Humana's 2026 Profit Forecast and Impacts on Medicare Advantage

Humana's projections for 2026 suggest profits will fall below industry expectations, mainly due to the impact of Medicare Advantage plan ratings. The company anticipates that 45% of its Medicare Advantage members will be in plans rated four stars or higher. These ratings are critical as they affect the bonus payments insurers receive, with lower ratings potentially decreasing revenue.

Julie Utterback, an analyst at Morningstar, noted that anticipated membership growth could further pressure profit margins. Humana's CFO, Celeste Mellet, indicated the ratings could reduce profits by approximately $3.5 billion in 2026. Consequently, Humana shares have dipped more than 3%.

Regulatory Developments Impacting Insurers

Recent regulatory developments, including payment rate adjustments for 2027 announced by the Trump administration, have influenced stock values of major insurers like CVS Health and UnitedHealth, along with Humana. Humana's CEO, Jim Rechtin, expressed plans to adjust to these changes once finalized, noting Medicare Advantage's continued popularity among seniors despite fiscal challenges.

As of this year, Humana's shares have decreased by 31.8%, with CVS Health and UnitedHealth experiencing declines of 5% and 17.7%, respectively. A minor rate increase of 0.09% is pending final approval by April and remains subject to change.

Outlook and Market Conditions

For 2026, Humana forecasts an adjusted profit per share of at least $9, falling short of analysts' expectations of $11.92, according to LSEG data. The company attributes this cautious outlook to volatile market conditions. Strategies to counter the industry's ongoing cost pressures include repricing plans and modifying benefits.

In recent results, Humana reported a medical cost ratio of 93% for the quarter, aligning with analyst projections. The company recorded an adjusted fourth-quarter loss per share of $3.96, slightly better than the consensus estimate of a $4.01 loss per share.