Health Insurance Giant Humana Takes a Nosedive
Humana’s stock has plummeted a staggering 23% this week, marking its most dramatic decline since 2020 and its largest two-day drop in over a decade. The sharp downturn comes on the heels of Medicare’s decision to downgrade the ratings of several of Humana’s key health insurance plans. This move is expected to have a significant impact on the company’s revenue and customer base.
The insurer’s shares took a hit, falling from around $320 at the start of the week to $246.80 on Friday, a 23% decline. The news of the downgrades first broke on Tuesday, and by Wednesday, the company had confirmed the changes, sending its stock tumbling 24% in just five minutes of trading.
Medicare’s quality ratings are a crucial factor in determining revenue for Medicare Advantage insurers like Humana. Higher ratings translate to increased government bonus payments, while lower ratings can deter customers. With the new ratings, only 25% of Humana’s customers will be enrolled in four-star or higher plans, a significant drop from the previous 94%.
Analysts at UBS described the downgrades as the “worst-case scenario” for Humana, while Bank of America analysts downgraded the stock to underperform, citing concerns that the company’s recovery may take longer than expected. They also warned that further pressure on Medicare Advantage plans could come if Democrats win in the upcoming elections, which could hinder Humana’s ability to regain its footing.
The road to recovery looks uncertain for Humana, with tough competition from peers like UNH and the looming threat of election results that could impact its business. As one analyst noted, “We think there is a risk that HUM loses some market share.”
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