CVS Could Lose Up To $1B Next Year From MA Star Ratings Drop

Dive Brief:

  • CVS expects its 2024 operating income to drop by $800 million to $1 billion next year due to lost bonus payments from lower plan star ratings in the Medicare Advantage program.
  • Just 21% of CVS’ MA members are currently in plans with a star rating of at least four, down from 87% at the end of 2021, the payer disclosed in a filing with the Securities and Exchange Commission on Thursday. Plans with a rating of four or above are eligible for bonus payments.
  • CVS’ score for its largest MA plan, Aetna National PPO, dropped from 4.5 to 3.5 stars. That was the main driver of the overall decrease in MA members in highly rated plans, CVS said. As a result, the plan — one of the largest in the U.S., with more than 1.9 million members — is no longer eligible for quality bonus payments in 2024.

Dive Insight:

The CMS considers a variety of measures when determining star ratings, including the quality of preventative services, chronic illness management and customer satisfaction.

Star ratings for the following year are released in October. Regulators caused a stir when they announced 2024 star ratings late last year that reflected a significant drop for major health insurers, throwing payers’ earnings targets into doubt.

For the 2024 plan year, only four major MA managed care providers — UnitedHealth, Humana, Elevance and Cigna — have a majority of their covered lives in plans with four stars or above.

CVS has been focusing on contract diversification and investing in improving the clinical and member experience to improve its ratings. On CVS’ most recent earnings call with investors, CEO Karen Lynch said she was “encouraged” by the payer’s progress relative to stars performance.

CVS’ earnings are also being pressured by costs from recent multibillion-dollar acquisitions, including that of value-based medical group Oak Street Health and home care company Signify Health.

Payers are apprehensive that the CMS has become stingier in handing out star ratings, cutting into profits in the lucrative Medicare program. MA plans saw a huge bump in their star ratings in 2021 due to COVID-19 disaster relief provisions that sunset last year, spurring the star ratings decline. The CMS has also increased the weight of consumer experience in evaluating scores.

MA plans received an estimated $10 billion in bonus payments in 2022, according to an analysis by KFF.

CVS received $1.2 billion and Centene received $233 million in 2022 bonus payments. UnitedHealthcare — the biggest MA payer in the U.S. — received $2.8 billion in bonuses, according to KFF.


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