Humana (HUM) shares dropped approximately 9% in premarket trading on Wednesday and remained among the major laggards in the S&P 500 during morning trading, even though the health insurer reported better-than-expected adjusted earnings for the second quarter.
The company lowered its full-year GAAP earnings target to a minimum of $6.52 per share, down from an earlier projection of at least $8.36 per share. Humana kept its adjusted full-year earnings forecast unchanged at a minimum of $9 per share.
New full-year GAAP earnings target for Humana, down from at least $8.36.
Humana attributed the reduced GAAP outlook to lower Medicare Advantage Star Ratings, which reduced quality bonus payments from the US federal government. The Star Ratings range from one to five and are tied to bonus payments from the US Centers for Medicare and Medicaid Services (CMS). The company noted a decline in the number of its plans rated four stars or higher, affecting 2026 bonus payments.
Humana's second-quarter profit was $694 million, or $5.73 per share, compared with $545 million, or $4.51 per share, in the same period last year. Total revenue rose 26% to $40.87 billion. On an adjusted basis, Humana earned $7.61 per share, exceeding analyst expectations of $7.26 per share, according to the Wall Street Journal.
The company's benefit ratio for the quarter was 91.2%, which Humana stated was in line with its expectations. Looking ahead, Humana expects individual Medicare Advantage enrollment to expand by roughly 25% compared with 2025.
Health insurers across the industry are facing elevated medical costs due to increased patient demand and higher drug prices, according to the Wall Street Journal. Humana's business is heavily dependent on Medicare Advantage, making it more susceptible to increased demand from seniors than its rivals.
In contrast, GE HealthCare Technologies (GEHC) was a top performer in the S&P 500 on Wednesday morning.