CVS Health is expecting Aetna’s operating income to decrease by up to $1 billion next year because the number of its Medicare Advantage members in four star plans has dropped significantly since last year, according to regulatory documents filed May 25 with the Securities and Exchange Commission.
The company said 21 percent of its Medicare Advantage members were enrolled in four star plans for 2023 ratings, compared to 87 percent for 2022 star ratings.
CVS Health executives had told investors in November that the company is expecting a $2 billion decline in 2024 revenue because of its lower Medicare Advantage star ratings combined with the loss of its pharmacy benefits contract with Centene. In October, Centene awarded a $35 billion PBM contract to Cigna for 2024, thereby dropping CVS Caremark.
"That would leave a headwind of about $1 billion or $0.55 a share for 2024," CFO Shawn Guertin said in November. "The amount of repurchases required to combat that headwind could be up to $10 billion."
CMS awards financial bonuses to Medicare Advantage plans that earn four stars or above. Average CMS star ratings saw a decline industry-wide in 2023, signaling revenue declines for some payers in 2024. In 2022, CVS received $1.2 billion in bonuses, according to a KFF analysis.
In May, CVS President and CEO Karen Lynch told investors that the company expects its Medicare Advantage membership to grow 12 percent by the end of this year. As of March 31, the company had 3.4 million MA members, 1.3 million supplement members and 6.1 million Part D plans.
Ms. Lynch said CVS' recent acquisitions of Dallas-based Signify Health and Chicago-based Oak Street Health will help the company improve star ratings and navigate recent risk adjustments changes from CMS.
"Aetna, Signify Health, and Oak Street are the right combination of assets to successfully manage through these changes," she said. "We will also introduce a star's enablement offering that will provide meaningful benefits for all payers.'
"I'm encouraged by what we're seeing on the internal metrics relative to our stars performance."