By Puyaan Singh and Sriparna Roy
Feb 11 (Reuters) – Humana forecast annual profit below Wall Street estimates on Wednesday, as it expects lower quality ratings of its Medicare Advantage plans by the government to hurt its results.
The insurer anticipates 2026 individual Medicare Advantage membership to grow about 25% from a year earlier, with about 45% of its members expected to be enrolled in the plans rated four stars and above.
The ratings, on a scale of one to five stars, are linked to bonuses paid to insurers, with anything less than three stars seen as poor quality that could lead to lower payments.
“While not shocking that Humana’s 2026 earnings expectations are much lower … the big increase in membership looks likely to cut into margins further than the market was anticipating,” Morningstar analyst Julie Utterback said.
Chief Financial Officer Celeste Mellet said the lower ratings will pressure Humana’s profits by $3.5 billion in 2026.
Shares of the company fell more than 3% in morning trade.
In January, the Trump administration proposed smaller-than-expected 2027 payment rates to insurers operating the plans, driving down shares of Humana and rivals CVS Health and UnitedHealth .
“Medicare Advantage sits at the intersection of U.S. fiscal pressures and a program that is incredibly popular with seniors,” CEO Jim Rechtin said. “We will adapt to the rate notice once it is final.”
Shares of Humana have fallen 31.8%, CVS 5% and UnitedHealth 17.7% so far this year.
The agency’s announced rate increase of 0.09% is set to be finalized in April and may change.
Humana expects 2026 adjusted profit per share to be at least $9, compared with analysts’ estimate of $11.92, according to data compiled by LSEG.
The level of conservatism in the 2026 initial outlook is higher than typical to account for the dynamic environment, the company said in its prepared remarks.
Humana has been repricing plans and adjusting benefits to shore up profits while confronting the persistent cost pressures that have gripped the industry for more than two years.
The company reported a quarterly medical cost ratio, the percentage of premiums spent on medical care, at 93%, roughly in line with analysts’ expectations.
It posted an adjusted fourth-quarter loss of $3.96 per share, compared with the estimate of a $4.01-per-share loss.
(Reporting by Puyaan Singh and Sriparna Roy in Bengaluru, Amina Niasse in New York; Editing by Shilpi Majumdar and Anil D’Silva)
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