Key Points
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Humana raised its 2026 adjusted earnings forecastto at least $9.50 per share from $9, citing favorable Medicare Part D performance and medical costs at or below expectations.
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Early Medicare Advantage enrollment trends are ahead of expectations, and Humana currently anticipates membership growth in 2027. The company expects material margin improvement next year and is targeting an individual Medicare Advantage margin above 3% in 2028.
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Medicare Stars ratings exceeded Humana's top-quartile goal, potentially providing a one-time financial tailwind in 2028. The company also said a BlackRock joint venture will reduce its cost of capital, while a planned Gentiva stake sale is expected to generate about $900 million in pretax proceeds.
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Humana (NYSE:HUM) raised its full-year 2026 adjusted earnings outlook and said early Medicare Advantage enrollment trends point to membership growth in 2027, as executives described progress toward a longer-term margin recovery.
The health insurer now expects adjusted earnings of at least $9.50 per share, up from its prior forecast of at least $9. Chief Financial Officer Celeste Mellet said costs for both new and existing members have been in line with or better than expectations, with favorable Medicare Part D performance helping drive the higher outlook.
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President and Chief Executive Officer Jim Rechtin said the company's recovery was moving from on plan toward ahead of plan. Humana expects to provide an update on its longer-term commitments at a Dec. 10 investor event.
Enrollment and margins
Rechtin said Humana's performance in the Medicare annual enrollment period was ahead of initial expectations, citing strong retention among members affected by plan exits and new sales above plan. Although enrollment remains in its early stages, the company currently anticipates membership will increase in 2027.
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Rechtin declined to give a growth range, noting that Humana does not yet have a clear picture of overall retention. He attributed much of the outperformance to distribution partners, following changes the company made a year earlier.
Humana expects its 2027 products to support progress toward an individual Medicare Advantage margin of more than 3% in 2028. Mellet said the company expects a material margin improvement next year, both with and without the effect of its existing Medicare Stars headwind, and expects the business to be profitable even after accounting for that headwind.
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Mellet said pricing would drive much of the incremental improvement, alongside continued benefits from efforts to reduce operating and medical costs. She said the company had prioritized pricing for margin in its bids, followed by retention and then growth.
For 2026, Humana remains on track to double its individual Medicare Advantage pretax margin, excluding the Stars headwind, Mellet said.
Stars results and cost trends
Humana's Medicare Stars results for bonus year 2028 significantly exceeded its top-quartile goal, Rechtin said, with a member-weighted rating of 4.17. Mellet said 95% of members were in plans rated four stars or higher.
Rechtin said the company plans to manage its benefits and cost structure around performance near the top quartile rather than assume its latest results will recur. Humana expects a one-time financial tailwind in 2028 from the stronger ratings and plans to use some for investments in Stars capabilities, customer experience and clinical outcomes, with some also passing through to earnings.
Executives did not quantify that benefit. Rechtin said its size will depend on factors including competitors' ratings and Humana's membership mix. Mellet cautioned that approximately 30% of the upside above the company's target would be offset by payments to value-based care providers.
Humana also expects top-quartile performance for bonus year 2029, Rechtin said.
On medical costs, Mellet said 2026 trends were running at the lower end of the company's expected 7% to 8% range, helped by better-than-expected inpatient performance. For 2027, Humana expects overall trend of 8% to 9%, driven largely by a health technology pipeline that it expects to push Part D trend to 14% to 15%. The company incorporated those expectations into its bids, she said.
CenterWell, Medicaid and capital
Rechtin said CenterWell Primary Care added nearly 147,000 members this year, representing 30% growth and including the first-quarter acquisition of MaxHealth. Medicaid membership increased by 104,000 in 2026, driven largely by integrated dual-eligible programs and a South Carolina program change.
Mellet acknowledged cost pressure affecting a particular group of CenterWell primary care patients in one geography. She said the impact was meaningful to the primary care operation but not to Humana as a whole, and that changes by CenterWell and its payer partners should address most of the pressure.
Humana also closed a joint venture with BlackRock that replaces its previous ventures with Welsh, Carson. Mellet said the arrangement reduces the company's cost of capital and is expected to lower its GAAP debt-to-capital ratio by approximately 130 basis points in the fourth quarter. It also removes the need to fund a previously pending put option in 2027.
The company expects to complete the sale of its minority interest in Gentiva during the fourth quarter, generating approximately $900 million in pretax proceeds, Mellet said. She added that Humana intends to grow its dividend as earnings recover and expects to increase buybacks beyond the level needed to offset dilution, while remaining mindful of their effect on the debt-to-capital ratio.
About Humana (NYSE:HUM)
Humana Inc is a U.S. health and wellness company that provides health insurance and healthcare services. Its insurance offerings include Medicare Advantage, Medicare Supplement and prescription drug plans, as well as Medicaid and employer-sponsored plans.
The company also provides care through CenterWell, its healthcare services brand, which includes primary care, home health and pharmacy services. Its insurance and care offerings are available in markets across the United States, with availability varying by product and location.
Humana was founded in 1961 as a nursing home company and later expanded into health insurance.
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The article " What Humana (HUM) Said on Its Q3 Earnings Call " was originally published by MarketBeat.
