Humana shares jump 16.5%, Alignment falls more than 20% after Medicare ratings
Key Facts
Humana shares rose 16.5%, while Alignment Healthcare shares fell more than 20%, according to a report published by Investing.com on October 8, 2026, following an update to Medicare Advantage ratings. The divergent moves came as ratings improved for Humana's plans and fell for Alignment's largest contract in California. Humana said 95% of its members in the program were enrolled in plans rated 4.0 stars or higher in the 2027 ratings. By contrast, Alignment's main contract fell to 3.5 stars from 4 stars in the previous cycle. The results carry financial significance because star ratings determine quality bonuses and affect rebates tied to program contracts, according to the Centers for Medicare & Medicaid Services.
Humana's latest results follow a weaker initial announcement of its 2026 ratings, when the company said about 1.2 million members were enrolled in plans rated 4 stars or higher. Those members represented 20% of its membership, according to its disclosure to the U.S. Securities and Exchange Commission at the time. At the contract level, the number of company contracts rated at least 4 stars rose to 18 from 7 a year earlier, according to the Wall Street Journal. Humana attributed the improvement to gains across all measurement categories, linking it to improvements in member experience and health outcomes. The company said in its statement: "Significant performance improvement was achieved across all measurement categories."
Alignment, meanwhile, said 6 of its 7 eligible contracts received 4 stars or higher in the 2027 ratings. But its largest contract in California, which was downgraded, serves about 75% of its health plan members, according to the company's disclosure to the U.S. Securities and Exchange Commission. The downgrade puts its main contract below the 4-star threshold, despite higher ratings for the remaining eligible contracts. Alignment attributed the downgrade, among other principal reasons, to higher industry-wide performance cut points. The company described this factor in its filing as "higher industry-wide cut points" in explaining why the contract's result changed.
Alignment said it plans to use available administrative appeals processes to challenge some Centers for Medicare & Medicaid Services calculations related to the rating. It added that it expects to initiate litigation over certain rating measures and the methodologies used to calculate them, according to the regulatory filing. On the financial impact, the company expects risk-sharing arrangements with providers to offset part of the effect of lower quality bonuses. These arrangements involve providers with which the company shares risk, according to its disclosure on the rating's implications. The Centers for Medicare & Medicaid Services designated 2028 as the year when the new ratings will affect Medicare Advantage quality bonus payments.
Within the program's ratings framework, the Centers for Medicare & Medicaid Services decided against implementing the Excellent Health Outcomes for All index reward. In its final rule, it confirmed that the historical reward factor would remain in use within the program's regulatory framework. Describing its decision, the agency said it "will continue to use the historical reward factor," retaining it instead of implementing the index-linked reward. Humana, for its part, said in a filing with the U.S. Securities and Exchange Commission that it does not expect to change its adjusted earnings per share guidance for fiscal 2026. This position concerns the adjusted earnings measure from which the company excludes items under its methodology, outside generally accepted accounting principles.
On upcoming dates, the Centers for Medicare & Medicaid Services set October 15, 2026, as the start of the program's open enrollment period. The period ends on December 7, 2026, according to the schedule the agency announced alongside the new star ratings. After enrollment ends, Humana plans to hold a virtual investor update on December 10, 2026, according to its regulatory filing. The company said the event would review its strategic framework and earnings growth initiatives. The announced investor update is part of the company's efforts to present its strategy after announcing improved plan ratings and maintaining its adjusted earnings outlook.