Humana's largest Medicare Advantage contract recovered to 4 stars from 3.5 stars in the 2027 ratings published by the Centers for Medicare & Medicaid Services on October 8, sending its shares up 16.5% on Thursday while rival Alignment Healthcare tumbled more than 20% after its largest California contract was downgraded to 3.5 stars from 4. The improvement restores Humana's eligibility for federal quality bonus payments, potentially providing a significant boost to the insurer's earnings in 2028. Alignment's downgraded contract accounted for approximately 81% of the company's membership as of September 2025. The developments mark a reversal of fortunes for the two insurers: Humana suffered a major ratings collapse in 2024, when the proportion of members enrolled in plans rated at least 4 stars plunged from 94% to 25% for the following year, while Alignment had emerged as an industry outperformer with 100% of its membership in plans rated at least 4 stars for 2026. CMS assigns Medicare Advantage plans ratings ranging from 1 to 5 stars based on measures including clinical outcomes, customer experience and plan performance, and contracts achieving at least 4 stars qualify for quality bonus payments that increase federal funding available to insurers; the newly published ratings will primarily affect payments and company revenues in 2028.
Alignment Healthcare LLCCMS downgraded Alignment's largest California contract to 3.5 stars from 4, covering ~81% of membership, cutting quality bonus payments.
Humana IncCMS restored Humana's largest Medicare Advantage contract to 4 stars, regaining eligibility for federal quality bonus payments.
