- Humana Inc. (NYSE: HUM) shares surged on Friday, October 9, after the insurer reported a sharp improvement in its 2027 Medicare Advantage star ratings, potentially restoring access to government quality bonus payments that were threatened by its previous ratings decline.
Humana shares rose about 15% in premarket trading after the Centers for Medicare & Medicaid Services (CMS) released its latest ratings, according to Reuters. The improvement places the health insurer in a stronger position to generate additional revenue from its Medicare Advantage business, which serves older adults and eligible people with disabilities through privately administered plans.
In a company announcement published October 9, Humana said 95% of its Medicare Advantage members would be enrolled in plans rated four stars or higher for 2027, compared with just 20% for 2026. The company also said 42% of its members would be in plans rated 4.5 stars.
The ratings represent a substantial recovery after Humana's previous results put pressure on its outlook for government payments tied to plan quality.
How Humana's 2027 Medicare Advantage Ratings Could Boost Revenue
CMS evaluates Medicare Advantage and prescription drug plans on a five-star scale based on measures that include quality of care, customer service and member experience. Insurers with qualifying ratings can receive quality bonus payments and additional funding that can support benefits and enrollment.
Humana said it had 12 Medicare Advantage contracts rated four stars and six rated 4.5 stars for 2027. The company also reported improvements across several quality measures, including preventive care and health-plan performance.
One particularly important change involved Humana's large H5216 contract, which rose to four stars from 3.5 stars in the prior rating cycle. The upgrade restores its eligibility for quality bonus payments associated with the higher rating threshold.
The financial benefits will not arrive immediately. The 2027 star ratings are expected to affect bonus payments in 2028, giving Humana time to use the improved results as it prepares its next Medicare Advantage offerings. Analysts cited by Healthcare Dive estimated that the improvement could generate at least $3 billion in additional revenue in 2028, although the ultimate benefit will depend on enrollment, plan bids and how much funding Humana uses to support member benefits.
The turnaround follows a difficult period for the insurer. Only 20% of Humana's Medicare Advantage members were in plans rated at least four stars for 2026, down sharply from earlier years. That decline threatened bonus-related revenue at a time when health insurers were already dealing with higher medical costs.
Humana's recovery also comes as insurers adjust their Medicare Advantage strategies ahead of the next enrollment cycle. Changes to Medicare Advantage provider networks for 2027 show how companies are trying to manage costs while maintaining competitive coverage.
What Humana's Stock Rally Means for Investors
The ratings improvement gives Humana a potential financial advantage over some competitors, but it does not remove the company's broader operating challenges. Medicare Advantage insurers have faced pressure from rising medical spending, greater healthcare utilization and questions about the adequacy of government reimbursement. Humana must still manage those costs while competing for members and maintaining the quality standards required to secure higher ratings.
The latest CMS results also create a different picture across the industry. Analysts cited by Reuters estimated that the proportion of UnitedHealth Group Inc. (NYSE: UNH) members in plans rated at least four stars could fall to about 67%, from 81%. For CVS Health Corp. (NYSE: CVS), the comparable share was estimated at roughly 70%, down from 84%.
That contrast helped make Humana a standout among health insurer stocks on Friday. However, the stock reaction reflects expectations about future earnings and payments rather than cash already received from the ratings change.
Investors will now be watching Humana's enrollment performance during the upcoming annual Medicare enrollment period, which runs from October 15 through December 7. The number of members who choose its plans, the benefits offered and the cost of providing care will help determine how much of the ratings improvement translates into financial gains.
The broader economics of Medicare Advantage will remain important, including the CMS outlook for 2027 Medicare Advantage premiums. Lower projected average premiums do not necessarily mean lower costs for insurers, and individual plan economics can vary significantly.
For Humana shareholders, the ratings update removes a major concern about future quality-related payments and improves the company's potential revenue outlook for 2028. Whether the stock can sustain its rally will depend on how the ratings translate into actual financial performance, alongside medical costs, membership trends and management's earnings guidance.