What Happened?

Shares of health insurance company Humana (NYSE: HUM) fell 3.8% in the afternoon session after the company lost a key lawsuit aimed at reversing cuts to Medicare bonus payments and received a new "sell" rating from Goldman Sachs. 

A Texas judge ruled in favor of the federal government, upholding a downgrade of quality ratings tied to Medicare Advantage payments. This decision threatened billions of dollars in potential revenue for the company. Adding to the pressure, a Goldman Sachs analyst initiated coverage on Humana with a sell rating and a $235 price target, which was substantially below the stock's previous closing price. The analyst also noted a longer path to recovery for the company's Medicaid and healthcare exchange businesses. These developments compounded existing concerns, as Humana also faced a class-action lawsuit alleging it had downplayed the impact of rising medical costs from pent-up demand for healthcare procedures.

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.

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 previous big move we wrote about was 11 days ago when the stock gained 11.9% on the news that the stock continued to rally as the company provided a positive update on its Medicare Advantage "star" ratings for its 2026 plans. 

The company disclosed that while about 20% of its Medicare Advantage members were in plans rated 4 stars or higher, the percentage of members enrolled in the top-tier 4.5-star plans jumped to 14% for 2026. This marked a significant increase from just 3% in 2025. Higher star ratings are important as they can lead to bonus payments from the government and are a key factor for seniors choosing a plan. Adding to the good news, Humana also reaffirmed its full-year earnings guidance for 2025, which indicated confidence in its financial outlook. The update was met with some mixed views from analysts, but the positive ratings news appeared to be the main driver for the stock's rise.

Humana is up 3.6% since the beginning of the year, but at $261.83 per share, it is still trading 16.1% below its 52-week high of $312 from September 2025. Investors who bought $1,000 worth of Humana’s shares 5 years ago would now be looking at an investment worth $619.00.

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