Humana Plans to Exit More Medicare Advantage Plans in 2027

Humana plans to close more Medicare Advantage (MA) plans next year to improve profitability. This move is expected to bring more disruption to seniors enrolled in private Medicare plans.

This is the second consecutive year Humana has reduced its plan footprint, indicating that insurers have not stopped shrinking their operations under pressure from rising costs—a strategy that has already forced many seniors to reselect health plans.

In 2026, Humana reduced MA coverage in three states and 194 counties. However, the company retained more generous benefits than competitors, attracting over one million new seniors to its plans.

But during a Wednesday morning conference call with investors to discuss second-quarter results, executives said Humana believes it needs to further shrink its footprint to achieve long-term margin targets.

"Our top priority is to make the necessary progress to ensure we deliver on our commitment to restore at least 3% sustainable margins by 2028," said Chief Financial Officer Celeste Mellet.

Mellet said Humana is closing plans with lower returns on capital to ensure it can maintain benefit stability and retain members in plans that generate higher profits. The company expects these exits to affect approximately 600,000 seniors, about 8% of its total MA membership of 7.2 million.

"But we will work to win back a significant portion of that volume, as we did in 2025," Mellet said. She expects Humana will be able to re-enroll about 40% of affected members, roughly 240,000 people, into other plans.

Insurers have made progress in reviving sluggish profits, while government programs are under pressure from rising spending—including the MA program, which is strained by seniors using more expensive medical services after the pandemic. The industry has benefited from generous 2026 rate increases locked in by the Trump administration, as well as its own cost-cutting measures, such as exiting unprofitable markets.

UnitedHealth, Elevance, Centene, and Molina all reported better-than-expected MA results in the second quarter and raised their 2026 earnings guidance after the results.

Wall Street has similar expectations for Humana. Humana is the second-largest insurer in private Medicare plans after UnitedHealth and could surpass UnitedHealth this year thanks to recent membership growth.

Executives said Humana has indeed benefited from good control of medical costs, with cost increases covered by higher rates. Mellet said cost trends are in line with expectations, with some areas, such as inpatient care, performing even better.

However, although Humana's earnings and revenue beat analyst expectations, its guidance disappointed investors. The company reaffirmed its adjusted earnings per share guidance (which the company considers the best indicator of core performance) but lowered its unadjusted earnings per share guidance.

Humana now expects earnings per share of at least $6.52 this year, down from its previous guidance of at least $8.36. This is the second time this year Humana has lowered its non-adjusted earnings per share outlook, as the company faces a significant decline in MA star ratings, which has severely reduced the quality bonuses it receives from CMS.

During the conference call, CEO Jim Rechtin said he is proud of the progress Humana has made in improving star ratings. Star ratings range from 1 to 5 stars and are designed to comprehensively reflect plan quality and performance in MA. Although the company's recent star ratings slipped again, Rechtin said Humana is on track to achieve its goal of reaching the top quartile of stars by the 2028 bonus year.

But Rechtin acknowledged that it is impossible to predict how the company's 2027 performance will compare with peers. "We don't know the industry thresholds. So, while we are pleased with the substantial progress we've made, we cannot guarantee the outcome," Rechtin said.

Insurers are increasingly frustrated with star ratings, arguing that regulators use overly complex methods to calculate them and change targets arbitrarily. Star rating uncertainty creates significant headaches for insurers, as a change of just half a star can mean plans losing hundreds of millions of dollars.

Anger over CMS calculation methods or perceived unfairness has triggered a wave of industry lawsuits attempting to force CMS to raise scores—including a lawsuit from Humana, although its legal efforts have so far been unsuccessful.

Overall, Humana reported revenue of $40.9 billion for the quarter, up 26% year-over-year, driven by membership growth and more generous MA rates. Humana posted a profit of $694 million, up 27% year-over-year.

Despite the improvement, Leerink Partners analyst Whit Mayo wrote in a report that Humana's overall results were "slightly below expectations." Humana shares fell nearly 8% in early trading Wednesday.

The company has made progress in growth areas, with revenue and profit expanding at its health services division CenterWell, partly due to recent acquisitions of Florida providers The Villages Health and MaxHealth. Humana has also seen recent wins in Medicaid, including a new Medicaid contract in Illinois (expected to take effect in 2027) and an extension of its Florida contract, where Florida is Humana's largest Medicaid state.

Humana also announced two new board members on Wednesday: Paul Smith, an executive at artificial intelligence company Anthropic, and Frederick Crawford, who has 30 years of experience in insurance and banking.