Humana soars, Alignment Healthcare sinks on Medicare rating changes

Investing.com -- Shares of Humana surged 16.5% on Thursday, while rival Alignment Healthcare tumbled over 20%, after newly released Medicare Advantage Star Ratings revealed sharp reversals in ratings for the two insurers.

Humana's largest Medicare Advantage contract recovered to 4 stars from 3.5 stars in the 2027 ratings published by the Centers for Medicare & Medicaid Services (CMS) on October 8. The improvement restores eligibility for federal quality bonus payments, potentially providing a significant boost to the insurer's earnings in 2028.

Alignment, meanwhile, suffered a major setback as its largest California contract was downgraded to 3.5 stars from 4. The contract accounted for approximately 81% of the company's membership as of September 2025.

The developments mark a reversal of fortunes for the two insurers. Humana suffered a major ratings collapse in 2024, when the proportion of members enrolled in plans rated at least 4 stars plunged from 94% to 25% for the following year, dealing a significant blow to its earnings outlook. Alignment, by contrast, had emerged as an industry outperformer, with 100% of its membership in plans rated at least 4 stars for 2026.

CMS assigns Medicare Advantage plans ratings ranging from 1 to 5 stars based on measures including clinical outcomes, customer experience and plan performance. Contracts achieving at least 4 stars qualify for quality bonus payments, which increase federal funding available to insurers. The newly published ratings will primarily affect payments in 2028.

The ratings released Thursday will affect company revenues in 2028.

Original Article

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