CVS did not release formal guidance for 2024 as part of its earnings call Wednesday morning as it continues to navigate headwinds at the insurance business.
CEO David Joyner told investors that the company expects to continue to feel the sting from elevated utilization through the end of the year. He said that in Medicare Advantage particularly, Aetna's poor performance in the 2024 star ratings led it to price its slate of plan offerings while underestimating medical costs.
"In this rising trend environment, we offered rich benefits which exacerbated our utilization pressures and grew membership rapidly," he said.
He added that Aetna has also seen significant growth in its exchange membership that has also led to higher utilization, alongside "several disappointing risk adjustment updates." Given these two financial hurdles, the health insurance business is feeling the squeeze, he said.
Aetna had a medical loss ratio of 95.2% in the third quarter of 2024, compared to 85.7% a year ago. Through the first nine months of this year, the MLR was 91.7%, according to the company's earnings report.
But, despite the challenges ahead, Joyner said he is "confident in the long-term prospects of Aetna."
"We will make the hard choices and take the necessary actions to drive a multi-year earnings recovery at Aetna," he said. "Our benefit design and price changes in Medicare Advantage and the individual exchange are down payments on this enduring commitment."
Joyner also pointed to leadership changes on the Aetna team that aim to right the ship. Earlier in the day, CVS announced that it had named Steve Nelson, who was previously the CEO of ChenMed and UnitedHealthcare, to helm Aetna as it looks to the future.
He added that CVS also brought on Andreana Santangelo, an experienced financial executive in the insurance space, and she has been working closely with Joyner, Chief Financial Officer Tom Cowhey and Aetna Chief Operating Officer Katerina Guerraz to push the insurer forward.
"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," he said.
While the company did not offer guidance for 2024 or formal figures for 2025, Cowhey told investors that CVS views 2025 as a "transition year" that puts it on track to meet its long-term growth goals.
"While we are confident we have taken the right initial actions, the road to recovery will take time," he said.