Humana executives gave investors a peek Wednesday into the company’s thinking around the 2027 Medicare Advantage bid cycle as elevated costs continue to sting the industry.
CEO Jim Rechtin said during the insurer’s earnings call that to achieve the goal of returning to a “stable margin” by 2028, it will need to look at adjustments to benefits. He did praise the Trump administration for shifting away from a flat 2027 rate proposal and instead choosing to finalize a slight increase, but said the change wasn’t enough to account for rising costs.
“This helps promote more stability in the industry as a whole, and it has a positive impact on the health of our seniors,” he said. “Nevertheless, medical cost trend continues to outpace program funding.”
He said that, given cost trends have created pressure that dates back to 2024, Humana’s positioning going into bids is stronger than it was two years ago, as its efforts to transform and adapt are more mature. This offers additional levers that the team can use in looking to respond to the cost environment.
This also means that the company has more options available to address these challenges, but the benefits will still be under the microscope.
“Ultimately, you still have to come back and say, ‘Okay, but what are the changes that you have to make to benefits in order to get to your target margin, so in order to get to a sustainable, durable, attractive long-term margin that gives us an appropriate return on capital?'” Rechtin said. “That’s the logic you’re going through each and every year.”
George Renaudin, president of Humana’s insurance segment, said on the call that the process requires going through benefits offerings market by market and getting a full grasp on not just what matters most to the members but the provider relationships underpinning those benefits, too.
It also means finding ways to support the broader margin mission across those different geographies, Renaudin said.
“And to the extent that you make adjustments to benefits, you do it in a way where it has the least impact on the things that are most important to them,” said Rechtin. “It means you do it in a way that is thoughtful to your members.”
Humana affirmed its outlook for 2026 on Wednesday morning, though the company’s shares fell premarket as future star ratings performance is murky.
In its earnings report, the company said it earned $1.19 billion in profit for Q1, down slightly from the $1.2 billion haul reported in the prior year quarter. Humana also brought in $39.6 billion in revenue for the quarter, growing year over year from $32.1 billion.
Both results surpassed Wall Street analysts’ forecasts, according to Zacks Investment Research.
Based on the performance, Humana confirmed it expects to earn at least $9 per share this year, and anticipates a medical loss ratio of 92.75% for 2026.
In addition, the company projects that its Medicare Advantage membership will grow by about 25% compared to 2025, backed by both new sales and strong retention.
Despite these positive signs, Humana also warned investors that its performance in the program’s star ratings is a likely headwind in the coming year. In the report, the company noted that the number of people enrolled in plans with four or more stars in 2025 declined significantly, and it undertook a legal challenge to get the ratings vacated in the courts.
However, the courts rejected that challenge in October. And while Humana has appealed that decision, whether it will win the case in the end remains up in the air.
“If the company is not successful, the decline in Star Ratings will negatively impact its 2026 quality bonus payments from CMS and may also significantly adversely affect the company’s revenues, operating results and cash flows,” the company said in the report. “In addition, there can be no assurances the company will be successful in maintaining or improving its Star Ratings in future years.”
Revenues at the company’s core insurance business were $38.1 billion in the quarter, reflecting its membership boom. However, the impact of that growth was partially offset by the ongoing challenges around the star ratings, Humana said.
The company added that the star ratings headwind is also a drag on its expectations around MLR. Alongside that, Humana found that new members who enrolled during the annual signup window generally have a higher acuity than those who were retained, driving up likely costs.
MLR for the first quarter was 89.4%, slightly favorable compared to the company’s expectations.
At CenterWell, revenues were $6.1 billion, growing from $5.1 billion in the prior-year quarter. Humana said this reflects both the growth in its own Medicare Advantage member base and growth in payer-agnostic clientele, particularly at its primary care centers.
“We’ve had a solid start to the year and feel good about how our operating execution and transformation initiatives are setting us up for the future,” said Humana President and CEO Jim Rechtin. “We continue to make progress where it counts for customers—quality experience and outstanding care.”