Humana Inc. Q2 FY2025 earnings call

• Medicare Product and Experience: Focused on improving member experience, including simplifying prior authorization and partnering with Epic to integrate health plan info into MyChart for increased transparency. • Clinical Excellence: Progress on BY '27 and '28 Stars, refiled Stars lawsuit after court dismissal, and closing care gaps. • Back Office Transformation: Implemented early retirement program, expanded shared services outsourcing, and evolved employee benefits to enable scalable growth and operating leverage. • Capital Allocation and Growth: Continued strategic expansion of Medicaid and saw strong performance in CenterWell Pharmacy driven by direct-to-consumer volume and favorable specialty pharmacy trends.

• CenterWell Pharmacy: Outperformed year-to-date with higher direct-to-consumer volume and favorable specialty pharmacy trends. • MA Membership: Individual MA membership declined less than expected, with bounce-back members contributing; guidance for membership decline revised to ~500,000 vs. previous ~550,000, driving higher revenue with in-line medical loss ratio (MLR). • Medicaid: Strategic expansion with 10 active states and 3 more awarded/pending, focused on LTSS population, less impacted by the Big Beautiful Bill, and on track with margin progression assumptions.

• Raised full-year 2025 EPS outlook from approximately $16.25 to approximately $17. • Membership decline guidance revised to around 500,000 vs. previous 550,000, reflecting better-than-expected membership performance. • Expectations for CenterWell and Specialty Pharmacy outperformance to continue into the future.

• Uncertainties surrounding the outcome of the Stars litigation. • Potential impact of CMS regulations on Part D and home health reimbursement. • Risks related to member experience and the impact of benefit changes on membership retention.

Q: Ann Hynes with Mizuho asked about cost trends and Medicaid performance.

A: Celeste Mellet and George Renaudin responded that cost trends are in line to better than expectations, with Medicaid performance driven by product focus on LTSS population, favorable state footprints, and value-based care network structure.

Q: Kevin Fischbeck with Bank of America inquired about Part D performance and CMS regulations.

A: Celeste Mellet noted Part D trends tracking in line with expectations, and George Renaudin discussed bid strategy considering IRA changes and stable pricing.

Q: Andrew Mok with Barclays asked about implications of individual PPO market pullback.

A: James Rechtin and George Renaudin explained that Humana's benefit cuts and recapture of members position them well, with confidence in benefit structure and pricing.

Q: Justin Lake with Wolfe Research asked about Stars progress.

A: James Rechtin stated plan preview one data not out, but operational progress made with improvement in underlying metrics.

Q: Others asked about various topics including Specialty Pharmacy strength, investment spend, CenterWell membership, home health rules, and trend assumptions, with corresponding responses from Celeste Mellet, George Renaudin, and James Rechtin.