Dive Brief:
- Humana will have 20% of its Medicare Advantage members in plans rated 4 stars or above in 2026, down slightly from 2025 but in line with internal expectations, the insurer disclosed Thursday.
- Humana — the second largest MA carrier in the country — did see an improvement in members in plans rated 4.5 stars or above. Next year, 14% of Humana’s MA members will be in those highly rated plans, up from 3% in 2025.
- Humana’s average star rating of 3.61 is roughly stable year over year. The insurer, which has been working to improve its ratings, said it was unsatisfied with the results. Still, Humana’s stock rose about 3% in Thursday’s trade following its disclosure.
Dive Insight:
It’s busy season for insurance market watchers, with the CMS releasing more information on the Medicare Advantage landscape for the coming year — including by mistake.
On Wednesday, regulators published more detailed information on MA plan offerings for 2026 and inadvertantly released some star ratings data, leading Humana to file its own disclosure to investors, the insurer said.
Though Humana’s average star rating remained essentially unchanged, the results are overall likely disappointing for the insurer. That’s because the percentage of MA members in plans rated 4 stars or higher dropped from 25% this year.
To put that further into context, Humana had 94% of members in plans rated at least 4 stars in 2024.
Reaching that threshold is key for insurers in the privatized Medicare program. Plans that receive an overall rating of 4 or higher receive higher bonus payments. Higher scores also result in larger rebates if plans submit bids below the CMS’ benchmark for the coming year.
Humana expects to lose billions of dollars in revenue as a result of the star ratings drop from 2024 to 2025, so a further dip for 2026 won’t help.
“While the Company is not satisfied with its 2026 Star Ratings, it is pleased with the tactical operational improvements made during the final months of the 2026 measurement period, creating a solid foundation for the Company’s expected return to Top Quartile results for the 2027 Star Ratings,” Humana said in its securities filing
Along with suing the government in a bid to improve its scores, Humana has hustled to improve its ratings by closing gaps in care, increasing member outreach and investing in technology, according to executive comments.
The insurer has also pursued a strategy called “contract diversification.”
The CMS measures quality through star ratings at the contract level rather than at the level of an individual plan. One contract can include many different plans. As a result, by juggling member enrollment in certain plans and plan attribution to certain contracts, Humana can move more members into more highly rated contracts and secure the higher per-member payouts that provides.
Along with contract diversification, Humana has stopped paying commissions to brokers for one-third of its products, according to a research note from investment bank TD Cowen. Cutting commissions to third parties that help seniors enroll in coverage is another strategy from insurers to steer members into more profitable or highly rated plans.
As a result of its efforts, Humana expects the percentage of its members in plans rated at least 4 stars will be “meaningfully higher” than 20% in 2027, according to the insurer’s filing.
Major publicly traded insurers are currently prioritizing profits over growth in MA after two years of seeing shrinking margins in the once-lucrative program. Seniors have been consuming more medical care than insurers expected, causing expenses to skyrocket, while regulatory changes have cracked down on reimbursement.
The three largest MA carriers, including Humana, all trimmed the number of states and counties they serve for 2026, according to an analysis of CMS data released Wednesday. Still, Humana kept its plan benefits relatively stable, a decision that’s worried some investors given it might attract many new members to Humana’s plans, including some that could saddle the payer with higher medical costs.
Overall, the Louisville, Kentucky-based payer expects to double its pre-tax margin in individual MA plans next year, excluding the impact of star ratings, according to the disclosure.
UnitedHealthcare, the largest MA carrier in the U.S., also disclosed some stars results early this year. In September, the UnitedHealth-owned insurer said it would have roughly 78% of its MA enrollees in plans rated 4 stars or higher, largely flat year over year.
