The paragraph is an introduction to Humana's First Quarter 2025 Earnings Call. The operator welcomes participants, notes that the call is being recorded, and hands over to Lisa Stoner, Vice President of Investor Relations. Lisa mentions the availability of a press release and prepared remarks on their website and introduces brief remarks from Jim Rechtin, CEO, and Celeste Mellet, CFO, followed by a Q&A session with the participation of George Renaudin, President of Humana's insurance segment. She issues a cautionary statement about forward-looking statements and refers to risk factors in their SEC filings. The discussion includes non-GAAP financial measures, with additional resources available on their Investor Relations site.

The paragraph outlines Humana's management's focus on using non-GAAP financial measures and mentions that a recording of the conference call will be available on their website. James Rechtin, addressing the conference call, expresses satisfaction with the company's start to 2025 and reaffirms their full-year guidance, while acknowledging that some Q1 outperformance was due to timing. He notes early-year uncertainties and various external factors, such as changes in consumer behavior and ongoing litigation. The company plans an investor conference for June 16 to outline their earnings potential, strategies to unlock it, and tracking progress. Rechtin highlights operational progress focusing on four business drivers: customer growth through product and experience, clinical excellence for outcomes and margins, efficient operations, and capital allocation for growth in CenterWell and Medicaid.

The paragraph provides an update on Medicare and other business segments for 2025, highlighting stability and positive performance trends. Medicare efforts focus on closing care gaps and improving customer quality and experience through partnerships and a combination of in-home and virtual visits, alongside medication adherence campaigns. The paragraph also discusses cost management success, notably using AI in contact centers to enhance efficiency. Growth in primary care, Medicaid, value-based models, and specialty pharmacy is emphasized, supported by the addition of 30 new centers through acquisitions and partnerships.

The article discusses recent developments and performance in a company's business operations. They have received an intent to award notice from Illinois for a new special needs program and CenterWell Pharmacy has begun working as a fulfillment center for NovaCare's weight loss medication for cash-paying customers. Additionally, the company has reached fulfillment agreements with three other companies recently. Celeste Mellet remarks on the company's solid start to the year, highlighting key business areas like membership growth, revenue, and medical trends. They have seen EPS outperformance due to shifted timing of expenses and reaffirm their annual outlook, including adjusted EPS guidance and expected insurance segment benefit ratio. The company aims to focus on quality, clinical excellence, and operational efficiency to expand margins and maximize earnings, while also ensuring efficient value from their balance sheet.

The paragraph discusses a conference call about Humana's financial strategies, particularly focusing on investment timing and its impact on financial metrics. Celeste Mellet addresses a question from Sarah James regarding the timing of investments that were expected to occur in the first quarter but are now anticipated to be more significant in the later quarters of the year, affecting the Medical Loss Ratio (MLR) minimally in Q1. The focus is on maintaining the same investment levels throughout the year, despite shifts in timing. The operator then introduces Ben Hendrix, who asks about the company's path to achieving a 3% MA margin target, notably in light of an impactful Stars ruling and changes in inmate rate updates expected in 2026.

James Rechtin states that the company is focused on returning to a 3% margin and provides no new updates on their progress. Justin Lake from Wolfe Research inquires about timing and handling of bids related to their Stars initiatives, as well as progress on their Stars performance for 2026. Rechtin mentions that the timing of Stars litigation is dictated by the legal system, and they lack visibility on it. He expresses confidence in the progress made in the previous and current years, although specific outcomes remain uncertain due to the volatility in cut points. George is expected to elaborate more on bids.

The paragraph discusses two main topics: the organization's current approach to bids and ongoing strategies, and a question posed by Andrew Mok regarding Part D experiences. George Renaudin explains that the company is actively working on bid diversification and a Stars strategy to reduce concentration in certain contracts, emphasizing a multiyear process focused on balancing membership and margins for long-term earnings. They are not sharing specific pricing strategies due to competitive reasons. Andrew Mok asks about experiences with Part D, specifically the pace at which seniors enter the catastrophic phase, and whether there are changes in behavior by seniors or manufacturers this year.

The paragraph discusses updates on business trends and performance, as reported by Celeste Mellet, and addresses a question from Stephen Baxter of Wells Fargo. Mellet notes that growth trends in both the medical and pharmacy sectors are aligning with expectations, with specific mention of higher trends in oncology that were anticipated. Stephen Baxter inquires about membership changes, visibility on risk adjustment, and Group MA diligence. George Renaudin responds, expressing satisfaction with the current membership shifts and emphasizing a focus on long-term earnings potential. These shifts are moving towards higher lifetime value segments and membership, which is seen positively for the business.

The paragraph discusses the strong year-to-date performance in markets with a high concentration of members, particularly in Florida, Illinois, and Texas. There is a higher percentage of non-DSNP members transitioning from other plans, which is beneficial for the Member Risk Adjustment (MRA). The strategy for individual plans is progressing well, while group Medicare Advantage (MA) is performing as expected, despite historical multiyear rate change guarantees affecting margins. The focus remains on improving MA margins through renewal cycles, and so far, no changes in behavior trends have been noted due to repricing activities. Celeste Mellet adds that everything is in line with expectations for the health plan and CenterWell, with the V28 impact being as anticipated for 2024, and a significant impact from B28 already called out for 2025. AJ Rice from UBS is introduced next, seeking clarification on the long-term target of a 3% pretax margin for MA amidst these changes.

In the paragraph, James Rechtin discusses the company's business outlook, acknowledging the uncertainty posed by external factors such as the open Stars litigation and potential changes in Part D. However, he expresses confidence in the underlying progress of the business, aside from these uncertainties. Rechtin mentions the importance of controlling what they can, such as medical costs and G&A, and notes that more details will be provided at the upcoming investor conference. Despite navigating regulatory challenges, the company is optimistic about progressing towards its target margins in the coming years.

The paragraph discusses strong patient and member growth within the insurance and CenterWell integration. New and existing clinics are seeing positive growth, with member growth in maturing clinics meeting expectations. Efforts to mitigate V28 impacts are successful, aligning closely with prior models. The primary care business is on a positive trajectory, although it's recognized that achieving full potential is a multi-year investment. Each new center is performing consistently as expected, following a J-curve growth model. James Rechtin emphasizes the importance of integration across CenterWell and invites George to add insights on this topic.

The paragraph discusses the positive impact of CenterWell's various business segments on their health plan's performance, particularly in improving their Stars ratings, accurate diagnosis, preventative care, and member retention. George Renaudin explains that a growing number of members are engaging with CenterWell's primary care organization, pharmacy, and home services, leading to better health outcomes like reduced ER visits and improved screening adherence. The integration between the insurance and CenterWell sides of the business is emphasized as a key factor in delivering positive results. Joanna Gajuk from Bank of America then asks about the outperformance in CenterWell's earnings, noting there were timing shifts related to investments around Stars.

In the paragraph, Celeste Mellet discusses CenterWell's contribution to the company's quarterly performance. She notes that about a third of the quarterly "beat" was due to CenterWell, driven largely by Performance Contracting Organization (PCO) and pharmacy gains. This included favorable pharmacy drug mix, particularly on the specialty side, and higher-than-expected patient growth. Some of these factors may continue to positively impact the year, though it's too early to be certain. Additionally, when comparing individual businesses within CenterWell, pharmacy and PCO exceeded expectations. The revenue growth was mainly attributed to patient growth and favorable Pay-for-Performance (PPD) factors.

The paragraph discusses the strong performance and growth of the company's Medicaid business, which is on track with expectations and has significant potential for earnings contribution. They highlight the success of their Healthy Horizons product and report year-to-date growth of approximately 100,000 members, aligning with their annual target. The company is proud of expanding its footprint to 13 states and was pleased that Georgia declined to rebid a contract, while it secured new contracts in Illinois for the FIDE and LTSS business.

The paragraph discusses the company's recent success and growth, particularly highlighting their expansion in Illinois with access to 450,000 dual eligibles and a positive implementation in Virginia, leading to expected modest margin improvements by 2025. James Rechtin notes that while the company didn't perfectly predict state-level rate adjustments for every state, the broader program expansion allows for better forecasting overall. George Renaudin adds that they've collaborated well with state partners on rate adjustments and have visibility on 76% of their ratings for the current year. A question from Lisa Gill of JPMorgan follows, asking about the visibility and variability of medical trends and the cadence of earnings.

In the paragraph, Celeste Mellet discusses the expected earnings trends for 2025, noting that due to the changes under IRA, 60%-65% of Part D earnings will be realized in the first quarter. The flu season's impact was anticipated, and current trends align with expectations and the guidance range. Earnings are expected to be front-loaded, with higher earnings in Q1 and lower in the subsequent quarters, while the benefit ratio follows an inverse pattern. Additionally, a "doc fix" is anticipated in late Q3 or Q4, which could impact the year-end results but is accounted for in the guidance. In response to Michael Hall's question, there is an affirmation of the commitment to individual MA margins of at least 3% over time, without implying any change in the target year of 2027.

In the paragraph, the discussion revolves around the unchanged adjusted EPS guidance for 2025, despite a reduction in GAAP EPS due to a valuation adjustment for CenterWell primary care centers. James Rechtin confirms that there is no structural impairment to the value-based care model or J curve expectations for these centers, even after the V28 changes. They anticipate returning to normalized margins by 2027, supported by ongoing operational adjustments. Celeste Mellet adds that attaining the Medicare Advantage (MA) margin will rely heavily on Stars ratings for 2027, and clarifies that the valuation adjustment does not imply a devaluation of the primary care assets.

The paragraph discusses the financial impacts and strategic decisions of a company concerning its health plan membership. George Renaudin highlights that the effects of V28 on high acuity patients were anticipated and align with expectations, particularly given the company's significant share of members with high-performing value-based providers. David Windley asks about the impact of exiting a block of dual-eligible members on the company's margins and future membership plans. Celeste Mellet responds by noting that exiting certain plans and markets has materially improved margins, and while the company may target dual-eligible members if it generates sustainable long-term value, it will not pursue growth merely for growth's sake.

In this paragraph, George Renaudin discusses recent wins in Medicaid that are setting up the company for success in dual markets, such as in Illinois. James Rechtin adds that while there will be normal adjustments to plans in 2026, they do not anticipate significant exits compared to the previous year. George Hill from Deutsche Bank then asks about the visibility of cost trends, specifically regarding core medical data as opposed to pharmacy data, and seeks clarification on membership acuity. Hill inquires about the impact of losing 40,000 dual members on overall member acuity and its relation to profitability, asking whether pursuing lower or higher acuity business affects profitability.

In the paragraph, Celeste Mellet and George Renaudin discuss various data sources and insights related to healthcare operations, including authorization and claims data, and insights from CenterWell assets. They note that up to April, the trends align with their guidance. Renaudin highlights a positive shift towards higher lifetime value segments and strong performance in certain markets like Florida, Illinois, and Texas. He also mentions unexpectedly high member bounce-back rates. Anne Hines from Mizuho inquires about the V28 headwind in 2026 Medicare Advantage rates versus 2025, and Renaudin explains that V28 was phased over three years and is progressing in line with their earlier guidance, which indicated a 160 basis point impact higher than the CMS industry average.

James Rechtin expresses gratitude to everyone for attending the event and for their interest in Humana. He also thanks the 65,000 associates who serve members and patients daily. The operator then concludes the conference call, inviting participants to disconnect.

This summary was generated with AI and may contain some inaccuracies.