Humana Q1 Earnings

New CEO Jim Rechtin Rebuilding/Retooling Humana

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Humana reported earnings before the market opened on Wednesday and delivered a recovery quarter. The company has been in the trenches the past two years, grappling with elevated utilization among seniors, shrinking reimbursement that has only recently started to stabilize, and reforms to risk adjustment that have upended how margins are managed. As a result, the stock has lost 54% of its enterprise value since December 2022 falling from $560 per share to just $258 today.

Initially, the market liked what it saw in the earnings, but any early momentum faded as trading wore on. Having read through the transcript, one thing that stood out was how short the call was easily one of the briefest I’ve seen in healthcare. They opened with quick remarks, then turned it over to Q&A. It made clear that new CEO Jim Rechtin has a big job ahead of him, realigning Humana’s entire structure and sharpening the company’s strategy as it navigates a new era for Medicare Advantage.

Rechtin’s Four Pillars and the Medicare Advantage Identity

Since taking over in July, Rechtin has consistently returned to four priorities: improving the product experience, building out clinical excellence, streamlining the backend of the business for efficiency, and channeling capital into CenterWell and Medicaid. With over 90% of Humana’s business still centered on Medicare Advantage, these pillars feel less like options and more like mandates. The company has long differentiated itself by focusing almost exclusively on seniors, and they continue to hold the second-largest Medicare Advantage book in the country behind UnitedHealth Group.

On the Medicare front, they’re holding firm to their full-year benefit ratio projection of 90.1% to 90.5%, and results so far are tracking toward that range. But there’s a big unknown hanging over everything STAR ratings.

The STAR Ratings Collapse and Legal Counterpunch

While they tried to avoid the topic in the prepared remarks, the elephant in the room came up during Q&A. CMS’s October release of 2025 STAR ratings hit Humana hard. The share of members in plans rated 4 stars or higher collapsed from 94% to just 25%. One large plan, representing nearly half of Humana’s total MA book, dropped from 4.5 to 3.5 stars. The implications are massive, potentially costing the company up to $3 billion in lost bonus payments for 2026.

In response, Humana filed a lawsuit in federal court, arguing that CMS used an “arbitrary and capricious” methodology in violation of the Administrative Procedure Act. Their complaint centers on a lack of transparency, particularly related to how complaints from one call center may have skewed the data. They’re not alone UnitedHealth, Elevance, and Centene are all in active disputes with CMS over the same issue.

Momentum in Medicaid Expansion