Bloomberg reported on Tuesday that a Texas judge ruled in favor of the federal government, affirming a downgrade of quality ratings that are tied to payments for Medicare Advantage.
Humana (HUM) has reportedly lost a lawsuit seeking to undo cuts to the bonus payments it receives from the federal Medicare insurance program.
Bloomberg reported on Tuesday that a Texas judge ruled in favor of the federal government, affirming a downgrade of quality ratings that are tied to payments for Medicare Advantage. The judge had dismissed a similar case in July as well.
Humana depends more than any other large insurer on revenue from the Medicare Advantage program, Bloomberg noted. About $3 billion was at stake in the lawsuit, the report said, citing consulting firm Capstone.
Centers for Medicare & Medicaid Services (CMS) assigns quality ratings, called stars, to Medicare Advantage plans, ranging from one to five, with five being the highest rating. Beneficiaries can use this data to help choose plans, and insurance companies can receive government bonus payments for higher ratings.
Humana’s stock dropped as much as 4% at the time of writing. On Stocktwits, retail sentiment around HUM stock stayed within the ‘bearish’ territory, coupled with ‘low’ message volume.
Earlier this month, Humana affirmed its full-year earnings per share guidance provided in July.
The insurer stated that it expects adjusted earnings per common share of $17 for the year ending Dec. 31, 2025, and diluted earnings per share of $13.77.
The firm also stated that its preliminary 2026 Medicare Advantage (MA) Star Ratings align with the assumptions in its financial planning. As a result, there is no change to the incremental earnings potential for 2025 to 2028. The ratings data provided by the Centers for Medicare & Medicaid Services was inadvertently accessible on CMS Plan Finder for a brief period on Oct. 1, 2025, the company stated.
Humana has about 20% of its members currently enrolled in Medicare plans rated four stars and above for 2026, and 14% of members in 4.5-star plans for 2026, it said.
“Based on all information available to date, the company remains confident in its 2026 Individual MA pricing and benefit design, including the expectation that it will double individual MA pre-tax margin in 2026 (excluding Stars), and believes it is positioned to return to membership growth in 2026,” the firm said.
HUM stock rose 3% this year and fell about 2% over the past 12 months.
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