Humana (NYSE:HUM) said its 2026 performance is tracking in line with expectations, with management emphasizing planned Medicare Advantage margin expansion in 2027, progress in its Stars program and continued operating-cost reductions as key components of its path toward a sustainable pretax margin of at least 3% in 2028.
President and Chief Executive Officer Jim Rechtin said the company’s 2026 membership growth trajectory remains on track and that both new and returning members are performing as expected. He said Humana’s priority in preparing its 2027 Medicare Advantage, or MA, bids was to make the margin progress needed to remain on course for its 2028 target.
2027 Medicare Advantage Plan Changes
Chief Financial Officer Celeste Mellet said Humana expects to make “significant progress” in 2027 compared with 2026, although final results will depend on the size and composition of its membership. The company did not provide a specific margin target for 2027.
Humana expects targeted plan exits for 2027 to affect approximately 600,000 members. Mellet said the company intends to recapture a significant portion of those members, similar to its experience in 2025, when it recaptured just over 40% of affected membership.
The company said it will use plan exits to preserve higher-performing plans, particularly those with greater penetration of value-based care. Mellet described the strategy as removing the lower end of profitability and returns rather than making more uniform benefit reductions across the portfolio. She said most planned exits involve plans with ratings of 3.5 Stars or below for bonus year 2027, though she said the strategy was not principally a Stars-related decision.
Humana said its bids continue to assume cost trends consistent with its 2026 outlook. Mellet reiterated that the company expects all-in medical and pharmacy cost trend of 7% to 8% this year, including lower medical-cost trend and double-digit drug-cost trend. For 2027, she said drug trend is expected to increase modestly due to the health technology pipeline and newly released drugs.
Management also said it incorporates contingency into its bids because they are submitted well ahead of the coverage year.
Cost Trends and Operating Efficiency
Mellet said medical costs have been within Humana’s expected range, with slight favorability concentrated in inpatient care. Based on roughly four months of completed claims data, she said the favorable inpatient trend was more concentrated among members served by value-based providers.
The company said it has seen both lower hospital admissions per thousand members and lower unit costs for admissions. Rechtin said Humana is pursuing site-of-service initiatives intended to steer members toward lower-cost and higher-quality settings through local contracting, provider incentives, benefit design and member education.
Humana’s consolidated operating-cost ratio declined 120 basis points year over year in the second quarter, according to Mellet. The company continues to expect an approximately 150-basis-point reduction for the full year. Management said operating-model efforts have generated hundreds of millions of dollars in value during the first half of 2026.
Among the actions cited by Rechtin were centralizing utilization-management operations from 11 markets into one team, expanding outsourcing in finance and human resources, optimizing information-technology vendor relationships and integrating CarePlus operations into Humana’s core platforms.
Mellet said earlier cost efforts were more tactical, while current work is increasingly transformational, including simplification of operations, organizational structures, data management and vendor relationships. She said Humana is not yet reflecting major benefits from technology initiatives but sees a longer-term opportunity.
Stars Progress and December Update
Rechtin said Humana’s outlook for bonus year 2028 Stars results remains unchanged and that the company remains confident in its ability to return to top-quartile results. Humana defines that objective as Stars revenue per member per month that is 10% above the median of its peer group, rather than relying solely on the percentage of members enrolled in plans rated 4 Stars or higher.
The company said its rate of improvement in 11 of 12 selected HEDIS and patient-safety measures outpaced the historical compound annual growth rate over the prior four years. Rechtin said the measures were selected because Humana had consistent longitudinal data for comparison and that management believes they are representative of broader performance.
Humana said it does not know the industry thresholds that will ultimately determine Stars outcomes and therefore cannot guarantee a result when the final data are released. The company expects to enter its annual Stars blackout period once it receives plan preview information from the Centers for Medicare & Medicaid Services beginning in August, with final data expected in October.
For bonus year 2029, Humana said it remained 5% ahead of last year’s quality-improvement rate on a per-member basis in key HEDIS measures at the end of the second quarter. New members’ engagement levels were in line with, and on some measures above, those of renewing members, management said.
Humana plans to host a virtual investor update on Dec. 10. Rechtin said the company expects by then to have full visibility into bonus year 2028 Stars results and preliminary insights into 2027 membership trends. He characterized the event as a “mark to market” on existing commitments rather than a change in strategy or financial goals.
Capital Actions, Medicaid and Leadership
Humana said it has agreed to divest its minority interest in Gentiva in a transaction valued at approximately $900 million and expected to close in the fourth quarter. Rechtin said proceeds will largely fund the company’s recent acquisition of MaxHealth.
The company also established $1.5 billion in contingent capital facilities using pre-capitalized trust securities, or PCAPS. Mellet said the facilities provide long-duration contingent liquidity without increasing balance-sheet leverage unless drawn, and Humana does not anticipate using them in the near or medium term.
In Medicaid, Humana said it was awarded a statewide Illinois Medicaid managed-care contract scheduled to begin in January 2027. Rechtin said Humana was the only new entrant awarded a contract alongside five incumbents.
Separately, the company announced that Paul Smith, Anthropic’s chief commercial officer, and Fred Crawford, the former president and chief operating officer of Aflac, will join Humana’s board of directors.
About Humana (NYSE:HUM)
Humana Inc (NYSE: HUM) is a health insurance company headquartered in Louisville, Kentucky, that primarily serves individuals and groups across the United States. The company is best known for its Medicare business, offering Medicare Advantage plans and prescription drug (Part D) coverage, alongside a range of commercial and employer-sponsored group health plans. Humana’s products are designed to cover medical, behavioral health and pharmacy needs for members, with particular emphasis on seniors and Medicare-eligible populations.
In addition to traditional insurance products, Humana provides care-management and wellness services intended to support chronic-condition management, preventive care and care coordination.
