Humana Confident in Medicare Advantage Growth Despite Challenges

Humana, one of the largest Medicare Advantage (MA) insurers in the United States, has expressed confidence in its ability to grow both the size and profitability of its MA business in 2026, despite facing challenges related to plan generosity and star ratings. The company's third-quarter results and recent statements from executives provide insights into its strategic positioning and outlook for the coming year.

Strong Third Quarter Performance and Outlook

Humana reported solid third-quarter results, with revenue of $32.6 billion, up 11% year over year, and net income of $195 million. Despite a 60% drop in net income compared to the previous year, both earnings and revenue exceeded analyst expectations. The company reaffirmed its 2025 adjusted earnings guidance, indicating confidence in its overall outlook.

CEO Jim Rechtin stated, "While it's early, we feel good about what we are seeing so far," referring to the first two weeks of the annual Medicare open enrollment period. Humana expects to retain 75,000 more MA members than previously anticipated, a significant improvement from earlier projections of losing 500,000 members.

Medicare Advantage Strategy and Challenges

Humana's approach to its MA business for 2026 has raised some concerns among investors. While the company has reduced its footprint, offering plans in three fewer states and 194 fewer counties, it has largely maintained the generosity of benefits in remaining plans. This strategy has led to worries that Humana may have designed its plans too aggressively for growth, potentially impacting margins.

However, Humana executives argue that not all growth is detrimental. David Dintenfass, Humana's president of enterprise growth, explained, "Part of this question about 'Is growth good, is it not,' comes down to the margin of that growth. We are trying to get to a place where all of our products on the insurance side have a reasonable margin."

The company is prepared to take action to slow sales if necessary, including decommissioning plans or adjusting marketing strategies. CFO Celeste Mellet expressed satisfaction with the current profitability of Humana's plans, stating, "Based on all the work that we did going into [open enrollment] in terms of our product design and our channel mix, we are happy with the margin we're seeing and expect it to be relatively consistent with our overall margin — although some will be above and some will be below."

Star Ratings and Profit Recovery Challenges

A significant challenge for Humana is the drop in valuable star ratings for its MA plans. In 2026, only 20% of Humana's MA members will be in plans rated at least 4 stars, down from 25% in 2025. This decrease could potentially set back the company's profit recovery plans.

Humana has chosen not to crosswalk MA members out of a major contract that houses the majority of its group membership that came in below 4 stars. Instead, the company plans to split this contract, known as H5216, into smaller contracts over time to reduce risk to the overall business if one underperforms.

Despite these challenges, Humana reports making progress on strengthening its stars performance through increased investments. CEO Rechtin noted improvement across the "vast majority" of metrics, with the company aiming to achieve top-quartile stars by the 2027 plan year.