Humana Inc.

Good day and thank you for standing by. Welcome to the Humana first quarter 2024 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. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. 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, both of which are available on our website. We will begin this morning with brief remarks from Bruce Broussard, Humana's Chief Executive Officer, and Jim Recton, Humana's President and Chief Operating Officer. Followed by a Q&A session where Bruce and Jim will be joined by Susan Diamond, Humana's Chief Financial Officer. 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 first quarter 2024 earnings press release as they relate to forward-looking statements along with other risks discussed in our SEC filings. We undertake no obligation to publicly address or update any forward-looking statements in future filings or communications regarding our business or results. Today's press release, our historical financial news releases, and our filings with the SEC are also available on our investor relations site. 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. Finally, this call is being recorded for replay purposes. That replay will be available on the investor relations page of Humana's website, Humana.com, later today. With that, I'll turn the call over to Bruce Broussard.

Thank you, Lisa. And good morning, everyone. And thank you for joining us. I hope you had the opportunity to review our prepared remarks, which we posted this morning, along with our earnings release. We'll spend the majority of our time today on Q&A. But I'd first like to highlight a few key messages that we want you to take away from our discussion. First, we had a solid start to 2024, and we're pleased to reaffirm our full-year adjusted EPS guidance of approximately $16, while increasing our individual MA membership growth outlook by 50,000 to 150,000 net growth. Early medical cost trend indicators in our individual MA business are largely in line to positive relative to expectations, and we have seen strong year-to-date patient growth in our primary care business, with 20% growth in our de novo centers and 7% growth in our more mature wholly-owned centers. In addition, we are incredibly proud of our continued organic success, expanding our Medicaid platform with recent contract wins in Florida, Texas, and Virginia. We are pleased that 2024 is trending in line with expectations. As we look ahead, we acknowledge that the industry is experiencing a dynamic and challenging time we must navigate. And while the current environment will create disruption for the industry in the near term, we continue to believe in the strong core fundamentals and growth outlook of the MA industry and our ability to effectively compete in MA market remains intact. Specific to 2025, we expect benefit levels, plan stability, and choice for seniors to be negatively impacted by the final MA rate notice, which is not sufficient to address the current medical cost trend environment and regulatory changes. Considering the significant difference between the final rate notice and our previous funding assumption, combined with the inherent pricing limitations imposed by the TBC change thresholds, we no longer believe $6 to $10 of adjusted EPS growth is the appropriate target range for 2025. Importantly, we believe the industry will adjust to the current funding regulatory over time. continuing to deliver strong top-line growth and normalizing at an appropriate margin of at least 3%. In that context, we remain committed to margin recovery and profitable growth through multi-year pricing actions, creating value for our shareholders over the long term. Our 2025 adjusted EPS growth outlook will be impacted by several variables to which we will not have clear visibility until later this year. including finalization of our MA bid pricing decisions, the continued evolution of the industry cost trends, and the level of competitor pricing actions in 2025, which will impact our net membership growth. In addition, we continue to evaluate opportunities to drive growth and further productivity across all lines of business to support 2025 adjusted EPS growth. We appreciate your desire for more detail regarding our outlook for 2025, and we will therefore provide an update on our bid strategy post-bid finalization, with further update in the fall once we have visibility into our competitor plans and expected membership implications. Before turning it to Jim for a few remarks, I'd further emphasize that we continue to believe there is strong bipartisan support for the MA program. and that the strong core fundamentals and growth outlook for MA and value-based care remain intact. In addition, Humana's platform, unique focus on MA, and expanding center well capabilities will allow us to compete effectively and deliver compelling shareholder value over the long term.