According to preliminary data from the Centers for Medicare and Medicaid Services (CMS), Humana Inc. ( HUM ) faces a substantial drop in its Medicare Advantage (MA) Star Ratings for 2025.

The data available in the CMS Plan Finder as of October 1, 2024, reveals that only 25% of Humana’s members are enrolled in plans rated four stars and above, a sharp decline from 94% in 2024.

The decrease is primarily driven by contract H5216, which holds around 45% of Humana’s MA membership and 90% of its employer group waiver plan (Group MA) membership.

Also Read: FTC Investigation Uncovers Anti-Competitive Practices By Handful Of Pharmacy Benefit Managers, Including CVS Health, UnitedHealth.

H5216’s rating dropped to 3.5 stars from 4.5 stars, affecting the company’s quality bonus payments in 2026. CMS is expected to release the official 2025 Star Ratings around October 10.

Humana attributes the lower star ratings to narrowly missing higher industry benchmarks based on a few key measures.

The company has raised concerns regarding potential errors in CMS’s calculation of certain results and industry thresholds. While appeals are still pending, Humana has requested further clarification from CMS to ensure the accuracy of its ratings.

The company plans to engage closely with CMS to address these issues and ensure that the Star Ratings accurately reflect the quality of its plans.

Despite its efforts to appeal the results, Humana expressed disappointment with its 2025 performance. It has launched initiatives to improve operational discipline and reclaim its leadership position in MA Star Ratings.

Humana expects the changes to drive improvements in key performance areas and positively impact quality bonus payments by 2027.

Looking ahead, Humana is exploring options to mitigate the potential revenue loss anticipated in 2026 due to the drop in Star Ratings.

It does not expect these ratings to affect its financial outlook for 2024 or 2025. Humana reaffirmed 2024 adjusted EPS of ~$16.00 versus the consensus of $20.31. Humana expects a 2024 insurance segment benefit ratio of approximately 90%.

However, while Humana remains focused on achieving its goal of a 3% margin in individual MA by 2027, the likelihood of meeting this target has become more uncertain due to the 2025 ratings outcome.

Price Action: HUM stock is down 20.10% at $223.23 during the premarket session at the last check on Wednesday.

Read Next:

Eli Lilly Nears First Trillion Pharma Title, But Investors Caution Amid Sky-High Valuation.