Humana (HUM) stock is plunging in Wednesday's session after the health benefits company announced preliminary 2025 Medicare Advantage (MA) Star Ratings data provided by the Centers for Medicare and Medicaid Services (CMS).
HUM is down 15% at last check, making it the worst S&P 500 stock so far today. And this follows a 12% decline in the stock yesterday when the CMS plan finder website included Star Ratings for 2025 plans.
In a filing with the Securities and Exchange Commission (SEC) this morning, Humana said that approximately 1.6 million, or 25%, of its members are currently enrolled in MA plans that are rated as four stars and above for 2025, which is down from 94% in 2024.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"The decline in Stars performance for 2025 will impact Humana's quality bonus payments in 2026," Humana said in the filing. "2025 Star rating details are expected to be formally released by CMS on or around October 10th."
However, Humana went on to say that it believes "there may be potential errors" in the calculations by the CMS. It currently has outstanding appeals and said it has requested additional information to ensure the accuracy of the ratings.
"Despite ongoing appeal efforts, the Company is disappointed with its performance and has initiatives underway focused on improving its operating discipline and returning to an industry leading Stars position as quickly as possible," Humana said, adding that it "is exploring all available options to mitigate the expected 2026 revenue headwind related to its 2025 Star ratings in the event its challenges to the results are unsuccessful."
Is Humana stock a buy, sell or hold?
Humana has woefully underperformed the broader market so far this year, down 38% on a total return basis (price change plus dividends) vs the S&P 500's 21% gain. Yet, Wall Street remains bullish on the healthcare stock.
According to S&P Global Market Intelligence, the average analyst target price for HUM stock is $384.28, representing implied upside of more than 60% to current levels. Additionally, the consensus recommendation is Buy. However, these ratings and price targets may very well change following the news.
Financial services firm Argus Research has already moved to the sidelines when it comes to the large-cap stock, as evidenced by its Hold rating.
"Humana faces headwinds to revenue and earnings growth, as its profit margin is squeezed by an increase in medical utilization," wrote Argus Research analysts David Toung and Owen Shelley in an August 13 note. "Despite the favorable demographics of an aging population, with some 26 million Americans aging into Medicare-eligibility from 2023 through 2030, we are concerned that Medicare Advantage is not an unalloyed growth vehicle."
Related Content
-
Stagflation: What It Is and Why Retirees Should CareStagflation — the economic bogeyman of the 1970's — may return to the US. Here's what it could mean to your retirement.
-
Why Losing Your Job Could Be the Best Opportunity to Plan Your FutureAmid this uncertainty lies an opportunity for strategic reassessment and personal growth.
-
Can a New Manager Cure Vanguard Health Care Fund?Vanguard Health Care Fund has assets of $40.5 billion but has been ailing in recent years. With a new manager in charge, what's the prognosis?
-
What You Don't Know About Annuities Can Hurt YouLack of awareness leads many to overlook these potent financial tools, and with the possibility of running out of money in retirement, that could really hurt.
-
Three Keys to Logical Investing When Markets Are VolatileFocusing on these market fundamentals can help investors stay grounded rather than being swayed by emotion or market hysteria.
-
Yes, the Markets Are Spooked, But You Don't Have to BeIt's human nature for investors to freak out in a downturn. But with a little discipline, you can overcome the urge to sell and stay focused on long-term goals.
-
Remembering Bogle: A New Standard for Municipal InvestingImprovements in technology, data, systematic trading and risk analytics have led to more successful municipal indexing.
-
Stock Market Today: Stocks Are Mixed Before Liberation DayMarkets are getting into the freewheeling rhythm of a second Trump administration.
-
How to Invest in SportsIf it's springtime, Forbes is out with its annual list of baseball franchise values. The billions involved might make you wonder how to invest in sports.
-
Winning Strategies for Financial Advisers as Clients' Lives EvolveHow can the wealth management industry help make life transitions easier for the adviser and the client?
