Humana, a major health insurer, has experienced a significant drop in its stock price this week. The company’s shares have plummeted by 23%, marking its worst weekly decline since 2020 and its largest two-day drop since 2009. At the beginning of the week, the stock was trading at around $320 per share, but has since fallen to $246.80.
The sharp decline in Humana’s stock price follows a decision by Medicare to downgrade the ratings on some of the company’s health insurance plans. These ratings are crucial revenue drivers for Medicare Advantage insurers like Humana, as higher ratings result in government bonus payments. Conversely, lower ratings can deter customers from choosing these plans.
With the recent ratings downgrade, only 25% of Humana’s customers will now fall under its four-star or higher plans, a significant decrease from the previous 94%. This change is expected to have a negative impact on the company’s revenue and customer base. In response to the downgrade, Humana has stated that it is working to appeal the changes and regain its higher ratings.
Analysts at UBS and Bank of America have expressed concerns about Humana’s ability to recover from the ratings downgrade. UBS analysts described the downgrades as the “worse case scenario for stars,” while Bank of America analysts downgraded the stock to underperform and lowered its price target. They also warned that a potential win for Democrats in the upcoming elections could further pressure Medicare Advantage plans, hindering Humana’s recovery efforts.
Overall, the future outlook for Humana remains uncertain as the company navigates the challenges posed by the Medicare ratings downgrade. The competition in the health insurance industry, particularly from peers like UNH, adds another layer of complexity to Humana’s recovery efforts. It will be crucial for the company to focus on regaining its ratings and retaining market share in order to bounce back from this setback.
Source: Business Insider
