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Something unusual just showed up in Medicare’s 2026 preview

October 8, 2025 | by ltcinsuranceshopper


A subtle transformation is occurring in the $500 billion Medicare Advantage market that could quietly change who makes the most money in 2027.

The new 2026 star ratings, which decide how much money the government gives to insurers as bonuses, show that the biggest companies in the industry are taking different approaches. 

Humana  (HUM) , the second-largest Medicare Advantage provider, made big improvements to its quality mix that could mean hundreds of millions of dollars more in rebate money.

At the same time, competitors UnitedHealth Group  (UNH)  and CVS Health’s  (CVS)  Aetna are pulling back. Both companies are cutting back on their plans in dozens of counties for 2026, a defensive move to protect their short-term profit margins as the demand for care rises.

These early choices point to a strategic fork in the road: one player is trying to get the most out of bonuses, while the others are trying to limit risk.

That difference won’t show up on the income statement right away, but eventually it will. For investors, this is the first clear sign of how positioning in 2026 could affect earnings and free cash flow in 2027.

And right now, it looks like only one insurance company is taking advantage of that.

Humana’s Medicare Advantage strategy is diverging from rivals.

Humana

A subtle shift is reshaping the 2027 playing field

The Centers for Medicare & Medicaid Services recently released 2026 star ratings that do more than show quality; they also show a strategic split in how major insurers are preparing for future profits.

Humana, a long-time major player in the Medicare Advantage market, has seen a huge rise in the number of members enrolled in 4.5-star plans, going from 3% last year to 14% in 2026. 

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That change brings the company more in line with CMS bonus thresholds and could significantly increase its revenue base in 2027.

At the same time, both UnitedHealth Group and CVS’s Aetna are cutting back on their 2026 plan footprints, which means they are covering fewer markets, trying to protect themselves from margin pressure caused by rising care use.

This difference, which is small but significant, is creating a binary for investors: one group of insurers is setting the stage for long-term bonus upside, while the other group is playing defense to keep earnings stable today.

Star ratings now signal more than quality — they define future margins

Medicare Advantage star ratings are not just badges for good performance. Plans that get 4 stars or more from CMS can get extra payments that can add up to hundreds of millions of dollars in extra revenue. 

These payments don’t come right away; they depend on ratings from 2026, which affect payments in 2027. But for Wall Street, they are a good sign of future margin potential.

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Humana’s most recent filing shows that about 20% of its Medicare Advantage members are now in plans with 4 stars or more. The number of members in the 4.5-star bracket has grown fivefold. That’s a big change from last year, when the company had a temporary drop in its quality score that lowered expectations.

Humana also stuck to its adjusted EPS guidance of $17 for 2025, even though other companies cut back. It’s clear what management is doing: they’re holding the line now and getting ready for a rebound in the next cycle.

Margin stress forces strategic contraction — and Humana isn’t following the pack

While Humana improves its quality mix, others are retrenching.

  • UnitedHealth is exiting Medicare Advantage in 109 counties, affecting roughly 180,000 members.
  • Aetna is scaling back in over 100 counties and cutting its state-level footprint.
  • Humana, by contrast, is reducing exposure more modestly — maintaining 46-state reach and trimming county coverage from 89% to ~85%.

These moves are surgical. They pay attention to areas with high costs or low performance, especially markets with a lot of PPOs. UnitedHealth cut its full-year EPS forecast from almost $30 to as low as $26 because it was seeing a lot more use and the DOJ was looking into its Medicare billing practices. On the other hand, CVS has been working to keep its baseline profits even as medical loss ratios rise.

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In contrast, Humana raised its revenue guidance in Q2, had 9.6% year-over-year growth, and kept its medical cost ratio at 89.7%, all while sticking to its CenterWell primary care strategy.

Insurance companies that pull back now may protect their short-term profits, but they are also giving up their bonus leverage for 2027. That’s a trade that investors should keep an eye on.

The 2026 ratings may be the cleanest read on 2027 EPS potential 

This reset isn’t just a reaction to big-picture problems. It’s a test of a strategy that looks ahead to see which insurance companies will have momentum going into 2026 and which will just get by.

This gives investors a new way to look at long-term earnings power. Humana’s growing share of high-rated plans means it will be able to make more money from rebates in 2027. That tailwind could help free cash flow and dividends, even if demand stays high.

On the other hand, insurers cutting back on their plan maps now may be making a smart short-term move, but they are giving up the chance to make more money in what could be a good year for bonuses.

Humana is signaling offense — others are playing defense 

With CMS star ratings set in stone for 2026 and rebate dollars linked to them in 2027, the changes made today are already changing the P&L for the future.

Humana may not have said much, but the numbers show it’s getting ready to focus on growth through bonuses. On the other hand, UnitedHealth and CVS are focused on keeping their core margins safe in the face of regulatory and cost pressures.

That difference makes the 2026 Medicare Advantage positioning a strong early sign. Not just for plan coverage, but also for the earnings and free cash flow stability that investors will be looking for in 2027.

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