Humana Inc.

Greetings and gentlemen. Thank you for standing by and welcome to the Umana fourth quarter 2020 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. And to ask a question during the session, you will need to press star then the number one on your telephone. If you require any further assistance, simply press star zero. With that, I would now like to hand the conference over to Amy Smith, Vice President of Investor Relations. Thank you and please go ahead.

Thank you and good morning. In a moment, Bruce Broussard, Humana's President and Chief Executive Officer, and Brian Kane, Chief Financial Officer, will discuss our fourth quarter 2020 results and our updated financial outlook for 2021. 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. Additionally, we have posted supporting materials to our Investor Relations page for reference during Brian's prepared remarks. 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 statement. Certain of the matters discussed in this conference call are forward-looking and involve a number of risks and uncertainties. Actual results could differ materially. Investors are advised to read the detailed risk factors discussed in our latest Form 10-K our other filings with the Securities and Exchange Commission, and our fourth quarter 2020 earnings press release as they relate to forward-looking statements, and to note in particular that these forward-looking statements could be impacted by risks related to the spread of and response to the COVID-19 pandemic, including the potential impacts to us of, one, actions taken by federal, state, and local governments to mitigate the spread of COVID-19 and in turn relax those restrictions, Two, actions taken by us to expand benefits for our members and provide relief for the healthcare provider community in connection with COVID-19. Three, disruptions in our ability to operate our business effectively. And four, negative pressure in economic, employment, and financial markets, among others, all of which creates additional uncertainties and risks for our business. Our forward-looking statements should therefore be considered in light of these additional uncertainties and risks along with other risks discussed in our SEC filing. We undertake no obligation to publicly address or update any forward-looking statements in future filings or communications regarding our business or results. Today's press release, our historical financial news releases, and our filings with the SEC are all also available on our investor relations site. 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.

Bruce Broussard Thank you, Amy, and good morning, and thank you for joining us. Today we reported adjusted earnings per share of $18.75 for 2020, consistent with our commentary throughout the year as expected, reflecting a loss in the fourth quarter largely driven by our investments and programs to support members' patience, employers, providers, and the communities we serve. Our fourth quarter results were impacted by the continued waiver of Medicare Advantage cost sharing, including for primary care and COVID-19 treatment, delivery of meals, masks, and preventive tests to our members, in-home assessments, investments and programs to assist underserved communities, and efforts to ease the financial burden for our provider partners. For the full year, these initiatives, among others, exceeded $2 billion. Defined by the worldwide pandemic, 2020 was an unprecedented and challenging year. I'm proud of the resilience and response of our associates, putting our members, patients, and providers' holistic health at the forefront while continuing to advance our strategy. Despite the pandemic, Humana continued to accelerate on all fronts in 2020, including our short-term operating and financial performance, our ability to drive and invest in our long-term strategic objectives, and in our customer-centric efforts. The strength of our underlying core business is compelling, In our healthcare service business, we delivered double-digit percentage growth and adjusted EBITDA year over year in 2020, with our pharmacy, provider, and home business all performing well. In our pharmacy business, we processed 478 million scripts and drove mail order penetration of over 37% in MAPD. Today, our pharmacy business has organically grown to the fourth largest pharmacy benefit manager or PBM. In our provider business, we ended the year with 156 wholly owned primary care centers after opening 15 new centers in 2020, including expanding to Louisiana and Nevada. In addition, our Conviva primary care clinics delivered significant clinical and financial improvement as the turnaround in the business continued, including a 5% reduction in admissions per thousand. In the home, we've made important investments in our strategy to offer primary care and post-acute services in the home. Through minority investments in HEAL, a pioneer of in-home primary care in this and Dispatch Health, a provider of emergent in-home medical care. In addition, Kindred at Home successfully managed the transition to the new CMS payment model while also implementing a new operating system in 2020, setting it up to drive further operating model advancement in 2021. We demonstrated an over 50,000 home episodes integrated new proactive clinical models within the nurse's workflow significantly reduces downstream emergency room visits and hospital admissions. The success of these clinical tests and learns provides the confidence scaling these programs will provide meaningful quality and cost improvements in 2021 and beyond. We also delivered strong fundamental results in our core insurance business while investing for the long term. We remain very focused on the consumer experience broadly across all platforms and are proud to have driven an overall 670 basis points increase in our net promoter score or NPS in 2020 with a meaningfully higher increase in our NPS for our commercial group business. We also announced that 92% of our MA members are in plans rated four star or higher, leading the public traded MA companies. We ended the year with approximately 4.6 million total Medicare Advantage members, reflecting year over year growth of 11%. fueling consolidated revenue growth of 19% in 2020. The positive momentum continued in 2021 Medicare Advantage Annual Election Period, or AEP. For the full year, we are expecting individual MA growth of approximately 425,000 to 475,000 members, or 11% to 12%. Importantly, as in prior years, our robust growth is balanced across multiple MA plan types as a result of the strength of our clinical programs, provider partnerships, and distribution channels, as well as our broad offerings that allow for deeper personalization to meet the number's needs. In the AEP, we led the industry in each of HMO, special needs plans, or DSNIP, and MA only membership growth and continue to grow our LPPO membership. We also launched Author by Humana in South Carolina in January, managing five Medicare Advantage plans with approximately 13,500 members. Author is designed to meet the emerging expectations of digital savvy seniors aging into Medicare, leveraging health coaches, digital and artificial intelligence to create a simplified and integrated experience for consumers. We plan to scale AUTHOR by delegating more MA Lives over time and look forward to sharing our learnings. We continue to focus on how we can expand our presence with underserved populations in an effort to drive improved clinical outcomes and reduce health disparities. In Medicare Advantage, we experienced industry-leading growth in DSNPs in 2020, increasing DSNP membership approximately 41% year over year. We expect another year of robust DSNP membership growth in 2021. Our Medicaid strategy is predicated on the core strengths of our Medicare chassis, including our clinical programs, provider relationships focused on value-based care, and commitment to investments in the communities we serve. We are able to offer states individualized approach to care that considers the physical and mental well-being of beneficiaries, as well as the critical social determinants that impact the population. We began serving Medicare members in Kentucky in 2020 and recently announced our entry into the South Carolina Medicaid program as well as the acquisition of iCare in Wisconsin. We firmly believe organic growth is the most efficient use of capital for our shareholders and remain committed to further organic Medicaid growth supplemented by smaller tuck-in acquisitions. We have a long history of success growing our Medicare Advantage and pharmacy businesses organically, and in just the last week, we were awarded the managed Medicare contract in Oklahoma, a state that previously did not offer managed Medicaid. I would like to thank the Medicaid team for their tireless efforts and congratulate them on these key wins. As I reflect on what we've learned from the pandemic, I am energized by the way the collective healthcare system responded to the crisis. and how actions taken to combat the pandemic strengthened and accelerated critical tenets of the system. As an industry, in partnership with policymakers, we took deliberate and sustained actions to remove financial barriers and enhance access to care in response to the pandemic, easing some of the burden on our nation's most vulnerable population at a time when they need it most. Supported by CMS, health plans and providers proactively address social determinants of health that were exacerbated by the pandemic and quickly pivoted to the telephonic and in-home care, advancing in a matter of months what may have taken years absent the pandemic. Our combined actions underscore the strength of the Medicare Advantage Program as an enduring public-private partnership that puts seniors and their holistic health at the forefront. Humana's pandemic response continues to evolve, and we are actively engaged with the Biden administration, including HHS and CMS, as well as state and local governments regarding our role in the vaccination process as both a primary care provider and as a health plan, representing a significant portion of the nation's most vulnerable population. As such, our role is multifaceted and we stand ready to assist further as the nationwide distribution progresses to later phases and more and more individuals become eligible for the vaccine. Driven by our strong care coordination capabilities, our role includes identification of eligible members utilizing our analytics, vaccination education and concierge services, second dose reminders, and ensuring we follow up on any complications. We are also engaged in industry-wide efforts to conduct vaccine surveillance, identify regions where vaccinations are lagging, and intervene to help our members access vaccines. By collaborating with other health insurances, we can align regionally communication efforts to educate and engage members and reduce disparities in vaccine use across the U.S. Inequity in healthcare is an area that we are particularly focused on, recognizing that we must play a critical role working closely with our industry and governmental partners to address the imbalance that exists today. Data shows that Medicare Advantage is continuing to grow as the preferred option for those who are low income and for racial and ethnic minorities. Of the nearly 26 million Medicare Advantage members, there is a growing diversity in enrollment with more than 28% of the beneficiaries being racial and ethnic minorities as compared to 21% in traditional Medicare. This demonstrates that as we think about disparities in healthcare for underserved populations, Medicare Advantage plans are uniquely positioned to address the needs of these members. Humana is committed to leverage our business platforms to support local communities in their efforts to lower social and health disparities. This includes enhancing access to care by continuing to expand and build primary care centers in underserved markets, offering supplemental benefits including over-the-counter medication coverage, transportation, dental, and vision, as well as taking a leadership role enhancing innovative solutions aimed at addressing social determinants for both Medicare and Medicaid. In addition, we recently named Dr. Wandu Aloa to the newly created position of Senior Vice President and Chief Equity Officer effective in April of this year. Dr. Aloa will set direction and establish strategy to promote health equity across all Humana lines of business including our care delivery assets while working collaboratively with the broader healthcare community to advance health equity so healthcare can work better for everyone, regardless of background, age, or economic status. In closing, we remain committed to public-private partnerships that are solution-oriented and drive results that will meaningfully benefit the healthcare system in the coming years. With that, I'll turn the call over to Brian.