. To put our product in a good place.
And um, and we again we feel good about that. We we're seeing that this year, uh we feel good about the trajectory into next year.
And to the extent that others in the industry, did not take similar steps in the past and taking it. Now, we think that's good for everybody. We think that's good for the sector. We think that's good for the industry. We think that is a positive thing.
And that that at the highest level is kind of how we're thinking about it. But let me let George walk through some of the detail behind that George
Yeah, thanks Jen. As Jim said, I understand why everyone is thinking about this question, but let me start by reminding you of the market dynamics that we've played out over the last few years. We were transparent almost two years ago now in discussing the legalization trends we are seeing and the impact of V28, and we made adjustments each year since then. We're the only plans to produce benefits in any way in 2024, and we reduced more benefits—more significantly than just about all of our competitors—in 2025. In addition to that, we executed on the combination of plan and benefit county exits, impacting 560,000 members.
Given these 2 rounds of significant benefit Cuts. We have a significant Gap to peers benefit value, while some peers, held their benefits stable or even invested more in their benefits,
Now, it's important to look at the granular macfat data. I know a lot of you have pulled that middleman back that information, but you have to isolate the growth plan. Because if you simply look at the averages without taking out the Legacy plans that no 1's really selling anymore, you'll get an inaccurate view of how the plans compare. However, if you evaluate the growth plans, those plans you actually have seen growth on over the last couple years, you will see the significant Gap to our peers that has resulted from the 2 years of benefit reductions we've implemented.
And additionally, we also did planning County exes for 2025 and impacted 560,000 members.
We've recaptured 40% of those members in other MA offerings. Our goal, if you'll recall, was 50%, and we would have been happy with even more recaptured. Because of those plans, we feel confident they are being priced correctly. So, keep in mind, this is a 40% recapture rate of these exited members as you hear the 2025 trends that we're saying today are tracking in line with expectations.
To reiterate, when members rejoined us in plans that were priced appropriately, considering the funding and medical cost trends, we're tracking in line with expectations that we set out in our guidance.
And we feel good about our benefit structure and the members, we recaptured where we price them for the long-term value.
And for 2026. Our benefits are largely stable in some places. We may have invested a little bit. And in others, we may have pulled back some but even with the significant cut by peers,
If they do that for 26, we still anticipate having a gap. The next richest benefit in the market based upon an in-depth analysis of our competitors opportunities under the various bid rules including the TVC rules.
So the point is, we can continue to feel good about the current run rate of our plans and are confident that our plans are priced appropriately. Given the funny environment cost trends that we're all experiencing, even should we have greater growth?
Our next question comes from Stephen Baxter with Wells Fargo.
Yeah, hi. Thank you. Um, I was hoping you could speak to what you saw in terms of inpatient utilization Trends and Medicare Advantage. Or in the second quarter for context 1 of your competitors, spoke to an accelerating Trend in the second quarter. So it would be good to get your perspective on your data that you have today. Thank you.
Yeah. Um,
Thanks for the question. So
on the inpatient side of things, you know, it's things are trending in line to on the better end of our. Our expectations, when you take into account both Admissions and the cost per unit. So we're not seeing uh an acceleration of of of anything, if anything um you know, the beginning of the year because of the timing of the flu season was a little bit higher but in line with our expectations. So
Um, we are, you know, things are trending. As we've said a lot.
Our next question comes from Justin lake with Wolfe research.
Thanks. Good morning. I thought I'd take a shot at uh getting the latest on stars. Um, I understand you're going to go quiet and I know you don't have the cuff points yet so there's no way to know what your stars are specifically going to do, but I do believe that plan preview 1 is gone out.
And so you have a decent idea, or at least a starting point, in terms of how your own performance looks. And you might expect there's a lot of uh...
A lot of focus on this. So, you know, I would love to know if you could share with us here, um, how your own performance has been in stars? Do you feel like you've taken, you know, when we see the final data?
regardless of, you know, how the Cup points end up and therefore, how your stars end up, will investors be able to see a pretty strong step forward in terms of underlying performance in your uh in your star metrics. Thanks.
Yeah. Hey Justin, uh, plan preview, uh, 1 data is not out. Uh, and honestly if it was, we would not be talking about be like 27 at all. So it it is not out at this point and so we do not have any or, or if it is, we're not aware, but I don't think it's out.
Um, and so we don't have any additional uh, visibility, uh, look what I'd say and this is going to be consistent with what I've said in the past. We, uh, we we were behind where we needed to be back in September, uh, late September early October of last year.
We have made really good. Operational progress. We, we genuinely feel good about it, and you will see the underlying metric performance. Uh, you will see Improvement in the underlying metric performance. Meaning, you know, if you go metric by Metric, our performance has gotten better, uh, it really is a question of how much has the industry improved along with us and therefore, where the cut points and uh and at this point with the last,
Back at pp1 data. Uh you know we just don't have visibility into that uh which again is why we will.
Uh, enter a quiet period here over the next couple of months, as that data does become available.
Got it, thanks.
Our next question comes from Aaron Wright with Morgan Stanley.
Great. I was wondering if you could talk a little bit more about the Specialty Pharmacy strength and what was kind of driving that, and some of the part dynamics that kind of flow through there from an IRA perspective, and how that’s kind of playing out relative to your expectations at this point.
Hey, Aaron. Um,
So on this specialty pharma, and I would just say in the pharmacy business in general.
Um, part of what's driving our outperformance this year is strategic changes to how we're organizing and marketing that business.
Done a couple of things for U.S. 1. It's creating this new opportunity through this direct-to-consumer model, that's the Novo partnership. We have that. We've also.
Partnered with Row and Weight Watchers to sell some GLP-1. We expect to see more of this type of business over time. We're excited about the progress this year. It's coming ahead of our expectations.
The second piece that's driving outperformance.
I should say that the the second piece is generally. There's a broader outperformance from what we understand in specialty, uh, in the industry this year. But our specific performance is further boosted by winning additional access to multiple limited distribution drugs.
That we previously, wouldn't have been able to access, so this is really driven by the partnership. So I called out in the past, um, otherys have gotten them and we have been excluded from that and now we are included. So
Really excited about some of the progress and momentum in that business.
In terms of the PDP trends in general, as I called out earlier, the member mix and the RX trends are tracking in line with our expectations, and there haven't been any.
Unexpected, behavioral changes.
our next question comes from Joshua Raskin with Nephron Research.
Hi thanks. Good morning. Uh, last quarter, you spoke about, I think a couple hundred million of additional Investments that were mitigating upside to the guidance and I believe Celeste I heard you say there was another 100 million. I want to confirm, that's incremental spend that is in addition to the couple hundred from 1 queue, and then I'm curious why not invest more, you know, instead of letting it through flow through to guidance this quarter.
So um, but we
That is right. We are confirming your question. It is an incredible incremental $100 million. We see a lot of opportunity to invest.
Um, across the business really focusing on our transformation where we have incremental investments in some of our member retention work. AI General operational efficiencies a little bit on Starz where we're seeing high performance. Um, the their, you know, we, we are looking at where it makes sense to spend money. We don't want to just spend money to spend it, we're not going to spend it. Where there are
Good returns. Will we continue to look for additional opportunities? Absolutely. Um,
and but, but we are spending that 100 million where we think we can really drive a return and accelerate, some of our transformation work and potential upside and start.
Yeah. Hey hey the 1 thing I would just add to that is we've pulled some investment forward. So things we thought we were going to do next year got you know, pulled into this year. Uh but ultimately you run into just a limit on how much of that you can do, how much can you operationally absorb in any given period of time. We'd love to be pulling more forward. But right now, you know, we're we're digesting the Investments that that we're making and uh and and that, you know, that's a big part of it as well.
our next question comes from AJ rice with UBS
Uh, hi everybody. Um, just wanted to ask about 2 things related to Center. Well, um, you continue to, um, grow that membership on the value base primary, and Care signs and uh, seem to be hitting your metrics there. I wonder, you know, 1 thing, you emphasize is that your member agnostic where maybe some of your other peers in that space are more focused on the medically complex is that part of why you're seemingly doing better? And then I just would also in Cinderella. Ask are you
Have any update on home health role? I know you're uh, moving back to more value bases as well, but I think you're still 1 of the biggest fee for service providers in the proposed rules challenging. It's just sort of hard to know, uh, how much, uh, that's likely to impact the overall Enterprise, uh, giving it still, even though you're big in that space relatively small in terms of the entire Enterprise,
Um yeah, so let me um on their first question on patient growth.
It's really, you know, we've opened more clinics. Those clinics are ramping; they're doing well. Um, you know, it's a combination of word of mouth and marketing. There isn't a particular kind of patient that's driving.
You know even with a higher patient growth um you know Trends and and our expectations for that business are consistent with with what we would have thought.
In terms of Home Health. Um yeah, we're disappointed by the proposed.
6 Plus percent net rate reduction. We really don't think it's reflective of the wage and other inflation. Um that the industry is experiencing labor makes up almost 75% of that rate.
And the rate is supposed to be tied to that. We also had anticipated that CMS would eventually implement a behavioral adjustment.
We did not anticipate it anticipate that it would be as high as proposed. It also, say the data is supposed to be collected through the end of 26.
And then analyze then. So data is still being collected. Um, we believe it's early to make this adjustment. So we're continuing to advocate and educate the administration on the need for a reasonable Home Health reimbursement, and we're evaluating the impact on our home health businesses as proposed. But we do have a natural hedge in our insurance business.
It wouldn't fully offset. Any, if if this is implemented as proposed, it wouldn't fully offset it. But we believe we have other levers at the Enterprise level that can absorb, um, the headwind that isn't naturally offset by insurance.
Our next question comes from Ben Hendricks, with RBC Capital markets,
Hey, thank you very much. Uh, just want to go back to the commentary, you made on Ma benefit actions in 24, and 25. And the more conservative approach, uh, you have taken versus some peers, uh, to what extent could that put you at a disadvantage? From a member experience perspective, ahead of stars and, uh, kind of maybe you can remind us what types of Investments you're making right now that could, uh, mitigate some of that and lend some confidence in reaching that, uh, uh, you're a targets for the 28 bonus year. Thanks.
Yeah. Hey, uh
Great question. Uh, we are monitoring this closely as where I would start. Um, certainly anytime that you take benefit actions, it does, uh, have it does create some abrasion with members, we have been extremely active in diligence in uh in essentially taking offsetting uh, operating actions. So making sure that we're being very clear in how we communicate and explain
uh, the changes to our members, making sure that we're responsive, uh, to, uh,
Uh, to their concerns Etc. And and all in, all we feel pretty good about where we are at on that, uh, specific, um,
item meaning member experience related to
Uh, cuts and benefits last year. But but, yes, I mean, every time you go through a, uh, a set of cuts there is some member abrasion, and you have to take that into account your, in your operations and adjust for it. Uh, George is there anything that you would add to that?
Yeah, Jim. I would just add that there are a number of things that we follow there but you know, we we monitor NPS on a regular basis, on every call, frankly that's taken. We try to monitor NPS where men mentoring we are sorry monitoring both, The NPS are, which is The NPS for relationship and NPS, which is The NPS as you with each transaction. Each time we get a call from a member and every time we interact with a member and we're not seeing anything concerning in that data. We also, of course, are doing mock cap surveys. If you think about the surveys, that CMS does, every year, we do those to monitor what's happening and we're not seeing anything very, um, alarming there at all. In fact, things are looking fairly good. Um, and keep in mind, some of the other things that we are doing here, actually impact and help the member experience, um, Jim mentioned the
Epic. My chart where we were the first plan to try to integrate what members interacting with their provider and have them have their provider and payer show up in 1 spot to improve that member experience. So they can see um all their information about their plan and all the same time checking on their next appointment and the number of the activities.
They need that. They are being proactively outreached to get care that's appropriate for them and also doing so in a way that is Affordable. And we believe that the actions we've taken, we've talked about the cuts we made before and how we're very very um we use a lot of analysis to make those decisions about what benefits cut Cuts. We make to ensure care remains affordable. So all the actions we've taken are very much had that member experience. In mind, 1 of the things that I love about some of the teammate changes. We've had in the company over the past year or 2 is that we've brought in other expertise such as David. Dennis house. Who's worked, who's a who works on the elt with us and is making sure that we're very focused on that consumer experience. So, there are a whole host of actions that I could point to where we're actually trying to improve the member experience, while at the same time, taking improved and actions in our benefit designs.
Yeah. Hey let let me uh pull it back to just point out 2 things 1.
Uh, the bounceback membership that we are seeing this year. I think actually is, uh, you know, kind of proof that a bunch of those measures are working.
And so again, we look at the bounce back the degree of bounce, back membership, that is coming through oep and Roy and it makes us feel very good that we're doing the right things to adjust to the, uh, benefit changes that we made last year. And then the the second thing is, you know, this is really what you're you're driving at is, are we taking this into account in Our Stars calculations and and, you know, do we still feel good about our overall Stars performance and the direction that it's headed, even when you account for this and the answer to that is, yes, we're certain taking it into account and even when you think about, uh, some of that member abrasion that comes from reduced benefits. We feel good about the direction we're headed in. We feel good about the trajectory, uh, for, uh, by 28.
Thank you.
Our next question comes from George Hill with Deutsche Bank.
Hey, good morning, and thanks for taking the question. I think Jim you just kind of spoke about this, but could you provide a little bit more color on? What's driving the bounce back, uh, on the members that are returning to human entry year? Kind of where those guys coming from and and kind of what do you think from a benefits perspective? That's bringing those people back.
Uh, yes, uh, happy to hit that the I think so. First of all, it is disproportionately in places where we saw lots of membership, which I don't think will surprise anybody. But within the regions, where we've seen loss membership, it's pretty broad-based. There's no specific pattern across those regions.
Uh, and generally what we see.
Is that when somebody makes a decision to leave human and then bounces back more times than not. It's because they were surprised by what they were getting when they made the change and the surprise might be
That they didn't really understand the benefit package. The surprise might be something around customer service, but typically, they were surprised and then they come back to Humana where they have experience, where they know what they're getting from an experience standpoint from. Um uh and again this is why we want to be so clear about the benefit packages, the more clear we are and the more that they feel informed, the more comfortable. They are with the decisions that you know, that we have to make even when they're hard decisions. And I think that is part of what you're seeing.
Again, I'll just George anything, you would add or anything, any other color there?
No, Jim. I think you're right. It's it's about the product and services and whether or not they got what they expected when they left us to go somewhere else and they we're the empty, they know, we have good services and we talked about the investor day. We're known for our service and we're known for the way we approach our membership. So I think that that all just plays into it,
Our next question comes from David windley with Jeffries.
Hi, good morning. Thanks for taking my question. I wondered if you could remind us what your assumptions for Trend were this year and in light of your comments about costs developing in line with those, I know Celeste referenced the low double digit for pharmacy.
Curious to get the the other components. And then what are you assuming for Trend in 26 relative to what you were experiencing in 25 please? Thank you.
hey, um,
Low double digits; we continue to expect low double digits into next year. And then on the medical cost side, our expectations were for mid to high single digits.
And our expectations for next year are consistent with that.
Super, thank you.
Our next question comes from Whit Mayo with Ling partners.
Um hey thanks. I know the lawsuit that you have probably colors your answer but just any updated thoughts on radv, whether you have to make assumptions and bids around perspective, CMS, callbacks on premium payments that they actually make it through the 2019 audits. Thanks.
Uh yeah there's really not a lot of color that we have to provide on this 1 part, you know. Yes. With the litigation there's a limit to what we can say uh but partially there's just a lot of unknowns to be frank and so um very little uh very little color to add on this particular topic.
Hey Jim. If I could just add 1 other thing, it's just we've long supported the auditing of the contracts.
As long as it takes into account, the actual equivalence between the Maverick.
Okay, thanks.
Our next question comes from Sarah James with cancer.
Thank you. I was hoping you could clarify, the moving pieces in the guide boost. If I take about a third of the 1q beat that was described to the center well and all the 2 key beat and run rate it just for the investment. Spend I get pretty close to the guy boost about 6 cents below. Is that the right way to think about it? That the guy boosts, his primarily run raiding, the center roll out for performance year to date, or are there other moving pieces? And can we think about the center? Well, strength, as being sustainable Beyond 2025.
Um, yeah, great question. So um, we are that that is right. We are assuming some of the outperformance will continue through the year. Um,
Particularly on the centerwell PCO growth, so that will continue with this year and into next year and then the performance on the pharmacy side of things, the uh, specialty outperformance, and then the direct to Consumer and momentum that we have. We also as we call out have better than expected um membership. So, our guidance to the year is up to 500,000 loss versus 550,000 previously. Um,
So that will run it, run through the year and into next year. Um, there were some things in the first quarter in particular that were, you know, timing or one-timers in nature and we're not um, run reading those.
kind of,
Our last question today will come from Michael ha with beard.
Thank you. I understand you feel strongly about your benefit richness and are confident in attracting good, profitable membership. I'm curious though, is there any level of membership growth percentage that you think, if growth starts tracking to like 15%, 20%, or 25%, could potentially compromise earnings next year? And if you were to get an early sense of that through a specific indicator, would you work to adjust that growth if necessary? Also, I understand the plan preview data is not out yet, but I believe plans have already received the raw results for call center metrics earlier this month. Is there any ability to comment on how those results turned out against your expectations, especially since you know there’s such high sensitivity to even missing one single quality star rating? Thank you.
Uh, yeah, so we are not going to comment on any of the data that we've received from uh, CMS. Uh, and and again, we'll uh, we're headed into that quiet period and and we really will not be commenting again until we reach October.
uh, the
the uh,
I've now lost track. What was the first question membership? Yeah, yeah, yeah.
Um,
here's basically how we think about it. So first of all, we feel good about the product and we feel uh,
It's good that the membership we’re going to be receiving will be beneficial at whatever level it is.
Do we anticipate? That that is likely to happen. No. Will we monitor it and make adjustments as we need to? Yes.
To the degree that we can operationally absorb the growth. Then the real question I think then you're asking is hey is there a year 1 drag that we're worried about heading into next year?
if it is, uh,
you know if it's good growth and good membership, we will be focused on long-term value and we will explain that to you and we will continue to grow
Uh, we will be very clear and we'll be very transparent again when we look at it. Do we think the likelihood that we're in that situation is very high? No, not really.
Is it theoretically possible? It is
Uh, but the main question we will ask is, can we operationally absorb it? Not, are we afraid of year 1 economics, and therefore, you know, kind of turn off growth? Does that hopefully answer the question?
Maybe if I can just add.
Sort of a much less strategic and more taxable.
um, the timing of, when membership grows matters a lot, so that AE membership, you have a full year to absorb the marketing, but if you pick up a member late in the year, um, so if we picked up members late this year,
Next year, um, you know, they tend to come with a headwind because you don't really have a lot of revenue associated with them, and you have a lot of marketing costs.
Um, we do have, you know, all of our expectations for the any back-end growth in 25.
Perfect, thank you.
Hey, with that, I just want to, uh, thank everybody for joining us this morning. I also want to thank everyone for your interest in Humana. Finally, I want to express my gratitude to our 65,000 associates who serve our members and patients every day.
Uh, we appreciate your support, and we hope you have a great day. Thanks.
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