CVS braces for $1B hit following Medicare Advantage star ratings drop

CVS Health is bracing for a hit of up to $1 billion dollars as its reports a huge decline in its Medicare Advantage star ratings.

For 2023, 21% of Aetna's Medicare Advantage members were enrolled in plans with four stars or higher, down from 87% in the 2022 plan year, according to a filing with the Securities and Exchange Commission. The company estimates that this will reduce 2024 operating income for its insurance arm by between $800 million and $1 billion.

Under the Affordable Care Act, a portion of MA payments are tied to performance in the star ratings program.

The key driver behind the decline, according to the filing, was a one-star decrease in the rating for its Aetna National PPO plan, which accounts for more than half of the insurer's 3.2 million Medicare Advantage members. That plan's rating dropped from 4.5 stars to 3.5 stars, meaning it is no longer eligible for bonus payouts.

In the filing, CVS said that the Centers for Medicare & Medicaid Services have continued to revise the star ratings program to "make it harder to achieve 4 or more stars."

"There can be no assurances that the Company will be successful in maintaining or improving its star ratings in future years," the company wrote. "Accordingly, the Company’s Medicare Advantage plans may not continue to be or become eligible for full-level quality bonuses, which could adversely affect the benefits such plans can offer, reduce membership and/or reduce profit margins."

CVS added in the filing that its "contract diversification efforts" will enable it to "partially mitigate" the impacts associated with the star rating decrease.

Other insurers, such as Centene, have seen their star ratings scores decline significantly as CMS begins more intensive evaluations after easing off the gas during the COVID-19 pandemic.