0000049071-25-000057
SEC filingRevenue grew 11.1% in Q3 2025 driven by higher Medicare premiums, but net income fell 59.6% due to value creation and impairment charges.
For the three months ended September 30, 2025, Humana reported total revenues of $32.6 billion, an increase of 11.1% compared to $29.4 billion in the same period of 2024. The growth was primarily driven by a 9.9% increase in insurance premiums to $30.7 billion, reflecting higher per-member Medicare premiums largely due to an increased direct subsidy from the Inflation Reduction Act (IRA), as well as higher per-member state-based contracts premiums and membership growth in state-based contracts and stand-alone PDP businesses. This was partially offset by a decline in individual Medicare Advantage membership, including the exit from certain unprofitable plans and counties. Services revenue grew 45.1% to $1.6 billion, led by the CenterWell segment's primary care and pharmacy solutions businesses.
Despite top-line growth, net income attributable to Humana fell 59.6% to $195 million ($1.62 per diluted share) from $480 million ($3.98 per diluted share) in the prior-year quarter. The decline was driven by a significant increase in operating costs (up 22.3% to $4.1 billion) and a $63 million loss on sale of business. The consolidated benefit ratio increased 120 basis points to 91.1%, reflecting a shift in business mix toward higher-benefit-ratio lines (state-based contracts and PDP), a reduction in individual Medicare Advantage membership, and incremental investments to improve member outcomes. These were partially offset by pricing actions, plan exits, and higher favorable prior-period medical claims development ($275 million in Q3 2025 vs. $24 million in Q3 2024). The operating cost ratio rose 110 basis points to 12.6%, driven by business mix changes (CenterWell's higher cost ratio), operating leverage loss from Medicare Advantage membership decline, and $267 million in value creation initiative charges (severance and consulting).
The Insurance segment generated $31.0 billion in total external revenue, up 9.9% year-over-year, but income from operations decreased 8.4% to $251 million. The segment's benefit ratio increased 50 basis points to 91.1%, while the operating cost ratio improved 10 basis points to 9.1% due to administrative cost efficiencies from value creation initiatives and operating leverage from IRA-driven revenue increases. Individual Medicare Advantage membership declined 7.5% to 5.24 million, while group Medicare Advantage grew 4.2% and stand-alone PDP membership rose 5.6%.
The CenterWell segment reported total revenues of $5.9 billion, up 16.6% year-over-year, with external revenue surging 52.0% to $1.3 billion driven by primary care (up 96.6%) and pharmacy solutions (up 51.7%). However, income from operations fell 20.2% to $305 million as the operating cost ratio increased 260 basis points to 93.9%, primarily due to the continued phase-in of the v28 risk model revision in primary care and higher volume in CenterWell Specialty Pharmacy, which carries a higher cost ratio. These headwinds were partially offset by maturation of v28 mitigation activities and administrative cost efficiencies.
Management's discussion highlights several strategic priorities and forward-looking dynamics. The company is executing value creation initiatives to fund growth and investment in its Medicare Advantage business and healthcare services capabilities, with additional charges expected in 2025. The IRA's elimination of the Part D coverage gap and introduction of a $2,000 out-of-pocket cap are reshaping benefit design and seasonality, resulting in more level net prescription costs throughout the year. The company continues to focus on its integrated care delivery model, with 68% of individual Medicare Advantage members in value-based relationships as of September 30, 2025 (down from 70% a year earlier due to membership exits). Management believes its cash balances, operating cash flows, and available credit provide adequate liquidity for at least the next twelve months, including for debt refinancing and share repurchases. The effective tax rate was negative 77.3% for Q3 2025 due to a tax loss on sale of business, but normalized to 20.1% for the nine-month period.