Star ratings, not just cost spreadsheets, drove Humana’s decision to drop Medicare Advantage plans covering roughly 600,000 members for the 2027 plan year, according to the insurer’s own account of the cuts. Non-renewal notices are expected to reach affected members in early October, ahead of the fall enrollment window when they will need to pick a new plan. The exits are notable because Medicare’s star ratings do more than guide consumer shopping: they determine whether an insurer collects a quality bonus on top of its base federal payment, and Humana says most of what it is cutting fell short of that bonus threshold.
Humana’s Bid Rationale: 3.5 Stars or Lower on the Chopping Block
According to Humana’s own account of its 2027 bid strategy, the majority of the plans it is dropping were rated 3.5 stars or lower for the 2027 bonus year, though the company says star ratings were not the sole driver of the decisions. Humana Chief Financial Officer Celeste Mellet has described the exits as concentrated in the lower-profitability, lower-return portion of the business rather than applied as uniform benefit cuts, with the company prioritizing plans that have heavier value-based care participation. “We expect that our approach to 2027 MA bids will drive solid progress against our goal of delivering a sustainable pre-tax margin of at least 3% in 2028,” President and CEO Jim Rechtin said.
The roughly 600,000 affected members represent about 8 percent of Humana’s approximately 7.2 million Medicare Advantage enrollees. Humana recaptured just over 40 percent of the members displaced by its 2025 plan exits into other Humana plans, and it expects a similar recapture rate this time, meaning most people losing coverage will likely need to actively shop for a replacement rather than being automatically reassigned.
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How the Quality Bonus Payment Ties Federal Dollars to Star Ratings
Medicare Advantage insurers are paid a base rate for each enrollee, but that rate can rise substantially based on a plan’s star rating. Under the federal Quality Bonus Payment structure, contracts rated 4 stars or higher receive an increase to their payment benchmark, and higher-rated plans can also submit bids that generate larger rebates paid back into members’ benefits. In its Announcement of Calendar Year 2027 Medicare Advantage Capitation Rates and Part C and Part D Payment Policies, the Centers for Medicare & Medicaid Services listed “Change in Star Ratings” as one of the specific factors behind the projected 2.48 percent, more than $13 billion increase in payments to Medicare Advantage plans for 2027. Star Ratings themselves are built from dozens of clinical-outcome, member-experience and customer-service measures that CMS can revise from year to year, so a change in the measure set or the cutpoints can move a contract’s rating even when its underlying performance holds steady.
That structure is why a plan sitting at 3.5 stars, one half-star below the bonus cutoff, becomes a candidate for exit rather than renewal: it draws none of the added benchmark dollars that fund richer benefits, yet still carries the same network and administrative costs as a bonus-eligible contract.
The 2027 Cutpoints Just Got Harder to Clear
The timing adds pressure industry-wide. Earlier this week, CMS released draft cutpoints, the thresholds that convert a plan’s underlying quality and performance scores into its star rating, ahead of finalizing 2027 ratings in early October. An analysis by the Newton Smith Group found about half of the cutpoints got harder to reach, mostly in Healthcare Effectiveness Data and Information Set measures covering areas like cancer screening and chronic disease management, while roughly a third stayed unchanged and less than a fifth eased. The cutpoints also arrive amid legal turmoil over how CMS calculates the scores: a federal judge ruled in May that the agency’s methodology included illegal metrics after a challenge from insurer Clover Health, and CMS opted to rerun industry-wide scores using a similar approach for 2027 rather than fully revise its methodology, a decision analysts say could fuel further litigation.
Reaching the 4-star cutoff carries outsized financial weight. CMS paid out at least $12.7 billion in Medicare Advantage quality bonuses last year, according to an estimate from the KFF health policy research organization, and even a half-star swing can shift hundreds of millions of dollars for a single large contract. Humana’s own star performance has been volatile: the share of its Medicare Advantage members in plans rated 4 stars or higher fell from 94 percent in 2024 to 25 percent in 2025, a drop the company has said cost it an estimated $1 billion or more, before slipping again to 20 percent for 2026. Humana has said it expects its stars to be “meaningfully higher” next year.
What the October Notices Mean for Coverage Timelines
Members whose plans are not renewing will keep their current coverage through December 31, 2026, and need to select a new plan during Medicare’s annual enrollment period, which runs from October 15 through December 7. Anyone who does not choose a new Medicare Advantage plan or return to Original Medicare by that deadline risks a coverage gap or a default placement that may not match an existing doctor or drug formulary. Because Humana has said it expects to recapture a similar share of displaced members as it did after its 2025 exits, many affected enrollees can expect direct outreach steering them toward the company’s remaining plans in their area, though nothing requires them to stay with the same insurer.
The Public Record Behind the Bonus Math
CMS publishes the full record of each year’s Medicare Advantage rate-setting and Star Ratings policy changes, including the methodology behind quality bonus calculations, in its public rate announcement archive. That archive is the same one anchoring the 2027 payment figures now shaping which Humana contracts survive into next year and which ones, according to the company, did not clear the bar.
This article was produced with the assistance of AI and reviewed by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
