WILMINGTON (LN) — U.S. District Judge Jennifer L. Hall on Monday denied in part Humana Inc.'s motion to dismiss a securities fraud class action, ruling that the complaint plausibly alleged former CEO Bruce D. Broussard and CFO Susan M. Diamond knew the insurer was facing rising Medicare Advantage utilization costs while telling investors otherwise.

Hall allowed claims regarding both patient utilization and Star ratings to proceed, rejecting Humana's argument that the lead plaintiff lacked standing or that the complaint failed to allege scienter.

The lawsuit, filed by SEB Investment Management AB on behalf of its funds, alleges that Humana executives made false statements between July 27, 2022 and October 1, 2024 about the company's core Medicare Advantage business.

The complaint accuses Humana of telling investors it was not seeing an increase in patient utilization post-pandemic and that its Star ratings would offset any resulting financial impact.

Hall held that the complaint satisfied the Private Securities Litigation Reform Act's heightened pleading standards by identifying 42 allegedly false or misleading statements and providing specific facts showing executives knew the truth.

For example, Hall noted that Diamond stated on July 27, 2022, "we are seeing better-than-expected results ... based on ... the lower inpatient utilization we mentioned," while internal meetings attended by Broussard and other executives were actively discussing increased utilization.

Similarly, the judge concluded that allegations were plausible regarding Broussard's statement on March 27, 2023, that "[O]ur Stars performance will carry us farther than others in the 2024," despite internal mock surveys from late 2021 or early 2022 predicting a significant drop in ratings.

Hall dismissed only the claims brought on behalf of one investor, Gamla Liv, regarding the Star ratings statements because that entity sold its stock before the alleged corrective disclosures in October 2024.

The judge rejected Humana's argument that the complaint failed to allege loss causation for the utilization claims, holding that disclosures in late 2023 and early 2024 revealed new information about pent-up demand for healthcare services that caused the stock price to drop.

Hall ordered the parties to jointly prepare a proposed scheduling order and a letter outlining any disputes by May 26, 2026.