Humana receives premiums to cover medical and prescription bills and earns revenue through CenterWell’s pharmacies, clinics and home care services. In the third quarter of 2026, revenue grew 26.1%, but its Insurance business recorded a $303 million operating loss. New members brought more premium income and cash, yet reduced Medicare quality bonuses and higher medical costs relative to premiums left less money to cover running the business. Better quality ratings and a new clinic partnership strengthen the recovery plan, but their benefits arrive on different schedules.
Analysis period: July–September 2026, with January–September comparisons. Research cutoff: November 12, 2026, New York time.
1. More Medicare members did not produce more insurance profit
Humana’s main insurance business became larger while its quarterly result moved from profit to loss. Its operating result fell from a $251 million profit in the third quarter of 2025 to a $303 million loss in 2026. Across the first nine months, Insurance remained profitable, but operating profit fell 24.7% to $1.952 billion.
The enrollment gains were substantial across Medicare products. Medicare Advantage provides privately administered Medicare coverage; stand-alone drug plans cover prescriptions separately.
| Insurance membership; people at September 30 | 2025 | 2026 |
|---|---|---|
| Individual Medicare Advantage | 5,237,300 | 6,456,900 |
| Group Medicare Advantage | 569,800 | 728,300 |
| Stand-alone prescription drug plans | 2,446,200 | 4,027,500 |
Source: 2026 Form 10-Q, Insurance membership table, p. 44. Product counts are not necessarily unique people across all Humana products.
More members explain much of the premium growth. Humana also received higher premiums per member in individual Medicare Advantage and stand-alone drug plans. Management attributes those increases largely to better government benchmark funding and a larger direct subsidy for prescription coverage. Reduced quality bonus payments partly offset these gains. Growth was concentrated in Medicare: premiums from state-based contracts and other products fell from $10.757 billion to $10.474 billion over the first nine months.
The problem was how much of each premium dollar remained after medical costs. The Insurance segment spent $93.70 on benefits for every $100 of premiums in the quarter, compared with $91.10 a year earlier. Even excluding the bonus reduction, new individual Medicare Advantage members, on average, had a higher ratio of benefits to premiums than retained members. The loss of quality bonus revenue also reduced the money available to meet those costs.
Operating profit is what remains after medical benefits and running costs, before interest, taxes and the separately reported investment-partnership effects. The margin shows how much of each revenue dollar remains.
| Consolidated results; USD millions except per-share amounts and percentages | Q3 2025 | Q3 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Revenue | 32,649 | 41,155 | 97,149 | 121,670 |
| Operating profit | 400 | 75 | 3,512 | 3,189 |
| Operating margin, calculated | 1.23% | 0.18% | 3.62% | 2.62% |
| Net income attributable to Humana | 195 | 162 | 1,984 | 2,042 |
| Net margin attributable to Humana, calculated | 0.60% | 0.39% | 2.04% | 1.68% |
| Diluted earnings per share, USD | 1.62 | 1.33 | 16.43 | 16.84 |
| Consolidated benefits as a share of premiums | 91.1% | 93.9% | 89.3% | 91.5% |
Source: Humana third-quarter 2026 Form 10-Q, consolidated income statement, p. 4; MD&A, pp. 41–46. The consolidated benefit ratio differs from the Insurance segment ratio because of consolidation adjustments.
Humana also received less help from revising estimates of older medical bills. Claims ultimately costing less than previously estimated reduced benefit expense by $67 million in the quarter, versus $275 million a year earlier. The corresponding nine-month amounts were $509 million and $913 million. These are favorable changes in earlier estimates, rather than premiums from new business. Some of their effect belongs to providers under risk-sharing contracts, so the full reduction cannot be treated as additional Humana profit.
There was progress on administration. Insurance operating costs fell from 9.1% to 7.7% of revenue excluding investment income. Management credits spreading administrative costs across a larger business, cost reductions and transformation work. Those gains were insufficient to offset the pressure on medical margins. The practical task is now to make the enlarged membership base more profitable, rather than simply add more members.
Source: 2026 Form 10-Q, Note 8, p. 22; MD&A, pp. 42 and 45–46.
The weakness extends beyond a single comparison. Third-quarter consolidated operating profit was $728 million in 2024, $400 million in 2025 and $75 million in 2026, while revenue increased each year. The calculated operating margin fell from 2.48% to 1.23% to 0.18%. The latest quarter therefore continued a decline in how much reported operating profit Humana retained from its revenue.
Sources: Humana third-quarter 2025 Form 10-Q, consolidated income statement, p. 4, for 2024 and 2025; 2026 Form 10-Q, p. 4, for 2026. These are reported results, including each period’s charges.
2. A noncash gain kept the quarterly pretax result positive
The reported quarterly pretax profit depended on a noncash partnership gain. Humana recorded $358 million of other income from these arrangements. Without that gain, the reported $216 million result before income taxes and losses from minority investments would have been a $142 million loss, with all other reported items unchanged.
The old partnership allowed Welsh, Carson, Anderson & Stowe, or WCAS, to require Humana to buy its interest under specified terms. Humana also held purchase rights. Accounting rules required the estimated value of those rights and obligations to be updated each quarter. The resulting gain did not represent premiums collected, patients treated or cash received.
Management’s broader adjusted calculation removes this gain and adds back selected expenses, including acquired-intangible amortization, transformation charges and investment impairments. On that basis, the quarter produced a $104 million pretax loss, compared with a $527 million profit a year earlier. Adjusted pretax profit for the first nine months fell 18.1%, even though reported pretax profit increased. The complete reconciliation appears in the calculation notes.
These adjustments strengthen the finding that operating performance weakened, but they do not establish a permanently recurring profit level. Humana’s transformation expenses include employee exits and consultants, and the company expects further charges. Removing them from an adjusted measure does not remove their economic cost.
Sources: 2026 Form 10-Q, Notes 1 and 5, pp. 10–11 and 18–19; November 6, 2026 earnings release, p. 2 and adjustment footnotes. All profit adjustments above are pretax, before equity in net losses.
Taxes explain why higher reported pretax profit did not translate into higher quarterly net income. Humana recorded a $40 million tax expense in 2026, versus an $86 million tax benefit in the comparable 2025 quarter. The earlier period benefited from a business sale whose tax benefit did not recur. Net income attributable to Humana consequently fell 16.9% to $162 million. The reported tax comparison and the partnership gain both need to be separated from the underlying insurance result.
Source: 2026 Form 10-Q, income statement, p. 4; Note 11, p. 24.
3. Better quality ratings support 2028, while pricing must do more of the near-term work
Humana’s improved Star Ratings create a clearer route to better bonus funding in 2028. On October 9, the company reported that 95% of its Medicare Advantage members were in contracts rated at least four stars for the 2027 rating year. It reported improvements across all measure categories and 534,000 additional members completing an annual preventive visit compared with the prior year.
These ratings matter because qualifying plans receive quality bonus payments that help support benefits and profitability. The Centers for Medicare & Medicaid Services, or CMS, published the 2027 ratings in October 2026 for the coming enrollment season, but those ratings affect 2028 Medicare Advantage quality bonus payments. They do not reverse the bonus reduction affecting 2026 results.
Sources: Humana’s October 9, 2026 Star Ratings announcement, performance summary; CMS 2027 Star Ratings fact sheet, October 8, 2026, introduction and payment timing; Humana 2025 Form 10-K, risk factor concerning Star Ratings and quality bonuses.
Management’s November remarks offer meaningful counterevidence to the weak year-over-year results. Medical and pharmacy cost trends were in line with or better than its expected high-single-digit increases. The Insurance benefit ratio also came in below management’s expectation. Humana continues to target an individual Medicare Advantage pretax margin of at least 3% in 2028, with 2027 pricing intended to make progress toward that goal.
That is a management target for a particular business, not a forecast for consolidated operating margin. Near-term seasonality remains unfavorable: management expects the fourth-quarter Insurance benefit ratio to be just above 95.5%. As members pass their deductibles and annual out-of-pocket limits, Humana bears more of their medical costs; the second half also carries Medicare enrollment marketing expenses.
Sources: Prepared management remarks, November 6, 2026, pp. 2–5; 2026 Form 10-Q, “Seasonality,” pp. 37–38.
Government funding will not automatically solve the problem. CMS projects an industry-average 2027 payment increase of 2.48%, or 4.98% including its estimated risk-score trend. These figures are not Humana’s own premium increase. The final policy retains the risk model fully phased in during 2026, but limits which diagnoses can support payments, including restrictions on diagnoses from chart reviews unconnected to a patient encounter. Humana must match its benefit promises and provider payments to the funding its own members actually generate.
Source: CMS 2027 Medicare Advantage and Part D Rate Announcement, April 6, 2026, net-impact table and Part C risk-adjustment policy. The chart-review restriction includes an exception for beneficiaries switching between Medicare Advantage organizations.
A competitor’s results illustrate the alternative to rapid enrollment growth. UnitedHealthcare reported 935,000 fewer Medicare Advantage members since year-end 2025, including certain complex-population programs. Its broader insurance business improved its operating margin from 2.1% to 3.3%, which it attributed to pricing, benefit changes and cost management. UnitedHealthcare’s broader product mix prevents a direct margin comparison with Humana. Its experience nevertheless shows that tighter pricing and benefit choices can improve earnings alongside declining enrollment. Humana’s larger base will contribute to its recovery only if pricing and care delivery produce an adequate margin on it.
Source: UnitedHealth Group third-quarter 2026 results, October 13, 2026, UnitedHealthcare discussion, p. 4.
4. CenterWell is expanding, but its new partnership mainly buys financial flexibility
CenterWell’s growth has not yet translated into higher operating profit. Its pharmacies and clinics increasingly serve customers covered by other insurers, broadening the business beyond Humana’s own plans. Yet higher medical costs in parts of primary care and a larger contribution from lower-margin specialty pharmacy reduced the profit retained from that growth.
| CenterWell; USD millions except calculated margins | Q3 2025 | Q3 2026 |
|---|---|---|
| Primary care revenue from external customers | 627 | 948 |
| Pharmacy revenue from external customers | 352 | 564 |
| Home solutions revenue from external customers | 354 | 359 |
| Total external revenue | 1,333 | 1,871 |
| Revenue from other Humana businesses | 4,546 | 5,286 |
| Total segment revenue | 5,879 | 7,157 |
| Segment operating profit | 305 | 243 |
| Segment operating margin, calculated | 5.19% | 3.40% |
Source: 2026 Form 10-Q, Note 14, pp. 33–35; CenterWell MD&A, pp. 46–47. Sales between Humana businesses are removed from consolidated revenue; CenterWell’s full segment revenue must not be added to consolidated revenue.
The clinic expansion has both an acquisition component and operating challenges. Humana paid approximately $908 million, net of acquired cash, for Florida-based MaxHealth in February. Its preliminary purchase accounting assigned about $800 million to goodwill—the amount attributed to expected business benefits beyond separately identified net assets. The investment’s success therefore depends heavily on future patient care and earnings, rather than physical buildings alone.
At September 30, CenterWell served approximately 638,000 primary care patients and operated 399 centers. Management nevertheless identified higher costs for a particular patient group in one geography across multiple insurer partners. It expects contract changes and insurers’ plan, benefit and network changes to improve that situation in 2027. The filing also identifies pressure from the final phase of the Medicare risk-model change and first-quarter acquisition integration costs. Management did not identify the affected geography.
Sources: 2026 Form 10-Q, Note 3, p. 12; CenterWell discussion, p. 47; November 6 management remarks, “Primary Care,” p. 4.
Humana’s broader care strategy pays providers rewards or gives them shared financial responsibility for managing patients’ care. The aim is to improve health and avoid unnecessary costs. The number of individual Medicare Advantage members in these arrangements increased from about 3.55 million to 4.12 million year over year. Their share of individual membership nevertheless fell from 68% to 64%, because total enrollment grew faster. Humana has expanded the reach of this model, but extending it across the enlarged membership base remains unfinished work.
Source: 2026 Form 10-Q, “2026 Highlights,” p. 38.
The October agreement with BlackRock’s HPS Investment Partners changes how part of the clinic network is financed. BlackRock acquired WCAS’s ownership, valued at approximately $2.8 billion, and became the majority partner; CenterWell remains a minority owner. That transaction value is not cash paid to Humana. The new venture has committed capital from both partners for existing operations, new clinics and acquisitions.
The major improvement is that BlackRock cannot use the old type of put option to require Humana to buy it out. Humana expects the approximately $1.2 billion net liability attached to the former partnership to reverse in the fourth quarter. A new option arrangement is expected to create an initial net liability of approximately $255 million. These accounting changes can lift reported earnings and equity without supplying cash to pay claims or debt.
CenterWell retains the choice to acquire clinics beginning in 2028. Exercising the earliest successive purchase options could require an estimated $1.1 billion in 2028, $1.1 billion in 2029 and $1.2 billion in 2030, under current projections. These are optional, conditional payments, not scheduled debt maturities. BlackRock can seek a sale of remaining clinics after 2033, subject to CenterWell’s right to make the first offer. The partnership gives Humana more time and choice over ownership, while leaving the need to improve clinic economics intact.
Source: 2026 Form 10-Q, Note 5, pp. 18–19. The new venture is not consolidated; future purchase estimates depend on exercise timing, clinic revenue and capital contributions.
5. Operating cash improved because premiums arrived before more of the medical bills were paid
The stronger cash flow came mainly from payment timing and business growth, rather than a comparable increase in profit. First-nine-month operating cash flow rose to $5.383 billion from $2.573 billion. Consolidated net income, before allocating losses to minority owners, increased by only $59 million.
Humana normally collects premiums before paying the related medical bills. As enrollment grows, it can hold more cash while recognizing obligations for care already provided. Benefits payable rose by $3.160 billion during the first nine months of 2026, compared with a $351 million decline in the comparable 2025 cash-flow statement. This change was the largest contributor to the improvement in operating cash.
Collections also helped. Lower receivables contributed $439 million to operating cash, compared with $16 million a year earlier. Humana explains that Medicare risk-adjustment settlements typically bring significant collections in the second and third quarters. Other operating assets absorbed $1.274 billion, partly offsetting these sources. These movements describe when money was received and paid; they should not be mistaken for an equivalent improvement in insurance margins.
| Consolidated cash movements; USD millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Opening cash and cash equivalents | 2,221 | 4,200 |
| Operating cash inflow | 2,573 | 5,383 |
| Investing cash flow | 1,641 | -4,895 |
| Financing cash flow | -1,047 | 2,247 |
| Increase in cash and cash equivalents | 3,167 | 2,735 |
| Closing cash and cash equivalents | 5,388 | 6,935 |
Source: 2026 Form 10-Q, cash-flow statements, pp. 8–9; Notes 6 and 8; liquidity discussion, pp. 47–49. These cash balances follow the statement’s cash-and-cash-equivalents scope; they exclude investment securities.
The larger claims balance does not itself show slower processing. Humana reported 33.2 days in claims payable in both third quarters. Management also expects significant operating cash outflows in the remainder of 2026 as seasonal claims and other payments catch up. The nine-month cash inflow therefore cannot simply be extended into a full-year forecast.
Sources: November 6 earnings release, consolidated highlights, p. 3; 2026 Form 10-Q, operating cash-flow discussion, p. 48.
A separate government program explains another large cash movement. Since July, Humana has administered the Medicare GLP-1 Bridge, processing claims and payments for eligible weight-management drugs. CMS bears the underlying drug-cost risk. The program supplied $2.0 billion of net contract deposits, reported in financing cash flow, not premium revenue or operating cash flow. Across all contract-deposit programs, net receipts were $1.787 billion after other programs’ cash uses.
At September 30, Humana had a $2.7 billion settlement liability to CMS and $0.7 billion of related manufacturer rebate receivables. The program enlarged both assets and obligations. Treating the deposits as freely earned cash would overstate the resources generated by Humana’s own insurance operations.
Source: 2026 Form 10-Q, Note 1, “Administrative Service Fees,” p. 11; financing cash-flow discussion, p. 49.
Humana put substantial cash back into the business and its investment portfolio. It paid $1.007 billion for acquisitions, net of acquired cash, and spent $390 million on property and equipment, net of disposals. Those capital expenditures support technology, primary care facilities, claims processing and other services; the filing does not divide them into maintenance and expansion spending. Purchases of investment securities exceeded sales and maturities by a calculated $3.359 billion.
Cash dividends and share repurchases totaled $430 million. Operating cash flow exceeded net investing outflows plus these shareholder payments by just $58 million. This is a consolidated cash comparison, not an estimate of cash available for distribution: insurance capital rules, future claims and government deposits remain central to funding decisions.
Source: 2026 Form 10-Q, cash-flow statement, p. 8; investing and financing discussion, pp. 49–50. Calculation: $5,383 million − $4,895 million − $320 million paid dividends − $110 million paid repurchases = $58 million.
6. The balance sheet grew, but parent-company cash and borrowing costs still matter
Humana has substantial funding resources, although much of the consolidated cash supports regulated insurance operations. Parent-company cash and short-term investments fell to approximately $0.5 billion at September 30 from $1.5 billion at year-end. Acquisitions, capital contributions to subsidiaries, debt repayments, dividends and other spending outweighed the offset from new subordinated borrowing.
The distinction matters because the parent pays corporate obligations but cannot automatically withdraw every dollar held by an insurance subsidiary. State rules restrict dividends and require minimum capital. Based on the latest statutory statements cited in the filing, dated June 30, regulated subsidiaries held $15.7 billion of capital and surplus against $8.9 billion of aggregate minimum requirements. That provides a buffer, while rapid premium growth can also increase required capital.
| Selected consolidated balances; USD millions | December 31, 2025 | September 30, 2026 |
|---|---|---|
| Cash and cash equivalents | 4,200 | 6,935 |
| Current and long-term investment securities | 16,196 | 18,780 |
| Net receivables | 3,270 | 2,865 |
| Other current assets | 9,560 | 11,635 |
| Goodwill | 9,686 | 10,547 |
| Benefits payable | 9,967 | 13,127 |
| Trade accounts payable and accrued expenses | 5,717 | 9,390 |
| Short- and long-term debt, reported carrying amount | 12,369 | 12,504 |
| Total assets | 48,909 | 57,285 |
| Total liabilities | 31,172 | 38,397 |
| Total equity, including minority owners | 17,737 | 18,888 |
Source: 2026 Form 10-Q, balance sheet, p. 3; liquidity and regulatory-capital discussion, pp. 51–52. The debt row excludes a $100 million Federal Home Loan Bank advance recorded within accrued expenses at September 30.
Several balance-sheet increases have specific business explanations. Acquisitions added $893 million of goodwill, while disposals removed $32 million. The new GLP-1 program accounts for much of the increase in accrued obligations and part of other current assets. Separately, Part D subsidy and cost-sharing programs together held approximately $3.7 billion of net assets, up from $3.1 billion at year-end. Those balances show how much funding is tied up while Humana awaits government and drug-program settlements.
The net book value of property and equipment did not expand alongside revenue. Net property and equipment fell from $2.231 billion to $2.070 billion; cash spending on these assets was $390 million, while total depreciation was $540 million. Acquisitions and other movements also affect that balance, so those two flows are not a complete reconciliation. Net identifiable intangible assets rose from $1.128 billion to $1.184 billion, principally reflecting additions to customer relationships and trade names.
Source: 2026 Form 10-Q, balance sheet and cash-flow statement, pp. 3 and 8; Notes 1, 3, 6 and 7, pp. 11–12 and 20–21. The program balances describe different accounting categories and are not added together as a reconciliation of other current assets.
Humana also holds more securities whose market prices can move with interest rates. Total investment securities increased by $2.584 billion despite larger unrealized losses. Other comprehensive losses—changes recorded directly in equity rather than current net profit—reduced equity by $637 million during the nine months, principally because bond values fell. Management attributes these losses mainly to interest-rate changes and reported no material credit allowances on debt securities in unrealized loss positions. The company estimates that a further one-percentage-point rate increase would reduce portfolio fair value by approximately $803 million, based on its disclosed sensitivity assumptions.
Source: 2026 Form 10-Q, comprehensive income statement, p. 5; Note 4, pp. 13–15; market-risk discussion, p. 53.
Share repurchases were modest relative to the business’s funding needs. Humana spent $103 million under its public authorization and $7 million acquiring shares through employee plans during the nine months. The average number of basic shares declined. However, allowing for employee stock awards increased the share count used for diluted earnings per share from 120.778 million to 121.205 million. Thus, the 2.9% rise in net income attributable to Humana produced only a 2.5% increase in reported diluted earnings per share. Stock compensation was $183 million, and no public-program repurchases occurred in the third quarter.
Source: 2026 Form 10-Q, Notes 9–10, pp. 23–24; equity statement, p. 7; share-purchase disclosure, p. 54. The equity reconciliation is included below.
7. Available credit provides a cushion, while borrowing costs have risen
Humana has room to meet near-term note maturities, but interest costs have risen. Reported interest expense rose from $485 million to $607 million over the first nine months; cash interest paid rose from $440 million to $484 million. Humana attributes the increase to higher average borrowings and measures taken to secure liquidity and capital.
| Selected notes outstanding at September 30, 2026; USD millions except coupon | Maturity | Carrying amount | Stated annual coupon |
|---|---|---|---|
| Senior notes | February 2027 | 520 | 1.350% |
| Senior notes | March 2027 | 429 | 3.950% |
| Senior notes | March 2028 | 492 | 5.750% |
| Senior notes | December 2028 | 497 | 5.750% |
| Junior subordinated notes | September 2056 | 986 | 6.625% |
The two 2027 maturities total $949 million in carrying value, followed by $989 million in 2028. Carrying values include accounting adjustments and are not exact principal repayment amounts. The March 2026 subordinated issue had $1 billion of principal and helped repay short-term commercial paper. Its initial coupon costs $66.25 million a year before any deferral. Resets begin in September 2031, but the rate cannot fall below 6.625%.
Humana had the full $5 billion of its bank credit line available at September 30 under the five-year agreement entered in May 2025. The agreement limits debt to 60% of its defined total capital measure; Humana reported 40.9%. Two separate trust arrangements also make up to $1.5 billion of additional borrowing available. They had not been used at September 30. Keeping them available costs approximately $26.8 million a year in facility fees, before trust expenses.
Source: 2026 Form 10-Q, Note 12, pp. 25–28; cash-flow supplement, p. 9. Facility fees are calculated from $750 million at 1.661% plus $750 million at 1.916%. The uncommitted potential $1 billion increase in the bank facility is excluded from available liquidity.
The $5 billion bank facility provides a substantial cushion against the next maturities, subject to its borrowing conditions. That cushion has a cost: the September terms included a 0.11% annual facility fee and, for relevant revolving borrowings, 1.015 percentage points above SOFR, a benchmark short-term interest rate. The subordinated notes permit interest deferral, but generally restrict dividends and share repurchases during a deferral; Humana was not deferring interest.
Interest-rate swaps convert the exposure on $7.5 billion of senior notes to floating rates to better match returns on cash and investments. Those hedges also reduced the reported carrying amount of notes by approximately $556 million at September 30. The corresponding swap liability was $555 million. A lower accounting value of debt therefore should not be read as an equal repayment of principal.
Source: 2026 Form 10-Q, Note 5, pp. 17–18; Note 12, pp. 25–27.
After the filing, Humana launched a November 9 cash tender offer with a $1.5 billion purchase-price cap, excluding accrued interest, covering specified notes due from 2027 through 2032. The announcement scheduled expiration for November 16 and settlement for November 18. It did not establish completed debt reductions by the research cutoff. Because several later-dated notes rank ahead of the 2027 notes for acceptance, the full offer cannot be assumed to eliminate the nearest maturities. Its eventual cash use and refinancing benefit depend on which notes are accepted.
Source: Humana debt tender announcement, November 9, 2026, offer cap, priority table and settlement terms; related Form 8-K, Item 8.01.
Management also expected the sale of Humana’s minority interest in Gentiva, valued at approximately $900 million, to close in the fourth quarter. That disposal remained a prospective funding source in the November 6 remarks; its proceeds are not included in September cash.
Source: November 6 management remarks, “Capital Deployment & Balance Sheet,” p. 5.
Leases create additional operating commitments. The annual schedule, at December 31, 2025, showed $632 million of undiscounted lease payments, including $150 million scheduled for 2026 and $127 million for 2027. The recorded liability was $544 million after discounting future payments. These are historical schedule amounts, not a refreshed September balance. Alongside claims and technology commitments, they are another reason to assess cash needs beyond bond maturities alone.
Source: 2025 Form 10-K, Note 10, “Leases,” pp. 92–93.
8. Government payment rules remain a direct business risk
Humana’s funding improvement remains exposed to audits and litigation over how it is paid and how members are enrolled. Medicare products supplied approximately 85% of first-nine-month premium and services revenue, while state Medicaid business supplied approximately 8%. All material Medicare contracts and product offerings had been approved for 2027, but contract renewal does not settle disputes over payment accuracy.
CMS adjusts Medicare Advantage payments for members’ health conditions. If audits find that diagnoses lack adequate medical documentation, previously received payments can be challenged. Humana won a September 2025 district-court decision vacating the 2023 risk-adjustment audit rule on procedural grounds, but the government’s appeal remained pending in the November filing. CMS audits cover selected Humana contracts across several payment years. The court victory therefore does not remove the underlying audit exposure.
Separate matters include Justice Department requests concerning risk-adjustment practices and a False Claims Act case alleging improper non-commission payments to three broker partners, with additional allegations concerning marketing to Medicare beneficiaries under age 65. These are allegations, not established findings. Securities, shareholder-derivative and telephone-marketing litigation also remain disclosed exposures.
Humana says it cannot estimate possible losses beyond any amounts accrued for the specifically described matters. That is a limit on measurement, not evidence that the risk is zero. Adverse outcomes could require cash payments or changes to enrollment, documentation and marketing practices. Those operational consequences matter particularly when the margin available to absorb additional costs is already thin.
Source: 2026 Form 10-Q, Note 13, pp. 28–32. Litigation status is as disclosed in the November 6 filing; no undisclosed loss estimate is assumed.
9. Humana has more time to improve the business, but growth alone is insufficient
Humana’s recovery depends on earning more from each member and patient, rather than on enrollment growth alone. The larger insurance membership, broader care platform and improved quality ratings give it useful operating assets. The revised clinic partnership removes a potential forced-purchase obligation, and available credit provides room to manage near-term maturities.
The immediate evidence is still weaker margins in both Insurance and CenterWell. Much of the cash improvement reflects premiums collected before claims are paid, while accounting gains from partnership arrangements can make reported profit look stronger than current operations. Funding capacity gives management time to address these problems; it does not resolve them.
The assessment would improve with evidence that 2027 pricing and provider-contract changes produce better medical margins on the enlarged membership base, that the identified primary care cost pressure eases, and that improved ratings translate into stronger 2028 funding after the cost of competitive benefits. Continued growth accompanied by weaker medical margins or greater cash demands would point in the opposite direction. Those business outcomes will determine whether Humana turns its expanded reach into stronger earnings and a less demanding funding profile.
Reporting basis and calculation notes
Reporting basis: This analysis uses Humana Inc. and its consolidated subsidiaries under U.S. GAAP. The selected filing is the Form 10-Q for September 30, 2026, filed November 6, 2026, accession 0000049071-26-000066, CIK 0000049071. Quarterly comparisons cover July 1–September 30; nine-month comparisons cover January 1–September 30. Balance-sheet comparisons use December 31, 2025. The interim statements are unaudited. Historical leases use the explicitly dated annual disclosure, and minority-owned clinic ventures are not treated as wholly owned subsidiaries.
Sources: SEC filing index; SEC submissions record; SEC company facts. Relevant U.S.-GAAP facts were checked against the selected accession, USD or share units, and their actual start/end dates. In this filing, the standard net-income fact corresponds to income attributable to Humana; the cash-flow reconciliation begins with consolidated net income including minority interests.
Reporting basis: The research cutoff is November 12, 2026, New York time. The latest dated post-filing source used is the November 9 debt-tender announcement. Forecasts and proposed transactions retain the status stated in their source documents.
Calculation notes: Growth equals the current amount divided by the comparable prior amount, minus one. Operating margin equals consolidated operating profit divided by total revenue. Net margin uses net income attributable to Humana divided by total revenue. CenterWell’s margin uses its full segment revenue, including internal sales. Percentage-point changes describe subtraction between percentages; they are not percentage growth rates.
Calculation notes: The following table checks management’s pretax adjustment bridge. Positive adjustments remove expenses; negative adjustments remove gains. All amounts are USD millions, before income taxes and equity in net losses. These are management’s non-GAAP measures, not estimates of recurring or after-tax profit.
| Reported result plus adjustments | Q3 2025 | Q3 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Reported pretax result | 134 | 216 | 2,566 | 2,763 |
| Acquired-intangible amortization | +13 | +10 | +43 | +29 |
| Partnership put/call valuation adjustment | +97 | -358 | +460 | -181 |
| Transformation charges | +267 | +25 | +320 | +179 |
| Impairment charges | 0 | +3 | +32 | +24 |
| Employer-group exit benefit removed | -62 | 0 | -62 | 0 |
| Specified litigation expense | +15 | 0 | +15 | 0 |
| Business-sale loss | +63 | 0 | +63 | 0 |
| Adjusted pretax result | 527 | -104 | 3,437 | 2,814 |
Sources: November 6 earnings release, p. 2 and adjustment footnotes; 2026 Form 10-Q, Notes 1, 5 and 7 and MD&A, pp. 39–43. The simpler gain-removal calculation in section 2 is $216 million − $358 million = a $142 million loss; it retains all other reported charges. Interest expense and ordinary operating costs remain in management’s adjusted pretax result.
Calculation notes: The next table explains why operating cash exceeded consolidated net income. “Other operating balances” combines collections and payments outside medical claims. “Other adjustments” collects the statement’s remaining reconciliation entries; it is not presented as a separate source of recurring cash.
| Profit-to-operating-cash check; USD millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Consolidated net income | 1,979 | 2,038 |
| Depreciation and amortization | +630 | +569 |
| Stock compensation | +193 | +183 |
| Other adjustments | +158 | +133 |
| Change in benefits payable | -351 | +3,160 |
| Other operating balances, net | -36 | -700 |
| Operating cash flow | 2,573 | 5,383 |
Calculation notes: The “other operating balances” totals above use the following inputs. Positive amounts supplied cash; negative amounts used cash.
| Other operating cash movements; USD millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Cash effect of lower receivables | +16 | +439 |
| Increase in other assets | -1,374 | -1,274 |
| Change in other liabilities | +1,317 | +221 |
| Change in revenue received in advance | +5 | -86 |
| Net cash effect | -36 | -700 |
Calculation notes: Net receivables on the balance sheet fell by $405 million. Businesses acquired during the period added $34 million to receivables. Without that addition, the balance would have fallen by $439 million, matching the operating cash adjustment.
Calculation notes: Total 2026 depreciation and amortization of $569 million includes $89 million classified within benefits expense; the separately displayed income-statement expense is $480 million. Net securities purchases equal $7,070 million purchased less $2,296 million of maturities and $1,415 million of sales.
Source: 2026 Form 10-Q, cash-flow statement, p. 8; Note 14, p. 33; receivables reconciliation, p. 48.
Calculation notes: The following check separates medical costs recognized, revisions to earlier estimates, and actual payments. A favorable revision reduces the estimated cost of earlier claims.
| Consolidated benefits payable; USD millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Opening amount owed for benefits | 10,440 | 9,967 |
| Obligations removed through dispositions | -1 | 0 |
| Medical costs incurred in the current year | +83,004 | +105,910 |
| Favorable revisions to prior-year costs | -913 | -509 |
| Medical benefits paid | -82,442 | -102,241 |
| Closing amount owed for benefits | 10,088 | 13,127 |
Source: 2026 Form 10-Q, Note 8, p. 22.
Calculation notes: Equity is the accounting amount left for owners after liabilities are deducted from assets. This table checks how its components changed. Treasury shares are shares Humana repurchased and still holds; their cost reduces equity.
| Equity components; USD millions | December 31, 2025 | September 30, 2026 | Change |
|---|---|---|---|
| Common-stock capital | 33 | 33 | 0 |
| Additional paid-in capital | 3,600 | 3,774 | +174 |
| Retained earnings | 29,075 | 30,796 | +1,721 |
| Accumulated other comprehensive loss | -633 | -1,270 | -637 |
| Treasury shares at cost | -14,418 | -14,508 | -90 |
| Minority owners’ equity | 80 | 63 | -17 |
| Total equity | 17,737 | 18,888 | +1,151 |
Calculation notes: Retained earnings increased by $2,042 million of income attributable to Humana less $321 million of dividends and equivalents recorded in equity. Cash dividends paid were $320 million because declaration and payment timing differ. Additional paid-in capital increased by $183 million of stock compensation, less $15 million for restricted-stock vesting, plus $6 million from option exercises.
Calculation notes: Treasury shares cost another $110 million, while vesting and options released $20 million from that account, leaving a $90 million net reduction in equity. Minority owners’ equity fell by $4 million of losses and $13 million of distributions. Issued shares were virtually unchanged; the increase in treasury shares reduced outstanding shares by approximately 0.488 million. Shares held in treasury have not been retired.
Source: 2026 Form 10-Q, balance sheet, p. 3; equity statement, p. 7; cash-flow statement, p. 8.
Calculation notes: The balance sheet balances in both periods. September 30 assets of $57,285 million equal $38,397 million of liabilities plus $18,888 million of total equity. December 31 assets of $48,909 million equal $31,172 million of liabilities plus $17,737 million of total equity. Closing 2026 cash also reconciles: $4,200 million opening + $5,383 million operating − $4,895 million investing + $2,247 million financing = $6,935 million. The cash-flow statement does not add a separate restricted-cash balance; restrictions on moving subsidiary funds are discussed in section 6. Statutory deposits classified as long-term investment securities are outside this cash reconciliation.
Sources: 2026 Form 10-Q, pp. 3 and 8; 2025 Form 10-K, Note 2, cash and investment-security accounting policies.
This report provides business and financial information for general understanding. It is not investment advice.