Humana is the second-largest company selling Medicare Advantage plans, covering about one in five of the program’s enrollees nationwide. That kind of footprint would normally translate into a proportional cut of the extra federal dollars Medicare hands out each year to reward higher-quality plans. In 2026, it has not worked out that way. Humana holds roughly 20% of Medicare Advantage enrollment but is on track to collect only about 11% of this year’s quality bonus payments, a gap that traces back to a single insurance contract’s star-rating downgrade the company is still fighting in court.
The shortfall matters to people enrolled in a Humana Medicare Advantage plan, because quality bonus dollars are the same dollars insurers often lean on to pay for extras that Original Medicare does not cover, from dental work to hearing aids to a lower monthly premium.
A 20% Enrollment Share Turns Into an 11% Bonus Share
According to a KFF analysis of Medicare Advantage enrollment and payment files maintained by the Centers for Medicare & Medicaid Services, Humana Inc. enrolls the second-largest share of Medicare Advantage members in the country, at 20%. Despite that position, Humana is projected to receive about 11% of the money paid out under Medicare’s quality bonus program in 2026 — an estimated $1.5 billion. The mismatch stands out because the bonus program is meant to reward plans roughly in proportion to how many highly rated members they cover; a company holding a fifth of the market would ordinarily be expected to collect closer to a fifth of the bonus pool, not roughly half that share.
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One Contract’s Drop From 4.5 Stars to 3.5 Stars
The gap is rooted in Humana’s star ratings for the 2025 plan year — the ratings CMS published in October 2024 and uses to decide which plans qualify for a bonus in 2026. Humana’s company-wide average star rating fell considerably heading into this bonus cycle after one of its largest contracts, covering a substantial share of its membership, dropped from 4.5 stars to 3.5 stars. CMS assigns star ratings roughly a year before the bonus payments they trigger take effect, so a downgrade announced in one autumn is already locked into a plan’s finances by the time the following year’s premiums and benefits are set. Humana sued CMS over the downgrade, arguing the agency’s calculation was flawed, but so far the courts have sided with the government, leaving the lower rating — and the smaller bonus payment that comes with it — in place for the 2026 payment year.
How a Half-Star Swing Turns Into Hundreds of Millions
The mechanics of the quality bonus program, created under the Affordable Care Act, explain why a single contract’s rating carries so much financial weight. Each year, CMS scores every Medicare Advantage contract on roughly 40 quality measures — cancer screening rates, chronic-disease management, customer service and more — and converts that performance into a rating of one to five stars. Contracts that reach four stars or higher get a boosted benchmark, the maximum amount Medicare will pay for a member in that county; the increase is typically five percentage points, and as much as ten in certain high-enrollment urban counties. That higher benchmark then feeds into the plan’s rebate: insurers get back 70% of the gap between the benchmark and what they bid to provide care when a contract is rated 4.5 stars or above, 65% when it is rated 3.5 to 4.5 stars, and 50% below that. There is no separate bonus check mailed to insurers — the money shows up entirely through this benchmark-and-rebate math, which is why dropping from 4.5 to 3.5 stars can cost a large contract far more than a half-star gap might suggest.
What Bonus Dollars Fund: Dental, Vision, Hearing and Part B Premiums
CMS does not dictate exactly how insurers spend quality bonus dollars; plans may, but are not required to, put the extra money toward supplemental benefits beyond what Original Medicare pays for. Plans commonly use the revenue for dental cleanings and dentures, vision exams and eyewear, hearing exams and hearing aids, and reduced cost-sharing; some plans also apply part of it toward a member’s Part B premium, an arrangement often marketed as a premium giveback. Bonus revenue is pooled and managed at the plan level rather than tracked to any individual member’s account, so a smaller bonus share for Humana does not strip a specific benefit from a specific person. It does mean Humana has less bonus-funded room, relative to its membership size, to compete on those extras than insurers whose ratings held up or improved.
A Separate Star-Rating Recalculation Could Help Humana in 2027
Humana’s fight over its 2025 rating is not its only encounter with CMS’s ratings methodology this year. After a different insurer, Clover Health, won a separate court challenge over its own star ratings, CMS recalculated the 2026 Star Ratings for every Medicare Advantage contract, a change that affects 2027 bonus payments rather than the 2026 payments described above. Humana is named among the insurers expected to see a bonus increase from that recalculation, alongside Clover Health, Blue Cross Blue Shield of Alabama and CVS Health Corporation, adding an estimated $600 million in Medicare Advantage bonus spending industry-wide for 2027. CMS has appealed the court ruling behind the recalculation, so the agency itself has flagged uncertainty over whether the change holds beyond the 2027 plan year.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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