Key facts
- Humana shares rose 15% in premarket trading.
- 95% of Humana's Medicare Advantage members will be in plans rated four stars or higher in 2027.
- This is a significant increase from 20% of members in 2026.
- J.P. Morgan analysts expected 60% to 70% of Humana's plans to receive four stars or higher.
- The US health department rates Medicare Advantage plans on a scale of one to five stars.
- Higher star ratings lead to bonus payments and boost plan enrollment.
Humana Inc. shares surged 15% in premarket trading on Friday after the health insurer announced a significant improvement in its Medicare Advantage plan ratings for 2027. The company expects 95% of its members to be in plans rated four stars or higher, a sharp increase from 20% in 2026.
Analysts at J.P. Morgan noted that Humana's expected rating improvement exceeded their projections of 60% to 70%. The US health department assigns ratings from one to five stars to Medicare Advantage and prescription drug plans, with higher ratings leading to government bonus payments and increased enrollment.
Humana's improved ratings in drug-plan quality, health-plan quality, and readmissions were highlighted by Evercore ISI analyst Elizabeth Anderson, who stated it reflects management's focus on these metrics over the past year. The company provides Medicare Advantage plans on behalf of the government for adults aged 65 and older, and for people with disabilities.
Analysts suggest Humana's performance outshines larger competitors. J.P. Morgan estimates that UnitedHealth's share of plans rated four stars or higher will decrease to approximately 67% from 81%, and CVS Health's share will fall to about 70% from 84%. Overall, the health department reported that approximately 71% of Medicare Advantage prescription drug plan enrollees will be in contracts rated four stars or higher in 2027.