Humana plans to shut down Medicare Advantage plans to improve profits and reach margin targets
Humana reported second-quarter results that exceeded analyst expectations, yet the company plans to trim its Medicare Advantage footprint to reach long-term margin targets. CFO Celeste Mellet stated that the insurer will shut down plans with lower capital returns to ensure stable benefits for members in higher-profit plans. This strategy aims to help Humana reach a sustainable margin of at least 3% by 2028. While the company beat earnings and revenue estimates, it slashed its non-adjusted earnings per share guidance. This was largely due to a sharp decline in Medicare Advantage star ratings, which impacts quality bonus payments from the CMS. CEO Jim Rechtin noted that the insurer is making progress toward achieving top-quartile stars by 2028. The administration announced a generous rate hike for 2026, which helped the industry manage rising costs. Despite the solid quarter, Humana's stock fell in morning trade following the results. The insurer expects to recapture a significant portion of the affected members by bringing them into other plans.