Humana (NYSE:HUM) executives said the company delivered “solid” results in 2025, entered 2026 with strong Medicare Advantage membership momentum, and is prioritizing margin stability and operational execution as it works through a significant Stars-related earnings headwind and an uncertain funding backdrop.
2025 results and investments
Chief Financial Officer Celeste Mellett said Humana “delivered on our commitments in 2025,” reporting adjusted EPS of $17.14, which she said was in line with expectations and above the company’s initial guidance of approximately $16.25. She added that Humana elected to make “higher-than-initially planned investments” during the year to accelerate transformation and better position the business for the future.
Later in the call, management estimated incremental investments in 2025 totaled “close” to an analyst estimate of well over $550 million, and said roughly 90% of those incremental investments were in medical costs.
Medicare Advantage growth: scale, mix, and onboarding
President and CEO Jim Rechtin emphasized that the company “continues to feel good” about membership growth and said Humana’s approach is focused on maximizing customer lifetime value and net present value through sustainable pricing and strong retention, rather than “loss leader” plans.
Rechtin said Humana grew by approximately 1 million members, or 20%, during AEP, and that retention improved by more than 500 basis points year over year. He described the sales mix as favorable, citing several metrics management believes support the economics of the growth:
- Over 70% of new sales were switches from competitor plans, which management said typically have better economics.
- Humana said it did not have a high percentage of members impacted by competitor plan exits and “absorbed approximately 12%” of those members, which the company said was below its market share.
- About 70% of new sales were in contracts rated four stars or better.
- Nearly 30% of new sales were “bounce-back” members (members Humana has had previously).
- Over 75% of new sales came from “higher lifetime value channels,” a nearly 10 percentage point improvement year over year.
Looking to 2026, Rechtin said the company anticipates individual Medicare Advantage membership growth of approximately 25% and noted the go-to-market strategy is being managed dynamically with “levers to pull” as conditions evolve.
Management also argued the company is positioned operationally to absorb the growth. Rechtin pointed to early onboarding indicators in January, including fewer complaints to Medicare year over year, improved transactional Net Promoter Score at service centers, and higher completion rates for Health Risk Assessments—metrics that also feed into Stars performance.
2026 outlook: Stars headwind and margin bridge
Mellett said Humana’s initial 2026 guidance reflects an “appropriately conservative approach,” adding that the level of conservatism is “higher than typical” due to the dynamic environment. Humana guided to full-year adjusted EPS of at least $9, with the year-over-year decline driven by a “previously communicated bonus year 2026 Stars headwind net of mitigation.”
She said Humana continues to expect a doubling of individual Medicare Advantage pre-tax margin in 2026 when normalizing for Stars, explaining that if 95% of members were in four-plus star plans consistent with 2025, the company would see a doubling of individual MA margin in 2026. However, after accounting for the Stars headwind, Humana’s initial guidance assumes individual MA margins are “slightly below break-even.”
Mellett quantified the net Stars headwind for 2026 (including individual and group MA) at approximately $3.5 billion, net of contract diversification and provider offsets. She said the number is larger than prior discussions due to membership and revenue growth. For 2026, management said 45% of members will be in four-plus star plans, while the overall membership base is expected to be about 25% higher. Mellett also said higher retention kept more members on 3.5-star contracts than previously expected, and that about 30% of new sales were on contracts rated below four stars for the 2026 bonus year.
In response to questions about cohort profitability, Mellett said the Star headwind affects existing and new members differently, but that margins “look largely similar” between cohorts in 2026 for different reasons. Existing members are more impacted by Stars due to a heavier concentration in below-four-star contracts, while new members face acquisition costs and potentially higher medical costs early on due to lower risk adjustment capture and care management ramp-up.
Management also discussed how margins typically improve as cohorts mature, pointing to a reduction in marketing load from year one to year two and gradual medical benefit ratio improvement over several years as coding, care management programs, and paneling to value-based providers increase.
Efficiency, capital, and growth priorities
On operations, Mellett said Humana expects a significant improvement in consolidated operating costs ratio in 2026, driven by operating leverage from membership and revenue growth, along with tactical cost-cutting and transformation efforts, partially offset by the Stars headwind. She cited actions including consolidating the supplier base and an early retirement program, and said broader transformation efforts—such as expanding outsourcing, simplifying processes, and leveraging technology and automation—are expected to increasingly impact results beginning in 2026.
On the balance sheet, Mellett said Humana has worked to improve capital efficiency through efforts such as optimizing legal entity structures, refining reinsurance and risk transfer arrangements, selling non-core assets, and managing the timing and structure of capital deployment. She said that despite expected premium growth of 40% from 2024 to 2026, statutory capital requirements are expected to increase by less than 20%, and that capital optimization progress would offset over $3 billion of capital requirement growth from the end of 2024 through 2026. After funding expected membership growth and select small to mid-sized M&A opportunities (which management expects to fund through non-core asset sales), Humana said it expects debt-to-capital levels to remain largely flat year over year and reiterated its focus on maintaining credit ratings.
Rechtin also highlighted growth in Medicaid and CenterWell, saying Medicaid now spans 13 states, including Georgia and Texas, which are anticipated to launch next year. He said the company hopes to soon announce a strategic acquisition in the primary care space.
Rate notice, Stars strategy, and leadership update
Rechtin acknowledged investor concern around the Medicare Advantage Advance Rate Notice, characterizing Medicare Advantage as sitting at the intersection of U.S. fiscal pressures and a program popular with seniors. He said Humana will “wait and see” where the final rate notice lands and will adapt benefit structures if the funding environment cannot support them.
On Stars, Rechtin said the company remains confident it is on track to return to “top quartile” Stars results by 2028 and said the company will provide additional visibility once the hybrid season is complete, while declining to speculate on thresholds. He also said Humana is starting Stars programs earlier in the year than it did in the past and is improving targeting using earlier data to close care gaps. Still, he cautioned that Stars is a relative score and carries inherent risk.
Separately, Humana announced that Aaron Martin joined the company in January as President of Medicare Advantage and a member of the enterprise leadership team. Rechtin said Martin is expected to elevate to the president of insurance role upon George’s retirement.
About Humana (NYSE:HUM)
Humana Inc (NYSE: HUM) is a health insurance company headquartered in Louisville, Kentucky, that primarily serves individuals and groups across the United States. The company is best known for its Medicare business, offering Medicare Advantage plans and prescription drug (Part D) coverage, alongside a range of commercial and employer-sponsored group health plans. Humana’s products are designed to cover medical, behavioral health and pharmacy needs for members, with particular emphasis on seniors and Medicare-eligible populations.
In addition to traditional insurance products, Humana provides care-management and wellness services intended to support chronic-condition management, preventive care and care coordination.
