Humana Scales Back Medicare Advantage Plans for 2027, Targets Margin of at Least 3%
Key Facts
Humana plans to exit some Medicare Advantage plans for 2027 as it prioritizes stronger-performing plans and seeks to return to a sustainable pretax margin of at least 3% in 2028, according to management remarks. The chief financial officer said the exits were concentrated mainly in weaker-performing plans, according to an earnings call summary published by Investing.com citing GuruFocus. She added that the aim was to preserve benefits in higher-value areas. Summing up the company's approach, she said: "The exits are concentrated mainly in weaker-performing plans to preserve benefits in higher-value areas." Humana intends to try to retain some affected members through other plans it offers.
The plan reshuffle follows growth in Humana's individual Medicare Advantage membership from the start of 2026 through the end of the second quarter. Membership increased by about 1,204,000, according to management remarks filed with the U.S. Securities and Exchange Commission. That represents growth of 23% over the same period. On spending, management said medical and drug cost trends were in line with its expectations for growth in the high single digits. Its strategy combines efforts to retain as many members as possible with margin expansion, while prioritizing stronger-performing plans.
UnitedHealthcare's changes for 2027 include discontinuing some plans and reducing service areas, effective January 1, 2027, according to a company document for care providers. The company said it continued to prioritize health maintenance organization plans. Its priorities also include chronic condition special needs plans and plans for people eligible for both Medicare and Medicaid. In the group's results, UnitedHealth's medical care ratio fell to 88.4% in the third quarter of 2026. The ratio was 89.9% in the third quarter of 2025, according to financial results filed with the Securities and Exchange Commission.
On program funding, the Centers for Medicare & Medicaid Services expects payments to Medicare Advantage plans to increase by 2.48% in 2027. The expected increase amounts to more than $13 billion, according to the agency's payment rate announcement. The regulatory framework includes risk adjustment changes alongside the increase in payments. Meanwhile, the agency expects the weighted average monthly plan premium to fall from $14.37 in 2026 to $12.00 in 2027. The expected decline in the average premium is 16.5%, according to its statement on insurance and prescription drug coverage programs for next year.
On quality ratings, Humana said in its filing that its 2027 Star Ratings results exceeded its target for top-quartile performance. The company defines that target as monthly Star revenue per member that is 10% above the median of its peer group. Those ratings results are tied to the 2028 bonus year. In a separate update published in August, Morgan Stanley upgraded Humana shares to Equal Weight from Underweight, according to Investing.com. The bank also raised its price target for the stock to $370.00 from $249.00 in the same update.
For enrollees, Medicare's general open enrollment period runs from October 15 to December 7, 2026, according to the Centers for Medicare & Medicaid Services. The period allows them to choose coverage for next year. The government's Medicare website explains that members of plans whose contracts are not renewed return to Original Medicare if they do not join another Medicare Advantage plan before their current plan ends. The website said: "You will be enrolled in Original Medicare if you do not join another Medicare Advantage plan before your current plan ends." After the general enrollment period ends, Humana will hold a virtual investor update on December 10, 2026, according to the date announced by management.