Humana's Bid to Reverse Medicare Payment Cut Rejected by Court

Humana Inc. lost its lawsuit seeking to reverse cuts to its Medicare bonus payments, a blow to the insurer that had hoped the court would restore billions in revenue. A Texas district court ruled in favor of the government's motion to dismiss the case, affirming the Medicare program's downgrade of Humana's quality ratings that's set to squeeze the company's profits in 2026. Humana shares fell as much as 7.5%.

Humana Inc. (NYSE: HUM) experienced a significant setback on Thursday after a Texas district court ruled in favor of the government's motion to dismiss the company's lawsuit against the Medicare program. The court's decision affirms Medicare's downgrade of Humana's quality ratings, which will likely reduce the insurer's profits in 2026. Humana shares fell as much as 7.5% before trimming losses to 4% [1].

The lawsuit was a key attempt by Humana to restore billions in revenue that could have been lost due to the cuts in Medicare bonus payments. The company challenged the government's decision to reduce its quality ratings, which directly impact the bonus payments health insurers receive for Medicare Advantage plans. However, the court's ruling has dashed those hopes, potentially impacting Humana's financial performance in the coming years [1].

The ruling has also had an impact on other health insurers. Shares of CVS Health (NYSE: CVS) and UnitedHealth Group (NYSE: UNH) declined by 2% each, reflecting the broader market's concern over the implications of the decision for the healthcare sector [1].

Despite the setback, Humana has seen increased institutional investment in its stock. Bridgewater Advisors Inc. bought 1,167 shares of Humana's stock in the first quarter, valued at approximately $303,000. Several other institutional investors, including Dodge & Cox, Vanguard Group Inc., Norges Bank, Boston Partners, and GAMMA Investing LLC, have also increased their stakes in Humana [2].

Analysts have set varying price targets for Humana, with a consensus rating of "Hold" and an average target price of $279.81. However, the recent ruling may impact these projections as the company navigates the implications of the court's decision [2].

Humana's latest earnings report showed strong performance, with earnings per share (EPS) of $11.58, beating analysts' consensus estimates of $10.07. The company's revenue was up 8.4% on a year-over-year basis, indicating robust financial health despite the setback [2].

The court's decision underscores the importance of maintaining high-quality ratings for Medicare Advantage plans, which represent a significant portion of revenue for major health insurers. Humana will need to focus on improving its quality ratings to mitigate the potential impact on its profits [1].

References:
[1] https://www.investing.com/news/stock-market-news/humana-stock-falls-after-losing-medicare-bonus-payment-lawsuit-4142079
[2] https://www.marketbeat.com/instant-alerts/filing-bridgewater-advisors-inc-buys-shares-of-1167-humana-inc-nysehum-2025-07-17/