Can Humana's Star Ratings Rebound Unlock MA Earnings Power?

HUM's Star Ratings recovery is set to show early progress, but October's CMS release will test its MA turnaround and path to a 2028 margin target.

Zacks Equity Research

2 min read

Humana Inc.’s HUM Star Ratings recovery is emerging as a key catalyst for its Medicare Advantage (MA) turnaround. After facing a significant Stars-related headwind, the company is targeting a return to top-quartile performance by bonus year 2028. This recovery is important to the broader goal of achieving a sustainable pretax margin of at least 3% by 2028.

Early execution signals are encouraging. The rate of improvement across 11 of 12 selected HEDIS and patient-safety measures outpaced historical trends. This suggests that investments in clinical quality and member engagement are gaining traction. Still, we should view this as positive momentum rather than a completed turnaround.

The potential financial benefit is meaningful. The company defines top-quartile performance as Stars revenue per member per month 10% above the peer median. A successful recovery could improve the economics of its MA plans and complement other margin initiatives, including better plan selection and operating efficiencies.

The October Centers for Medicare & Medicaid Services (“CMS”) Stars release will be the key near-term test. A meaningful rebound would validate its quality improvement efforts and provide greater confidence in its earnings trajectory. More importantly, it could strengthen the case that Humana is on a credible path toward its 2028 margin target, giving investors a stronger reason to remain optimistic about the turnaround.

How Are Peers Positioned?

Peers like UnitedHealth Group Incorporated UNH and Elevance Health, Inc. ELV are also focused on strengthening Medicare Advantage quality and profitability.

UnitedHealth Group maintains a strong quality profile, with roughly 75-78% of members in 4+ Star plans. This sustained performance secures Quality Bonus Payments and preserves rebate dollars, giving UNH greater flexibility to fund competitive supplemental benefits while protecting underwriting margins.

Elevance Health operates with a broader commercial and Medicaid presence while working to strengthen its Medicare Advantage Stars profile through focused clinical outcomes and member engagement. Improving these quality scores could support ELV with better MA economics over time.

HUM’s Price Performance, Valuation and Estimates

Shares of HUM have gained 47.6% year to date, outperforming the broader industry’s 20.2% growth.

Image Source: Zacks Investment Research

From a valuation standpoint, HUM trades at a forward price-to-earnings ratio of 29.24X, up from the industry average of 15.98X. Humana carries a Value Score of B.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for HUM’s 2026 earnings implies a 47% deterioration year over year, followed by a 66.7% improvement next year.

Image Source: Zacks Investment Research

HUM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."

Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention.

See them now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report