A Department of Justice ("DOJ") lawsuit may stifle a major insurer's revenue...
You see, in the past ten years, Medicare Advantage was a huge moneymaker for healthcare companies.
This specific insurer benefits from the country's aging population. Not to mention a reliable revenue stream from the government.
A little more than a year ago, on May 1, 2025, the DOJ announced that it filed a False Claims Act ("FCA") complaint against three major insurers and three insurance broker organizations.
The DOJ claims the insurance companies gave illegal "kickbacks" to the brokers to steer Medicare applicants to more expensive (often unsustainable) plans regardless of individual needs.
These companies allegedly even offered bribes to discourage brokers from signing up disabled Medicare patients...
Apparently because these insurance companies view disabled Medicare beneficiaries as "less profitable."
Of course, that's alarming in concept. One would hope insurers would take their role of protecting disabled patients seriously. A year later, this lawsuit is still ongoing, but at the time, the market immediately priced in the damage.
Folks, we know that investing with your emotions isn't a good idea...
Especially when the Power Gauge sees more growth ahead.
It combines 20 unique factors across four categories into one easy-to-understand rating. And it doesn't factor in pending lawsuits or emotions.
We can see this by looking at one of the insurers in the lawsuit...
This Lawsuit Caused the 'Smart Money' to Flee
I'm talking about Humana (HUM).
Naturally, Humana claims that it didn't do anything wrong...
But on the same day the DOJ filed the complaint – our system detected a shift in Humana's stock.
Put simply, the lawsuit scared the "smart money" into running for the exits. The Chaikin Money Flow indicator immediately went negative.
Over the next two weeks, Humana's stock fell about 11%.
You can see this price action in the chart below.
But the smart money's fear did not last...
Big buyers stepped back in, and the stock's money flow recovered.
And the stock eventually grew back to where it was before the start of the lawsuit – and more.
In fact, shares of Humana are up 35% since the start of 2026.
Even better, the Power Gauge still rates the stock as "bullish."
As we know, that means our system sees more upside ahead. But Humana's future revenue is far from certain...
Folks, in 2025, revenue from the U.S. government made up 83% of Humana's premiums and services revenue. That segment makes up a total of $124 billion of the total annual revenue of $130 billion.
That means the government paid Humana $103 billion in 2025. And this lawsuit could put that money at risk.
But as we saw with a similar decadelong UnitedHealth (UNH) lawsuit... We know these lawsuits don't play out overnight. And there's no way to know now which side will prevail. In the case with UnitedHealth, the court eventually found no evidence that the company did anything wrong.
Now, UnitedHealth has had other, more recent issues affecting its share price today. But the lawsuit itself registered barely more than a blip in UNH's yearslong climb to an all-time high of $630.73 in late 2024.
As we've seen, HUM has followed a similar pattern. The onset of the lawsuit has been barely a blip on the share price. As of right now – the Power Gauge now gives Humana a "bullish" rating. And the smart money has stayed in the green since late March.
That could all change if the DOJ releases a major update to this lawsuit. But until then, Humana looks poised to keep growing.
Good investing,
John Evelius
