Ann Hynes: Yep. Good morning. Just thinking about the competitive environment, obviously it appears very challenging and Humana seems to focus on profitability versus growth. But in the scenario that I think you mentioned in your prepared remarks Bruce that you hope that your peers would also price for 2025 given the challenging utilization environment. But if they don’t and the environment stays like this, how do you view growth versus margin over the long-term? And would you mean to prioritize profit and be willing to grow below market or do you think you can eventually grow within the market again if the competitive environment doesn’t change?
Bruce Broussard: Yes, well, I think it’s a big assumption that competitive environment doesn’t change and I’ll answer your question specifically. But I do want to just reemphasize that what we have seen over the years, and we saw it in 2022, we saw it this year, that there is one, or usually one, maybe two that gets really aggressive and then they fall away the following year. And we’ve that over a long period of time. And as you look at our growth over an extended period of time, you will see these volatilities year-to-year. But that’s really not a result of our pricing. It’s more a result of the industry pricing. We usually have been fairly considerate in our pricing in the industry and have not been as aggressive as competitors and there will be one or another one that comes there.
We don’t think that is sustainable. We just don’t. We see the business as being much tougher as a result of regulatory environment. We see that things like what we saw this year relative to utilization, getting back to above COVID levels, we just see it not being as easy to price to membership growth. I will say that from our vantage point is that as similar to what we did in Part D, is that we’ll continue to focus on what is the sustainable, profitable and the appropriate profitability within the industry and we will price towards that. And use our brand and our relationships with our value based providers, our quality scores and other mechanisms to compete. But we do not feel that pricing is how you compete. You price to be economically solid and you price to provide value to your customer, but at the end of the day, we don’t look at that as a competitive advantage.
We look at our capabilities as a competitive advantage and we’ll continue to focus on the capability and the differentiation in our capabilities.
Ann Hynes: Thanks.
Bruce Broussard: Welcome.
Operator: Our next question comes from the line of AJ Rice with UBS.
AJ Rice: Hi everyone. Just trying to get at two things here. Your comment about inpatient utilization, I think up to this point in the commentary you attributed a lot of the higher inpatient utilization you were seeing to that cohort, the growth cohort of 2023. It sounds like maybe that’s broadened on what are you just seeing late in the fourth quarter? What are you seeing seasonally that makes you think that continues? And by the way, did you keep a lot of those 2023 cohorts, or is that where we’re seeing some of the growth, at least in one of the competitors, that those people transitioned away from you? And if I could just ask, in a normal environment where an MA carrier has priced below trends, the natural result has tended to be that you get very strong enrollment.
We’re not seeing it this time, and I wonder conceptually how you put that in context, the fact that you’re saying you’re underpriced for the 2024 trend you’re dealing with, whereas that usually results in big enrollment growth, your enrollment expectations for 2024 are quite modest. How do we put that in perspective?
Susan Diamond: Hey AJ, sure, I can answer that. So on the first related inpatient, you are correct. When we cited some of the inpatient pressure that we were seeing earlier in the year, we attributed that to the fact that we had a lot of new enrollment growth and have limited information from which to predict the level of medical cost utilization. So risk scores is one example. And we were seeing that relative to our expectations, the medical costs were slightly higher than we would have expected based on what the [indiscernible] indicated. So you are correct about that. I would say what we saw in the fourth quarter is completely unrelated and different than that, and very much more widespread, and particularly for the months of November and December.
And what we’ve seen so far is an increase in short stay inpatient authorizations in particular. They are being upheld through our utilization management processes at a higher rate than you would typically expect as well. And given that the positive seasonality you would typically see in the months of November and December, it was that much more surprising. The absolute level of authorizations was up relative to what you would have expected for all those dynamics. Coincidentally, and while the data is still very early, as you know, on non-inpatient we’re reliant on the paid claims to get some visibility. We are seeing indications that starting in November, we are also seeing a decline in observation stays. So that’s something we will continue to analyze and understand better.
But quite frankly, we are going to need more time, more claim development to fully understand the underlying sort of admission, diagnosis codes and other things to fully assess the nature of the uptick in inpatients and corresponding decline in observations and understand if they’re in any way related, and then how we think about that again on a go forward basis. In terms of retention mix, I would say a little bit too early for us to fully assess that and look at, we’ve looked at the AEP enrollment data, I would say from what the team has looked at so far, nothing of concern in terms of the retention mix versus those members who disenrolled. But generally I would say given the benefit reductions we did make in 2024, I would certainly expect individuals who have an intent to highly utilize those benefits were probably ones that were looking at what other options might be available.
And to the degree another plan maintained a richer level of benefit, certainly would expect that that was someplace we would see higher disenrollment. To your question about 2024, so I would say it a little bit differently. While certainly this trend was not fully contemplated in our pricing, I think the entire industry would agree with that statement. All of us saw unexpected trend after we filed our bids. We, in spite of that though, did make more benefit adjustments than the industry. And so if you remember, we talked earlier in the year that when you look at the changes made, we did make a higher level of benefit adjustments than others and in some cases we were very surprised to see actual net incremental investment in 2024 despite the stars and v28 and other headwinds that they were dealing with.
So we don’t feel like this is an issue in terms of underpricing, it’s just the occurrence of higher than expected trend late in the year, unfortunately, after benefits were filed, and again, a lot to learn in terms of the persistency of that not only through 2024, but 2025 that we will continue to evaluate as we do all of our 2025 pricing. But based on everything we know now, our intent would be to assume those trends persist and make sure it’s covered in our 2025 pricing.
AJ Rice: Okay, thanks.
