Morgan Stanley: Proposal to Keep US Federal Medicare Rates Unchanged Further Threatens Humana's Profitability

Morgan Stanley analysts said that the Trump administration's proposal to keep rates roughly flat for insurance companies participating in the US federal Medicare program next year exacerbates the challenges facing Humana in increasing profitability. These analysts downgraded the stock to underweight and lowered their target price from $262 to $174. Humana has a significant exposure to the Medicare Advantage business, which means that lower-than-expected rates could put significant pressure on profits. The analysts said that the proposal "adds a layer of policy uncertainty in government support for Medicare Advantage plans". In addition, the analysts noted that Humana has not actively withdrawn from the less profitable US federal Medicare plans like its competitors, putting it in a precarious position in improving profitability.