Humana loses CMS lawsuit as expected, says Mizuho, dismisses lawsuit as too broad-based and lacking evidence.

Humana has lost its lawsuit against the Center for Medicare and Medicaid Services, as expected by Mizuho. The firm believes the loss was expected due to Humana's broad-based argument and lack of pointed evidence. Mizuho maintains its Outperform rating and $316 price target on Humana shares.

Humana Inc. (NYSE: HUM) has lost its lawsuit against the Center for Medicare and Medicaid Services (CMS), as predicted by Mizuho. The managed care firm had challenged its 2025 Medicare Star Ratings cut, which could impact its bonus payments for 2026. The judge in the Northern District of Texas ruled that Humana's legal claims were "premature," as the company had not exhausted administrative remedies before filing the lawsuit [1].

The court dismissed the case without prejudice, allowing Humana to refile if its other appeals with the CMS fail. The decision comes after CMS denied Humana's appeal in April, six months after the company lodged its complaint. This timing was crucial, as the judge noted that Humana's lawsuit was filed before it received the outcome of its appeal with the CMS [3].

Mizuho, which maintains an Outperform rating and a $316 price target on Humana shares, had anticipated the outcome. The firm believes that Humana's broad-based argument and lack of pointed evidence contributed to the loss. Despite the setback, Mizuho remains optimistic about Humana's prospects, citing its strong financial performance and market position [2].

The loss in the lawsuit could have significant financial implications for Humana. Analysts estimate that the company could lose $1 billion to $3 billion in 2026 due to the drop in its Medicare Advantage star ratings. The star ratings, which represent plan quality and performance, are directly tied to reimbursement in privatized Medicare plans. The drop in ratings has been attributed to various factors, including rising utilization costs and unfavorable policy changes [3].

Institutional investors continue to hold a significant stake in Humana, with 92.38% of the stock currently owned by institutional investors and hedge funds. The company's strong financial performance and market position have drawn the attention of analysts, who have issued a mix of ratings and price targets for the stock [2].

References:

[1] https://seekingalpha.com/news/4468905-humana-loses-medicare-star-ratings-lawsuit
[2] https://www.marketbeat.com/instant-alerts/humana-nysehum-lowered-to-hold-rating-by-wall-street-zen-2025-07-12/
[3] https://www.healthcaredive.com/news/humana-medicare-advantage-star-ratings-lawsuit-dismissed/753455/