CVS Health's new CEO is prepared to make "hard choices" to turn around Aetna's performance.
On a Nov. 6 earnings call, transcribed by Seeking Alpha, CVS CEO David Joyner said benefit design and price changes in Medicare Advantage are one example of necessary actions to improve the business.
Aetna has struggled in 2024. The company exited some plans and reduced benefits for 2025. The company previously told investors it expected to lose around 10% of its Medicare Advantage membership for 2025.
On the Nov. 6 call, CFO Tom Cowhey told investors the company expects membership to land around the 10% decline it reported earlier.
CVS "clearly underestimated" rising medical costs in 2024, Mr. Joyner said.
In the third quarter of 2024, CVS Health's health benefits segment lost $924 million, down from a profit of $1.5 billion in the third quarter of 2023.
The medical loss ratio in the third quarter of 2024 was 95.2%, up from 85.7% in the same time period last year.
Here are five things to know about the leadership shake-up and changes at Aetna:
- Previous CVS Health CEO Karen Lynch was ousted Oct. 17, as the company struggled to control costs in its health benefits segment and sales in its retial pharmacy declined. CVS Health Board Chair Roger Farah told the Wall Street Journal the company's board believed it was time for a leadership change. Mr. Joyner previously led Caremark, CVS Health's pharmaceutical benefit manager.
- CVS Health named two new executives to lead Aetna on Nov. 6. Steve Nelson, who previously served as CEO of ChenMed, was named President of Aetna. Before leading ChenMed, Mr. Nelson was CEO of UnitedHealthcare from 2017 to 2019.
- The company also named Prem Shah as group president of its healthcare benefits segment. Mr. Shah joined CVS in 2013 and has held leadership positions across the company's pharmacy businesses, most recently serving as executive vice president, chief pharmacy officer, and president of pharmacy and consumer wellness. The company also recently added Andreana Santangelo, who previously served as CFO of Blue Cross Blue Shield of Massachusetts, as CFO of Aetna.
- In addition to tightening Medicare Advantage offerings, the company is restructuring how it handles risk management and underwriting decisions, Mr. Joyner said. The decisions will be pulled out of individual business units and into the financial chain, he said.
- The company is also targeting efficiency, Mr. Joyner said. Aetna is using AI to reduce the time case managers spend on preparation and improving integration with Caremark to catch emerging utilization trends sooner.
- "The work at Aetna is underway, and we are confident we are taking the right steps to address the underlying issues and drive improved performance with Aetna," Mr. Joyner said.