Investing.com -- Managed care insurers face divergent earnings impacts from the Centers for Medicare and Medicaid Services' 2027 Star Ratings, with Humana positioned for significant upside while UnitedHealth confronts the largest headwind, according to an Evercore note to clients from analyst Elizabeth Anderson following the CMS release.

The Star Ratings determine quality bonus payments that insurers receive for their Medicare Advantage plans, directly affecting profitability. The latest ratings show material shifts in contract performance across the sector's largest players.

1. Humana Inc (NYSE: HUM) - HUM's recovery is supported by improvement across multiple contracts, including the all-important H5216, which gained 4 stars on 13 contracts and lost 1. Drug-plan quality-improvement ratings rose on all 12 upgraded contracts, health-plan quality-improvement ratings rose on 10, and readmission improved on 9. H5216 also saw both its Part C and Part D summary ratings reaching 4. The breadth of improvements reflects the importance management has placed on fixing this metric over the past year. HUM has the most potential earnings per share upside, as the company should receive approximately $4.8 billion of bonus payments in 2028, translating to adjusted EPS of $50 or more in 2028 versus Evercore's current estimate of $28.10, representing roughly 85% of potential upside.

2. Unitedhealth Group (NYSE: UNH) - UNH's decline spans both improvement scores and Part D performance. Health-plan quality-improvement ratings fell on all 12 contracts that lost 4-star status, and Part D summary ratings declined on 9. H2802, the largest affected contract at 4.4% of membership, saw its health-plan rating fall from 4 to 2 and its Part D summary rating decline from 4.5 to 3.5. Evercore estimates UNH should face a headwind of approximately $1.4 billion from lower Star payments in 2028, translating to EPS of approximately $24.84, roughly 5% below the current estimate of $26.11. However, the firm believes UNH should be able to offset a meaningful portion of this potential headwind.

3. CVS Health Corp (NYSE: CVS) - CVS's losses are more dispersed across operating measures. Care-coordination ratings declined on all eight contracts that crossed below 4, while diabetes medication adherence and blood-pressure control each declined on six. Evercore estimates a $463 million unmitigated headwind, or $0.27 per share, putting 2028 EPS at $9.60 versus $9.87, representing roughly 3% downside before pricing or benefit adjustments.

4. Elevance Health Inc (NYSE: ELV) - ELV's decline is narrower and more clearly Part C driven. H3655 accounts for 7.6% of membership and nearly all of the lost 4-plus share. Its health-plan quality-improvement rating fell from 5 to 1, its health-plan rating from 4 to 2, and members choosing to leave increased from 12% to 25%. Evercore estimates a $246 million unmitigated headwind, or $0.88 per share, putting 2028 EPS at $33.14 versus $34.02, representing roughly 3% downside before mitigation.

Original Article