Humana says it beat its Medicare quality-ratings target, aiming to end a two-year slump

Humana Inc. told the Securities and Exchange Commission on Friday that it has beaten its own target for the 2027 Medicare Advantage Star Ratings, the annual quality scores the insurer disclosed in a filing a day after federal regulators published the results. It is the clearest sign yet that the Louisville, Kentucky-based company is climbing out of a two-year slump triggered by a 2024 ratings collapse that erased billions of dollars in revenue and sent its stock into one of its worst routs since the financial crisis.

The Centers for Medicare and Medicaid Services released the 2027 Star Ratings for Medicare Advantage and Part D plans on Thursday, the measure CMS uses to score health plans on clinical quality, member experience and customer service. The ratings determine which insurers qualify for lucrative quality bonus payments from the government in 2028, a pool of money that has become one of the largest swing factors in managed care earnings.

The numbers

CMS said the enrollment-weighted average star rating across Medicare Advantage prescription drug plans came in at 3.99 for 2027, a slight step down from 4.01 the year before but above the 3.95 recorded for 2025. Within that overall figure:

• About 37% of rated contracts, or 188 of 508, earned four stars or more.
• Roughly 71% of Medicare Advantage enrollees are now in contracts rated four stars or higher.
• The ratings will flow through to 2028 quality bonus payments once plans are posted to Medicare's Plan Finder tool for open enrollment, which runs from October 15 through December 7.

Humana's filing did not disclose a single headline percentage of members in top-rated plans, the metric it has used in past years. Instead, it said it had exceeded its goal of "Top Quartile" results, which the company defines internally as Star-driven revenue per member per month at least 10% above the median of a peer group that includes Centene, CVS Health, Elevance Health, Health Care Service Corporation and UnitedHealth Group. The company reaffirmed its full-year 2026 adjusted earnings guidance of at least $9.00 a share and said it expects part of the 2028 benefit to be one-time in nature, with details on how it will deploy that windfall, including possible shareholder returns, to come on a future earnings call.

How a ratings collapse became a two-year earnings headwind

The scale of Friday's relief is best understood against what came before it. In October 2024, Humana disclosed that preliminary data for the following year's ratings showed the share of its Medicare Advantage members in plans rated four stars or higher falling from 94% to roughly 25%, after one contract covering nearly half its membership slipped from 4.5 stars to 3.5. Shares fell as much as 24% intraday, among the steepest single-day declines for the stock since 2009, as analysts estimated the revenue at risk in the billions of dollars.

Humana disputed the methodology and pursued appeals, but lost a court challenge in Texas in mid-2025, leaving the lower ratings in place. The company subsequently cut its full-year 2025 GAAP earnings guidance to about $12.26 a share from roughly $13.77, and by early 2026 its chief financial officer was describing the ratings hit as a $3.5 billion profit headwind for that year alone. A preliminary update in October 2025 showed only modest improvement, with about 20% of members in four-star-or-better plans, prompting Humana to tell investors it was "not satisfied" with the results even as it reaffirmed guidance. This past July, the company cut its 2026 GAAP guidance further, to at least $6.52 a share from at least $8.36, while holding its adjusted EPS floor at $9.00, the figure it reaffirmed again on Friday.

Who else moved, and what Wall Street is saying

Humana was not the only insurer highlighting its scores this week. CVS Health's Aetna unit said in its own announcement that more than 69% of its Medicare Advantage members are in plans rated four stars or higher for 2027, which it called one of the best results among large, publicly traded Medicare Advantage organizations for a third consecutive year. CMS's own fact sheet separately credited UnitedHealth Group and Elevance Health with sponsoring five-star contracts, while flagging one CVS Health contract, Aetna Better Health of California, as a low performer, a reminder that even insurers with strong headline numbers carry weaker pockets within their book of business.

"For years, Aetna has been a leader in Star Ratings, and this year's results highlight our distinction in the market," said Steve Nelson, president of Aetna.

Wall Street had been positioning for a Humana rebound for months. Deutsche Bank upgraded the stock to buy in May, nearly doubling its price target to $441 and framing 2026 as an earnings trough with the October ratings as the key catalyst for recovery. Cantor Fitzgerald followed with an upgrade to overweight just ahead of the CMS release, raising its target to $460 from $300 on expectations that Humana would regain lost ground. Those calls helped drive the stock from a 52-week low near $163 to above $400 heading into Thursday's release, a run that reflects how much of the recovery narrative was already priced in before the actual numbers landed.

What happens next

The ratings Humana touted on Friday do not change its 2026 financial results; they govern bonus payments insurers will collect starting in 2028, after this year's scores are used to set 2027 Medicare Advantage bids and benefit designs during the open enrollment period that begins October 15. Humana has scheduled a virtual investor update for December 10 to revisit the long-term framework it laid out at its last investor day, and executives have said they will spell out specifics on the one-time portion of the 2028 benefit, including how much might go toward new member-facing investments versus buybacks or dividends, when the company reports full-year results early next year. For the broader Medicare Advantage industry, the modest decline in the national average rating, even as more enrollees landed in four-star-and-above plans, suggests CMS's tightened scoring thresholds are still squeezing insurers generally, making Humana's claimed turnaround, and competitors' efforts to defend their own scores, the central storyline heading into 2027 bid season.