Louisville, Kentucky – Humana Inc., a major health insurer focused on Medicare, has faced a series of setbacks this year, leading to a 50% decline in its market value. The latest blow came on Wednesday when the Centers for Medicare and Medicaid Services lowered the quality ratings for Humana, potentially putting billions of dollars in revenue at risk. This drop in ratings means that only about 25% of Humana’s members will be in highly rated plans generating extra revenue, a sharp decline from the previous 94%.
As a result of the lowered ratings, Humana’s shares plummeted by as much as 24%, marking their biggest decline in 15 years. Analysts have estimated that the company could lose billions in revenue due to these lower ratings. Humana has been the only major US health insurer dedicated primarily to Medicare, making it more susceptible to fluctuations in the program than its more diversified competitors.
Humana is currently appealing the ratings decision made by CMS, with hopes of overturning the decision before the payment cuts go into effect in 2026. The company’s new CEO, Jim Rechtin, faces a challenging road ahead in regaining investor confidence and rebuilding the company’s earnings. This recent development could potentially reignite takeover interest from Cigna Group, particularly if regulatory scrutiny under a potential second Trump administration proves to be less stringent.
The ratings, known as stars, play a crucial role in determining bonus payments to insurers under Medicare. Humana now faces the task of improving its performance and returning to a leading position in the industry as quickly as possible. While there have been no reports of other major insurers experiencing similar significant drops in their ratings, the impact of Humana’s situation on the broader health insurance industry remains to be seen. Medicare will continue to review plans each year, providing an opportunity for Humana to work towards restoring its ratings in the future.
Despite the challenges faced by Humana, the company remains focused on enhancing its operating discipline and ultimately improving its ratings. The company reassured investors that the ratings downgrade is not expected to impact its financial outlook for the coming years. As the situation unfolds, industry experts will be closely watching to see how Humana navigates this difficult period and the potential implications for the broader healthcare landscape.