Humana Star Ratings plunge is latest in recent Medicare setbacks

Humana (NYSE:HUM) shares reached a new 52-week low on Wednesday after the managed care player announced a sharp decline in membership enrolled in its top-rated Medicare Advantage (MA) plans, its latest headwind related to government-backed insurance.

The update signaled a medium-term impact on the company: HUM said the rating plunge can hurt its 2026 revenue as it takes steps to improve its Stars position, which determines the level of bonuses health insurers receive from the Centers for Medicare and Medicaid Services (CMS).

This year, Humana (HUM) has repeatedly struggled in the market for Medicare Advantage plans, the private versions of the U.S. government’s medical insurance for seniors and those with disabilities.

Early this year, Louisville, Kentucky-based HUM was forced to lower its outlook twice in January due to higher-than-expected costs in its MA business.

The company was also part of a broader managed care selloff in April after the CMS set a lower-than-expected reimbursement rate for MA and Part D healthcare plans for 2025.

“Humana believes the emerging trends are impacting the industry broadly and anticipates the trends will be contemplated in the 2025 Medicare Advantage pricing cycle,” the company said as it pulled 2025 earnings guidance with its Q4 2024 results.

A leadership change in July with a new CEO at the helm has yet to reassure investors. The stock is down ~39% this year, vastly underperforming its MA-focused rivals such as UnitedHealth (UNH), CVS Health (CVS), and Alignment Healthcare (ALHC).

“The recent developments have cratered the stock price,” Seeking Alpha analyst Trapping Value wrote after the latest update. With a Hold rating on Humana (HUM), the analyst added that the company’s credit rating is also at risk as a result. “We can almost guarantee here that the credit rating will be cut after this news,” the analyst wrote.

Meanwhile, Stephens downgraded HUM to Equal Weight from Overweight and slashed its price target to $250 from $400 on Wednesday, noting that the Star Ratings plunge “represents a worst-case scenario result” for the company.