Susan Diamond
Chief Financial Officer at Humana
Okay. Yeah. So, I think that was six questions in one, but I will do my best to hit them all. So, your first comment about the $37, you are correct. Inherent in that initial modeling, you can think of it between 3% and 3.5% over that period. And we had always said that our belief was that, any margin progression and improvement would largely come from productivity and efficiency, not MLR gains, and that any sort of revenue and claims trend, vendors would sort of support the product to remain competitive and continue to grow. But, yes, you are correct in terms of where we would have been thinking in the previous guidance.
And you are correct, the 3% plus that we referenced does not include investment income. And so, that can sometimes vary in terms of how peers report their margin targets. But for us, that would exclude investment income.
In terms of 2025, as you said, TBC is going to be a huge factor, just given where we think we are in terms of expected benefit changes and the net membership growth, as you said. The other thing I'll mention before coming back to membership is just trend. Depending on how trend develops in -- well, frankly, how 2023 ultimately restates, how 2024 develops, that could be impactful to 2025 as well. We are not pricing for any favorability to emerge in 2024. And so, to the degree it does, and that would be incrementally positive going into next year as well.
When you think about the membership, I would say the absolute membership is certainly important. And in light of the final rate notice and the expected changes that we expect, we think our ultimate result will be more sensitive to the net membership than it might otherwise have been.
And then, in addition to that, I would say plan mix underneath. There are varying margin profiles across, say, duals versus non, certain geographies and other factors, and so that mix ultimately will be important in how our plans are ultimately positioned relative to others.
I would say, right now, as we've said all along, we are anticipating net membership declines for 2025, largely because we do intend to exit certain plans and counties. Whether that is incrementally larger or smaller based on the other plans will be very dependent on what we see across the competitive landscape. And as we know more, we'll certainly keep you apprised of our thinking.
Depending on the level of membership change, we certainly will be mindful of driving the appropriate admin cost adjustments in light of that. We are currently, as I said, planning for membership losses, so we would be proactively anticipating that. The variable is certainly much easier to address than normal course. We would just have to be very mindful of the targets we set across some of the non-variable items, but certainly are anticipating that and we'll have strategies in place should we see differences in the membership than we're currently thinking.
And then, finally, I would say, generally speaking, the largest CenterWell business that's impacted by any net membership change is the pharmacy, just given the penetration within the Humana pharmacy. That also is fairly sensitive to mix, less sensitive to dual changes who use mail order at a lower rate, and be more highly sensitive to consumers who are shopping on value in terms of those copays.
So that's something we'll continue to monitor. But I would say, mostly, we would be looking at the impact of pharmacy. The impact would be much smaller across primary care and home. And primary care, in particular, because they continue to have work on contracts with other providers, such that even if we see a member just on the health plan side, hopefully, they are positioned to retain them on the clinic side through their other payer contracts.
