Humana emerged as the biggest winner from the federal government's 2027 Medicare Advantage star ratings, released Thursday evening by the Centers for Medicare and Medicaid Services (CMS). The insurer said Friday that 95% of its Medicare Advantage members will be enrolled in plans rated four stars or higher in 2027, up from about 20% in 2026. Shares jumped 15% in premarket trading Friday to $444.01.
Humana said 18 of its Medicare Advantage contracts received ratings of at least four stars from CMS, up from seven a year earlier. About 42% of its Medicare Advantage members are enrolled in 4.5-star plans, and its prescription drug plan contract earned a 4.5-star rating for 2027. The decisive move: its largest contract, H5216, covering about 2 million members, rose from 3.5 stars back to 4, putting it above the threshold for federal quality bonus payments. The same contract had fallen from 4.5 stars to 3.5 in the ratings published in October 2024, dragging the share of Humana members in 4-star-plus plans from 94% to 25% and cutting the bonus payments it was set to receive in 2026. Thursday's rebound restores its bonus eligibility for 2028.
"We're extremely proud of these Star Ratings," Chief Executive Jim Rechtin said, attributing the improvement to employees' efforts to provide members with high-quality care and coordinated support. Humana also reported gains in preventive care: 663,000 more care opportunities were met and 534,000 additional members completed annual preventive visits compared with the prior year. Evercore ISI analyst Elizabeth Anderson said Humana improved on measures of drug-plan quality, health-plan quality and readmissions, adding that the improvement "reflects the importance management has placed on fixing this metric over the past year."
The result beat expectations by a wide margin — analysts at J.P. Morgan had expected only 60% to 70% of Humana members to be in 4-star-plus plans. Oppenheimer analyst Michael Wiederhorn said the better scores could add $3.6 billion in revenue for Humana while improving visibility into future earnings. Barclays raised its price target on Humana to $582 from $515 with an Overweight rating, saying the insurer had recovered all its large 3.5-star contracts including H5216, restoring its bonus mix to 93% — a "clear path" to more than $40 in 2028 earnings per share.
Larger rivals looked worse by comparison. J.P. Morgan estimates the share of UnitedHealth members in plans rated four stars or higher will fall to about 67% from 81%, and CVS Health's to roughly 70% from 84%. Three of CVS's big contracts fell from four stars to 3.5 stars, sending its shares down about 3% in extended trading. Alignment Healthcare's largest California contract, H3815, dropped from 4 stars to 3.5, and its shares plunged 23%; the company disputed CMS's conclusions and said it would pursue "administrative remedies" to appeal. Clover Health went the other way — its PPO Medicare Advantage plans earned the top five-star rating and its HMO plan received 4.5 stars, lifting its shares about 11%. Overall, about 71% of Medicare Advantage prescription drug plan enrollees are in contracts that will be rated four stars or higher in 2027, CMS said late Thursday.
The ratings published Thursday do not change this year's results — they feed payments in 2028. CMS scores each contract from one to five stars on measures such as clinical outcomes, member experience and how the plan is run. The four-star mark is the cutoff that matters to investors: crossing it unlocks bonus payments that raise the federal money an insurer receives per member, while dropping below it takes that bonus away. A single half-star move on a large contract can be worth hundreds of millions of dollars — which is why markets react so sharply to half-star moves.