Humana Loses Court Battle Over Medicare Advantage Ratings, Billions In Payments At Risk

Humana Inc. (NYSE:HUM) lost a legal battle challenging cuts to its Medicare Advantage bonus payments, raising concerns over billions in potential revenue.

Per a media report on Tuesday, a Texas judge ruled in favor of the federal government and upheld the downgrade of Humana's star ratings—ratings that are directly tied to the payments private insurers receive under Medicare Advantage.

The ruling marks a setback for Humana, which had argued that the government's decision to lower some of its star ratings was based on three phone calls deemed unsuccessful in what the insurer called an "arbitrary and capricious" move.

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In his decision, the judge found that the government had correctly evaluated the calls, dismissing Humana's claims.

UnitedHealth Group Inc. (NYSE:UNH), Elevance Health Inc. (NYSE:ELV), and SCAN Health Plan won similar legal challenges over the past two years.

Humana's reliance on the Medicare Advantage program makes this ruling particularly concerning. In August, the consulting firm Capstone estimated that about $3 billion in payments were at stake for Humana. Quality "Star" ratings, which measure the performance of Medicare Advantage plans, directly influence bonus payments from the federal government.

Citing Kaiser Family Foundation data, Bloomberg noted that in 2025, total bonus payments to insurers reached at least $12.7 billion. A downgrade in Humana's ratings could therefore have a notable financial impact.

Humana has historically depended more on Medicare Advantage revenue than other major insurers, making this legal defeat a significant threat to its bottom line.

In July, Humana posted a second-quarter adjusted EPS of $6.27, down from $6.96 a year ago, beating the consensus of $5.90. The company reported sales of $32.39 billion, beating the consensus of $31.89 billion.

Humana expects 2025 adjusted earnings of approximately $17 per share compared to prior guidance of $16.25 and the consensus of $16.36, supported by solid execution and results.

Updated adjusted EPS guidance now contemplates approximately $100 million of incremental investments to improve member and patient outcomes and support operational excellence, positioning the company for long-term success.

Humana shares were down 3.24% at $262.22 at the time of publication on Tuesday, according to Benzinga Pro data.

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