Health Insurer Humana Plunges into Crisis Mode as Medicare Ratings Slump
In a devastating blow, Humana Inc.’s stock price plummeted 22% in just two days, evoking memories of the 2009 global financial crisis. The health insurer’s shares are on track for their worst week since 2020, with a staggering loss of nearly half its market value.
The crisis began when speculation emerged that Humana would lose its high-quality ratings on certain Medicare plans. The company confirmed the rumors, revealing that only about a quarter of its members would be in highly rated plans, down from 94% previously. This drastic drop will significantly impact revenue, as highly rated plans generate extra income.
The news sent Humana’s shares into a free fall, with a 24% intraday decline – its largest since February 2009. Analysts predict a potential $23 per share hit to profits in 2026, which could virtually eliminate earnings. The company’s margin recovery is also expected to be pushed further out.
Wall Street responded swiftly, slashing price targets and downgrading ratings on the stock. Despite this, the consensus remains that Humana’s shares will rebound to $347 in the next 12 months, a 44% increase from current levels.
The ripple effect is being felt across the health insurance industry, with fears of falling star ratings spreading. Clover Health Investments Corp. saw a surprise jump in its shares after some of its Medicare Advantage plans appeared to receive higher quality ratings. CVS Health Corp. also benefited, with its shares gaining after its plans retained four-star ratings.
However, UnitedHealth Group Inc. is taking a different approach, suing the US government over its quality rating downgrade. The official results are expected to be announced on or around October 10.
As the cloud over Humana grows, related companies like agilon health inc. are also feeling the pressure. Its shares lost 20% in three days, its worst streak in six months, as investors worry about the potential impact on other payers.
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