Humana Loses Lawsuit Over Medicare Bonus Cuts, Stock Slides

A federal district court in Texas sided with the government in dismissing the lawsuit, upholding the Centers for Medicare and Medicaid Services’ downgrade of Humana’s quality ratings.

Humana (HUM) reportedly lost its legal challenge on Friday to overturn a decision that slashed its Medicare Advantage bonus payments, dealing a setback to the insurer’s effort to recover billions in anticipated revenue.

Humana’s stock dropped as much as 4.5% in morning trade amid broader market weakness. However, on Stocktwits, retail sentiment around the company remained in ‘bullish’ territory.

Other insurer stocks, Elevance Health (ELV) and Molina Healthcare (MOH), also trended lower on Friday. Elevance Health’s stock dipped 5.4% while Molina’s stock was down 5%. 

According to a report by Bloomberg, a federal district court in Texas sided with the government in dismissing the lawsuit, upholding the Centers for Medicare and Medicaid Services’ downgrade of Humana’s quality ratings. 

The decision effectively allows the ratings to stand, potentially limiting bonus payments the company would receive under the Medicare Advantage program starting in 2026.

The report said that the Texas judge called Humana’s federal court claim “premature,” noting that the company had not yet exhausted all administrative procedures available to challenge the downgrade.

The court dismissed the case “without prejudice,” which means that Humana can refile the lawsuit if it loses future appeals with the agency. 

Humana had filed the lawsuit in October to challenge how the U.S. Medicare program calculated the quality ratings after a surprise downgrade. The insurer had argued that the downgrade was improper and would have a material effect on future earnings. 

Humana’s stock is down more than 15% this year so far and has dropped 45% over the past 12 months.

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