Humana Raises 2026 Profit Forecast After Better-Than-Expected Quarter

The quarter and the new forecast

Humana's quarter topped expectations, and management followed up by nudging its 2026 adjusted earnings per share target to a minimum of $9.50, up from at least $9. The company also posted a per share loss that was slightly narrower than the $1 loss analysts had penciled in.

Shares slipped 1.4% before the market opened on Friday. Through Thursday's close, the stock was up 61% year to date.

Costs, margins and Medicare Advantage

In prepared remarks, Humana said medical and pharmacy costs rose more slowly than, or in line with, what it had planned for, after budgeting for a high single digit increase. Pricing health plans to match future care costs is the heart of the insurance business.

While skipping a 2027 forecast, the company said its Medicare Advantage line is still expected to produce a pretax margin of 3% in 2028.

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Ratings, bonuses and market exits

Medicare Advantage sits at the heart of Humana's operations. For 2028, expectations call for Humana to receive larger bonus payouts than earlier thought after the government raised quality scores on certain plans. Those quality scores, known as Star ratings, can unlock bonus dollars for plans with four or more stars.

Bloomberg Intelligence analyst Glen Losev said that, in total, 95% of Humana's members were enrolled in plans eligible for those bonuses, which is more than double the rate a year earlier. Many other large Medicare Advantage carriers saw declines in eligible membership.

What to watch for investors

The government has recently kept payment increases in check for companies and intensified oversight of the program, which has rattled investors. In turn, insurers including Humana have been trimming Medicare Advantage offerings in markets with thinner returns. Humana is closing plans covering about 600,000 people, and combined with moves by peers, that means millions of seniors will have to pick new coverage next year as companies emphasize margins over expansion.

Why does that matter? Premiums, benefit cuts and market exits have been shoring up profits across health insurance, bolstering an earnings season that beat Wall Street's expectations. How those levers - and bonus payments tied to plan quality - evolve will shape what the sector earns next, and by extension, how your portfolio treats managed care.

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