Humana Inc. (NYSE: HUM) said it expected a smaller drop in full-year individual Medicare Advantage membership than previously projected but slashed its unadjusted profit forecast due to elevated medical costs. Shares fell more than 7% in intra-day trading on Wednesday.

The U.S. health insurer, one of the largest providers of Medicare Advantage coverage for Americans aged 65 and older, projected that membership in the business would decline by roughly 425,000 this fiscal year, compared with its prior estimate for a drop of up to 500,000. The company cited stronger retention and robust sales as reasons for the improvement.

In October, Humana reported that about 20%, or roughly 1.2 million, of its members were enrolled in Medicare Advantage plans rated four stars or higher for 2026. Around 14% were in 4.5-star plans, up sharply from 3% the prior year.

Later that month, however, a U.S. court rejected Humana's effort to challenge 2025 plan ratings from the Centers for Medicare & Medicaid Services (CMS), a ruling seen as a potential hit to future government bonus payments. High-rated plans typically earn larger payouts, sometimes reaching billions of dollars, if cost targets are met.

Humana said it expected a “significant decline” in the number of higher-rated plans in 2025 and warned that if it failed to overturn the ruling, its 2026 CMS quality bonus payments could be reduced, potentially impacting revenue, operating results, and cash flow.

The company posted a third-quarter medical cost ratio of 91.1%, up from 89.9% a year ago but within expectations. Like UnitedHealth, Humana continued to face persistent cost pressures tied to higher utilization in government-backed programs.

Adjusted earnings were $3.24 per share, topping estimates, while revenue came in at $32.65 billion. For the year, Humana now expected unadjusted earnings of about $12.26 per share, down from $13.77 previously, while reaffirming adjusted EPS guidance of around $17.00.