Humana 2Q26: Inline performance with 3Q presenting Stars oppty, although risks persist with fast 26 MA growth

Research evidence excerpt

Humana 2Q26: Inline performance with 3Q presenting Stars oppty, although risks persist with fast 26 MA growth

Lance Wilkes +1 917 344 8501 lance.wilkes@bernsteinsg.com 3 August 2026

released in October. Management did not comment on current litigation in the industry surrounding Stars methodology.

Exiting 600k members: New and returning membership is “performing as expected”. HUM announced that they anticipate

exiting plans for 2027 that will impact ~600k members, though they will work to recapture a significant portion of that volume.

The purpose of the exit is to make progress towards their 3% margin target. Management added that the exits are a piece

of their expected margin expansion, but not the majority, as they no longer have many negative margin plans to exit from.

Additional incremental margin will be gained from benefit adjustments and operating efficiency.

MA bidding: Management expects their 2027 MA bid approach to drive progress towards their 3% margin goal in 2028. Their

#1 priority is to remain on track to deliver 3% margin in 2028, but they did not quantify what progress towards that goal will be

in 2027. Their #2 priority is to retain as many members as possible while making the changes necessary to drive the intended

margin expansion.

IBNR: Management cautioned against comparing IBNR to the prior year, noting it should be evaluated relative to membership,

and it has remained roughly stable on that basis. Given that IBNR would typically decline throughout the year as pharmacy

claims, which require little to no IBNR, become a larger share of claims, the stable reserve balance suggests a degree of

conservatism.

Medicaid: Medicaid margins are tracking at approximately -1%, in line with expectations. Management continues to see some