What’s Happening With Humana Stock?

Humana stock nosedived 21% on January 27. See, Humana is a “pure play” on Medicare Advantage—about 85% of their business. When CMS announced the 0.09% rate increase for 2027, HUM got hit harder than anyone. Humana is the second-largest MA provider (17% national enrollment, 8.5 million members) with essentially no diversification cushion. Also, see – What Just Happened With UnitedHealth Stock?

Humana hasn’t reported Q4 2025 yet (scheduled for February 11), but Q3 2025 showed the deterioration:

• Q3 revenue: $32.65 billion (up 11% YoY)
• Q3 adjusted EPS: $3.24 (down 22% YoY)
• Medical benefit ratio: 91.1% in Q3 2025

That 91.1% benefit ratio is brutal. For context, anything above 90% leaves very little room for profitability. Humana expects full-year 2025 adjusted EPS around $17.00, with an expected benefit ratio of 90.1-90.5%.

There’s also the membership problem—they bleeding customers. Humana is projecting a Medicare Advantage membership decline of approximately 425,000 members in 2025. Why? They’re exiting unprofitable markets and counties where the economics don’t work.

If you invested in Humana a year back, you have already lost nearly one-third of your investment. That’s why portfolios work better. If you seek an upside with less volatility than holding an individual stock like HUM, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 105% since its inception. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Photo by geralt on Pixabay

What about their Star Ratings disaster?

This is critical. Humana’s Star Ratings—which determine bonus payments from CMS—collapsed for bonus year 2027. Lower star ratings mean lower reimbursement and reduced ability to offer rich benefits that attract members. Management says they’re targeting top-quartile Stars by bonus year 2028, but that’s 2+ years away. In the meantime, they’re at a competitive disadvantage versus UNH and others with higher ratings.

Valuation—is this a value trap?

At approximately $209 per share (after yesterday’s 21% drop), HUM trades at roughly 13x estimated 2026 EPS. Also, look at Humana Valuation Ratios Comparison. The valuation looks slightly cheap versus historical multiples of 16-18x, but there’s a reason:

• The company expects 2025 adjusted EPS of $17.00
• Q4 2025 analyst expectations: Loss of $4.00 per share (compared to a loss of $2.16 in Q4 2024)
• The Q4 loss projection includes investments in fixing their Star Ratings problem, but it signals how severe the turnaround challenge is.

Can they survive this? Humana has structural advantages in CenterWell (their care delivery arm) and is pursuing operational efficiencies (targeting $100M+ in savings through AI and outsourcing). However, the 2027 rate proposal is existential for a pure-play MA company. If the 0.09% rate holds, Humana will need to:

• Raise the maximum out-of-pocket limits significantly
• Cut supplemental benefits (dental, vision, gym memberships)
• Exit more unprofitable markets
• Potentially reduce provider payment rates

Industry lobbyists (Better Medicare Alliance) are fighting the proposed rates, and the final announcement in April could be more favorable. But betting on regulatory relief is risky.

Also, check out – What’s Behind The Crash In CVS Stock?

The verdict—recovery story or falling knife?

Humana at $209 is pricing in substantial distress. The demographic tailwind (aging population) supports long-term demand for Medicare Advantage, but the economics have fundamentally shifted. Management’s “reset” strategy for 2025-2026 hasn’t had time to prove itself, and now they face another regulatory headwind.

Investment view: This is a show-me story. Until we see Q4 results (Feb 11), final 2027 rates (April), and evidence that the benefit ratio can get back below 89%, HUM is too risky for most investors. The 35% analyst upside projection seems optimistic given the structural challenges. If you believe the 2027 rates will be revised higher in April and that Humana can execute its turnaround, there’s asymmetric upside—but that’s a big “if.”

Also, investing in a single stock without comprehensive analysis can be risky. Consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

Invest with Trefis Market-Beating Portfolios

See all Trefis Price Estimates