Navigating Contradictions: Insights from the Latest Earnings Call on MLR, 2026 Uncertainties, and Stars Litigation

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First Quarter Performance and Guidance:
- Humana reported strong performance in the first quarter of 2025, reaffirming their full-year guidance.
- The company's outperformance was driven by timing-related factors, with some expenses expected to shift to later quarters.
- It also noted challenges and uncertainties, such as the IRA's impact on consumer behavior and ongoing litigation related to CMS star ratings.

MA Product and Experience:
- Humana maintained its membership guidance for 2025, with positive trends in Medicare product and experience, especially during the Open Enrollment Period (OEP).
- The positive outlook is supported by strong performance in markets like Florida, Illinois, and Texas.
- The company anticipates stability in the industry due to more reflective rate notices.

Operational Progress and Stars Ratings:
- Humana is making operational progress on Stars ratings, focusing on closing care gaps and improving quality and experience for members.
- Through partnerships, they are better engaging members without primary care providers, aiming for a 25% year-over-year reduction in gaps.
- Medication adherence campaigns have shown a 30% to 50% reduction in members with medication refills.

Cost Management and Efficiency:
- The company's G&A cost for the quarter was better than expected, mainly due to timing factors and ongoing cost management efforts.
- AI integration in contact centers is reducing call times and improving member interactions.
- Efforts to increase flexibility and operating leverage are supporting long-term success.

CenterWell and Medicaid Expansion:
- Humana's CenterWell business has shown robust patient and membership growth, with significant additions to primary care centers.
- Medicaid membership has grown by approximately 100,000 members year-to-date, aligning with expectations.
- Illinois contract wins for dual eligibility programs will expand access to 450,000 dual-eligible members.