:max_bytes(150000):strip_icc()/GettyImages-1569285206-9bca4eec316b4086b584d7e1a73dd78d.jpg "Humana Stock Is at Multiyear Lows as Investors Digest Its Medicare Rating")
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Key Takeaways
- Jefferies downgraded Humana, warning how the latest Medicare ratings will affect results.
- The analysts noted that data from federal regulators showed Humana had a huge dropoff in Medicare customers. Humana is appealing CMS’s decision, claiming the rating process is flawed.
- Shares of Humana have tumbled this year on concerns about medical costs and government regulations.
Humana (HUM) shares slid after Jefferies downgraded the insurer’s stock, pointing to the negative impacts of the company’s latest ratings for its Medicare offerings.
Humana stock plunged last week after the Centers for Medicare & Medicaid Services (CMS) said the quality rating of one of its plans, which accounts for nearly half of its Medicare Advantage (MA) memberships, fell to 3.5 stars down from 4.5 stars last year. Higher star ratings generate bonus payments for the insurers that offer plans that earn them.
Today the shares, down nearly 2%, are trading at lows not seen since the early days of the 2020 COVID-19 outbreak. Jefferies, meanwhile, cut its rating on Humana to “hold” from “buy,” and slashed its price target from $419 to $253, well off Wall Street’s consensus around $327 according to Visible Alpha data.
The analysts said that although Humana is suing the CMS, calling its star ratings process flawed—and noting that United Health Group (UNH) and Elevance Health (ELV) both filed successful appeals last year—they are continuing to move forward as if Humana would not win its appeal against CMS.
Shares of Humana have sunk since the CMS rating came out last week, adding to a slump that began in January when the company first warned that higher medical costs and government regulations would hurt profits.
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