Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Humana Inc (HUM, Financial) exceeded expectations for the quarter and is confident in achieving at least $16 of EPS for the full year.
- Individual Medicare Advantage (MA) membership growth is anticipated to be around 5% year-over-year, outpacing expectations.
- Humana Inc (HUM) was ranked the number-one health insurer for customer experience by Forrester for the fourth consecutive year.
- The company is making significant investments in technology, including AI solutions, to improve operational efficiency and reduce administrative costs.
- Humana Inc (HUM) is expanding its senior-focused primary care clinics, expecting to add roughly 40 clinics this year, which are meeting clinical and financial targets.
Negative Points
- There is a need for significant investment to improve Stars ratings, which could impact short-term earnings progression.
- The company faces challenges with higher specialty drug costs, particularly in oncology, which could affect medical cost trends.
- Humana Inc (HUM) anticipates losing a few hundred thousand members in 2025 due to plan exits and ongoing redetermination processes.
- The company acknowledges the risk of not achieving the 3% margin target by 2027 due to the need for meaningful Stars progression.
- There is uncertainty around the impact of the Two Midnight Rule and its effect on inpatient claims and denial rates.
Q & A Highlights
Q: Can you provide more details on the investment spending for 2025 and its impact on earnings?
A: Jim Rechtin, President, CEO, & Director, explained that while they feel good about their pricing and plan exits, they are reaffirming that 2024 performance is a floor for 2025. They are considering investment opportunities that could impact near-term earnings progression but are focused on long-term shareholder value. Susan Diamond, CFO, added that the pricing actions taken allow for flexibility in making necessary investments without going backwards year-over-year.
Q: How are medical cost trends impacting your 2025 bids?
A: Susan Diamond, CFO, stated that current-year claims developed as expected, with some geographic differences. They feel confident in their trend assumptions within pricing and anticipate a reasonable assumption of losing a few hundred thousand members in 2025.
Q: What is the outlook for the 2027 margin target, considering Stars recovery?
A: Jim Rechtin, President, CEO, & Director, acknowledged that while the 3% margin target is realistic, there is risk due to Stars performance. Meaningful progression in Stars is necessary, but they are not specifying a minimum bonus level. Susan Diamond, CFO, added that the right environment and competitive landscape will also be important factors.
Q: How are you addressing the impact of higher specialty drug costs?
A: Susan Diamond, CFO, noted that higher oncology costs were observed, attributed to new treatments and label expansions. They anticipate further uptick in trends due to IRA changes and have built induced utilization assumptions into their 2025 planning.
Q: What are your expectations for Medicare Advantage market growth in 2025?
A: George Renaudin, President - Insurance, expects industry growth of 5% to 5.5%, slightly down from the previous year. They anticipate losing a few hundred thousand members in 2025 but are focusing on retention through improved digital tools and internal sales channels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
