Something unusual just showed up in Medicare’s 2026 preview

Core Insights - A transformation in the $500 billion Medicare Advantage market is underway, potentially altering profit dynamics by 2027 [1] - The 2026 star ratings indicate differing strategies among major insurers, with Humana improving its quality mix while UnitedHealth Group and CVS Health's Aetna are scaling back [2][4] - This strategic divergence may impact future earnings and cash flow, with Humana positioned to benefit from increased bonuses [3][6] Company Strategies - Humana has significantly increased its enrollment in 4.5-star plans, rising from 3% last year to 14% in 2026, aligning with CMS bonus thresholds [4][5] - In contrast, UnitedHealth Group and CVS's Aetna are reducing their market presence for 2026, aiming to protect short-term profit margins amid rising care demand [2][5] Financial Implications - The differences in strategy will not immediately reflect in income statements but are expected to influence earnings and free cash flow in 2027 [3][6] - Medicare Advantage star ratings are crucial as plans with 4 stars or more can receive substantial extra payments, potentially amounting to hundreds of millions in additional revenue [7]