Humana shares slid more than 10% Wednesday after the health insurer warned that a steep drop in the federal government’s quality ratings of its Medicare plans could hit its results in 2026.
Humana said it has about 25% of its members currently enrolled in plans rated four stars and above for 2025 based on preliminary 2025 Medicare Advantage ratings data from the Centers for Medicare and Medicaid Services, down from 94% this year.
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The quality ratings, on a scale of one to five stars, are tied to bonuses paid to insurers. The downgrade could have a huge revenue impact in 2026, with analysts suggesting a range of figures, from less than $2 billion to far higher.
“The scale of the drop is a shock,” said Sarah James, an analyst with Cantor Fitzgerald, who projected the shift in stars could affect nearly $3 billion in 2026 revenue if Humana isn’t able to alleviate it.
The company’s shares fell more than 20% in morning trading before partly recovering. The stock closed down 11.3% to $31.57 a share, a loss of $3.8 billion worth of market capitalization.
Humana said it is appealing the CMS decisions and would work to mitigate their impact. The company said its “commitment to quality is unwavering,” and the fall in the ratings was largely driven by narrow misses on key measurements that weigh heavily in the federal quality analysis.
The announcement is the latest sign of how the Medicare business, long seen as a main source of growth and profit for insurers, has become riskier and more challenging.
As Medicare and other government programs have become an ever-larger share of the insurance business, decisions by agencies and Congress can have outsize impact on the companies’ results. In one sign of the volatility this dynamic can bring, shares of Humana and rival UnitedHealth Group fell in the wake of the presidential campaign debate.
Medicare results have weighed on the shares of Humana rival CVS Health because of struggles at its Aetna unit.
Humana, which reported $106.4 billion in revenue last year, is especially vulnerable to government moves.
Its insurance business is nearly all Medicare Advantage, the private version of the federal program for the elderly and disabled. The company has in the past suggested that its close focus on the Medicare business is a strength, as Medicare Advantage is growing as more seniors choose the plans. Humana’s own stock has been hurt already this year after unexpectedly high medical costs hit its results.