Only 21% of the payer's Medicare Advantage (MA) members are enrolled in plans with at least four stars.
CVS Health is expecting to take a hit of around $800 million to $1 billion to its operating income in 2024 due to a decline in MA star ratings, the company announced.
In a filing with the Securities and Exchange Commission, the payer revealed that the percentage of its MA members enrolled in plans with star ratings of at least four stars dropped from 87% in 2022 to 21% for 2023. Plans with ratings of at least four stars qualify for bonus payments in 2024, which is why CVS is bracing to take a loss to its operating income.
The insurer said the main reason for its star ratings drop is the full star decrease to Aetna National PPO, which fell from 4.5 to 3.5 stars. The health plan, which makes up 59% of the payer's MA membership, will no longer be eligible for bonus payments in 2024.
When CMS released the 2023 star ratings for MA plans in October 2022, the average rating across all plans fell from 4.37 to 4.15. The methodology was adjusted to account for the pandemic no longer being at the height it was in recent years.
In CVS' recent earnings call, CEO Karen Lynch said she was "encouraged by what we're seeing on the internal metrics relative to our stars performance."
In the filing, the payer stated: "There can be no assurances that the Company will be successful in maintaining or improving its star ratings in future years. 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."
Jay Asser is the contributing editor for strategy at HealthLeaders.
CVS disclosed in a filing with the Securities and Exchange Commission that it expects to lose $800 million to $1 billion to its operating income in 2024 from lost bonus payments.
Medicare Advantage plans with at least four-star ratings qualify for bonus payments, but CVS plans with four stars dropped from 87% in 2022 to 21% for 2023.