Operator: Our next question comes from the line of Ben Hendrix with RBC Capital Markets.
Ben Hendrix: Hey, thank you very much. I just want to get back to one more question on the $6 to $10 for 2025. I appreciate your comments on the overly competitive environment and difficulty in forecasting how actors scale that down in the future. But if you could comment on, is there a level or a range of kind of headwind attrition that you are assuming in that $6 to $10? And if so, what are you expecting kind of margin versus attrition to kind of offset by attrition to kind of get you to that range?
Susan Diamond: Yes, Ben. So we won’t comment specifically, obviously on expected membership growth at this stage, but just direction can tell you that in the range of scenarios the team has reviewed and one of the reasons why it’s a larger range as well, as I said earlier is, there’s got to be an assumption around membership impact based on our changes as well as those of others across the industry. And so you can think of that range accommodates less optimistic and more optimistic range with the less optimistic, assuming we do lose not a small number of members, so hundreds of thousands of members would be contemplating that low end of the range. Some of that is going to depend on, as I said earlier, as we look at certain counties and plans, whether or not we think there is a path to the profitability levels we would expect, and there may be some cases where at this time we feel that’s not true, where we might see disproportionate impact.
You might remember years ago we used to actually disclose sort of plan exits and how much impact there was to our membership growth. It’s going to be akin to that where if we do ultimately determine we need to exit counties or plans, we will probably disclose that discreetly in terms of the impact. And I said you can consider that sort of no regret moves as a way to restore margins. But our hope would be that we can find solutions to that and may need to moderate benefits and still provide a compelling value proposition. But recognize some areas will have disproportionate cuts which will have disproportionate impact to membership. And certainly as we go through the bid process and share updates with you later this year, can give you an updated perspective on where in that range we might be, depending on what we continue to learn.
Ben Hendrix: Thank you.
Operator: Our next question will come from the line of Nathan Rich with Goldman Sachs.
Nathan Rich: Hi, good morning. Can you hear me okay?
Bruce Broussard: Yes, I can.
Nathan Rich: Oh, great. Thanks for the questions. I think following up on AJ’s question, Susan you kind of talked about still evaluating some of the drivers of utilization as it relates to 2024. Just maybe could you talk about what you’re looking at specifically? I guess, do you expect those dynamics you mentioned around the nature of hospital stays to continue? And are there any early data points on January that would suggest the higher trend that you saw kind of emerge late in for Q isn’t seasonal? And then just as a clarification, you talked about restoring margins longer term, I guess is your view of long-term margins for the individual MA business changed just given the backdrop that the industry faces? Thank you.
Susan Diamond: Hey Nathan, sure. So in terms of the utilization drivers, as I said earlier, they are definitely shorter stay events. We have looked very closely at the respiratory data, and as we said in our commentary, based on all the information we have, it is not respiratory-driven. As you guys might remember, we called out COVID in our third quarter call that we saw it. And if you remember at that time, we hadn’t anticipated in the third quarter in our original thinking, but had it in the fourth quarter. And if you recall, what we said is despite the fact that it peaked in the third quarter and may come down, we left it in our fourth quarter forecast. And so as we look at the fourth quarter results, while you certainly see an uptick, third quarter to fourth quarter in respiratory, that was something we had anticipated and was actually slightly favorable to what we had expected.
We had planned for sort of a five-year average on respiratory and it came in slightly lower. So for us it was not a cause of the variance and the additional utilization is non-respiratory related. For that reason, because we don’t have any clear indicators that it is something that you can reasonably assume is seasonal or transitory, we’re making the assumption that it will persist throughout 2024. Looking at January data, which is very early, so we only have really some look into the first two weeks. We would say it is continuing to stay at the elevated levels that we saw in the fourth quarter. And again, I wouldn’t have expected anything this quickly to change that pattern materially, but it does reinforce that, at least for the near-term, that we can likely expect to see it.
Again we will continue to evaluate the more mature claims data to try to get more information about the drivers. One thing we’re certainly looking at is if you remember, there are regulatory changes being implemented January 1 related to utilization management referred to the two-midnight rule. We know there was a lot of activity both on health plans and provider side preparing for that and so that is one thing we’ll be looking at to see if potentially that has any underlying cause related to some of what we’re seeing based on what we had expected for 2024 In terms of the long-term margin outlook, I would say, we had — if you remember at Investor Day, we had really moved away from setting a specific target for individual MA, recognizing that we will work very hard to maximize the margin contribution across the enterprise, which becomes increasingly important as we continue to expand and scale the CenterWell capabilities and so we remain very focused on that.
We will certainly expect, as we said, to restore margin to a reasonable level within the health plan over a relatively short period of time, but you will hear us continue to emphasize the opportunity to expand enterprise margin over just discreetly focusing on the health [indiscernible] growth consistently going forward.
Operator: Our next question will come from the line of David Windley with Jefferies.
David Windley: Hi, thanks for taking my questions. Continuing on the last one regarding utilization, I guess in your scenario analysis, Susan, to what extent are you taking into account the possibility that utilization could go higher again from here or what kind of boundaries or historical norms could you frame for us to judge the likelihood or unlikelihood of that? I’m also wondering, in your pricing model for 2024, to what extent did Humana reduce benefits to offset the risk model change in pricing versus, how much of that did you — were you willing to absorb in MLR for 2024? And then finally, was there a difference in this utilization between regular community MA and duals? Thanks.
