Shares of Humana Inc. tumbled 15% on Wednesday after the health insurer reported a significant decline in enrollments for its top-rated Medicare Advantage (MA) plans.
The drop in quality ratings for one of its largest plans has cast doubt over the company’s future revenue and government bonus payments, leading to a nearly $5 billion reduction in market value.
The company announced that the rating of its H5216 plan, which represents almost half of Humana’s Medicare Advantage membership, fell from 4.5 stars in 2024 to 3.5 stars for 2025. As a result, only 25% of Humana’s members are expected to remain in 4+ star-rated plans for 2025, compared to 94% in 2024. These star ratings, determined by the Centers for Medicare and Medicaid Services (CMS), directly impact government reimbursements and bonus payments to insurers.
Humana expressed disappointment with the ratings drop, attributing the lower score to narrowly missing industry thresholds in a few key measures. The company also indicated potential errors in CMS calculations and is exploring options to challenge the results, which could impact its revenue projections for 2026.
The ratings cut prompted several analysts to lower their outlook on Humana’s stock. Scott Fidel of Stephens downgraded the stock, calling it a “worst-case scenario.” Despite the setback, Humana emphasized that it has initiatives underway to improve its star ratings and strengthen its financial performance in the coming years.
The impact of these ratings won’t be felt until 2026, allowing the company time to address the issue, but investors remain concerned. Shares saw their biggest intraday drop since 2009, reflecting market uncertainty around Humana’s ability to rebound.
While other insurers, such as CVS Health Corp., retained their high ratings, Humana’s struggle with star ratings underscores the challenges faced by Medicare-focused insurers. Rising medical costs, policy changes, and tighter government reimbursement standards have added pressure to the Medicare Advantage market, making it a tougher environment for companies like Humana to maintain profitability.
Reuters, Bloomberg, Market Watch contributed to this report.
