Humana Stock Plummets Amid Medicare Ratings Downgrade
Published On: October 3, 2024
Humana’s stock experienced a significant downturn after the Centers for Medicare and Medicaid Services (CMS) downgraded a large portion of their Medicare Advantage offerings. The Medicare star ratings, which greatly affect the insurer’s government bonuses, fell drastically for 2025, with only a quarter of Humana’s members now enrolled in highly rated plans. This sent Humana’s shares tumbling to their lowest level since 2020. Investors are particularly concerned about future revenue, as these ratings determine bonus payments, potentially impacting profits as early as 2026.
- Humana’s stock (HUM) plunged 12% on Wednesday following a Medicare ratings downgrade, and is currently at $248.08
- Only 25% of Humana’s Medicare Advantage members will be in four-star or higher plans for 2025, down from 94% in 2024
- Shares fell as low as $213.31 during the day and have declined about 46% year-to-date
- Analysts estimate potential revenue losses of nearly $3 billion by 2026 due to bonus reductions
- Major competitors, including UnitedHealth, experienced mixed reactions to the news
The downgrade means Humana could face a challenging financial outlook in the coming years. If CMS’s ratings hold, Humana could lose billions in revenue tied to government bonuses. This hit comes at a time when competitors like UnitedHealth are showing resilience, with UnitedHealth’s stock even rebounding slightly amid the broader market uncertainty.
Insiders at Humana have expressed disappointment in the CMS rating process, hinting at possible errors in calculations. The company is reportedly considering legal actions to challenge the ratings, similar to what other insurers like Elevance Health have done successfully in the past. However, analysts remain cautious, with several lowering their price targets for Humana stock amid concerns about the company’s ability to recover their once-strong market position.
For investors, this plummet is a stark reminder of the volatility in the healthcare sector, particularly when tied to government programs. Although the star rating reductions won’t affect 2024 or 2025 earnings directly, the forecast for 2026 is bleak. Many analysts expect further downside unless Humana can successfully overturn CMS’s decisions.
For consumers, particularly those enrolled in Humana’s Medicare Advantage plans, the downgrade could signal reduced plan quality. Humana’s appeal may ultimately dictate whether these cuts to government ratings result in plan changes, higher premiums, or other modifications that affect customer satisfaction.
In conclusion, while the immediate impacts of the CMS downgrade are primarily financial, the broader implications for Humana’s market presence and consumer trust could be long-lasting. Investors and consumers alike will need to monitor developments closely to see how Humana addresses these challenges moving forward.