Humana Raises Its 2026 Outlook as Medical Costs Come In Below Plan

Humana posted a narrower third-quarter loss than analysts expected on Friday and raised its full-year earnings outlook, as medical costs ran below the insurer's own plan.

The health insurer reported an adjusted loss of $0.70 a share for the quarter ended September 30. Analysts expected a loss of $1.00 a share, according to the consensus carried by MarketBeat.

Revenue rose 26% to $41.16 billion, ahead of the $40.87 billion analysts expected on the same compilation. A year earlier, Humana earned an adjusted $3.24 a share on revenue of $32.65 billion.

Reported results told a different story. On a GAAP basis — the standard accounting measure — Humana earned $1.33 a share, down from $1.62 a year earlier, with net income of $162 million.

The gap between two profit lines

The two measures diverge because of items the adjusted line strips out. The largest is a $2.94-a-share valuation loss on put and call rights tied to minority investments, which sits inside the reported figure.

Excluding those items, the quarter was a pretax loss of $104 million on an adjusted basis. A year earlier, the same measure was a pretax profit of $527 million.

That swing is the quarter's real pressure point. Membership grew quickly, and new members tend to cost more to cover in their first years than long-held ones.

Costs ran light, reserves ran thin

The insurance segment's benefit ratio — the share of premiums spent on members' medical care — was 93.7%. Management had guided to slightly above 94%, and the ratio was 91.1% a year earlier.

Medical and pharmacy cost trends ran in line with, or better than, the company's high-single-digit expectation. That held for new and existing members alike, management said in its prepared remarks.

One tailwind faded. Favorable development on prior-period medical claims reserves was $67 million, down from $275 million a year earlier — a smaller cushion from claims that cost less than reserved.

The insurance segment posted an adjusted operating loss of $299 million, against a $270 million profit a year earlier. CenterWell, the services arm, earned an adjusted $291 million, down from $358 million.

Growth is doing the heavy lifting

Humana is expanding while rivals pull back from Medicare Advantage, the privately run version of Medicare. Individual Medicare Advantage membership added about 1,208,000 members in the first nine months, a rise of about 23%.

Medicaid membership grew by about 104,000, helped by new integrated programs for dual-eligible members in Michigan, Illinois and South Carolina. CenterWell's senior primary-care arm added 146,800 patients, a rise of 30%.

A new joint venture with BlackRock's HPS arm now runs nearly 150 CenterWell clinics, replacing the prior ventures with Welsh, Carson, Anderson & Stowe. Humana says the switch cuts its cost of capital and funds further growth.

"Humana is delivering positive results for our members, our patients and their health," President and Chief Executive Jim Rechtin said. "We are also increasingly driving financial and operating performance toward being 'ahead' of our plan."

A bigger raise on paper than in operations

For the full year, Humana now expects adjusted earnings of at least $9.50 a share, up from at least $9.00. Even at the new floor, adjusted earnings fall well short of the $17.14 reported for 2025.

The company blames the drop on a Star Ratings headwind: lower quality scores for bonus year 2026 cut the bonus payments Medicare pays its plans. Mitigation efforts soften, but do not erase, that hit.

The reported outlook moved far more. GAAP guidance rose to at least $15.09 a share from at least $6.52 — a jump driven by the noncash reversal of a roughly $1.2 billion put liability, not by operations.

The bridge also carries a $2.14-a-share option liability for the BlackRock joint venture, expected in the fourth quarter and excluded from adjusted results. Readers should treat the GAAP raise as an accounting move, not an operating one.

The arithmetic points to a heavy fourth quarter. With adjusted earnings of $17.17 a share already booked this year, landing exactly at the $9.50 floor implies a fourth-quarter adjusted loss of about $7.67 a share, by TickerGrove's calculation.

Investors were unmoved. Shares eased 0.36% to $410.32 in premarket trading at 8:25 a.m. ET on Friday, according to StockAnalysis, after closing at $411.79 on Thursday, down 1.35%.

What remains unknown

Whether the lighter cost trend survives the fourth quarter is unproven. The quarter is seasonally Humana's weakest, and the implied loss at the guidance floor is the largest test of the cost story.

How many of the new members stay, and at what cost, is also open. Enrollment for 2027 plans runs into early December, and first-year members have historically run at higher benefit ratios.

What to watch: Humana's investor update on December 10, Friday's close after the open, and whether fourth-quarter cost trends match the prepared remarks' in-line-to-better reading.