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The second-largest health plan provider in the country took a hit in Medicare Advantage (MA) star ratings, and execs expect it to hurt the company’s bottom line.
Humana reported Wednesday on a Form 8-K current report filed with the Securities and Exchange Commission (SEC) that about 25%, or 1.6 million of its members, are enrolled in its plans with ratings above four stars for 2025—a drop from 94% of its total 6.4 million members in 2024.
MA star ratings are calculated by the Centers for Medicare & Medicaid Services (CMS), which ranks plans from one to five stars, with five being the best. The goal is to help beneficiaries compare health plans, but there’s also a financial incentive for companies.
MA plans with four- and five-star ratings become eligible for bonus payments from the agency. CMS doled out $12.8 billion on bonus payments in 2023, according to KFF.
In its SEC filing, Humana reported that one of its major MA plans, which serves about 45% of the company’s MA beneficiaries, dropped to a 3.5-star rating for 2025 from a 4.5-star rating in 2024. Based on its own review, Humana claimed that the drop was due to “narrowly missing higher industry cut points on a small number of measures.” Cut points are part of the measurement process used to ultimately rank health plans at a certain star rating.
“Humana believes there may be potential errors in CMS’s calculation of certain of its results and industry threshold cut points,” the filing read. “Despite ongoing appeal efforts, the company is disappointed with its performance and has initiatives underway focused on improving its operating discipline and returning to an industry-leading stars position as quickly as possible.”
Humana is not alone. Healthcare Brew previously reported that CVS Health’s Aetna projected it could lose $1 billion in 2024, and Elevance Health (formerly Anthem) expected to lose $500 million because of lower ratings.
In August, Aetna, the third-largest health plan provider in the country, replaced its president Brian Kane and initiated a $2 billion cost-savings plan, Healthcare Brew reported. UnitedHealth Group is the largest health insurer in the US and recently sued CMS over issues with its 2025 star ratings.
CMS announced in June it would recalculate 2024 star ratings after two court rulings questioned the agency’s process.
In the meantime, Humana has taken a hit. The company’s stock plummeted more than 15% to just under $214 per share on Wednesday morning following the SEC filing.
“Humana is exploring all available options to mitigate the expected 2026 revenue headwind related to its 2025 star ratings in the event its challenges to the results are unsuccessful,” the filing read.