“Truly shocking” and “huge setback” were just two of a flood of analyst reactions to Humana Inc.’s Oct. 2 disclosure that its percentage of Medicare Advantage members in plans with 4 or more stars will plummet to 25% next year. That’s down from an estimated 94% for 2024 and is largely the result of a decline in Star Ratings for its largest contract, according to a new filing from Humana.

Although the full set of Star Ratings data won’t be released until next week, this development confirmed industry fears that rising cut points will diminish ratings — and related revenue. UnitedHealthcare, meanwhile, has already filed a complaint over CMS's scoring of one measure, which industry observers predict could be followed by similar challenges.

Editor's Note: This article has been updated to include a statement from Glenview Capital.

In a development that drew mixed reactions from analysts, CVS Health Corp. is reportedly considering breaking up its diversified health care enterprise due to the poor performance of its Aetna health benefits division.

The news of CVS’s deliberations on the company’s future — reported by multiple outlets citing anonymous sources — came shortly after a hedge fund investor, Glenview Capital, reportedly met with CVS executives to offer ideas about turning the company around. However, Glenview Capital then denied that it as pushing for a breakup of CVS.

David Cordani, CEO of The Cigna Group, made it clear during a Sept. 5 presentation at the Morgan Stanley Healthcare Conference that the firm doesn’t view the elevated medical costs facing health insurers this year as a threat to its diversified portfolio.

Cigna Healthcare, the firm’s health insurance business, in the “recent timeframe” has been able to deliver “good, predictable” medical loss ratios (MLRs), Cordani said, referring to a closely watched metric that shows the percentage of premiums spent on medical claims.

During the Wells Fargo Healthcare Conference on Sept. 4, executives from Centene Corp. and Humana Inc. shared new details about how the headwinds facing their Medicaid and Medicare businesses are expected to play out. And within those updates, there was both good and bad news.

Centene Chief Financial Officer Drew Asher said during his presentation that the firm is “continuing to get Medicaid pressure,” largely due to the resumption of routine eligibility checks that restarted last spring after a multiyear pause during the COVID-19 pandemic. Centene discussed the issue at length during its second-quarter earnings call in July, “and so you might ask, all right, what’s changed in the last month and a half?” Asher said. 

So far, 2024 has proven to be an eventful year for publicly traded health insurers — and not always in a good way.

Indeed, during the most recent quarter CVS Health Corp. made waves by adjusting its earnings outlook downward for the third time this year and dismissing the short-tenured president of its Aetna health benefits division due to ongoing Medicare cost pressures.

Other publicly traded firms, including Humana Inc. and Elevance Health, Inc., offered better second-quarter performances, but still saw their share prices fall amid investors’ concerns about how medical costs will shake out in the second half.

When CVS Health Corp. announced on Aug. 7 that Aetna President Brian Kane was leaving after less than a year on the job, it highlighted how severe the company’s struggles in its health benefits segment have become. The decision also drew mixed reactions from Wall Street analysts.

Barclays’ Andrew Mok wrote in an Aug. 7 note that Kane’s departure was “a big surprise” and added that Kane “was widely viewed as the fixer for the Medicare Advantage business,” which has been a drag on earnings.

“The accountability here is questionable and the change casts significant uncertainty on whether the company was able to capture developing cost trend pressure in 2025 Medicare bids,” Mok wrote.

Here’s how major health insurers’ stock performed in July 2024. UnitedHealth Group had the highest closing stock price among major commercial insurers as of July 31, 2024, at $576.16. Humana Inc. had the highest closing stock price among major Medicare insurers at $361.61.

While most of the largest managed care organizations have recently reported higher-than-expected utilization that negatively impacted their second-quarter results, the three publicly traded “insurtechs” did not have the same issues.

Ari Gottlieb, principal of health care consulting firm A2 Strategies who has often criticized the financial performance and management of Alignment Healthcare, Inc., Clover Health Investments Corp. and Oscar Health, Inc., tells AIS Health the insurtechs “all posted pretty good quarters” and are headed in the right direction.

Despite Humana Inc. beating second-quarter earnings and revenue expectations, Wall Street did not react kindly to the insurer’s latest financial results. Humana shares closed at $361.61 on July 31, the day the results were released, a 10.6% decline from the previous day. Wells Fargo analyst Stephen Baxter primarily attributed the negative sentiment to higher-than-expected inpatient admissions and the company not raising its full-year guidance as many had expected it would do.

Humana had adjusted earnings per share (EPS) of $6.96 in the second quarter, well above the Wall Street consensus estimate of $5.92. Still, Humana reaffirmed its full-year EPS of about $16, which CEO James Rechtin said “prudently assumes that the higher inpatient costs will continue even as we work to mitigate that pressure.” Humana in January surprised investors by lowering its EPS guidance to about $16 for the year, down from its previous estimate of about $25, which it attributed to elevated care utilization.

Although The Cigna Group reported second-quarter results on Aug. 1 that were strong on paper, the company’s decision to reaffirm — not raise — its full-year 2024 earnings guidance and executives’ remarks regarding health care utilization trends appear to have led to a mild stock selloff.

For the quarter ending June 30, Cigna reported adjusted earnings per share (EPS) of $6.72 and total revenues of $60.5 billion, beating Wall Street’s consensus estimates of $6.43 and $58.5 billion and representing 25% and 10% year-over-year growth, respectively. Cigna said its revenue increase was “primarily driven by significant growth in Evernorth Health Services, reflecting large client wins.”