US health insurer Humana (NYSE: HUM) raised its full-year 2026 profit outlook after reporting lower-than-expected medical expenses in the third quarter, strengthening expectations that the US health insurer can improve profitability over the next two years.
The company increased its adjusted earnings guidance to at least $9.50 per share, compared with its previous forecast of at least $9.00.
- Humana increased its 2026 adjusted earnings forecast to at least $9.50 per share from $9.00, exceeding analysts’ average estimate of $9.15.
- The insurer reported a third-quarter medical cost ratio of 93.7%, below the 94.39% expected by analysts, while adjusted losses were smaller than forecast.
- Individual Medicare Advantage enrollment increased 23% through September, and 95% of members are expected to be enrolled in plans rated at least four stars in 2027.
Analysts surveyed by LSEG had expected annual adjusted earnings of approximately $9.15 per share. Humana shares rose 3.2% in morning trading following the November 6 earnings announcement.
The insurer also reaffirmed its objective of achieving a sustainable pre-tax margin of at least 3% in its Medicare Advantage business by 2028.
Humana’s medical cost ratio falls below market expectations
Humana reported a third-quarter medical cost ratio of 93.7% in its insurance segment, compared with analysts’ expectations of 94.39%.
The ratio measures the percentage of insurance premiums spent on medical services. A lower figure generally indicates that a smaller proportion of premium revenue is being used to cover healthcare costs.
Chief Financial Officer Celeste Mellet said medical cost trends were tracking toward the lower end of the company’s expected range for 2026.
Better-than-anticipated performance in inpatient hospital care and Medicare Part D prescription drug coverage supported the improved outlook.
Humana reported an adjusted quarterly loss of $0.70 per share, narrower than the $1.00 loss expected by analysts. The company also revised its GAAP earnings forecast to at least $15.09 per share, up from its previous projection of at least $6.52.
Humana Q3 2026 results and full-year outlook
| Financial metric | Reported or forecast |
|---|---|
| Q3 insurance medical cost ratio | 93.7% |
| Analysts’ medical cost ratio estimate | 94.39% |
| Q3 adjusted loss per share | $0.70 |
| Analysts’ expected loss per share | $1.00 |
| Updated 2026 adjusted EPS guidance | At least $9.50 |
| Previous adjusted EPS guidance | At least $9.00 |
| Updated 2026 GAAP EPS guidance | At least $15.09 |
| Medicare Advantage membership growth YTD | 23% |
| Expected Medicare Advantage growth for 2026 | Approximately 25% |
| Target Medicare Advantage pre-tax margin in 2028 | At least 3% |
Medicare Advantage enrollment increases 23%
Humana continues to expand its Medicare Advantage membership despite a broader industry trend toward reducing exposure to the government-funded insurance program.
Individual Medicare Advantage enrollment increased 23% during the first nine months of 2026. The company maintained its forecast for approximately 25% membership growth over the full year.
Medicare Advantage provides healthcare coverage through private insurers to eligible older Americans and people with certain disabilities.
Several major health insurers have reduced their participation in some Medicare Advantage markets in response to rising healthcare expenses and pressure on profitability.
Humana has instead pursued membership expansion while adjusting its pricing and benefit structures to improve future margins.
Humana expects higher Medicare bonus payments in 2028
Humana’s Medicare Advantage star ratings have improved substantially for the 2027 plan year. The company expects 95% of its Medicare Advantage members to be enrolled in plans rated four stars or higher in 2027, an increase of approximately 20 percentage points compared with 2026.
The ratings are important because Medicare uses them to determine quality-related bonus payments to insurers. Improved 2027 ratings are expected to increase Humana’s government payments in 2028.
The company anticipates a one-time earnings benefit from the ratings recovery and plans to reinvest part of the additional proceeds.
Humana said its approach to pricing and benefits for 2027 Medicare Advantage plans should support progress toward its target pre-tax margin of at least 3% in 2028.
Barclays analyst Andrew Mok said the insurer’s earnings growth prospects are supported by repricing in 2027 and improved quality ratings in 2028.
CenterWell reports higher primary care costs
While Humana’s insurance operations benefited from lower medical expenses, its CenterWell healthcare services business faced increased costs.
CenterWell, which provides senior-focused primary care and other healthcare services, reported a third-quarter operating cost ratio of 95.9%, compared with 93.9% a year earlier.
The increase was primarily driven by higher primary care expenses concentrated among a specific group of patients in one geographic market. The result illustrates the different cost trends affecting Humana’s insurance and healthcare delivery operations.
Despite the increase in CenterWell expenses, improved insurance performance enabled Humana to raise its consolidated earnings outlook.
Humana targets stronger profitability through 2028
Humana’s revised guidance reflects management’s expectation that medical cost pressures will remain within its forecast range through the remainder of 2026.
The insurer is pursuing higher Medicare Advantage enrollment while preparing pricing and benefit changes intended to support margins in 2027. The anticipated improvement in Medicare Advantage star-related payments represents another potential earnings driver in 2028.
Cantor Fitzgerald analyst Sarah James said the higher profit forecast indicated greater management confidence in medical cost trends than investors had previously anticipated.
Humana’s ability to sustain membership growth, manage medical expenses and improve profitability will remain central to its financial performance over the next two years.
