Humana slips 15% amid low demand and ratings of Medicare Advantage 📉

Shares of insurance company Humana (HUM.US) are losing 15% today, after the company indicated to the Securities and Exchange Commission that its ratings for so-called Medicare Advantage plans have dropped significantly. The share of customers enrolled in the 2025 plans fell to 25%, down from 94% this year. These plans, are private equivalents of the government's Medicare program, (designed for people 65 and older). The annual enrollment window for 2025 insurance begins Oct. 15, and customers will have until Dec. 7 to decide on coverage.

The insurer said the results of the assessments are not expected to affect its performance in the current and next year's 2025, but will negatively affect revenues starting in 2026.

• Based on preliminary 2025 data from the Centers for Medicare & Medicaid Services (CMS), only 1.6 million, or 25%, of its members are currently enrolled in individual plans for next year.
• The main culprit is a drop in ratings for one of Humana's key contracts, in which 45% of its members are enrolled. Ratings have dropped from 4.5 stars to 3.5 stars, and the contract represents more than 90% of group Medicare Advantage plans.
• The company estimates that the drop in ratings is due to a change in the way they are calculated, which may still be wrong, and will await clarification, by CMS. The company is currently trying to resolve the issue and minimize the impact.
• BTIG indicated that Humana's ratings were disappointing, given that plans are already facing problems - higher claims and rising hospital visits.

Humana (HUM.US, D1 interval)

Humana intends to provide more details in the next few months on future strategies to improve performance. It reported that it is taking steps to increase member and provider engagement, improve technology and enhance customer service. However, investors are very cautious. Shares of the Humana are now set at $237, near Covid-19 lows, much below EMA200 (red signal).