Humana Cuts GAAP Outlook as Medical Costs Rise
Second-quarter revenue climbed 26.2% to $40.87 billion as Medicare membership expanded.
Humana Inc. (HUM), the health insurer, reported second-quarter adjusted earnings of $7.61 a share, up 21.4% from a year earlier as cost reductions helped counter a higher benefit ratio.
The quarter showed widening pressure from medical costs even as membership growth lifted premiums. Humana’s consolidated benefit ratio deteriorated 140 basis points to 91.1%, while favorable development of prior-period medical-claims reserves declined to $53 million from $161 million a year earlier.
Revenue rose from $32.39 billion a year earlier and increased 3.1% from the first quarter. GAAP earnings climbed 27.1% to $5.73 a share, though year-to-date adjusted earnings were nearly flat at $17.91 a share.
Insurance-segment revenue increased 25.9% to $39.14 billion, driven by Medicare membership growth and higher per-member premiums, partly offset by the 2026 Star Ratings headwind. Segment operating income rose 7% to $820 million as the benefit ratio increased 130 basis points to 91.2%, limiting the earnings contribution from higher revenue.
Cost controls provided an offset. The consolidated operating-cost ratio improved 120 basis points to 9.8%, reflecting revenue leverage and Humana’s cost-cutting and transformation initiatives. Charges tied to those efforts rose to $56 million from $29 million.
Humana lowered its full-year GAAP earnings floor to $6.52 a share from $8.36 in April, while maintaining adjusted earnings guidance of at least $9.00 a share. The company continues to forecast an Insurance benefit ratio of 92.75%, plus or minus 25 basis points, and approximately 25% growth in individual Medicare Advantage membership.
Operating cash flow more than doubled to $3.22 billion, helped by working-capital activity, a higher claims balance and the timing of an approximately $1.05 billion Medicaid payment. Humana also secured a statewide Illinois Medicaid managed-care award expected to begin in January 2027, adding a new growth channel as the company works through its medical-cost pressure.