Q3 2024 Earnings Summary
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +11% | Driven by membership growth in Medicare Advantage and higher premium rates, partially offset by declines in group commercial membership and the company’s exit from certain businesses. |
Operating Income (EBIT) | -40% | Primarily due to higher medical costs, increased benefits expense, and rising interest expense, which outpaced revenue growth. Strategic investments to support membership gains also contributed to near-term margin pressure. |
Net Income | -94% | Significantly impacted by elevated benefits expense and operational costs, along with higher interest expense. The planned exit from Commercial Fully-Insured products further weighed on net results, despite revenue growth. |
Insurance – Premiums | +11% | Reflects Medicare Advantage membership expansion and increased per-member premiums. Offsetting factors included the planned exit from group commercial products, which reduced overall premium growth. |
Commercial Fully-Insured | -90% | Largely attributed to Humana’s deliberate exit from the Employer Group Commercial segment, resulting in a rapid membership decline and lower revenue in this business line. |
CenterWell | -81% | Impacted by divestitures (reducing prior revenue contributions) and higher operating cost ratios. Although there was growth in primary care and home solutions, increased investments and the v28 risk model revision pressured margins. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
EPS | FY 2024 | $16 | at least $16 | no change |
Membership growth | FY 2024 | no prior guidance | ~5% year-over-year | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Margin Restoration | Q2 2024: Multi-year margin recovery remains a focus, aiming for 3% by 2027. Q1 2024: Extended timeline and multiyear process discussed. Q4 2023: Consistent priority; timeline shifted based on regulatory and utilization pressures. | **Key priority, targeting 3% by 2027 but acknowledging risks including Stars performance. ** | Consistent across periods; timeline and optimism adjust with market/regulatory factors |
Membership Growth or Decline | Q2 2024: Plan exits, redeterminations, and pricing actions shape net membership outlook. Q1 2024: Upward revision for 2024 but expected declines in 2025 from pricing discipline and exits. Q4 2023: Emphasis on profitability over growth. | **~5% MA membership growth and plan exits in 2025; ~80 bps redetermination pressure. ** | Consistent topic; near-term growth but 2025 impacted by strategic exits and redeterminations |
Medical Cost Trends | Q2 2024: Higher inpatient admissions continued into July but EPS guidance reaffirmed at $16. Q1 2024: Slightly higher inpatient usage early, then improved; reaffirms 2024 EPS. Q4 2023: Notable inpatient uptick in late 2023, raising MLR. | **Stabilized inpatient utilization with 2-midnight rule implementation; factored into 2025 baseline. ** | Ongoing concern; shifts in utilization directly influence EPS guidance and margin targets |
Star Ratings | Q2 2024: No specific discussion [No mention]. Q1 2024: No specific discussion [No mention]. Q4 2023: No specific discussion [No mention]. | **Highlighted as crucial for long-term margin (3% by 2027) with additional investments and focus on provider incentives. ** | New emphasis in Q3 2024 with direct impact on margin restoration goals |
Dual-Eligible Redeterminations | Q2 2024: Not specifically highlighted [No mention]. Q1 2024: Mentioned as ongoing uncertainty for membership forecasts. Q4 2023: No specific mention [No mention]. | **Viewed as a headwind to 2025 membership; ~80 bps impact anticipated; issues with eligibility confirmation. ** | Stronger spotlight in Q3 2024, adding to membership pressure |
Digital Tools and AI | Q2 2024: AI partnership with Google to reduce costs and improve consumer experience; increased Medicare claims auto-adjudication. Q1 2024: No specific mention [No mention]. Q4 2023: General tech pipeline references, but limited AI detail. | **New AI-driven focus for sales, retention, and operational efficiency; generative AI cut care management documentation time ~50%. ** | Gaining prominence in Q3 2024 for efficiency and retention initiatives |
Investment Decisions for 2025 | Q2 2024: No direct mention of Stars-driven uncertainty [No mention]. Q1 2024: 2025 EPS growth impacted by competitor actions, bid pricing, and medical trends. Q4 2023: No specific mention [No mention]. | **Stars improvement and other investments introduce EPS uncertainty; 2024 performance is a floor for 2025. ** | Increasing focus on balancing near-term EPS with strategic 2025 investments |
Competition from Aggressive Players | Q2 2024: No specific mention [No mention]. Q1 2024: No specific mention [No mention]. Q4 2023: Highlighted as major factor; unsustainable aggressive pricing from key competitor. | Not emphasized in Q3 2024 [No mention]. | Less spotlight after Q4 2023; no recent emphasis |
Medicaid Performance | Q2 2024: Cited as a positive contributor, especially in Florida; newer markets had discrete pressures. Q1 2024: No specific mention [No mention]. Q4 2023: No specific mention [No mention]. | Not mentioned in Q3 2024 [No mention]. | Dropped from discussions after Q2 2024 |
TBC Threshold Constraints | Q2 2024: Constrained margin recovery capacity for 2025 amid V28 and IRA factors. Q1 2024: Significant obstacle after final rate notice, driving plan exits. Q4 2023: No specific mention [No mention]. | **Referenced primarily for 2025 pricing limits but not a major Q3 focus. ** | Diminished emphasis post-Q1 2024 but still influencing 2025 strategy |
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2025 EPS Guidance and Investments
Q: Is investment spending cutting 2025 EPS growth?
A: Management reaffirmed that 2024 performance is a floor for 2025 and sees room for EPS progression, but they're prioritizing long-term earnings potential over near-term EPS growth due to planned investments that could impact 2025 earnings. -
2027 Margin Target and Stars
Q: Can you achieve 3% margin by 2027?
A: They believe the 3% margin target is realistic for 2027 but acknowledge risk; meaningful improvement in Stars ratings is needed to reach this goal. -
Utilization and Cost Trends
Q: How are utilization trends affecting bids?
A: Utilization and claims development are in line with expectations. They've incorporated higher 2024 baseline trends into 2025 bids and feel good about assumptions. No large regulatory changes expected in 2025 to disrupt projections. -
Impact of IRA and Specialty Drugs
Q: Are specialty drug costs a concern for 2025?
A: They saw higher oncology costs due to new treatments and expect further uptick in 2025 from IRA changes and lower maximum out-of-pocket limits; have built induced utilization assumptions into 2025 planning. -
Membership Outlook and Plan Exits
Q: What's the outlook on membership growth?
A: Expect industry growth of 5% to 5.5% in 2025 vs. 6% in 2024. Humana anticipates losing a few hundred thousand members due to plan exits but is focusing on retention efforts and digital tools to mitigate impact. Expects positive contribution from higher-performing plans. -
Stars Ratings and Litigation Impact
Q: Will Stars appeal affect investments in 2025?
A: The appeal won't significantly impact 2025 investment plans. Investments are aimed at improving operational performance and Stars progression regardless of the appeal outcome; key to long-term earnings potential. -
D-SNP Redetermination Impact
Q: How will D-SNP redetermination affect you?
A: Anticipate an 80 basis point industry headwind in 2025 from D-SNP redeterminations due to the 6-month grace period ending; built into expectations with potential dual disenrollment affecting membership. -
Claims Denials and MLR Impact
Q: Are claim denials affecting MLR materially?
A: With the 2 midnight rule, they've seen higher initial approvals but also higher appeal and uphold rates; anticipated this early and incorporated into estimates, with no meaningful MLR impact since. Trends are stable. -
Investment in Sales Channels
Q: How are you addressing broker capacity?
A: Invested in internal sales channels and digital tools, seeing a 70% increase in internal brokerage sales. Focused on improving member experience and capacity to achieve expected growth despite industry shifts. -
Early Thoughts on 2026 Rates
Q: Expectations for 2026 rate environment?
A: While hard to predict, they're cautiously optimistic about 2026 rates, hoping for positive adjustments to reflect current trends and acknowledging prior assumptions may not have materialized. -
Crosswalk Possibilities for 2026
Q: Can you crosswalk members to mitigate Stars?
A: Exploring crosswalk options to de-risk member concentration but need to consider factors like Stars progression, group contracts, and membership mix; it's one lever among others, not a sole solution. -
Inpatient Claims Denial Trends
Q: Trends in inpatient claims denials?
A: Since implementing the 2 midnight rule, they've seen stable trends with higher initial approvals and appeals; working with providers to ensure understanding, with no significant impact on MLR.