02:01 PM EDT, 10/02/2024 (MT Newswires) -- Humana (HUM) said Wednesday that the number of members enrolled in 2025 Medicare Advantage plans with a quality rating of at least four stars is expected to plunge, likely affecting its 2026 revenue and bonus payments.

Preliminary Medicare Advantage data from the Centers for Medicare and Medicaid Services showed the company has about 1.6 million, or 25%, of its members enrolled in plans rated 4 stars and above for next year, down from 94% in 2024, according to a filing with the US Securities and Exchange Commission. The decrease in stars performance will impact Humana's 2026 quality bonus payments, the company said.

The health insurer's shares were down 14% in Wednesday afternoon trade and have lost 47% of their value so far this year.

The company said the preliminary results were weighed down by contract H5216 dropping to a 3.5-star rating from a 4.5 in 2024. H5216 contains roughly 45% of Humana's Medicare Advantage membership, including greater than 90% of its employer group waiver plan membership, the filing showed.

The drop in star ratings is likely driven by "narrowly missing higher industry cut points on a small number of measures," the company said. "Humana believes there may be potential errors in CMS' calculation of certain of its results and industry threshold cut points." The company said it has outstanding appeals regarding certain results and has requested further information.

"Despite ongoing appeal efforts, the company is disappointed with its performance and has initiatives underway focused on improving its operating discipline and returning to an industry-leading stars position as quickly as possible," Humana said. The company expects the initiatives to affect performance across key measures and drive improved quality bonus payments starting in 2027.

Last month, health policy research group KFF said Medicare Advantage plans are expected to receive at least $11.8 billion in bonus payments in 2024, including $2.5 billion to Humana, down from a total of $12.8 billion last year. KFF attributed the decline to a drop in star ratings following the expiration of COVID-19 pandemic-era policies.

Humana said Wednesday the preliminary Medicare Advantage stars results are unlikely to affect its financial results or guidance for 2024 or 2025. The company is exploring "all available options" to mitigate the anticipated headwind to 2026 revenue in case its challenges to the results are not successful.

"The company remains focused on achieving its individual (Medicare Advantage) margin target of 'at least 3%', although there is now more risk in its ability to fully achieve this result by 2027," it said.

Humana expects the CMS to formally release details of the 2025 star ratings by Oct. 10, according to the filing. On Monday, the company said it will release its third-quarter financial results Oct. 30.

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