Humana
Humana Inc. is an American for-profit health insurance company headquartered in Louisville, Kentucky, that provides medical and specialty insurance products, with a primary focus on Medicare Advantage plans, alongside commercial group coverage and integrated healthcare services through its CenterWell division.[1][2] Originally founded in 1961 by lawyers David A. Jones Sr. and Wendell Cherry as Extendicare Inc., a nursing home operator, the company expanded into hospital management before pivoting to health insurance in the 1990s, becoming a Fortune 500 entity ranked 92nd by revenue in 2024.[3][4] Humana serves over 17 million total members, including approximately 5.8 million in Medicare Advantage plans as of June 2025, securing about 17% of national Medicare Advantage enrollment and dominating or co-dominating markets in numerous counties.[5][6] Key achievements include pioneering consumer-centric health benefits and achieving high veteran-friendly employer ratings, while notable controversies encompass securities class-action litigation alleging misleading disclosures on Medicare Advantage utilization and risk adjustment from 2022 to 2024, as well as a failed federal challenge to its lowered 2025 plan star ratings, which could reduce bonus payments and affect membership retention.[7][8][9]History
Founding and nursing home operations (1961–1974)
Humana was founded in 1961 in Louisville, Kentucky, by lawyers David A. Jones Sr. and Wendell Cherry as a nursing home operator initially named Extendicare Inc. (also referred to early on as Heritage House of America Inc.).[3][10] The duo each invested $1,000, joined by four friends, to construct the company's first facility, capitalizing on the emerging demand for long-term care amid an aging population.[3] The first Heritage House nursing home opened in 1962 on Liverpool Lane in Louisville, featuring 78 beds and marking the start of rapid expansion across Kentucky, Virginia, and Connecticut.[11] By 1968, Extendicare had grown to over 40 facilities, establishing itself as the largest nursing home chain in the United States through organic development and stock sales.[3] The enactment of Medicare and Medicaid in the mid-1960s significantly accelerated this growth by reimbursing care for elderly and low-income patients, enabling further acquisitions and construction.[3] Nursing home operations emphasized efficient, scalable care models, with Extendicare going public in 1968 to fund expansion; by 1970, it operated over 100 facilities nationwide.[3] In 1971, the company acquired Hill Haven Corp., adding specialized skilled nursing services and bolstering its market dominance.[3] However, recognizing saturation in the sector, Jones and Cherry began divesting nursing home assets in 1972 to pivot toward hospitals, completing the sale of the chain by that year while retaining focus on healthcare delivery efficiencies honed in long-term care.[3] The company was renamed Humana Inc. in January 1974, signaling the formal end of its primary nursing home phase.[3][10]Hospital expansion and diversification (1974–1993)
In 1974, Extendicare Inc. restructured its operations by spinning off its nursing home business into a separate entity and renaming the hospital-focused division Humana Inc., marking a strategic pivot toward acute care facilities.[12] The company accelerated hospital development through a fast-track construction process, enabling the opening of approximately one new facility per month during the mid-1970s.[10] This expansion incorporated the innovative double corridor model, which positioned patient rooms between parallel corridors—one for staff access and one for visitors—to reduce travel distances for nurses and improve operational efficiency.[10] Humana's growth intensified in 1978 with the acquisition of American Medicorp Inc., the second-largest U.S. hospital chain at the time, which effectively doubled Humana's size and bolstered its network of owned and managed facilities.[12] [13] By the early 1980s, the company had established itself as one of the leading for-profit hospital operators, expanding through both organic builds and targeted purchases across the United States.[10] Notable developments included the 1983 opening of Humana Hospital University in Louisville, Kentucky, at a cost of $73 million, and the 1984 implantation of the Jarvik-7 artificial heart at Humana Hospital Audubon—the world's second permanent human recipient of the device.[12] Diversification efforts complemented hospital expansion, as Humana entered prepaid health plans in 1984 with Humana Health Care Plans, aimed at securing patient volume for its facilities despite initial setbacks from underpriced premiums.[12] By the mid-1980s, Humana had grown into the world's largest hospital operator, operating dozens of facilities and completing its 27-story headquarters in Louisville in 1985.[10] The health plans division achieved its first operating profit of $4 million in 1989, signaling viability in managed care precursors.[12] By 1993, Humana operated 76 hospitals but faced pressures from regulatory changes and shifting industry dynamics, leading to the spin-off of these assets into the independent Galen Health Care Inc., which later merged with Columbia Hospital Corp.[12] This divestiture allowed Humana to streamline operations amid rising costs and competition in hospital management.[10]Shift to managed care and health insurance (1994–2003)
In 1994, following the prior year's spin-off of its hospital operations into Galen Health Care—which was sold to Columbia/HCA for $3.4 billion—Humana completed its strategic pivot to managed care by acquiring the Group Health Association HMO with 125,000 members and the Milwaukee-based CareNetwork HMO for $180 million, expanding its health plan footprint in key urban markets.[3][14] This refocus on health maintenance organizations (HMOs) and preferred provider organizations (PPOs) aligned with industry trends toward cost containment through utilization management and provider networks, rather than direct ownership of care facilities.[15] Membership growth accelerated in 1995 with the $650 million acquisition of EMPHESYS Financial Group, adding 1.3 million members and bringing Humana's total enrollment to 3.8 million, while revenues reached $4.7 billion primarily from premium income.[3] However, profitability pressures emerged in 1996 amid rising medical costs and competitive bidding for employer contracts; Humana exited 13 unprofitable markets, including selling the recently acquired Group Health Association to Kaiser Permanente at a $100 million loss, and recorded a $200 million pretax restructuring charge, resulting in net income of just $12 million.[3] Rebound occurred in 1997 through acquisitions of Physician Corporation of America for $290 million plus $121 million in debt (adding 1.1 million members) and ChoiceCare Corporation for $250 million (250,000 members), driving revenues to $8.04 billion and net income to $173 million as Humana consolidated its position in commercial and Medicare HMO segments.[3] In May 1998, Humana announced a $5.4 billion stock-swap merger with United HealthCare Corporation to form a 10.4 million-member managed care giant, but the deal collapsed in August due to United's unexpected quarterly losses and a sharp decline in its stock value, amid broader regulatory scrutiny and antitrust concerns.[16] The late 1990s managed care backlash, fueled by patient complaints over denied claims and provider restrictions, led to class-action lawsuits against Humana and peers for practices like capitation incentives that allegedly prioritized cost savings over care quality.[17] Enrollment growth slowed industry-wide as consumers and employers shifted toward less restrictive PPO models, prompting Humana to refine its product mix by 2000 with acquisitions like CarePlus Health Plans to bolster Medicare HMO presence in high-growth areas such as Florida.[14] By 2003, premium revenues had climbed to approximately $9.6 billion from 1998 levels, but persistent challenges from medical loss ratios and regulatory pressures underscored the limits of pure HMO strategies without diversification.[18]Growth in Medicare Advantage and modern developments (2003–present)
Following the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, which restructured the Medicare+Choice program into Medicare Advantage (MA) with improved payment benchmarks and risk adjustment mechanisms, Humana pivoted its strategy to prioritize MA expansion as a core growth driver.[19][15] This shift capitalized on higher per-beneficiary payments to private plans compared to traditional fee-for-service Medicare, enabling Humana to offer supplemental benefits that attracted enrollment. By leveraging its managed care infrastructure, Humana rapidly scaled its MA offerings, transitioning from a diversified insurer to a dominant player in the senior market.[20] Humana's MA enrollment surged alongside industry-wide growth, with the company's Medicare segment becoming its primary revenue source. In 2022, this segment accounted for 81% of Humana's annual revenue, predominantly from individual MA plans.[21] By 2024, UnitedHealthcare and Humana collectively enrolled nearly half of all 32.9 million MA beneficiaries nationwide, underscoring Humana's market leadership despite competitive pressures.[22][23] The firm's growth was fueled by organic expansion, targeted marketing during open enrollment periods, and integration of prescription drug coverage under Part D, which facilitated cross-selling to MA.[24] Key milestones included Humana's aggressive entry into Part D in 2006 to build a pipeline for MA conversions and its attempted $37 billion merger with Aetna announced in 2015, aimed at bolstering scale in MA and pharmacy benefits but blocked by antitrust regulators in 2017 due to concerns over reduced competition in MA markets.[24][25] In the 2010s, Humana enhanced plan designs with extras like dental, vision, and hearing aids, aligning with CMS incentives for higher star ratings that influence bonuses and rebates. By 2025, 99% of Humana's individual MA plans included vision coverage, 98% dental, and over 97% hearing services, reflecting a strategy to differentiate amid rising MA penetration exceeding 50% of eligible beneficiaries.[26] Modern developments have introduced challenges amid maturing market dynamics. Post-2020, Humana grappled with elevated utilization and medical loss ratios following deferred care during the COVID-19 pandemic, contributing to profitability pressures despite revenue growth to $32.1 billion in Q1 2025 from higher per-member premiums.[27] Enrollment growth slowed industry-wide, with Humana reporting a net decrease of about 297,000 MA members from 2024 to 2025, partly due to strategic exits from underperforming plans and a drop in average star ratings to 3.5 for 2025, which reduced bonus eligibility.[5][28] The company unsuccessfully challenged CMS's 2025 ratings in federal court, arguing methodological flaws could cost billions in revenue, highlighting tensions over opaque quality metrics that affect 70%+ of Humana's individual MA enrollment.[9] Regulatory scrutiny intensified on prior authorization denials and payment accuracy, with audits revealing overpayments in some MA plans, though Humana maintained these practices ensure fiscal sustainability against risk selection incentives.[29] Looking ahead, Humana affirmed 2025 adjusted EPS guidance of $16.25 while emphasizing cost controls and selective growth in high-rated plans.[30]Business Model and Operations
Core products and services
Humana's primary health insurance products consist of Medicare Advantage plans, which integrate coverage for hospital (Part A) and medical (Part B) services with additional benefits such as dental, vision, hearing, and prescription drugs in many cases.[31] These plans are offered in various models, including Health Maintenance Organizations (HMOs) like Humana Gold Plus and Preferred Provider Organizations (PPOs), with options for dual-eligible special needs plans (D-SNPs) that coordinate benefits for individuals qualifying for both Medicare and Medicaid.[32] [33] The company also provides standalone Medicare Part D prescription drug plans (PDPs) and Medicare Supplement Insurance (Medigap) policies to cover out-of-pocket costs not addressed by Original Medicare.[34] [35] In 2023, Humana announced its exit from the commercial employer group and individual health insurance markets over 18 to 24 months, redirecting focus to government-sponsored programs like Medicare and Medicaid-integrated offerings to streamline operations amid rising medical costs in non-Medicare segments.[36] Complementing its insurance products, Humana operates pharmacy services through CenterWell Pharmacy, which includes mail-order delivery, specialty pharmacy for complex medications, and retail locations integrated with primary care sites, serving as the preferred option for many Humana plan members to reduce costs via home delivery.[37] [38] Additionally, CenterWell Senior Primary Care provides clinic-based services tailored to Medicare-eligible patients, emphasizing preventive care, chronic condition management, and coordination with home health and behavioral health resources, with locations offering extended physician time and on-site pharmacy access.[39] Wellness initiatives, such as the Go365 program, support members with rewards-based activities for tobacco cessation, maternity, and cancer management, though these are ancillary to core insurance and pharmacy functions.[40] [41]Focus on Medicare Advantage plans
Humana's Medicare Advantage (MA) plans, also known as Medicare Part C, represent the core of its health insurance operations, providing an alternative to traditional Medicare by bundling Parts A, B, and often D coverage through private managed care networks. These plans emphasize coordinated care models, including health maintenance organizations (HMOs) and preferred provider organizations (PPOs), with offerings available in 46 states and Washington, D.C., covering approximately 85% of U.S. counties as of 2026 plan designs.[42] Humana reported approximately 5.5 million individual MA enrollees in 2024, though it anticipates a decline of about 550,000 members, or 10%, in 2025 due to factors such as elevated utilization and market adjustments.[43] As the second-largest MA provider behind UnitedHealthcare, Humana holds significant market share, with 25% enrollment dominance in certain counties and leading positions in specialized segments like special needs plans (SNPs).[6] MA plans from Humana typically include supplemental benefits beyond Original Medicare, such as routine dental, vision, and hearing services, which became standard across all plans starting in 2026; $0 copays for unlimited in-network primary care visits; and no-cost preventive services like vaccines, mammograms, colonoscopies, and prostate exams.[31] These extras aim to address gaps in traditional fee-for-service Medicare, potentially reducing out-of-pocket costs for enrollees while incentivizing preventive care through network restrictions. However, plan availability and specifics vary by ZIP code, with HMO options often limiting coverage to local networks for cost control, whereas PPO variants offer broader flexibility at higher premiums.[31] Performance metrics for Humana's MA plans have faced headwinds, particularly in Centers for Medicare & Medicaid Services (CMS) Star Ratings, which evaluate quality on a 1-5 scale based on member experience, care coordination, and outcomes. In 2024, 94% of Humana's MA members were in 4-star or higher plans, but this fell sharply to about 25% in 2025 and stabilized at 20% (roughly 1.2 million members) for 2026, reflecting challenges in meeting CMS thresholds for rewards like bonus payments.[44][45] Lower ratings stem from factors including appeals processes and data validation, prompting Humana to invest in operational fixes like enhanced member engagement and provider alignment.[46] Regulatory and operational scrutiny has intensified around Humana's MA practices, including prior authorization denials and risk adjustment coding. A 2024 Senate report highlighted Humana's use of AI-driven tools to deny post-acute care requests, contributing to a 54% rise in long-term acute care denials from 2020 to 2022, which critics argue prioritizes profits over patient needs.[47][48] Industry-wide, including Humana, MA plans have faced accusations of upcoding—intensifying diagnoses via home visits to inflate risk scores and secure higher CMS payments—resulting in an estimated $33 billion in extra 2021 payments from coding practices and $20.5 billion in overpayments to firms like Humana as of 2023 analyses.[49][50] Projections suggest upcoding could lead to $600 billion in Medicare overpayments over the next decade, fueling calls for audits and clawbacks, as evidenced by Humana's ongoing legal challenges to CMS auditing rules.[51][52] Despite these issues, empirical data indicate MA enrollees, including those in Humana plans, often experience lower overall costs and better access to extras compared to Original Medicare, though at higher taxpayer expense due to benchmark overpayments averaging 104% of fee-for-service equivalents.[53]Military healthcare and other segments
Humana Military, a subsidiary of Humana Inc., administers the TRICARE East Region health plan for the U.S. Department of Defense, providing managed care services to active duty service members, retirees, their families, and other eligible beneficiaries.[54] The East Region encompasses 21 states, the District of Columbia, and U.S. territories in the eastern United States, serving over 2.7 million beneficiaries as of the contract's inception.[55] Humana was awarded the initial TRICARE East contract in July 2016, valued at up to $16.1 billion over nine years, with responsibilities including claims processing, provider network management, and beneficiary support services.[56] This contract was extended under a new agreement effective January 1, 2025, maintaining Humana Military as the regional contractor amid restructuring of TRICARE regions, though six states shifted to the West Region.[55][57] The TRICARE East program under Humana emphasizes coordinated care through a network of military treatment facilities and civilian providers, with Humana handling enrollment, authorizations, and customer service via a dedicated call center operating 8 a.m. to 6 p.m. ET/CT on weekdays.[58] Humana Military's operations include self-service portals for beneficiaries and providers to manage accounts, claims, and eligibility, alongside efforts to integrate telehealth and preventive care aligned with military health priorities.[59][60] Performance under the contract has focused on network adequacy and cost control, though specific outcome metrics are reported through Department of Defense oversight rather than public Humana disclosures.[61] Beyond military healthcare, Humana operates in the Group and Specialty segment, which encompasses employer-sponsored commercial insurance products, including medical, dental, and vision plans for large and small groups.[43] This segment also includes administrative services only (ASO) arrangements and specialty benefits like life and disability coverage, serving businesses seeking cost-effective group coverage outside government programs.[62] Humana offers individual and family health plans in select markets, though these represent a smaller portion of its portfolio compared to government-funded lines, with enrollment fluctuating based on Affordable Care Act marketplaces.[63] Additionally, Humana participates in state-based Medicaid managed care contracts in limited geographies, providing coordinated services to eligible low-income populations, though it has scaled back in this area to prioritize higher-margin segments.[43] These non-Medicare Advantage operations collectively contribute to diversified revenue, with the Group and Specialty segment reporting pretax income influenced by enrollment trends and utilization rates as of fourth-quarter 2024 results.[64]Pharmacy and wellness initiatives
Humana's pharmacy operations are primarily conducted through CenterWell Pharmacy, which offers integrated services including mail-order delivery, retail pharmacy access, specialty medications, and over-the-counter (OTC) benefits tailored to plan members.[37] This division supports prescription fulfillment for Medicare Part D plans, with formularies listing covered drugs and tools for prior authorizations and generic alternatives.[37] Humana Pharmacy Solutions functions as its pharmacy benefit manager (PBM), handling drug pricing negotiations, formulary management, and rebate processing, holding approximately 8% of the U.S. PBM market share as of 2024.[65] Key pharmacy initiatives include the Medication Therapy Management (MTM) program, a Medicare-mandated service providing comprehensive medication reviews to eligible members, aiming to optimize therapy, reduce adverse events, and improve adherence, particularly for those with multiple chronic conditions or high drug costs.[66] CenterWell Specialty Pharmacy delivers targeted clinical outreach for complex conditions, such as oncology or rare diseases, including patient education and adherence monitoring.[67] In 2025, Humana expanded pharmacy growth projections amid medical cost controls, reflecting integration with broader Medicare Advantage strategies.[68] Patient assistance programs facilitate cost reductions through manufacturer copay cards, payment spreading, and low-income subsidies under the Low-Income Subsidy (LIS) or LI NET temporary coverage for dual-eligible beneficiaries.[69][70] Wellness initiatives emphasize preventive care and behavioral incentives, with the Go365 program rewarding members for activities like exercise tracking, healthy eating, and wellness education via points redeemable for gift cards or premiums discounts, available to Medicare and employer plan participants.[71][40] SilverSneakers, included in most Humana Medicare Advantage plans, provides free gym memberships and fitness classes to adults aged 65 and older, focusing on strength, balance, and social engagement to combat age-related decline, with participation linked to lower healthcare utilization in studies of similar programs.[72] Additional wellness efforts include the Humana Healthy Options Allowance, reimbursing members for OTC items like vitamins, pain relievers, and first-aid supplies up to specified annual limits on select plans.[73] Programs address specific risks through tobacco cessation coaching, maternity support via HumanaBeginnings, and cancer care navigation, integrating digital tools for goal tracking and virtual coaching.[41][74] Medicare Annual Wellness Visits, covered under Humana plans, enable personalized prevention plans based on health risk assessments, distinct from routine physicals.[75] These initiatives align with value-based care by incentivizing engagement, though effectiveness varies by member participation rates reported in Humana's program data.[76]Financial Performance
Revenue composition and growth trends
Humana's revenue is overwhelmingly derived from premiums within its Insurance segment, which encompasses Medicare Advantage, Medicaid, and military health programs. In fiscal year 2024, premiums accounted for 96.2% of consolidated revenues, amounting to approximately $113.1 billion out of total revenues of $117.8 billion.[77] The Insurance segment generated $113.8 billion in GAAP revenues for the year, up from $102.9 billion in 2023, reflecting its dominance in the company's topline.[78] Within premiums, individual Medicare Advantage plans contributed the largest share at $88.0 billion, followed by state-based contracts and other programs at $10.9 billion, group Medicare Advantage at $7.7 billion, and Medicare Part D stand-alone plans at $3.1 billion.[77] Approximately 94% of premiums and services revenue stemmed from government-sponsored programs, underscoring Humana's heavy reliance on Medicare and related federal funding.[77] Services revenue, primarily from the CenterWell segment encompassing pharmacy, primary care, and wellness services, represented 3.8% of consolidated totals, with external services at $3.5 billion in 2024.[77] This segment's contributions include intercompany activities that are eliminated in consolidation, but external growth in primary care and pharmacy benefited from expanded CenterWell operations. Investment and other income supplemented the premiums and services base, though it comprised a minor portion overall.[78] Revenue growth has been robust and sustained, propelled by rising Medicare Advantage enrollment, favorable rate adjustments, and membership gains in government programs. Total revenues reached $117.8 billion in 2024, a 10.7% increase from $106.4 billion in 2023.[79] This followed a 14.5% rise in 2023 from $92.9 billion in 2022, yielding a compound annual growth rate exceeding 12% over the period.[79] The Insurance segment's expansion, particularly in Medicare Advantage per-member premiums amid inflation and utilization trends, drove much of this trajectory, though growth moderated in 2024 due to market exits in unprofitable areas and regulatory pressures on star ratings.[80]| Fiscal Year | Total Revenue ($ billions) | Year-over-Year Growth (%) |
|---|---|---|
| 2022 | 92.9 | — |
| 2023 | 106.4 | 14.5 |
| 2024 | 117.8 | 10.7 |
Profitability metrics and challenges
Humana's net profit margin stood at 1.28% for the most recent quarter ending June 30, 2025, reflecting a decline from its three-year average of 2.29%.[81][82] Return on equity (ROE) was reported at 12.12% as of October 22, 2025.[83] In the second quarter of 2025, the company achieved net income of $545 million, a decrease from $679 million in the same period of 2024, despite revenue growth to $32.4 billion, up 9.6% year-over-year.[84] Adjusted earnings per share (EPS) for the quarter reached $6.27, contributing to raised full-year 2025 guidance of approximately $17 in adjusted EPS.[85]| Metric | Value (Q2 2025 or Latest) | Year-over-Year Change |
|---|---|---|
| Net Profit Margin | 1.28% | Worsened from 3-year avg. of 2.29%[81] |
| ROE | 12.12% | N/A[83] |
| Net Income | $545 million | Down from $679 million[84] |
| Revenue | $32.4 billion | Up 9.6%[86] |
| Adjusted EPS | $6.27 (Q2) | FY 2025 guidance raised to ~$17[85] |
Stock performance and investor relations
Humana Inc. common stock trades on the New York Stock Exchange under the ticker symbol HUM. As of October 24, 2025, the stock closed at $290.65, reflecting a year-to-date decline amid pressures from Medicare Advantage enrollment trends and regulatory scrutiny. Over the trailing 12 months ending October 2025, HUM delivered a total return of 13.98%, trailing the S&P 500's 16.90%; on a three-year basis, the return was 42.57% versus 78.85% for the S&P 500; and over five years, it stood at 31.65% compared to 95.99% for the benchmark. These figures highlight underperformance relative to broader market indices, attributable in part to sector-specific headwinds such as anticipated membership losses of several hundred thousand in Medicare Advantage plans for 2025 and elevated medical loss ratios.| Period | HUM Return | S&P 500 Return |
|---|---|---|
| 1-Year | 13.98% | 16.90% |
| 3-Year | 42.57% | 78.85% |
| 5-Year | 31.65% | 95.99% |