Humana stocks plunge after warning about star ratings

The shares of the American health insurer Humana have fallen by more than 20 percent in pre-market trading. The reason for this is a warning from the company that recent changes in the quality ratings of private Medicare plans by the federal government could impact profits in 2026. According to data from the Centers for Medicare and Medicaid Services, Humana currently has about 25 percent of its members in plans rated four stars or higher for 2025. In comparison, this year it was an impressive 94 percent. The CMS rates the quality of these plans on a scale from one to five stars, with programs receiving high ratings getting bonus payments that can significantly influence financial success. Humana further stated that the decline in star ratings will diminish quality bonus payments in 2026. This is primarily due to narrowly missing higher industry thresholds on a few measures. Additionally, Humana believes there could be potential errors in some of the agency's calculations and has filed appeals against certain results. The CMS is set to officially announce the details of the star ratings for 2025 next week. The company is currently reviewing all available options to mitigate the anticipated revenue decline in 2026 should the appeals prove unsuccessful. However, it does not expect the issue to affect financial results or outlook for 2024 or 2025. Humana has initiated efforts to improve its operational discipline and regain a leading position in star ratings as quickly as possible. These measures are expected to result in improved quality bonus payments starting in 2027 and beyond. In recent hours, the value of Humana shares has fallen by 21 percent to $220.74 in pre-market trading.