Jul 29, 2026 earnings call — 2027 MA bids and Stars progress
Company expects 2027 MA bids to drive progress toward a sustainable pretax margin of at least 3% in 2028.
Revenue $40.9B (est $40.6B) · EPS $7.61 (est $7.27)
Key quotes
"We expect that our approach to 2027 MA bids will drive solid progress against our goal of delivering a sustainable pretax margin of at least 3% in 2028."
"We continue to be confident we are on the right track to return to top quartile Stars results in BY '28."
"Our 2Q consolidated operating cost ratio is down 120 basis points year-over-year, and we continue to expect a full year reduction of approximately 150 basis points."
Analyst Q&A 13
2027 bids and margins
Q (Justin Lake · Wolfe): He asked if Humana expects to get more than half of the needed margin improvement in 2027 from bids, and what trend assumptions and conservatism are built into those bids.
A: She would not comment on specific progress from '26 to '27 because membership size and composition will drive outcomes. She said they expect significant progress in '27, assume trends in line with this year (with drug trend high and ticking modestly higher), and build contingency into bids done six months ahead.
"So we believe we are well positioned to make significant progress and look forward to this year's AEP." — Celeste Mellet (CFO)
cost trend and inpatient drivers
Q (Jason Cassorla · Guggenheim Partners): He asked for more detail on cost trend, what is driving inpatient favorability, and for a reminder of site-of-service initiatives and how those offset trend.
A: They guided all-in trend for the year as high single digits or 7% to 8%, with medical a little lower and drug costs in double digits, and noted favorability on inpatient with lower admits per 1,000 and lower unit costs. Site-of-service is one of many initiatives to move members to higher-quality, lower-cost settings through contracting, aligned incentives, benefit design and member education; they will not share specific numbers now.
"As a reminder, our all-in trend assumption for this year is high single digits or 7% to 8%." — Celeste Mellet (CFO)
Stars metrics selection and representativeness
Q (Stephen Baxter · Wells Fargo): He asked how the sample metrics were selected, how representative they are of broader performance, and whether they'd still expect outperformance versus peer group trends.
A: They said the tone and plan are unchanged and they focus on closing gaps and reaching at least top quartile Stars measured on a PMPM basis. The shared metrics were chosen because they have clear longitudinal data over the last 5 years and they believe those metrics are representative of broader performance; they will not share internal threshold estimates and will navigate threshold uncertainty.
"These are the metrics that we have clear longitudinal data over the last 5 years to be able to compare." — James Rechtin (CEO)
IBNR trend update
Q (Ann Hynes · Mizuho): She was asked for a directional update on IBNR coming out of Q2 and how it is trending versus membership.
A: The IBNR detail will be in their Q this afternoon, and they reported that IBNR remained basically flat from last quarter. They view that as prudent because IBNR should decline as the year progresses, and they are up significantly year-over-year and versus the beginning of the year in both IBNR and more so than membership.
"What you'll see is that the IBNR remained basically flat from last quarter." — Celeste Mellet (CFO)
contingent pre-capitalized trust reasons
Q (Benjamin Hendrix · RBC): He asked why they formed the contingent pre-capitalized trust, what drove the decision, and whether trends or 2027 bids made this vehicle appropriate.
A: They like the product because it increases liquidity without increasing the balance sheet unless drawn and they do not anticipate drawing on the P-Caps in the near to medium term. It diversifies contingent liquidity at relatively low cost with no counterparty risk, uses cash held in securities to make yield, pays a small premium, and offers extended 10- and 30-year duration versus typical revolvers.
"At this point, we do not anticipate using them or drawing on the P-Caps in the near to medium term." — Celeste Mellet (CFO)
market exits and high-value plans
Q (Kevin Fischbeck · BofA): He asked why Humana is exiting markets in 2027 versus not doing it this year, whether Stars influenced market choices, and what targeting high-value plans means.
A: They apply a multiyear approach and set underwriting margin targets at the plan level, monitoring benefit design, costs and revenue to drive profitability and capital returns. They pushed harder this year to protect highest-value plans by removing the lower tail of profitability; they expect to capture a similar portion as in 2025 and said the majority of plan exits were in plans with 3.5 or lower ratings for BY '27, and it's not primarily a Stars action.
"The majority of the plan exits were in plans with 3.5 or lower ratings for BY '27, but I wouldn't really think about this as a Stars item." — Celeste Mellet (CFO)
MA cost trend and margin drivers
Q (Albert Rice · UBS): He asked why peers seemed to see more favorability on cost trend and how much margin lift is natural versus due to initiatives like lower commissions, coding, or cost actions.
A: They guided to 7% to 8% cost trend and said some peers guided higher, but Humana is in line with the range with some favorability and continues to build prudent reserves. They will not give specific bid details; margin progression will depend on membership size and composition, and they are working on reducing cost of care through site-of-care, clinical innovation, transformation, benefit adjustments, and plan exits while addressing chart review items.
"So we did guide to 7% to 8% cost trend." — Celeste Mellet (CFO)
value-based care and CenterWell performance
Q (Lance Wilkes · Bernstein): He asked how value-based care contracting trends compare with fee-for-service and whether they will change contracting in '27, and he asked about CenterWell performance across ownership models.
A: They said value-based care is slightly better than fee-for-service and sits within the 7% to 8% trend range, and they continue to drive contracting consistency and aligned incentives with providers. CenterWell is performing in line with broader trends with strong patient growth from organic expansion and acquisitions; de novo sites overlapping with Welsh Carson are still working through the J curve but making progress.
"And value-based care is slightly better than the fee-for-service." — Celeste Mellet (CFO)
Part D trends and CMS program timing
Q (Scott Fidel · Goldman Sachs): He asked for an update on Part D underwriting performance and whether the CMS decision to end the premium stabilization program was known or considered in 2027 bids.
A: On Part D, drug trends and member behavior are in line to slightly better than expectations and they remain confident in pricing for the year; they focused on margin when bidding for '27 and priced for health technology risk. On policy, they planned for the demo possibly being canceled in bids, said the demo's removal impacts members more than Humana, and rebate data fell within their planning scenarios.
"We certainly planned for this possibility in our bid process." — James Rechtin (CEO)
litigation impact on Stars program
Q (Andrew Mok · Barclays): He asked how recent litigation outcomes around MA Stars affect their view of the program, competition, and investment needs.
A: They will not speculate on litigation outcomes that they do not control. They said the Stars program is important for quality and member experience, needs to be stable, can evolve and improve, and they want to be a partner to CMS to reinforce a stable program while letting events play out.
"Our view is that we need this program to be stable." — James Rechtin (CEO)
duals vs non-duals and bid priorities
Q (Ryan Langston · TD Cowen): He asked how medical and Rx trends differed for duals versus non-duals and whether bids prioritized capturing or recapturing duals.
A: They said duals performance looked fairly consistent with the rest of the book. Retaining members is a priority for both duals and non-duals and they prioritize benefits members care about, but they would not disclose bid positioning; they also said Humana believes it is well positioned to serve duals effectively.
"The duals performance looked fairly consistent with the rest of the book." — Celeste Mellet (CFO)
year-1 to year-2 margin lift drivers
Q (Benjamin Mayo · Leerink Partners): He asked historically how much margin lift new members typically provide in their second year versus the first year and what drives that lift.
A: She said margin improvement from year 1 to year 2 comes from better diagnosis and management of members leading to appropriate payment for acuity and from much lower marketing and onboarding costs in year 2. She emphasized retention matters and the overall lift depends on membership retention, size and mix.
"Second, as you know, the year 1 all-in marketing and acquisition costs, co-op marketing, et cetera, onboarding costs are 2x what the second year is." — Celeste Mellet (CFO)
cost-cutting progress and Investor Day plan
Q (Elizabeth Anderson · Evercore): She asked for an update on cost-cutting progression, any change in composition or assumptions, and what they plan to communicate at the December Investor Day.
A: They said last year's savings were more tactical, and this year progress is more transformational through outsourcing, vendor consolidation and centralizing functions to improve service and save G&A. They plan a December update to mark-to-market commitments without changing strategy; cost management is focused on simplifying the business and they have a multi-year roadmap to continue progress.
"This year, much more of the progress is really on the transformational side." — Celeste Mellet (CFO)