Susan M. Diamond
Chief Financial Officer at Humana
Thank you, Bruce, and good morning, everyone. Today, we reported adjusted EPS of $7.78 for the third quarter. Results in the quarter were slightly positive -- slightly above initial expectations, driven by outperformance in our Medicaid and primary care businesses and continued focus on driving sustainable productivity gains, offset by modestly higher-than-anticipated utilization in our Medicare Advantage business. I will provide additional detail on recent utilization trends in a moment.
Our performance to date continues to reflect the strength and agility of the enterprise, demonstrating our ability to successfully navigate the higher-than-anticipated utilization, while delivering on our earnings commitments and driving individual Medicare Advantage membership growth that significantly outpaces the industry. We now expect to add approximately 850,000 members in 2023, reflecting a 19% growth rate. Further, for the full year, we have reaffirmed our adjusted EPS guidance of at least $28.25, which reflects a 12% increase over 2022.
I will now provide additional details on our third quarter performance and full year outlook by segment beginning with Insurance. This morning, we reported that our Insurance segment benefit ratio exceeded expectations by 40 basis points due to higher medical costs in our Medicare Advantage business. We continued to experience an increase in COVID admissions in the third quarter, whereas our forecast previously assume that this would occur in the fourth quarter.
To date, we have not seen an offset in non-COVID utilizations, which diverged from the consistent patterns seen previously. With respect to non-inpatient trends, we previously communicated that we expected the higher PMPMs reported in the second quarter to continue throughout the back half of the year, reflecting a moderating year-over-year trends percentage. The most recent paid claims data suggested a modest uptick in PMPMs for the third quarter versus the stable levels we anticipated.
Considering the most recent trends, we are planning for the higher level of utilization seen in the third quarter to continue for the remainder of the year. As a result, we are increasing our full year Insurance segment benefit ratio guidance to approximately 87.5%, which implies a fourth quarter ratio of 89.5%. This guidance also reflects the increased individual MA membership growth, which continues to include a higher-than-expected proportion of agents. As we've previously discussed agents initially run a higher benefit expense ratio in the average new member, which negatively impacts the current year benefit ratio, but results in a larger margin expansion opportunity on these members over time.
We anticipate that the higher 2023 Insurance segment benefit ratio will be offset by additional administrative expense reductions, driven in part by the sustainable productivity initiatives Bruce discussed, improved net investment income and other business outperformance. Turning to Medicaid, the business exceeded expectations in the quarter, primarily driven by favorable membership due to redeterminations timing, which continues to track slightly favorable to our expectations, combined with disciplined medical costs management initiatives and lower-than-expected utilization.
Moving now to CenterWell. This segment continued its solid performance seen throughout the year, outperforming expectations in the quarter. Our primary care organization results exceeded expectations, driven by better-than-expected patient volume revenue, combined with lower-than-anticipated utilization resulting in improved medical margin in our fully-owned centers. We continue to see better-than-expected patient growth, adding over 17,000 patients or nearly 89% growth in our de novo centers since December 31, plus 15,000 patients in our wholly-owned centers, representing 9% growth year-to-date. We now anticipate full year patient panel growth of approximately 34,000 to 36,000 as compared to our original estimate of 20,000 to 25,000 patients, more than doubling the patient growth achieved in 2022.
Our primary care organization also continued to improve the operating and financial performance of our wholly-owned centers. We continue to positively impact patient outcomes with hospitalization levels trending down year-over-year. In addition, in part due to our -- due to our continued efforts to engage our patients, retention has now improved 270 basis points year-over-year, up from a 220 basis-point improvement as of the second quarter. Patient satisfaction scores continue to reflect the quality of care delivered with net promoter scores averaging 82 nationally. And we are proud of our quality scores, which are tracking ahead of last year's trajectory, with a 4.5 star performance year-to-date on provider influence measures for engaged patients.
We now expect to increase the number of wholly-owned centers that are contribution margin positive from 110 at the end of 2022 to approximately 130 at year-end 2023, an increase from our previous expectation of 125 and representing an 18% increase year-over-year. In addition, we expect to increase the number of centers that have reached our $3 million contribution margin target from 31 in 2022 to approximately 44 at the end of 2023, an increase from our previous expectation of 40 and representing a compelling 42% increase year-over-year.
The better-than-expected primary care earnings in the quarter resulted in our consolidated benefit expense ratio in 100 basis points lower than our Insurance segment benefit expense ratio as compared to our previous expectation of 40 basis point to 60 basis point reduction. As a reminder, on a consolidated basis, we report from the perspective of the health plan and as such intercompany earnings from these services are eliminated against benefit expense. At this time, we do not anticipate that the primary care outperformance will run right into the fourth quarter. Therefore, we continue to point you to our 40 basis point to 50 basis point reduction between our Insurance and consolidated benefit expense ratios for the fourth quarter with the reduction of approximately 50 basis points for the full year.
Turning to the Home, in our core fee-for-service business year-to-date episodic admissions are up 8.6%, while total admissions are up 5.1%, tracking in-line with our full year expectations of a mid-single digit year-over-year increase. As Bruce discussed, we are working diligently to identify clinical and operating efficiencies to offset industry headwinds, including rate reductions, declining original Medicare admissions, the increasing MA penetration, and ongoing labor pressures. From a capital deployment perspective, we have completed approximately $1 billion dollars in repurchases to date and continue to anticipate share repurchases of approximately $1.5 billion in 2023.
Before commenting and 2024, I would like to take a moment to highlight the significant progress we have made towards the near-term targets we shared in our Investor Day, one year ago. As a reminder, our 2025 adjusted EPS target of $37 represents a 14% CAGR from 2022 and is expected to be comprised of 10% on enterprise earnings growth, largely driven by the contribution from our Medicare membership, 20 basis points of improved operating leverage and a 2% contribution from capital deployment on an annual basis. While allowing for continued growth and investment in our Medicaid and CenterWell businesses as these high-quality assets are expected to meaningfully contribute to our long-term earnings growth as they continue to scale and mature.
Over the last year, we have outperformed in virtually all of these goals, including above industry average membership growth in our Medicare Advantage business, significant outperformance of our productivity goals, and increased share buybacks, as you saw, stock price dislocation earlier this year. We continued to invest in and grow our Medicaid and CenterWell businesses outperforming -- outperforming top line growth goals across these businesses as well.
At the same time, we've experienced higher-than-expected medical cost trend within our Medicare Advantage business and have worked hard to mitigate the impact of these trends in order to deliver on our enterprise earnings and EPS commitments. All in, we are proud of the significant progress we have made and remain committed to the targets we shared last year, including our 2025 adjusted EPS target of $37.
I'll now take a few moments to provide additional color on our early outlook for 2024 starting with membership. As Bruce shared, while it's still early in AEP, we expect that our balanced approach to our 2024 bids positions us to grow individual Medicare Advantage membership at or above the overall industry growth rate, while planning for a modestly higher attrition rate, given the benefit design changes we implemented in response to the rate environment. As we always caution this time of year, it's early in the AEP selling season. So the outlook we provide today could change depending on how sales and voluntary disenrollment ultimately come in.
Broadly speaking, 2024 competitor plan designs reflects less benefit degradation than anticipated, which will likely lead to fewer consumer shopping, and therefore, less opportunity for Humana to meaningfully outpace the industry growth rate. Specifically, Humana's performance relative to the market, initial feedback from brokers is positive, supporting our expectation of at or above industry average growth. Finally, recall that we have limited visibility into membership enrollment data this early in the AEP season, as those results take longer to complete and we look forward to providing further commentary on our fourth quarter call.
In our Group Medicare Advantage business, we expect a membership growth of approximately 45,000 in 2024, driven by small and mid-sized account wins and remain committed to disciplined pricing and a competitive group Medicare Advantage market. With respect to standalone PDP, the overall PDP market continues to decline as Medicare beneficiaries select Medicare Advantage over original Medicare and PDP. In addition, we remain disciplined in the pricing of our PDP products as cost trends continued to rise. As a result, our Walmart Value plan will not be as competitively priced as it has been historically, and our basic claim will exceed the low-income benchmark in 16 regions in 2024.
We currently expect a net decline of approximately 750,000 PDP members in 2024, including the loss of approximately 220,000 members as a result of exceeding the low-income benchmarks. As we look beyond 2024, we will evaluate the impact of the various proposed regulatory changes, which are likely to resolve in higher PDP planned premiums broadly and could lead to further industry-wide movement from standalone Part D plans to Medicare Advantage plans, given the strong Medicare Advantage value proposition. Our focus remains on creating enterprise value from our PDP plans by driving increased mail-order penetration and conversions to Medicare Advantage.
Finally, in our Medicaid business, Humana continues to demonstrate the ability to deliver unique value per communities by building on a strong operating model that integrates physical and behavioral health and develops meaningful partnerships and innovations to address health and equities and social determinants of health. After successfully implementing the Ohio and Louisiana contract in early 2023, we look forward to beginning to serve members in both Indiana and Oklahoma in 2024 and continue to expect to bring our total Medicaid footprint to United States and approximately 1.5 million members by year-end 2024.
Turning now to our expected 2024 financial performance. I would reiterate that we expect grow 2024 adjusted EPS within our targeted long term range of 11% to 15%. Recognizing the increased utilization we're now seeing in 2023, and prudently assuming this level of utilization continues into 2024, we currently anticipate growth at the low-end of this range. We look forward to providing more specific 2024 guidance on our fourth quarter earnings call in February. Looking ahead to 2025, as previously mentioned, we remain committed to our 2025 adjusted EPS target of $37, reflecting a 14% CAGR from 2022 to 2025.
It is important to note that our 2025 adjusted earnings growth will benefit from the maturation of our robust individual MA membership growth expected in 2023 and 2024 advancing of the mitigation activities, our primary care and home organizations are implementing to offset the impact of their revenue headwinds, capital deployment activity, as well as the sustainable productivity and value creation initiatives discussed today.
In addition, we anticipate certain industry pricing actions to be taken across our individual and group Medicare growth in response to the higher utilization and trends experienced. In closing, I want to say thank you to our over 65,000 teammates. Our success is enabled by your dedication to putting our members and patients at the center of everything we do. I would also like to thank our shareholders for their continued support. Finally, I'd reiterate that Humana's fundamentals are strong and we remain well-positioned to drive compelling earnings growth in the mid and longer term.
With that, we will open the line for your questions. In fairness to those waiting in the queue, we ask that you limit yourself to one question. Operator, please introduce the first caller.
