TLDR
- Humana reported a Q4 loss of $1.01 billion ($6.61 per share), wider than the prior year’s $862 million loss ($5.76 per share)
- The company expects 2026 adjusted earnings of at least $9 per share, far below Wall Street’s $11.91 estimate
- Lower Medicare Advantage Star Ratings for 2026 will reduce bonus payments from the government, pressuring profits
- Revenue rose to $32.52 billion from $29.21 billion, beating Wall Street’s $32.04 billion estimate
- Medical cost ratio climbed to 93.1% from 92.1% as older patients used more healthcare services and drug costs increased
Humana shares dropped 7% in premarket trading Wednesday after the health insurer reported a wider fourth-quarter loss and issued a 2026 profit forecast that came in well below Wall Street expectations.
The company posted a Q4 loss of $1.01 billion, or $6.61 per share. That compares to a loss of $862 million, or $5.76 per share, in the same period last year.
On an adjusted basis, Humana reported a loss of $3.96 per share. Analysts polled by FactSet had expected a loss of $4 per share, so the company narrowly beat estimates.
Revenue climbed to $32.52 billion from $29.21 billion a year earlier. Wall Street had projected $32.04 billion.
The company’s benefit ratio jumped to 93.1% from 92.1% the previous year. This metric measures how much of premium revenue goes toward covering medical costs.
Higher medical expenses continue to squeeze health insurers. Older Americans are using more healthcare services and prescription drug prices keep climbing.
Lower Star Ratings Hit 2026 Outlook
Humana’s 2026 guidance spooked investors even more than the quarterly results. The company expects adjusted earnings of at least $9 per share for the full year.
Analysts had been forecasting $11.91 per share. That’s a gap of nearly 25%.
The culprit? Lower Medicare Advantage Star Ratings for 2026. These government quality ratings range from one to five stars and determine bonus payments to insurers.
Humana gets most of its revenue from Medicare Advantage plans. Lower ratings mean fewer bonus dollars from Washington.
The company expects about 45% of its members to be enrolled in plans rated four stars or above in 2026.
Membership Growth Could Squeeze Margins Further
Despite the profit pressure, Humana forecasts individual Medicare Advantage membership to grow about 25% in 2026. That’s on the higher end of what investors expected.
The growth comes as major competitors pull back from the Medicare Advantage market. Humana attributes its expansion to a “customer-led benefit strategy and changes to its customer service approach.”
But there’s a catch. New members typically aren’t as profitable as existing ones and can drive up costs for insurers.
Morningstar analyst Julie Utterback noted that “the big increase in membership looks likely to cut into margins further than the market was anticipating.”
Humana said the level of conservatism in its 2026 outlook is higher than usual. The company is accounting for what it calls a “dynamic environment.”
The insurer has been repricing plans and adjusting benefits to protect profits. Medical cost pressures have gripped the industry for more than two years now.
Humana’s quarterly medical cost ratio came in at 93%, roughly matching analyst expectations. The company reported an adjusted Q4 loss of $3.96 per share versus estimates of a $4.01 per share loss.
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