Humana has a much better set of Medicare star ratings to show investors. Before I start mentally spending the bonus money, though, I want to check two things: when it arrives and how much of the improvement is likely to stick.
In its October 9 update, the insurer said 95% of its Medicare Advantage members, using its current membership mix, are in contracts rated four stars or higher for 2027. That’s encouraging. The quality-bonus payoff belongs to bonus year 2028, and management has already warned that some of the outperformance will be temporary.
The calendar is doing quite a bit here
The Centers for Medicare & Medicaid Services’ October 8 release says the 2027 ratings will affect 2028 Medicare Advantage quality bonus payments. They also appear in the plan-comparison information for the upcoming enrollment period.
So we’re looking at information released in 2026, labeled 2027, with a bonus-payment effect in 2028. A calendar deserves a place beside the calculator on this one.
CMS uses the ratings to assess the quality of health and prescription-drug services. The agency also cautions that results can change from year to year and that the thresholds used to assign ratings are recalculated annually.
For a shareholder, the improvement is useful evidence about Humana’s future position. The ratings do not bring those 2028 quality bonus payments into this quarter. Keeping those dates straight helps avoid paying for a benefit in an earnings estimate before that benefit actually belongs there.
What improved, and what management expects to keep
In his prepared remarks, CEO Jim Rechtin said Humana’s member-weighted rating, using its current contract and member mix, increased from 3.84 for bonus year 2027 to 4.17 for bonus year 2028. Eleven additional contracts will qualify for the four-star quality bonus.
The more interesting part comes after those encouraging numbers. Humana intends to manage its products and benefits around performance that approximates its own “Top Quartile” target. Humana defines that target as Stars-related revenue per member per month 10% above the median for its defined peer group.
Management expects some of the performance above that target in 2028 to be one-time. Rechtin specifically said it doesn’t expect that outperformance to repeat in bonus year 2029, citing changes to the program, movement of members across contracts and other structural factors.
I like having that distinction stated upfront. A recovery that supports a healthier ongoing business can be valuable even when the best year isn’t a sensible template for every year afterward.
The mistake would be to take an unusually favorable year, multiply it indefinitely and call the result a conservative forecast. My spreadsheet would happily do that. It has very few opinions about whether I’m being sensible.
A comparison chart isn’t an earnings forecast
Humana’s October 9 filing compares Stars-related revenue using standardized assumptions and September 2026 membership. The calculation includes quality bonuses and incremental retained rebates. It isn’t a measure of total revenue per member.
The company explicitly says actual 2028 amounts will differ with enrollment, contract mix, risk scores, payment benchmarks and rebates. That makes the comparison helpful for judging relative position, while leaving important pieces of the eventual profit calculation open.
Humana expects to use the extra, one-time benefit for one-time investments and returns to shareholders. Humana intends to discuss the amount and expected use before, or alongside, detailed 2028 guidance on its fourth-quarter 2027 earnings call. That isn’t a specific dividend or buyback commitment today.
This year’s guidance still needs its own line
Humana reaffirmed full-year 2026 adjusted earnings guidance of at least $9 a share. It couldn’t yet reconcile that outlook to GAAP earnings while completing its quarter-end close, and said strategic initiatives could change its GAAP guidance. The filing calls the guidance preliminary during the close, although Humana said it didn’t expect its adjusted EPS outlook to change.
That accounting distinction belongs in any summary of the announcement. Our guide to reading an earnings report walks through why guidance, adjustments and the underlying results need to be considered together.
I’ll be watching how Humana separates sustainable earnings improvement from the temporary extra benefit. Its next scheduled earnings call is November 6, followed by a December 10 investor update. Better ratings give shareholders a concrete reason to revisit the recovery case; the next useful step is seeing how management turns that stronger position into an earnings plan.
For general education. This analysis is not personalized investment advice.