Humana forecasts 2026 profit pressure as lower quality ratings weigh

By Puyaan Singh and Sriparna Roy

Feb 11 (Reuters) - Humana HUM.N forecast annual profit below Wall Street estimates on Wednesday, as it expects lower quality ratings for Medicare Advantage plans to weigh on its performance, pushing the health insurer's shares down 7% in premarket trading.

Lower quality ratings for the plans for people aged 65 and older and those with disabilities have emerged as a major worry for 2026 as they could cost Humana, which gets most of its revenue from them, millions of dollars in bonus payments from the U.S. government.

"While not shocking that Humana's 2026 earnings expectations are much lower... the big increase in membership looks likely to cut into margins further than the market was anticipating," said Morningstar analyst Julie Utterback.

Humana anticipates 2026 individual Medicare Advantage (MA) membership to grow about 25% over the year earlier, and expects about 45% of its members to be enrolled in the plans rated 4 stars and above.

While major peers retreat from the MA market, analysts said Humana's enrollment growth forecast was toward the higher end of investors' expectations.

New members are usually not as profitable as seasoned members and can lead to higher costs for insurers.

Humana expects 2026 adjusted profit per share to be at least $9, compared with analysts' estimate of $11.92, according to data compiled by LSEG.

The level of conservatism in the 2026 initial outlook is higher than typical to account for the dynamic environment, the company said in its prepared remarks.

Humana has been repricing plans and adjusting benefits to shore up profits while confronting the persistent cost pressures that have gripped the industry for more than two years.

The company reported a quarterly medical cost ratio, the percentage of premiums spent on medical care, at 93%, roughly in line with analysts' expectations.

It posted an adjusted fourth-quarter loss of $3.96 per share, compared with the estimate of a $4.01-per-share loss.