Shares slid more than 10 percent on Wednesday in the Louisville-based Humana, based on the health insurer’s warning that its quality ratings in the Medicare Advantage plan were being downgraded by the Centers for Medicare & Medicaid Services (CMS). Writing in The Wall Street Journal on Oct. 2, Anna Wilde Mathews and Colin Kellaher stated that “Humana said it has about 25% of its members currently enrolled in plans rated four stars and above for 2025 based on preliminary 2025 Medicare Advantage ratings data from the Centers for Medicare & Medicaid Services. The quality ratings, on a scale of one to five stars, are tied to bonuses paid to insurers. The downgrade could have a huge revenue impact in 2026, with analysts suggesting a range of figures, from less than $2 billion to far higher,” the reporters noted.
“The scale of the drop is a shock,” Sarah James, an analyst with Cantor Fitzgerald, told the WSJ. She projected the shift in stars could affect nearly $3 billion in 2026 revenue if Humana isn’t able to alleviate it, the reporters wrote.
And, the WSJ’s reporters noted, “The company’s shares fell more than 20 percent in morning trading before partly recovering some of the losses. The drop in Humana’s shares erased about $3.8 billion worth of market capitalization.” And, they wrote, “Humana said it is appealing the CMS decisions and would work to mitigate their impact. The company said its “commitment to quality is unwavering,” and the fall in the ratings was largely driven by narrow misses on key measurements that weigh heavily in the federal quality analysis. rs for Medicare and Medicaid Services, down from 94% this year.”
Meanwhile, The Washington Post’s Taylor Telford wrote on Oct. 2 that “Enrollment in Medicare Advantage has more than doubled since 2010, according to researcher KFF, with last year marking the first time that more than half of all eligible Medicare consumers were covered through the privately run plans. KFF estimates that Humana has about 18 percent of the Medicare Advantage market, second only to UnitedHealthcare’s 29 percent,” she wrote. And, she added, “Humana attributed some of its woes to a pending ratings cut to a plan accounting for 45 percent of its Medicare Advantage membership, citing preliminary data released by CMS on Tuesday that said the plan’s rating is slated to fall from 4.5 stars to 3.5 stars in 2025.”
Further, Telford wrote, “Enrollment in Medicare Advantage has more than doubled since 2010, according to researcher KFF, with last year marking the first time that more than half of all eligible Medicare consumers were covered through the privately run plans. KFF estimates that Humana has about 18 percent of the Medicare Advantage market, second only to UnitedHealthcare’s 29 percent. Humana attributed some of its woes to a pending ratings cut to a plan accounting for 45 percent of its Medicare Advantage membership, citing preliminary data released by CMS on Tuesday that said the plan’s rating is slated to fall from 4.5 stars to 3.5 stars in 2025.”
And, Telford noted, “The lower rating for its primary Medicare Advantage contract could take a big bite out of Humana’s earnings in 2026 because it risks falling below the level that nets the company a government rebate. Such bonuses will total at least $11.8 billion in payments to insurers this year, including $2.5 billion to Humana, KFF estimates. That is roughly equivalent to Humana’s total net income for 2023.”
Meanwhile, Investor’s Business Daily’s Jed Graham wrote late on Wednesday afternoon that “Humana (HUM) stock continued to dive on Wednesday after revealing that one of its primary Medicare Advantage plans got downgraded in the government's star-rating system, which will hit profitability. UnitedHealth Group (UNH) made a bullish move at the open. But UNH stock, a Dow Jones Industrial Average component, slashed initial gains. Other Medicare Advantage players were mixed, with CVS Health (CVS) rising and Elevance Health (ELV) sliding. In a Wednesday filing, Humana said that only 25% of its Medicare Advantage members are currently enrolled in plans that will earn at least four stars in 2025 in the government's five-star system. That's down from 94% in 2024,” he wrote. And he added that “Humana highlighted one plan, H5216, with 45% of its MA members that barely missed the cutoff, and the company is challenging calculations made by the Centers for Medicare and Medicaid Services. While Humana said the stars downgrade for 2025 won't impact 2024 or 2025 results, it expects a ‘revenue headwind’ for 2026 that it is working to mitigate.”
Healthcare Innovation has reached out to Humana corporate for comment. This is a developing story, and will be updated as new information is available.
