Humana Stock Plunges After Medicare Rate Shock

Shares of major U.S. health insurers tumbled dramatically on Tuesday, January 27, 2026, after the Trump administration unveiled a proposal to keep Medicare Advantage payment rates for 2027 essentially flat. The move sent shockwaves through the healthcare sector, with Humana Inc. bearing the brunt of the selloff, but its competitors—UnitedHealth Group, CVS Health, Elevance Health, and others—were not spared either. The Centers for Medicare & Medicaid Services (CMS) announced late Monday that the net average payment increase for Medicare Advantage plans in 2027 would be a mere 0.09%, amounting to roughly $700 million across the industry. This figure fell dramatically short of Wall Street’s expectations, which had anticipated an increase in the range of 4% to 6%.

According to Benzinga, Humana shares plunged 13.49% in premarket trading, falling to $228.00 from the previous close of $263.63. The downward spiral continued throughout the day, with GuruFocus reporting that Humana ultimately closed at $209.00—a staggering 20.7% single-day drop, wiping $54.63 off its share price. The company’s market capitalization also took a hit, sliding to $25.15 billion. Humana’s year-to-date return stood at just 2.93%, while its one-year return reflected a decline of 9.27%.

The broader health insurance sector was swept up in the rout. UnitedHealth Group shares dropped 16%, CVS Health tumbled 13%, and Elevance Health fell 7.7%, as reported by Barron’s. Other insurers, such as Alignment Healthcare and Centene Corp, also experienced sharp declines. The S&P 500’s biggest losers ahead of the opening bell were dominated by healthcare names, underscoring the sector-wide anxiety triggered by the CMS announcement.

The source of the market’s angst was clear: the 0.09% proposed increase for Medicare Advantage plans in 2027 marks a dramatic reduction from the 5.06% increase insurers received for 2026. For companies like Humana, which specializes in government-sponsored programs and has over half of Medicare beneficiaries enrolled in its Medicare Advantage plans, such a move has immediate and profound implications. The proposed rates directly influence what insurers can charge for monthly premiums, the benefits they can offer, and ultimately their profit margins. As The Wall Street Journal highlighted, the Trump administration’s proposal set up payments to plans to increase by approximately 0.09% next year, leaving many investors and analysts disappointed.

CMS Administrator Dr. Mehmet Oz explained that the proposal aims to strengthen payment accuracy and modernize risk adjustment, while protecting taxpayers from unnecessary spending. However, analysts noted that the proposal also seeks to eliminate certain billing practices that have historically been profitable for insurers, adding to investor concerns regarding future earnings. The abruptness and scale of the proposed change left analysts scrambling to reassess their outlooks for the sector.

Humana, as one of the largest private health insurers in the U.S., is particularly exposed to such regulatory shifts. The company’s core business revolves around Medicare, Medicaid, and the military’s Tricare program. It also provides a range of healthcare services including primary-care, at-home services, and pharmacy benefit management. Despite the market’s negative reaction, Humana’s underlying financial health remains robust. According to GuruFocus, Humana’s revenue has grown 14.9% over the past three years, with trailing twelve months sales totaling $126.36 billion. The company’s net margin stands at 1.02%, EBITDA margin at 2.55%, debt-to-equity ratio at 0.68, return on equity at 7.3%, and return on assets at 2.61%.

Humana’s financial stability is further underscored by a Piotroski F-Score of 7, which signals strong financial health, and a Beneish M-Score of -2.43, suggesting a low likelihood of earnings manipulation. The company’s valuation metrics—P/E ratio of 19.6, forward P/E of 17.38, P/S ratio of 0.2, and P/B ratio of 1.36—point to a potential undervaluation compared to historical ranges. Analysts’ average target price for Humana is $288.89, indicating room for recovery should market conditions stabilize. Institutional investors seem to agree: institutional ownership is high at 98.4%, with insider ownership at 1.05%.

Yet, the risks facing Humana and its peers are significant. The company’s volatility is measured at 37.97, and with a beta of 0.32, Humana exhibits lower market sensitivity than many of its peers. However, sector-specific risks loom large, particularly regulatory changes in healthcare and government policy impacts on Medicare and Medicaid. The CMS proposal is a stark reminder of how quickly regulatory winds can shift, upending even the most stable-seeming business models in the sector.

Market sentiment following the announcement was decidedly negative. As Barron’s noted, investors backed out of healthcare stocks while showing little concern for the risk of another U.S. government shutdown. The CMS proposal’s 0.09% increase was well below what analysts had been expecting, and the disappointment reverberated through the sector. UnitedHealth’s selloff was further exacerbated by its own quarterly earnings report, which showed softer-than-expected revenue and weak guidance for the current year.

Other companies also made headlines Tuesday, but none saw the same scale of reaction as the health insurers. Micron Technology climbed 4% after announcing a $24 billion investment in Singapore, while logistics giant UPS gained 3.3% after beating earnings expectations. In contrast, steelmaker Nucor and hospitality software company Agilysys posted losses after reporting weaker-than-expected results.

For now, the focus remains firmly on the healthcare sector and the fallout from the CMS proposal. Analysts will be watching closely as the industry responds to the regulatory challenge. While Humana’s financial fundamentals suggest resilience, the company—and the sector at large—faces a period of heightened uncertainty. The next steps from CMS, potential revisions to the proposal, and how insurers adapt their business models will all play a role in shaping the market’s trajectory in the coming months.

Amid the turmoil, one thing is certain: regulatory decisions in Washington can reshape the fortunes of entire industries overnight. For Humana and its peers, the challenge now is to weather the storm and chart a path forward in a landscape where the rules can change at a moment’s notice.