And so we just see not only the dollar value from an actuarial point of view, but also the inherent additional benefits that they receive as a result of being a Medicare Advantage beneficiary. So we see that continuing to be the case. We’ve done a significant amount of analysis around where the value proposition is today, where it was 3, 4 years ago. And what we see is that the value proposition still will be greater than it was 3 or 4 years ago, a little lesser than today, but we feel confident that we’ll see the growth there. With that, do you want to — Susan, do you want to take the Medicare supplement question?
Susan Diamond: Yes. On MedSup, interestingly enough, the change health care disruption was particularly disruptive to our MedSup business. And so I don’t know if that’s a function of just CMS not working with providers for redirection versus the MA plans, I’m not sure, but we did see a disproportionate impact to MedSup. And so I would say that our current visibility is a little bit less than it would typically be. . Otherwise, I would say the IRA impacts for 2025 will impact Part D, as you said. And we will see varying degrees of impact across the plan — the stand-alone Part D plans, just recognizing the underlying mix is different for each of those plans. And so to your point, those who are in MedSup are also having to purchase a stand-alone Part D plan.
And so that’s certainly should give them a different perspective in terms of as they evaluate the value proposition of MA, and we’ll act as a bit of a mitigant in terms of what we see the impact to the MA plan offerings themselves.
Bruce Broussard: And Scott, I think your other question was just relative to the growth of Medicare Advantage and just how that looks. And we continue to see and believe over the coming years that it will be a mid-single-digit growth, and that will be a combination of demographic growth, maybe slowing a little bit in the latter years of this decade, but we continue to see that along with the penetration of more beneficiaries using Medicare Advantage. Kaiser put out an estimate over the next few years that there will be about a 60% penetration with MA and we continue to believe that’s very achievable going forward. So we feel the value proposition is going to continue to be strong as a result of not only the actuarial value, but also the additional benefits. We continue to believe that that’s going to drive more penetration of Medicare Advantage for Medicare beneficiaries overall. And so we look at continuing to maintain mid- to single-digit growth.
Operator: Our next question will come from the line of Joshua Raskin with Nephron Research.
Joshua Raskin: Just getting back to the 3%, I guess, how did you come to this long-term industry margin of 3% plus? What does that mean for Humana relative to the industry? And what do you think that translates into in some form of like return on invested capital? And then just a follow-up on the exits. I’m just curious what percentage of your membership is in areas that are even being considered for market exits. I’m not looking for a specific estimate of how many members you’ll lose, but just a sense of how many markets are even in that bucket of consideration?
Susan Diamond: Josh, so as we think about the 3%, and as Justin had asked earlier, that even historically had been — how the business has been performing and expectation that we would be able to continue to maintain that level of performance and believe that the industry will minimally require that level of margin, just recognizing the inherent sort of risk in the insurance business the regulatory capital that has to be established. But that just feels like an appropriate margin on a sustainable basis and certainly reasonable and still be able to provide a very strong value proposition to consumers. . Also, as you look at the long-term targets that most of the national peers have talked to, it is in the 3% to 5% range. And as we said earlier, there are some differences in what’s included in those numbers across the peer set.
But certainly, everything that we have seen and believe and others, I think, have reiterated is, I believe that the long-term margin is down. We just have some environment to navigate in the near midterm to get back to that and have all of the health plans reflect not only the funding environment, but then the more — the higher more recent trends that we’ve experienced. In terms — and then I would say, in terms of return on invested capital, because that, again, is similar to what we’ve historically or more recently performed, I would say no material things that how we would think about the expected returns for the business. In terms of market exits, again, just given the sensitivity on — we haven’t commented specifically on either number of plans, as you said or percentage of eligible covered and we’d feel more comfortable sharing more information on that post bid filing.
And certainly, we’re happy to do that as we have in the past and we have executed larger-scale plan exits. Just don’t feel comfortable doing that in advance of the bids being submitted for competitive reasons.
Bruce Broussard: And just on the return on capital, Josh, as you look at the math, we put about 10% statutory capital in the business, and this is a 3% margin kind of activity, which creates a significant amount of incremental return on capital for us. And since all this is organic growth and not any kind of acquisition growth. I mean it’s highly accretive to the overall cost of capital to the company.
Operator: Our next question will come from the line of Nathan Rich with Goldman Sachs.
Nathan Rich: I have a few follow-ups. I guess, first on utilization, there’s some thought that some of the March trend could be related to calendar dynamics around Easter versus more sustained change in the trend. I guess, could you maybe just give us your view here? And then also be curious if you’re seeing any changes in the level of acuity of patients that are showing up for care. And then Susan, could you maybe talk about what’s driving the EPS seasonality this year? I think you’ve guided for over 80% of earnings in the first half of the year. Is it mainly the result of that expense timing that you mentioned in response to A.J.’s question? Or is there any other dynamic that we should consider?
