Humana Inc. (NYSE:HUM) reported on October 9, 2026, that its membership-weighted Medicare Advantage star rating increased to 4.17 for bonus year 2028, compared with 3.84 for bonus year 2027, using its current contract and membership mix. Approximately 95% of members were in contracts rated four stars or higher, including 42% in contracts rated 4.5 stars. Management said the results approached the company’s highest ratings ever.
The improvement is consequential, but the timing matters. The Centers for Medicare & Medicaid Services released the 2027 ratings on October 8. Those ratings will affect Medicare Advantage quality bonus payments in 2028, rather than immediately lifting this year’s earnings.
That leaves one clear question for investors following Humana stock—can better Medicare ratings produce a lasting earnings recovery?
Better Ratings Strengthen Revenue Potential
The recovery extends across multiple contracts. Humana Inc. (NYSE: HUM) said 17 contracts improved their ratings, with 11 additional contracts qualifying for four-star quality bonus payments in bonus year 2028. Management also reported 663,000 more gaps in care closed on a membership-adjusted basis year over year.
The financial significance reaches beyond the headline rating. In its October 9 filing, the company said it exceeded its own top-quartile goal, defined as ratings-related revenue per member per month at least 10% above its peer-group median. That measure incorporates quality bonus payments and incremental rebates retained.
The analytical takeaway is that better ratings can improve the resources available to support competitive benefits and profitability. However, additional revenue becomes valuable to shareholders only after accounting for medical claims, operating expenses, and spending needed to retain members.
Stronger Quarterly Earnings Have Not Settled the Recovery Debate
The latest reported financial results provide useful context. On July 29, Humana Inc. (NYSE: HUM) disclosed second-quarter adjusted earnings of $7.61 per share, compared with $6.27 a year earlier—an increase of approximately 21.4%. GAAP earnings rose to $5.73 from $4.51 per share.
Yet the stronger quarter did not translate into a higher annual adjusted outlook. On October 9, the company reaffirmed 2026 adjusted earnings guidance of at least $9 per share. It described that guidance as preliminary while completing its third-quarter close and said potential changes to GAAP guidance could arise from strategic initiatives.
This distinction separates demonstrated progress from expected recovery. Improved ratings strengthen the longer-term opportunity; they do not establish that near-term earnings pressure has disappeared.
Medical Costs and Temporary Benefits Remain the Main Risks
Medical spending remains a critical variable. In July, management described medical and pharmacy cost trends as high single digits. It also expected third-quarter adjusted earnings of approximately negative $1 per share and an Insurance segment benefit ratio slightly above 94%. Those were management forecasts, not reported third-quarter results.
The benefit ratio measures the share of premium revenue consumed by benefit expenses. A rising ratio can leave less room for administrative costs and profit. Better Medicare reimbursement would therefore offer limited protection if claims costs consistently exceed pricing assumptions.
There is another important qualification. Humana Inc. (NYSE: HUM) expects some ratings outperformance in bonus year 2028 to be temporary and anticipates using the associated benefit for one-time investments and shareholder returns. Actual financial results will depend on future membership, contract mix, risk scores, benchmarks, and rebates.
Investors should consequently distinguish a recurring improvement in operating profitability from a particularly favorable bonus year.
November Results and December’s Update Will Test the Thesis
Humana Inc. (NYSE: HUM) lists its third-quarter earnings conference call for November 6, 2026, at 8 a.m. Eastern time, followed by a virtual investor update on December 10.
The November results should allow investors to compare actual adjusted earnings and the Insurance benefit ratio against July’s expectations. Results materially worse than those forecasts would challenge the view that medical costs remain manageable.
December’s update offers another opportunity to assess management’s previously stated goal of returning individual Medicare Advantage to a sustainable pretax margin of at least 3% in 2028. That remains a target requiring execution.
The ratings recovery gives the earnings thesis stronger support. A durable recovery would require controlled claims costs, disciplined benefit design, and evidence that improved reimbursement can support profits beyond one favorable year.
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Disclosure: No material interests to disclose. This article was originally published on Global Market Bulletin.
