Introduction
In a significant development, Humana has reported a substantial drop in its Medicare Advantage (MA) star ratings for 2025. The decrease could negatively impact the company’s revenue in 2026, with fewer members enrolled in high-rated plans. This shift represents a challenge for Humana, one of the largest providers of Medicare Advantage plans in the U.S., which now faces the potential financial repercussions of losing its top-tier status in a key metric used by the Centers for Medicare and Medicaid Services (CMS).
The Decline in Humana’s Medicare Advantage Star Ratings
The preliminary 2025 MA star ratings data from CMS has revealed a marked reduction in Humana’s performance. Only 25% of its members are now enrolled in plans rated 4 stars or higher for 2025, compared to a staggering 94% in 2024. This decline reflects a sharp decrease in the company’s ability to maintain the same level of quality in its Medicare Advantage offerings.
The star ratings are essential indicators of quality for Medicare Advantage plans, influencing members’ choices and determining the level of bonus payments from CMS. The star ratings are calculated based on multiple factors, including member satisfaction, health outcomes, and the overall quality of services provided.
Factors Contributing to the Decline
The primary cause of the decline in Humana’s star ratings is the drop in one of its major contracts from 4.5 stars to 3.5 stars. This change has had a widespread impact, affecting almost half of Humana’s Medicare Advantage membership and the majority of its employer group plans.
Humana attributes this drop to narrowly missing higher industry cut points in a small number of measures, leading to a significant downgrade in the star ratings. These cut points are determined by CMS and reflect thresholds that plans must meet to receive higher ratings. In some cases, it believes there may have been errors in the calculation of certain results and industry threshold cut points, which may have contributed to the lower ratings.
The decrease in star ratings does not reflect a sudden decline in the quality of care or services provided by Humana. Instead, it suggests that the company narrowly missed the thresholds necessary for higher star ratings, possibly due to increased competition or changes in the industry standards set by CMS.
Potential Impact on Revenues and Financial Outlook
The decrease in star ratings is expected to affect Humana’s quality bonus payments in 2026. These payments are tied to the star ratings of Medicare Advantage plans, with higher-rated plans receiving larger bonuses. A reduction in these payments could result in a significant loss of revenue for Humana.
Humana’s financial outlook for 2024 and 2025 remains unaffected by this decline in star ratings. However, the company is exploring options to mitigate potential revenue loss in 2026. It has filed appeals with CMS to review its star ratings, hoping to correct any errors in the calculations that contributed to the lower ratings.
Humana’s Response and Future Strategy
In response to the star ratings decline, Humana is taking proactive steps to address the potential financial shortfall in 2026. The company is actively working to resolve any discrepancies in the ratings and improve its performance on the measures where it fell short. This effort will involve a detailed review of CMS’s feedback and recalibration of its strategies to meet or exceed industry standards in the future.
Additionally, Humana has made the difficult decision to stop offering Medicare Advantage plans in 13 counties starting in 2025. This move is driven by rising medical costs and lower reimbursements from CMS, which have made it financially challenging to continue offering coverage in certain areas. The exit will affect approximately 560,000 beneficiaries, or 10% of its Medicare Advantage membership.
Despite these challenges, Humana expects to retain about half of the members affected by these plan exits. In most areas where the company is ending plans, it will continue to offer alternative Medicare Advantage options to provide continuity of care for its members.
Implications for Members and Medicare Advantage Plans
The decline in star ratings may cause concern among Humana’s Medicare Advantage members, particularly those who were previously enrolled in plans rated 4 stars or higher. The star ratings system is often used by Medicare beneficiaries to select the highest quality plans, and a lower rating may impact member retention and satisfaction.
However, Humana’s commitment to improving its performance and addressing the issues that led to the decline in ratings should provide some reassurance to its members. The company is focused on ensuring that its Medicare Advantage plans continue to deliver high-quality care and services, despite the temporary setback in its star ratings.
For members in the counties where Humana is discontinuing its Medicare Advantage plans, the company is working to provide alternative options and minimize disruption to their coverage. In many cases, members will have the opportunity to switch to other Humana plans or select coverage from another insurer offering plans in their area.
Conclusion
Humana’s significant decline in Medicare Advantage star ratings for 2025 is a concerning development for both the company and its members. The decrease from 94% to 25% of members enrolled in plans rated 4 stars or higher represents a major shift, with the potential to negatively affect its revenue in 2026. However, the company remains committed to addressing the issues that led to the decline and is working on strategies to mitigate the financial impact.
As Humana navigates these challenges, it continues to focus on delivering high-quality care to its Medicare Advantage members and improving its performance in the CMS star ratings system. With ongoing efforts to correct any errors and adjust its strategies, It aims to regain its top-tier status in the Medicare Advantage market.
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FAQs
Q1: What are Medicare Advantage star ratings?
A. Medicare Advantage star ratings are a measure of the quality of health plans offered to Medicare beneficiaries. The ratings are based on several factors, including member satisfaction, health outcomes, and the quality of services provided.
Q2: How does a decline in star ratings affect Humana’s revenue?
A. A decline in star ratings reduces the quality bonus payments that Humana receives from CMS. These payments are tied to the star ratings of Medicare Advantage plans, with higher-rated plans receiving larger bonuses.
Q3: Will members be affected by the decline in star ratings?
A. While the star ratings decline may cause concern among members, Humana is committed to delivering high-quality care and services. The company is taking steps to improve its performance and provide alternative options for members affected by plan exits.
