What Happened?
Shares of health insurance company Humana (NYSE: HUM) fell 3.2% in the morning session after the company lost a lawsuit seeking to reverse cuts to its Medicare bonus payments.
A Texas district court ruled in favor of the U.S. government, affirming the Medicare program's downgrade of Humana's quality ratings. This decision was a significant blow to the insurer, which had challenged the cut to its 2025 Medicare Advantage Star Ratings. The ratings are crucial as the Centers for Medicare and Medicaid Services (CMS) provides annual bonus payments to plans that earn four or more stars. The court's decision means the lower ratings, which will squeeze the company's profits in 2026, will stand. This legal defeat created uncertainty for the health insurer, which had previously seen the percentage of its members in 4-star or higher rated plans drop significantly.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Humana? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Humana’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 15.3% on the news that peer UnitedHealth reported underwhelming first-quarter 2025 results as its sales and profits fell below Wall Street expectations. Guidance was the biggest concern. The new full-year earnings forecast came in well below what analysts had been expecting, mainly because the company saw its care (medical costs in its privately run Medicare plans) and funding issues lasting longer. The news cast a shadow over other health insurers with similar offerings, hinting at tighter margins and more uncertainty ahead.
Humana is down 14.2% since the beginning of the year, and at $216.75 per share, it is trading 46.4% below its 52-week high of $404.52 from July 2024. Investors who bought $1,000 worth of Humana’s shares 5 years ago would now be looking at an investment worth $546.31.
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