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Can Humana's Star Ratings Rebound Unlock MA Earnings Power?
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Key Takeaways
Humana is targeting a return to top-quartile Star Ratings performance by bonus year 2028.
Improvement in 11 of 12 selected measures is outpacing historical trends, signaling quality gains.
A rebound could lift MA economics and complement plan selection and operating-efficiency efforts.
Humana Inc.’s (HUM - Free Report) Star Ratings recovery is emerging as a key catalyst for its Medicare Advantage (MA) turnaround. After facing a significant Stars-related headwind, the company is targeting a return to top-quartile performance by bonus year 2028. This recovery is important to the broader goal of achieving a sustainable pretax margin of at least 3% by 2028.
Early execution signals are encouraging. The rate of improvement across 11 of 12 selected HEDIS and patient-safety measures outpaced historical trends. This suggests that investments in clinical quality and member engagement are gaining traction. Still, we should view this as positive momentum rather than a completed turnaround.
The potential financial benefit is meaningful. The company defines top-quartile performance as Stars revenue per member per month 10% above the peer median. A successful recovery could improve the economics of its MA plans and complement other margin initiatives, including better plan selection and operating efficiencies.
The October Centers for Medicare & Medicaid Services (“CMS”) Stars release will be the key near-term test. A meaningful rebound would validate its quality improvement efforts and provide greater confidence in its earnings trajectory. More importantly, it could strengthen the case that Humana is on a credible path toward its 2028 margin target, giving investors a stronger reason to remain optimistic about the turnaround.
How Are Peers Positioned?
Peers like UnitedHealth Group Incorporated (UNH - Free Report) and Elevance Health, Inc. (ELV - Free Report) are also focused on strengthening Medicare Advantage quality and profitability.
UnitedHealth Group maintains a strong quality profile, with roughly 75-78% of members in 4+ Star plans. This sustained performance secures Quality Bonus Payments and preserves rebate dollars, giving UNH greater flexibility to fund competitive supplemental benefits while protecting underwriting margins.
Elevance Health operates with a broader commercial and Medicaid presence while working to strengthen its Medicare Advantage Stars profile through focused clinical outcomes and member engagement. Improving these quality scores could support ELV with better MA economics over time.
HUM’s Price Performance, Valuation and Estimates
Shares of HUM have gained 47.6% year to date, outperforming the broader industry’s 20.2% growth.
Image Source: Zacks Investment Research
From a valuation standpoint, HUM trades at a forward price-to-earnings ratio of 29.24X, up from the industry average of 15.98X. Humana carries a Value Score of B.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HUM’s 2026 earnings implies a 47% deterioration year over year, followed by a 66.7% improvement next year.
View the Zacks #1 Rank List
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Can Humana's Star Ratings Rebound Unlock MA Earnings Power?
Key Takeaways
Humana Inc.’s (HUM - Free Report) Star Ratings recovery is emerging as a key catalyst for its Medicare Advantage (MA) turnaround. After facing a significant Stars-related headwind, the company is targeting a return to top-quartile performance by bonus year 2028. This recovery is important to the broader goal of achieving a sustainable pretax margin of at least 3% by 2028.
Early execution signals are encouraging. The rate of improvement across 11 of 12 selected HEDIS and patient-safety measures outpaced historical trends. This suggests that investments in clinical quality and member engagement are gaining traction. Still, we should view this as positive momentum rather than a completed turnaround.
The potential financial benefit is meaningful. The company defines top-quartile performance as Stars revenue per member per month 10% above the peer median. A successful recovery could improve the economics of its MA plans and complement other margin initiatives, including better plan selection and operating efficiencies.
The October Centers for Medicare & Medicaid Services (“CMS”) Stars release will be the key near-term test. A meaningful rebound would validate its quality improvement efforts and provide greater confidence in its earnings trajectory. More importantly, it could strengthen the case that Humana is on a credible path toward its 2028 margin target, giving investors a stronger reason to remain optimistic about the turnaround.
How Are Peers Positioned?
Peers like UnitedHealth Group Incorporated (UNH - Free Report) and Elevance Health, Inc. (ELV - Free Report) are also focused on strengthening Medicare Advantage quality and profitability.
UnitedHealth Group maintains a strong quality profile, with roughly 75-78% of members in 4+ Star plans. This sustained performance secures Quality Bonus Payments and preserves rebate dollars, giving UNH greater flexibility to fund competitive supplemental benefits while protecting underwriting margins.
Elevance Health operates with a broader commercial and Medicaid presence while working to strengthen its Medicare Advantage Stars profile through focused clinical outcomes and member engagement. Improving these quality scores could support ELV with better MA economics over time.
HUM’s Price Performance, Valuation and Estimates
Shares of HUM have gained 47.6% year to date, outperforming the broader industry’s 20.2% growth.
Image Source: Zacks Investment Research
From a valuation standpoint, HUM trades at a forward price-to-earnings ratio of 29.24X, up from the industry average of 15.98X. Humana carries a Value Score of B.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HUM’s 2026 earnings implies a 47% deterioration year over year, followed by a 66.7% improvement next year.
Image Source: Zacks Investment Research
HUM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.