Humana Inc.

Good morning. My name is Mary, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Humanus first quarter earnings call. All lines have been placed on mute to avoid any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, you may press star and the number one on your telephone keypad. If you would like to withdraw your question, press the found key. Thank you. I will now turn to go over to Amy Smith, Vice President of Investor Relations. Ma'am, you may begin.

Thank you, and good morning. In a moment, Bruce Broussard, Humanis President and Chief Executive Officer, and Brian Kane, Chief Financial Officer, will discuss our first quarter 2019 results and our updated financial outlook for 2019. Following these prepared remarks, we will open up the lines for a question and answer session with industry analysts. Our Chief Legal Officer, Joe Ventura, will also be joining Bruce and Brian for the Q&A session. We encourage the investing public and media to listen to both management's prepared remarks and the related Q&A with analysts. This call is being recorded for replay purposes. That replay will be available on the Investor Relations page of Humana's website, Humana.com, later today. Before we begin our discussion, I need to advise call participants of our cautionary statements. 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 first quarter 2019 earnings press release, as well as in our filings with the Securities and Exchange Commission. Today's press release, our historical financial news releases, and our filings with the SEC are all also available on our investor relations site. Call 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. Finally, any references to earnings per share or EPS made during this conference call refer to diluted earnings per common share. With that, I'll turn the call over to Bruce Broussard.

Thank you, Amy. Good morning, and thank you for joining us. Today, we reported adjusted earnings per share of $4.48 for the first quarter of 2019 and raised our full year 2019 adjusted EPS guidance to $17.25 to $17.50, primarily reflecting improved results in our retail segment. We continue to expect strong industry-leading individual Medicare Advantage membership growth, and today are raising our full-year 2019 guidance to a range of 415,000 to 440,000 members, primarily reflecting improved rest-of-the-year growth projections as a result of solid performance in the open enrollment period that ended in March. We take pride in the fact that we are leaders in Medicare Advantage, the fastest growing sector of healthcare as a result of the significant value that Medicare Advantage plans provide to over 22 million seniors across the nation. Seniors who participate in Medicare Advantage receive a higher level of benefits relative to fee for service with a cap on the total amount of expenses the member will incur in a given year. At the same time, the Medicare Advantage Program drives quality, improved health outcomes, lowering the cost to the healthcare system by effectively managing the members' care, saving the system millions while helping seniors achieve their best health. For example, Humana MA members in value-based care settings are going to the ER 7% less, and hospital admissions are 5% lower than traditional fee-for-service Medicare. Our members are also getting 11% more colorectal cancer screenings and 10% more breast cancer screenings. As you know, under Medicare Advantage, members are able to participate in a variety of programs and services, including in-home care coordination services, proactive care management programs such as remote monitoring, medication adherence, and various supplemental benefits, including dental and vision coverage. As a result of the payment model and MA, private organizations are motivated to treat seniors with more complex conditions and to go beyond traditional healthcare needs to address the whole health of an individual, including social determinants of health, financial support, and transportation. Today, approximately two-thirds of our individual Medicare Advantage members have access to physicians incentivized to spend more time with each patient. Take Betty as an example. Betty is a 78-year-old who lives with her disabled son and is a primary caregiver. She likes to be independent and self-sufficient and wants to spend time with her grandchildren and great-grandchildren, but is living with multiple chronic conditions, including congestive heart failure, diabetes, and COPD. A stroke has left her with shoulder and sciatic pain, In addition, she struggles with depression and anxiety. We enrolled Betty in our Humanity at Home Telephonic Chronic Care Management Program and assigned a care manager to her to tackle Betty's fear of doctors, develop an action plan for COPD, educate Betty regarding monitoring her blood sugar, blood pressure and weight and the importance of regular primary care and specialist follow-ups, finding transportation and eyeglass resources, apply for financial grants for medication, sign Betty up for an in-home well-being assessment, and enroll her in Humanis mail-order pharmacy. As a result of these actions, Betty experienced reduced financial strain, significantly lowered her A1C, lost 15 pounds, was able to get her blood pressure in the normal range, and stopped smoking after 60 years. She was so happy with her improved health outcomes and service that she then recommended Humana to her sister, and now she is a member. This is an example of one of many that demonstrates the effectiveness of our integrated care delivery model. The results experienced by Betty and millions of seniors are why Humana and Medicare Advantage continue to grow. As we look ahead to 2020, we are pleased that CMS enabled plans to offer greater flexibility and benefits so that we may continue to focus on areas to improve the health of seniors and people with disabilities we serve. The final rate notice for 2020 reflects an increase of approximately 2.5% for the industry. We expect the impact on Humana to be slightly lower given small differences in various components. In addition, for 2020, CMS has added telemedicine as a covered benefit, and we continue to work with them on broadening the scope of these services. Expanded the benefits that plans may offer to address social determinants of health, Improved interoperability with Blue Button for MA, putting more data at members' fingertips and in their control. And added a demonstration program that narrows our risk via the corridors in Part D if point-of-sale rebate regulations become effective after bids have been submitted. With the increased likelihood of this policy change, we believe the implementation of drug rebates at the point of sale in January 2020 creates certainty for both the industry and the members. In result, we stand ready to implement. In the interim, we recognize that we may still be exposed to manufacturer actions in 2019. In addition, while we appreciate the changes from CMS, We would caution that all of the recent changes add more complexity to the bid process, particularly as it relates to how the various components of the Part D bids interrelate, including premiums, formulary design, and risk corridors. As we navigate this transition, we believe that PBMs will continue to play an important role as an advocate for lower prices for members at the counter through both retailer and manufacturer negotiations. Perhaps more importantly, robust clinical programs related to medication therapy management, drug adherence, and specialty drugs are essential to the PBM's ability to impact health outcomes. In this respect, our clinical and pharmacy capabilities position as well to lower healthcare costs and improve member health. Despite these updates from CMS, the rate notice alone is not enough to overcome the formidable headwind from the return of the health insurance industry fee in 2020, estimated at $1.2 billion for us and is not tax deductible. While we will continue to work on designing new programs to improve health outcomes and lower costs as well as productivity initiatives, we do expect seniors nationwide to experience a decline in benefits and or increase in premiums in 2020 as a result of the return of the HIP. Now I'll offer a few words on Medicare for All. Humana does not support any bill that would eliminate Medicare Advantage or make private insurance illegal, and here's why. Insurance and Medicare Advantage create an incentive to have a holistic view of a member, which is critical to the long-term success of the program and the ability to offer greater benefits and more security for individuals. MA is a program where the payment model motivates plans to engage with individuals with complex chronic conditions while driving quality improvement at clinical outcomes, resulting in lower cost and higher customer satisfaction. The success of this program is evidenced by the continued increase in MA penetration. The percent of Medicare eligibles enrolled in Medicare Advantage has grown from 22% to 34% in the last decade, nearly doubling membership. Looking ahead, the increasing number of Medicare beneficiaries participating in programs like Medicare Advantage, coupled with the rapid advancement in technology, only serve to reinforce the strength of our integrated care platform. Our investments in this platform, a consumer-centric operating model, and deeply integrated technology and analytics to enable personalized care and high-value services such as primary care, home, pharmacy, behavioral health, and social determinants of health will significantly improve health outcomes. The end goal of our strategy is to slow the rising cost of healthcare and enable expansion of coverage, while positioning the organization for growth and sustainability to deliver long-term value for our shareholders. Over the past 30 years, our company's commitment to improving the health of those we serve has meant working in private and public partnerships that transcend party lines, and we look forward to continuing that work. With that, I'll turn the call over to Brian.