Humana Loses Court Battle Over Medicare Advantage Ratings, Billions In Payments At Risk

Core Viewpoint - Humana Inc. faces significant revenue concerns following a legal ruling that upheld cuts to its Medicare Advantage bonus payments, which could impact billions in potential revenue [1][4][5]. Legal Challenge and Ruling - A Texas judge ruled in favor of the federal government, dismissing Humana's claims that the downgrade of its star ratings was arbitrary, based on three unsuccessful phone calls [2][3]. - Other insurers, including UnitedHealth Group, Elevance Health, and SCAN Health Plan, have successfully challenged similar legal issues in the past two years [3]. Financial Implications - Capstone estimated that approximately $3 billion in payments are at stake for Humana due to the downgrade in star ratings, which directly affect bonus payments from the federal government [4]. - In 2025, total bonus payments to insurers are projected to reach at least $12.7 billion, indicating that a downgrade in Humana's ratings could have a substantial financial impact [5]. Company Performance - In Q2, Humana reported an adjusted EPS of $6.27, down from $6.96 year-over-year, but above the consensus of $5.90, with sales of $32.39 billion exceeding the consensus of $31.89 billion [6]. - The company has updated its adjusted EPS guidance for 2025 to approximately $17 per share, up from prior guidance of $16.25, supported by solid execution and results [6][7]. - Humana's shares declined by 3.24% to $262.22 following the news [7].