Humana’s Medicare spending weighs on 2025 earnings outlook

Humana Inc. forecast 2025 profit that fell short of Wall Street’s expectations, as the company said it will invest heavily to improve quality in its Medicare Advantage plans that have been hit by government downgrades.  

Humana depends more than other insurers on revenue from Medicare Advantage, private versions of the government’s program for older and disabled people. Investors are concerned about the long-term results from the business as the government has lowered Humana’s quality ratings, called stars, that affect future payments. 

Adjusted profit for the year will be at least $16.25 a share, the company said Tuesday in a statement. Analysts surveyed by Bloomberg expected $16.78 a share.

The shares rose 2.1% before US markets opened. They had lost 5.2% this year through Monday’s close. 

Humana, UnitedHealth Group Inc. and other insurers have rapidly expanded enrollment in the private programs. Slightly more than half of Medicare enrollees were in Medicare Advantage plans in 2023, more than double the level in 2010, according to KFF, a nonprofit health policy and data analysis group.

However, investors have been forced to reset their expectations for profit in light of trends that forced Humana to pull its 2025 forecast at this time last year. Pointing to rising costs of patient care, the company also issued a 2024 earnings forecast below estimates, and the shares plunged.  

Government regulators have also raised their scrutiny of billing practices in Medicare Advantage, saying that private insurers inflate the severity of illness, along with costs, for patients they cover. 

Humana and other insurers sued the government last year over downgrades in star ratings. Last month, the government dropped an appeal of a case brought by UnitedHealth, the biggest US health insurer. Humana’s case is still ongoing.  

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