Humana (NYSE:HUM) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.
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Summary
Humana reported that their first-quarter performance met expectations, with a focus on achieving a sustainable margin of at least 3% by 2028.
The company emphasized member growth trajectory and plans to adjust benefits to maintain margins amid rising medical costs.
Progress in clinical excellence and operational efficiency was highlighted, with initiatives like centralizing teams and increasing automation.
Capital allocation updates included the acquisition of Max Health and Medicaid membership growth driven by new programs in several states.
Management reiterated their commitment to doubling individual MA margins by 2026 and maintaining pricing discipline to unlock earnings potential by 2028.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to Humana's first quarter earnings call. At this time all participants are in the listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Lisa Stoner, Vice President of Investor Relations. Please go ahead.
Lisa Stoner (Vice President of Investor Relations)
Thank you and good morning. I hope everyone had a chance to review our press release and prepared remarks which are available on our website. We will begin this morning with brief remarks from Jim Recton, Humana's President and Chief Executive Officer and Chief Financial Officer Celeste Millay. Following these remarks, we will host a question and answer session where Jim and Celeste will be joined by George Renneden, Humana's President of insurance segment and Dr. Sanjay Shetty, President of Centerwell. Before we begin our discussion, I need to advise call participants of our cautionary statement. Certain of the matters discussed in this conference call are forward looking and involve a number of risks and uncertainties. Actual results could differ materially. Investors are advised to read the detailed risk factors discussed in Our latest Form 10K, our other filings with the Securities and Exchange Commission in our fourth quarter 2025 earnings press release as they relate to forward looking statements along with other risks discussed in our SEC filings. We undertake no obligation to publicly address or update any forward looking statements in future filings or communications regarding our business or results. Today's press release, our historical financial news release release and our filings with the SEC are also available on our investor relations site. Call Participants should note that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles or GAAP Management's explanation for the use of these non GAAP measures and reconciliation of GAAP to non GAAP financial measures are included in today's press release. Any references to earnings per share or EPS made during this conference call refer to diluted earnings per common share. Finally, this call is being recorded for replay purposes. That replay will be available on the investor relations page of Humana's website humana.com later today. With that I will turn the call over to Jim.
Jim Recton (President and Chief Executive Officer)
Thank you Lisa and good morning everyone. Thank you for joining us today. We have a few headlines. Let me start with we are pleased with our first quarter and that is because we are where we expected to be and I'm just going to repeat that for emphasis. We are pleased with our first quarter because we are where we expected to be. And right now, second headline, we are turning our attention to bids and we are approaching bids with a focus on returning to a sustainable margin of at least 3% in 2028 and making progress against that in 2027. We know that we need to make some progress against that in 2027. Those are the commitments we laid out in June of last year at Investor Day, and we stand by those commitments. The primary headline here is that we believe that we are on track to meet our commitments from Investor Day and we're doing the things to follow through on that. So as usual, I will frame my comments today around the four drivers of our business. First is product and experience, which drive customer retention and growth. Second is clinical excellence, which delivers clinical outcomes and medical margin. Third, highly efficient operations and fourth, capital allocation and growth in both CenterWell and Medicaid. So let's start with product experience, where there are three things that I want you to take away. First of all, our member growth trajectory is on track. Now. We will, and we have will continue to manage distribution and growth dynamically if things change, but our growth trajectory is on track. Second, I want to emphasize that membership, both new and returning, is performing as expected three months into the year. Now, as we turn our attention to bids for the 2027 plan year, I want to express appreciation for CMS's engagement on the improved rate notice. This helps promote more stability in the industry as a whole and it has a positive impact on the health of our seniors. Nevertheless, medical cost trend continues to outpace program funding. And so our third takeaway, which is something we have noted previously, is that we will adjust benefits to remain on track to deliver our 2028 commitment of returning to a sustainable margin of at least 3%. And again, we expect to make the necessary progress towards that goal in 2027. We are very aware that we need to make some progress in 27. So turning to clinical excellence, our outlook on by 2028 stars has not changed. We continue to be confident that we're on the right track to return to top Quartile stars results in by 2028. Our performance on the stars compensation metric as disclosed in our proxy is a good indicator of our progress. However, as you know, we don't know industry thresholds and so while we feel good about our progress, we cannot guarantee an outcome in October. We will share more about our Progress in the Q2 earnings call once the hybrid season is complete for by 29 stars we are seeing a strong early start. We have early engagement efforts. These are new efforts which are translating into improved member activation and improved outcomes. To provide just one example, we're identifying certain chronic conditions among new members faster than we have in the past. What this allows us to do is to better target our gap closure efforts and as a result, at the end of Q1 we are about 5% ahead of last year's gap closure pace on a per member basis on certain key FETUS metrics. Now, regarding highly efficient operations, we continue to make progress on our operating model changes. This includes centralizing certain teams, expanding outsourcing and increased automation of processes. All of these things are increasing efficiencies. And then finally on capital allocation, we recently completed the acquisition of Max Health. This is a Florida based primary care organization that will expand CenterWell's reach into new critical markets. We also saw Medicaid membership grow by approximately 50,000 lives and this is largely driven by the January start of programs in Michigan, Illinois and South Carolina. So in conclusion, we expect to double individual MA margin in 2026. Adjusted for stars. We expect to double individual MA margins. We continue to feel good about the way our member growth is setting us up for this year and subsequent years. We are making good progress on stars. We will continue to be disciplined in pricing with a focus on unlocking the earnings power of the business by 2028. As a final note before I turn it over to Celeste, I want to share an update on the insurance leadership transition that we announced in December. George Renneden, Insurance Segment President, will retire effective June 29, 2026. Until then he will focus primarily on the annual MA bid process and he will continue to serve as a strategic advisor through at least the end of 2026. Erin Martin, who is currently President of Medicare Advantage, will begin leading the day to day management of the insurance segment now. He will continue to report to George and he will formally assume the role of Insurance Segment President when George retires. John Barger, a 30 year industry veteran with more than a decade in Medicare Advantage, will lead MA operations effective immediately and will formally assume the role of President of Medicare Advantage when Erin transitions. I want to personally thank George for his nearly three decades of service to Humana and its instrumental impact on growing the Medicare Advantage business. And with that I will turn it to Celeste for a few remarks before we go to Q and A.
Celeste Millay (Chief Financial Officer)
Thank you Jim. There are a couple of items I will briefly address before we begin. Q&A. First we are pleased that available information to date suggests that our Medicare Advantage members, both new and existing, are performing in line or better than our guidance, even after adjusting for a more subdued flu season and the winter storms. This data, including what we continue to monitor in April, includes risk scores, hospital admits per thousand or apts, pharmacy claims and initial medical claims which are continuing to complete for the first quarter. And we continue to enhance our claims and cost trend monitoring practices, including anomaly detection to identify and react to claims and payment trends faster as well as to improve first time payment accuracy. This important work improves visibility into cost trends and further strengthens payment integrity Turning to Capital Deployment and the Balance Sheet in the first quarter of last year, I posited that there was a real opportunity to increase the efficiency and resiliency of our balance sheet. Over the last 12 months we have made considerable progress towards this end. Our efforts include bolstering liquidity and addressing future funding needs with rating agency friendly instruments such as the $1 billion junior subordinated notes we completed in March, which is expected to fund 2027 maturities. In addition, we executed on several initiatives to optimize the balance sheet including deploying subsidiary reinsurance and augmenting legal entity structures, successfully mitigating over $3 billion in capital contribution requirements for 2026. We are maintaining dividend levels and limiting share repurchases to amounts necessary to offset dilution from employee stock compensation, though intend to increase both when our cash flows and funding capacity grow with the execution of the plan laid out at our Investor Day and we are pursuing non core asset divestitures to help fund strategic acquisitions and expect to share more news with you on this front over the next several months. All in we are pleased with the results of our balance sheet enhancements and are comfortable with our capital levels which provide a prudent buffer above regulatory and rating agency requirements. Consistent with this disciplined approach, we continue to evaluate a pipeline of initiatives to further strengthen the balance sheet. Lastly, let me reiterate the key messages that Jim highlighted. We are pleased with a solid start to 2026 and believe our expanded membership base, relentless focus on returning to top quartile stars and pricing discipline position us well to deliver a stable and compelling MA margin and unlock the earnings potential of the business by 2028. As laid out at our Investor Day last year. We remain committed to taking appropriate action to meet the commitments we have made to you. I will now turn the call back to Lisa to start the Q and A. Thank you Celeste.
Lisa Stoner (Vice President of Investor Relations)
Before starting the Q and A, just a quick reminder that in fairness to those waiting in the queue, we ask that you please limit yourself to one question with that operator.
OPERATOR
Please introduce the first caller.
Ann Hynes (Analyst)
Our first question comes from Ann Hynes with Mizuho.
Celeste Millay (Chief Financial Officer)
Great. Good morning. Thank you. I would just like to dig into DCP and IBNR a bit. From the press release. It looks like IBNR grew about 35% sequentially and this is versus a 22% membership growth. When looking at just total Medicare Advantage, could you provide some insights into the drivers of this elevated IBNR growth relative to the membership growth and also relative to your expectations coming in line? If it came in line with your expectations and is this conservatism on your part, Anything would be great. Any more details would be great. Thank you. Hi Ann, thanks for your question. So consistent with the prudent assumptions we embedded in our guidance at the beginning of the year, which we are maintaining, we did take a prudent approach to claims reserves for the quarter given how early it is in the year and given the membership growth. So you are right, IBNR was up 35%, well above the growth in membership. We typically point you to looking at membership growth to understand how IBNR should flow. So we believe we are prudently reserved. You know, coming out of the first quarter, just given the year ahead, I want to reiterate that we feel very good about what we saw in the first quarter and through the end of April in terms of all of the early indicators and completed claims. And what we're seeing in April so far is fairly consistent with what we saw in the first quarter.
OPERATOR
Our next question comes from Andrew Mock with Barclays.
Andrew Mock (Analyst)
Hi, good morning. Wanted to ask about the Welsh Carson put call options given some near term exercise windows. First, do you plan to exercise your June call options for the first two clinic cohorts? And second, if Welsh Carson were to exercise the full amount of its put options, what would the total cash obligation look like in 27 and 28? Thanks.
Celeste Millay (Chief Financial Officer)
Hi Andrew, it's Celeste. So we need to make a decision on the put call option in the middle of this year. We will obviously be mindful of all of the other things that are going on in our cash position and our balance sheet. I would say that Wells Carson has been an amazing partner to us and we're proud of what we built together in a leading primary care business for seniors and continue to see structural value in this type of relationship in terms of if they put to us next year. So next year would be the beginning of the first put. It would be about a billion to a billion and a half dollars in 2027. And to be clear, they can only put the 25 cohort to us in 2027, but both would be about a billion to a billion and a half. And we have included any outflows related to puts or calls in our funding plan.
OPERATOR
Our next question comes from Justin Lake with Wolff Research.
Justin Lake (Analyst)
Thanks. Good morning. I wanted to talk a little bit more about your 27 bidding strategy. I appreciate your prepared remarks around rates and trend for 27 and how you'll be reducing benefits to bridge the delta between those two numbers and protect margins. But I want to ask your thoughts about protecting margins beyond that. Specifically, the reality that the full cost profile of your members probably won't be known for a couple months, combined with the fact that you're in my confidence that you're going to get your stars back for 28 will reduce your TBC for 2028. So I want to ask how investors should think about the potential that the company might add some cushion to bids above and beyond that rate trend differential you talked about to reflect this new member uncertainty in the 2028 PDC reality in order to protect 2027 margins. Thanks.
George Rennigan (President of Insurance Segment)
Yeah, thanks Jim. Justin, the other thing just to consider is that as we're looking through this, we are going market by market. So it's not just a matter of taking a look at the various benefits and paying a lot of attention to those that Jim mentioned our members care about most. And it also helped drive better health outcomes and better stars results. But it's also looking at it market by market, understanding the environment we're in with various providers and going through each one of those geographies. Because it's not just a matter of benefit changes. You also have to look at geographies to make sure that every geography is going to be supportive to the long term trajectory of what we're trying to accomplish to get to our 28 targets and we'll make a lot of progress in 27. We also do have fairly good amount of information now about the new cohort. It is not perfect information by any means, but as Celeste has mentioned, all the key indicators of both our new and concurrent members we have and those are lining up according to our expectations, our APTs, our authorizations, our pharmacy MRA, all those things are lining up the way that we were expecting. As Celeste mentioned in her opening comments. And the other thing just to emphasize here is one of the things that we are seeing in the industry today is that the industry is taking, it appears to be anyway, a more measured approach given the funding environment, medical trend. The help we receive from CMS is helpful, but it is not, as Jim said, keeping up with medical trend. So we and others are having to make benefit adjustments, geographic adjustments in line with those expectations to continue to make progress towards our 28 goals.
OPERATOR
Our next question comes from Jason Kasorla with Guggenheim Partners.
Jason Kasorla
Great, thanks. Good morning. Maybe just a quick one on earnings seasonality. You guided two QMLR slightly above 91. It represents a deceleration in the year over year step up in MLR compared to this first quarter. I guess with your significant new member growth in a stars headwind, maybe can you just help bridge us to that MLR expectation for the second quarter? That would be helpful, thanks.
OPERATOR
Our next question comes from Steven Baxter with Wells Fargo.
Steven Baxter (Analyst)
Yeah, hi. Thanks. I was hoping you could maybe expand a little bit on trend dynamics in the quarter. I guess maybe speaking ideally to how much of a benefit you think you might have seen from flu and weather in the quarter and then also potentially whether there's any difference in trend dynamics if you were to focus maybe more on the retained membership you had in the MA book. Thank you.
OPERATOR
Our next question comes from David Windley with Jefferies.
Sanjay Shetty
Thanks. Thanks for taking my question. Good morning. I wanted to switch to center well and the operating cost ratio there, which ran a little higher than we were expecting. I wondered how much of that might be a result of the acquisitions and onboarding those and then for the consolidated relatedly, the operating cost ratio seems to need to have a flatter trajectory through the year than would be normal for you and how are you planning to execute that and wondering if those two are related. Thanks. Great. Well, this is Sanjay. Thanks for the question. So first off, just stepping back and looking at centerwall more Broadly for the quarter, I would say we're really pleased with the solid growth across each of our lines of business in the first quarter. We're seeing that both because of the growth in Humana's membership as well as our continued agnostic expansion. And so you can kind of see that across each of the three businesses, starting with pharmacy, we continue to see industry leading mail order penetration for our Medicare members and it's a really nice uptake by new members in 2026. We're also continuing to expand our agnostic volume across specialty, direct to consumer and direct to employer. And including looking forward to the new cost plus partnership that we announced earlier this week. Second, in primary care we're seeing really nice patient growth year to date, so sequentially 110,000 patients or 22.5% sequential growth. And that's both through organic growth as well as through our recent acquisition of Max Health. And in the home we're seeing solid growth in center roll home health and within one home and that includes through the launch of the next phase of our skilled nursing facility value based care model, now covering an additional 2 million patients. So all in, we're really pleased with the growth and execution across centerwell. I think one of the things you may have noticed is that in the first quarter we did have a handful of items that will not repeat and in some cases will actually reverse later in the year. And so I think that's what you're getting at. A couple of examples of what those are include the skin substitutes in our ACO Reach program in the primary care organization. That's both current year and continued runout from the prior year for which CMS will hold us harmless. Second, some timing related items related to the Villages Health acquisition that as we continue to integrate we'll see improvement for the rest of the year. And finally, some transaction and integration costs associated with the Max Health acquisition that were not previously contemplated in our Q1 guidance.
Celeste Millay (Chief Financial Officer)
Thanks Sandra. I'm just going to add to that. Sorry Sandra, I'm just going to add to that. First, if you're comparing to the first quarter of last year, particularly in Centerwell, it is a tough comparison. If you recall we did mention one time positivity particularly in specialty pharmacy which is driven by better than expected drug mix. And we also had some favorability in 1Q25 in PCO. If you take a look at the OCR in Center Wells, it does actually tie to your question. In 1q25 it was well below the rest of 2025. This year is you're going to have a more normalized OCR level throughout the year rather than the ramp that we saw in one Q25 through the rest of the year. And just generally in center well, I would look to 2024 for seasonality. We had about 20% of our earnings in Centerwell in 1Q24. We expect about the same in 2026. And then just taking a step back to the consolidated ocr, yes, the first quarter was impacted by some of the noise and the comparisons in centerwell. Our expectations for the year are in line with, with what we laid out in our guidance. And if you, you know, if you want to, if you look towards the insurance business, you can see really nice progress there on the ocr. But we are still expecting a significant pickup in the OCR this year or improvement, I should say not. Pick up.
OPERATOR
Our next question comes from A.J. rice with UBS.
A.J. rice
Hi everybody. Maybe just going back to the MA side of things. I appreciate the comments about all the metrics you're tracking and they're tracking well. I think historically there's always been this view that and what reality shown out is the second quarter claims experience really tells you whether you've got a problem or not. It sounds like some of these metrics are things you just normally would have tracked in prior years, but maybe some are new that you've done because of your initiatives. And I wondered if you could just give us a flavor for how much incremental information, given the initiatives you have, that you feel like you have to sort of get ahead of what normally shows up in the second quarter. And just to follow up on one of the previous discussions about the bids, if your expectation and a lot of what you're gearing for is the earnings power in 2028, understanding the restrictions on TBC from year to year and understanding the desire to hold. But if it's constant, does that cause you to lean into making sure you hold on to membership? Because you're going to get this big lift on stars next year and maybe in a normal year you go for more margin improvement next year. But because you know Stars and some of the other things happening for 28 are going to be positive, you'd sort of be willing to slow that progression just to hold on or even grow membership. Any thoughts on that aspect of your bid strategy?
Jim Recton (President and Chief Executive Officer)
Hey AJ Let me start. First of all, there's a lot in there. I'm going to try to tease it apart and hit the different components of it. I'll start. I'm sure. Either Celeste or George will want to weigh in as well. So, you know, let me just start with kind of the leading indicators. I think the way to think about our understanding of trend as it progresses through the year is, is that each incremental month is narrowing the range of possibilities of what you might see then for the balance of the year. So you don't, of course, you don't have perfect information at the end of March, you don't have perfect information at the end of April, you don't even have perfect information frankly at the end of June. But each of those months is narrowing the range of outcomes that you might see for the rest of the year. And so, you know, we're obviously looking at the first quarter and as Celeste indicated, we have also taken an early look at April as it's coming in and all of the indicators look as expected in that period of time. And then, you know, what I would say is it's not so much that we're looking at new and more indicators, it's more the way I would describe it is we are being more disciplined in looking at them on a regular basis and a regular cadence so that we understand that trend even more in real time than we have in the past. I mean, that's the way I describe it. So are we feeling better each month? Yes. Do we also want to see what happens at the end of the second quarter? Of course. Clearly we want to see what happens at the end of the second quarter and clearly we will feel better then than we feel now. So that's kind of how we think about that. On the second part, which I'm going to now blank on, is the bids. Oh yeah, bids in 28. You know, look, the way that we have thought about this, including last year, including this year, including next year, is that we have a margin expectation that is kind of consistent with over time being at a place that provides a sustainable attractive margin for the business and a good return on capital. And that during this period of time where we have the stars challenges, we are making adjustments so that we can protect the business through that period of time while also making progress against margin. And so we're starting with where does our margin need to be each year? We did that this year we started with where does our margin need to be this year? We don't start with hey, how much do we want to grow? We start with where does our margin need to be to be on track to 20, 28 and back to a sustainable and durable long term margin that is the first principle that we started with that is the same thing we started with a year ago, frankly. And so yes, we have an idea of the various scenarios that may play out in 28. Obviously we don't know what 2028 is going to look like, but we can kind of hone in on there's four or five different scenarios that might play out and we need to plan for 27 in a way that puts us in a situation where we can accommodate each of those scenarios. And when I talk about multi year planning, which I've done a lot of over the course of the last few years, that's what we're talking about. We should always be looking out two to three years in trying to understand how the external environment might evolve and making sure that we are putting in place plans and contingency plans that can accommodate the unknown across that period of time. And that's really what we're doing. So let me open it up to Celeste or George to add.
Celeste Millay (Chief Financial Officer)
Hey, I just want to add on the claims work there's. We're doing a lot more both in the front, particularly on the front end of claims where we are looking for anomalies and differences in terms of regional provider drgs, just looking for things that might indicate that something which would normally be identified down the pike, something is different than our expectations. And we're also spending a lot more time looking at the inventory, what's in there and some of the drivers of that. And then on the back end we're going deeper on the new member components than we typically would as well as the overall, but breaking down in much more depth and more grain. Some of the things that we would look at so we can identify hotspots faster if they exist. And as I said previously, the early indicators and then the ongoing claims that we see are running in line to better than our expectations.
George Rennigan (President of Insurance Segment)
Hey, it's George. Thanks. I'll just add two quick things. One is we've talked in the past about how much progress we're making in interoperability and the work we're doing in stars where we're getting out ahead. Jim mentioned all the things we've done to be able to reach out on the front end to our members as they're coming in our new members that also is helping inform where we are. So that's yet one more indicator. And then I want to be very direct on your question about tbc. We're very well aware of the TBC limitations. We're very well aware of what happens when TBC comes back when with our expectations what we're going to recover in stars. And so that is very much part of our planning process as we're going to the 27 bids.
OPERATOR
Our next question comes from Kevin Fischbeck with Bank of America.
Kevin Fischbeck (Analyst)
Great, thanks. I guess I really do like the commentary around focusing on margins first and foremost. But I just wanted to understand a little bit this commentary because this year you expect to double margins on an MA basis and now you're saying next year you're willing to cut benefits, even though this year you were able to do that without with a relatively stable benefit design. So are you saying that the funding shortfall for 27 is bigger than the funding shortfall for 26 as far as Humana goes? Or is there something else around the timing of some of the cost cutting initiatives on the GNA side that make next year potentially more reliant on benefits? I'm just trying to understand a little bit of a change in tone here about margins and cutting benefits if necessary to achieve margin improvement. Thanks.
OPERATOR
Our next question comes from Scott Fadal with Goldman Sachs.
Scott Fadal (Analyst)
Hi. Thanks. Good morning. Wanted to ask just two more targeted questions within two of the Medicare lines of business and just around the themes in terms of the monitoring and sort of early utilization trends. First would be Just on individual material, how you're seeing some of those trends and the new members in particular maybe playing out between HMO and ppo. And then also we really haven't talked much on PDP yet where you have had pretty substantial growth. So curious around how the PDP line of business appears to be performing from a utilization perspective relative to the margin targets that you laid out in your guidance.
OPERATOR
Great, thanks. So,
Celeste Millay (Chief Financial Officer)
excuse me, operating leverage still stands as a meaningful contributor to that 2028 bridge. Just can you remind us on the progress on addressing some of the operating costs? Was there any timing dynamics to call out in the quarter, anything we should think about for the year? I guess can you remind us of some of those components of the cost levers embedded in 2026 guidance? And what are some of the longer term opportunities, the progress relative to what you were thinking maybe a year ago at the Investor Day and just have there been any changes or surprises on that front in terms of those levers near and longer term? Thanks. Yeah, hey, thanks for your question. So we are making great progress against our operating cost targets in terms of the particular quarter. As I mentioned earlier, there's a little bit of noise just given the tough comparison to last year in Centerwell versus some of the less favorable one time noise in Centerwell this year. But our expectations for the year are on track for what we had guided to you or at the beginning on our fourth quarter call. As it relates to the cost cutting, both tactical and strategic, we are making really excellent progress there. So in terms of the tactical cost cutting measures that we talked about, Jim announced the early retirement program last year. We're continuing to see those employees exit. The last of them will leave at the end of the second quarter. That gives an opportunity to folks who've been here for a really long time to if they'd like to go do something else or sail off into the sunset and enjoy their lives outside of Humana, they can do that. We've been optimizing our internal policies. They squeeze out differences. They also in some cases get us more in line with corporate best practices. We've been improving productivity and increasing volume discounts while also improving payment terms with vendors. And we've been consolidating our supplier base to drive better supplier relationships. Those are some of the more tactical things, some of the more strategic long term, some of which are running through 2026 are changing and expanding our outsourcing capabilities. What 2026, you'll see where we're seeing the improvements is really in some of our corporate functions where we were well below industry benchmarks in terms of outsourcing percentages. We're getting closer to those benchmarks. So in finance, for example, and HR recently made some changes there as well. Over the longer term we see significant opportunities to consolidate our relationships and increase service and quality for our membership and our patients. At the same time, that will also reduce costs, continuing to standardize and simplify our processes while leveraging technology to use more automation and create efficiency. And Jim talked about our operating model changes. There are some components that have shifted already. We've been really focused on centralizing the things that make sense to centralize. You know, we believe it makes sense for us strategically, but it also does have is beneficial to our costs and I think provides better and more consistent experiences for our members and our patients across the country. So those are just a few examples. And again, we are very confident in the progress that we are making this year and the targets we laid out for you for 2028.
OPERATOR
Our next question comes from Ben Hendricks with RBC Capital Markets.
Sanjay Shetty
Thank you very much. Just wanted to follow up on some of the centerwell commentary. I just hoping to get any early observations within centerwell on trend. Anything to call out on patient profiles or patient behavior that you've observed across your expanded Medicare membership versus the growth that you're seeing in the carrier agnostic population.
OPERATOR
So this is Sanjay. Thank you for the question. So broadly speaking for CenterWell, the growth in Humana is definitely a tailwind to the business across the three businesses. We see that within the pharmacy business through the mail order penetration that we have in our Medicare business. We see that within the Home Solutions segment, both in Centerwall home health as well as within one home, which as a reminder is our post acute value based convener and specifically within the primary care organization, that growth has been helped by the growth of Humana. Broadly speaking, what we're seeing in that population is in line with what the plan is seeing as we enter the new year, although it is very, very early for us in the year. So I think we will continue to monitor that as an early indicator though some of the things that we track are engagement of those new patients and those are tracking Very much in line with expectations.
Lance Wilkes (Analyst)
Our next question comes from Lance Wilkes with Bernstein.
OPERATOR
Great, thank you. I wanted to reframe Justin AJ and I guess Kevin's question a little differently about the 27 margin setup. So if I were to use 2025 a year with flat rates, poor funding environment where Humano is still able to drive individual MA margin improvement, I believe doubling it to around 1% as sort of a comparison year, the setup for 27, stronger rate notice, stronger year to year star ratings, improvement. Granted, your star is in payment year 25 or higher overall, but your diversification efforts are driving a stronger year to year improvement into 27. And now a potentially similar conservative posture on benefits and pricing. Would it be fair to make this comparison and say the year to year setup into 27 actually feels even better than 25 when it comes to your ability to drive margin improvement. This concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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