Humana Stars Metrics 5-Year Selection and Peer-Outperformance Outlook, Q2 2026 Earnings Transcript

How Humana’s “Stars” metrics were selected, how representative they are, and how trends could compare to peer averages

1) How the Stars metrics were selected

A. They are a “subset” chosen for measurement consistency and disclosure practicality

Management explicitly framed the Stars metrics shown as a subset of broader program elements (the questioner referenced “a subset of HEDIS and patient safety measures”) ¹. Humana’s answer clarified that the selection criteria are primarily data continuity: these are the metrics where it has clear longitudinal data over the last 5 years so they can be compared consistently ².

They also explained why some metrics were not included: certain measures “came in or out of the program” during the 5-year window and therefore lack consistent operational data, and some survey components are held by CMS with less visibility ².

B. The company’s “north star” performance yardstick is not raw measure counts; it’s Stars revenue PMPM vs peer median

While the operational view uses a selection of 12 HEDIS and Patient Safety metrics (with metrics de-identified for competitive reasons) ³, Humana said its competitive target is top quartile Stars results defined as Stars revenue per member per month (PMPM) that is 10% above the peer group median ³.

Humana further defined Stars revenue PMPM as incorporating (i) quality bonus and (ii) percentage of rebate retained at each star level ³. That is the “competitive” metric the operational metrics are meant to support ³.

C. Measurement window alignment: the charted operational trend is tied to BY ’28 measurement completion

Humana stated that the measurement period for BY ’28 is complete, and that Appendix A (referred to in management’s remarks) shows the rate of improvement in BY ’28 compared to the previous 4 years for the selected metrics ³. This indicates the selected metrics are intended to demonstrate momentum specifically going into the BY ’28 Stars cycle ³.

2) How representative are these metrics of broader Stars performance?

A. Management believes the selected set is “pretty representative,” but stresses threshold uncertainty

Humana stated it believes the metrics are representative of its performance broadly, describing them as “a pretty representative sample” while acknowledging there are things it “don’t know” and that threshold outcomes can surprise ⁴.

They also acknowledged “inherently” some threshold uncertainty: some measures will land “a little bit higher…or a little bit lower” than expected ². The key point is that Humana argues representation is good enough because it has multiple operational paths to the Stars outcome it targets (PMPM) even if some specific thresholds differ ².

B. Representation is supported by: (1) historical linkage, (2) operational progress, (3) known limitations

Humana provided a rationale for representativeness grounded in history and operational causality: it said that hitting a metric 10% above the median player among its top 5 competitors has historically indicated it is competitive in the marketplace ².

At the same time, management said it avoids sharing internal threshold estimates and emphasizes that CMS survey data and program membership changes can limit visibility/consistency for certain measures ². So representativeness is not “perfect”; it is conditional on the company’s confidence that the chosen metrics are the subset with stable comparability and sufficient linkage to the Stars PMPM objective ²⁴.

C. The set used has explicit evidence of outpacing historical improvement rates (but not full peer targeting detail)

Humana said its slide shows that its rate of improvement outpaced and in many places meaningfully outpaced the historical CAGR across 11 of the 12 measures ³. That supports the argument that its operational execution is translating into measurable improvement in a broad set of quality/safety indicators ³.

However, the excerpts do not provide the actual numeric peer-group averages on those specific charts; thus, the analysis of representativeness is strongest on “internal historical improvement” and “subset coverage,” and weaker on “exact mapping to peer trends” ³.

3) How would trends compare to peer-group averages, and what would “outperformance” look like?

A. Humana’s definition of “outperformance” is thresholded at peer-median-relative Stars revenue PMPM

Humana defined top quartile as 10% above the peer group median in Stars revenue PMPM ³. Therefore, in peer-comparison terms, the company’s implicit expectation of outperformance is not merely “better on HEDIS/patient safety metrics,” but achieving a PMPM revenue level that clears that peer-relative bar ³.

B. What management would show qualitatively: improvement that supports crossing the 10%-above-median standard

Humana addressed a direct question about what a peer average line would look like and whether the company would still have outperformance versus peer average. The response emphasized:

• There is some threshold uncertainty, and metrics can land higher/lower than expected ²⁴.
• But the selected metrics are the ones with the longest consistent historical data and operational relevance, and management argues it has multiple ways to get to the PMPM number it needs ².
• Operational progress provides “confidence” to navigate the uncertainty ².

So, if one imagines a peer-average line on a trend chart, Humana’s narrative implies that its trajectory should remain consistent with achieving the top-quartile peer-relative PMPM outcome even if specific thresholds deviate ²³.

C. The excerpts provide evidence of operational improvement outpacing historical performance, which is a prerequisite for peer outperformance

Humana’s disclosed evidence is improvement rate: it claimed outperformance versus historical CAGR across 11 of 12 selected measures ³. While this is not the same as being above “peer group averages,” it indicates the company is not relying on mere baseline continuation; it is accelerating improvements across most measures ³. That is the closest directly supported proxy in the excerpts for “trend strength” relative to prior periods ³.

D. Limits: the excerpt does not quantify peer-group average trends

The excerpts do not provide:

• a numeric peer-group average line for the specific 12 measures,
• the actual trend values over time relative to peers,
• or the probability-weighted likelihood of landing above the “10% above peer median” threshold.

Management did say it uses peer-median-relative PMPM to define top quartile and that it feels confident about being able to land where it needs to land, but it did not quantify the peer trend gap for each metric ²⁴³.

4) Bottom-line synthesis (answering the user directly)

• Selection method: Humana chose Stars-related metrics primarily because it has clear longitudinal data over 5 years to make them comparable; other measures were excluded when operational consistency was weaker or when visibility was limited (e.g., CMS-held survey data) ². The shown set is described as a subset of HEDIS and patient safety measures (12 metrics) ¹³.
• Representativeness: Management explicitly believes the selected set is “pretty representative” of broader Stars performance, and argues it has multiple paths to the PMPM target even with threshold uncertainty, though it acknowledges it cannot guarantee outcomes ²⁴. It also backed the representativeness claim with evidence that improvement outpaced historical CAGR across 11 of 12 measures for BY ’28 ³.
• Peer comparison & outperformance: The operational metrics are meant to support a competitive objective defined as Stars revenue PMPM 10% above the peer group median (top quartile) ³. Management indicates it expects that, despite threshold uncertainty, its operational progress supports the ability to navigate to the required outcome ²⁴. However, the excerpts do not supply the actual numeric peer-group average trend lines for the specific metric set, so “peer outperformance magnitude” cannot be calculated from the provided text alone ²³.