Business Context and Reporting Period
Company: Humana Inc.
Filing Type: Form 8-K (Current Report)
Date: October 2, 2025
Context: The filing provides a Regulation FD disclosure regarding preliminary 2026 Medicare Advantage (MA) Star Ratings, updates on 2027 Star Ratings progress, 2026 Individual MA pricing strategy, and a reaffirmation of 2025 full-year earnings guidance.
Key Financial Metrics and Operational Data
- 2025 Earnings Guidance (Full Year):
- GAAP Diluted EPS: Approximately $13.77
- Adjusted (Non-GAAP) EPS: Approximately $17.00
- 2026 Medicare Advantage Star Ratings (Preliminary):
- Average Star Rating: 3.61 (consistent with 2025 average).
- Members in 4+ Star Plans: Approximately 1.2 million (20% of total membership).
- Members in 4.5 Star Plans: 14% (up from 3% in 2025).
- 2026 Individual MA Margin Target: Expectation to double pre-tax margin (excluding Stars).
Material Changes and Strategic Updates
- Star Rating Performance: While the 2026 average rating remains at 3.61, the proportion of members in 4.5-star plans increased significantly from 3% to 14%. Management notes the ratings are generally in line with multiyear financial planning assumptions.
- Contract Diversification: Humana is executing a strategy beginning with the 2026 Annual Election Period (October 15, 2025) to shift membership toward higher-rated contracts. This is expected to meaningfully increase the percentage of members in 4+ star plans for the 2027 payment year.
- Operational Shift: The company cites a fundamental shift in its Stars program utilizing data analytics and an "always-on" approach to drive improvements.
Guidance, Outlook, and Risks
- 2025 Guidance Affirmation: The company reaffirms its FY 2025 EPS guidance issued in July and August 2025. However, it notes that GAAP EPS guidance may change in the Q3 2025 earnings release due to ongoing value creation initiatives, while Adjusted EPS guidance is not expected to change.
- 2027 Outlook: Management anticipates a return to Top Quartile results for the 2027 MA Star Ratings, supported by operational progress made in 2026 and 2027 measurement periods.
- Membership Growth: The company believes it is positioned to return to membership growth in 2026 based on current pricing and benefit design.
- Risks: Forward-looking statements are subject to risks and uncertainties, including those detailed in the company's Risk Factors section. The 2026 Star Ratings data was preliminary and inadvertently accessible on CMS Plan Finder prior to this filing.
Investor Verification Checklist
- Verify the final 2026 MA Star Ratings once officially released by CMS to confirm the preliminary 3.61 average and 14% 4.5-star distribution.
- Monitor the Q3 2025 earnings release for updates to the GAAP EPS guidance, which management expects to change due to value creation initiatives.
- Track membership enrollment trends during the 2026 Annual Election Period to assess the effectiveness of the contract diversification strategy.
- Review the reconciliation of GAAP to Adjusted EPS in the Q3 2025 filing to understand the specific impacts of amortization, put/call valuations, and impairment charges.