Shares of insurer Humana (NYSE:HUM) fell in premarket trading in the U.S. on Wednesday after data showed the percentage of its members enrolling in four-star or higher Medicare plans for the coming year fell sharply.
Humana is a major seller of the government-backed Medicare Advantage plans, which are designed for adults age 65 and older.
Preliminary data from the Medicare Advantage Star Ratings, a measure of health and prescription drug plan performance conducted by the Centers for Medicare and Medicaid Services, showed that 25% of Humana members were enrolled in plans rated 4 stars or higher in 2025 — up from 94% the previous year.
Much of that decline was due to Humana’s H5216 contract downgrading to 3.5 stars from 4.5 stars, the company said in a regulatory filing Wednesday. The plan includes about 45% of Humana’s Medicare Advantage customers, including more than 90% of employer group waiver plan members, he added.
“The reduction in star performance for 2025 will affect Humana’s quality bonus payments in 2026,” the company noted. The Centers for Medicare and Medicaid typically award quality bonuses to health plans that achieve 4 stars or higher.
Humana noted that details about the 2025 star ratings are expected to be officially announced by the Centers for Medicare and Medicaid Services, or CMS, “on or around” Oct. 10. It said the downgrade came from its designs “marginally missing the highest industry limits on a small number of measures,” adding that it believes CMS made possible calculation errors.
The group has pending appeals related to some of the results and has requested additional information to ensure the accuracy of the margin calculations, it said.
However, Humana said it was “disappointed with its performance and has undertaken initiatives focused on improving its operational discipline and returning to a leading position in the Stars industry as soon as possible.” This effort is projected by Humana to improve bonus payments “in 2027 and beyond.”
The ratings downgrade is not expected to affect Humana’s financial results or outlook for this year or 2025, but the company said it is taking steps to “mitigate” an expected headwind to its earnings in 2026 if its appeals prove unsuccessful .
In July, Humana said demand for medical care was higher than forecast in the second quarter, stoking investor fears that the recent surge in medical costs for health insurers may not abate soon.
Medical costs have jumped across the industry since late 2023, when seniors began catching up on health procedures delayed by the COVID-19 pandemic. Government payments to manage the health care of Medicare members have also been sluggish.
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Reference;
Kanowsky, S. (2024) Humana slumps 23% as data shows membership in high-rating Medicare plans declined By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/humana-slumps-23-as-data-shows-membership-in-highrating-medicare-plans-declined-3644823 (Accessed: 2 October 2024).
