HUM Slide 14.67% Amidst Increase in Medicare Advantage Plans

Humana's ( HUM ) stock has experienced a significant decline of almost 15% in early trading on Tuesday, following the Centers for Medicare & Medicaid Services (CMS) announcement of a 3.7% increase in federal payments to Medicare Advantage plans. This increase matches the percentage increase proposed in January, leading to disappointment among investors and concerns regarding health insurers' profit margins, given the rising costs of medical care. The CMS has projected that the federal government will contribute between $500 billion and $600 billion in Medicare Advantage payments to private health plans in 2025, to maintain the stability of the program and ensure that payments are up-to-date and accurate.

Humana's CFO, Susan Diamond, had previously informed investors that the health insurer would fall short of its upper earnings-per-share growth target without a more significant increase in payments. The payment revision, which excludes the estimated growth in patient risk scores, represents a 0.16% decline, leading to disappointment among investors and health insurers who had lobbied for a higher increase. Research from JPMorgan cited by Bloomberg revealed that there has only been one instance in the past decade where Medical Advantage plan final rates have not increased from the government's initial rate proposals.

Other health insurers, including CVS Health, UnitedHealth Group, and Centene, have also experienced declines following the news, losing 5.9%, 4.5%, and 2.3%, respectively, in after-hours trading. However, Humana has been hit the hardest, with the stock falling 14.65% to $299.70 in early morning trading on Tuesday, putting it at levels not seen since the early days of the pandemic in March 2020.

Technical Outlook
With the Relative Strength Index (RSI) at 20 a break below the ceiling of the falling wedge is imminent thereby forming a new support at that level and spike after any major fundamentals. Allowing buyers to stack at that level.

Investors should keep an eye on a key horizontal trendline that stretches back to the stock's April 2020 pandemic recovery, an area that may attract buying interest around $318, amid Tuesday's expected news-driven sell-off to a multi-year low.