CVS Shares Fall as Aetna Members in Highly Rated Plans Reach 69%
Key Facts
CVS Health shares fell on Friday after its insurance unit Aetna lost ground in the latest Medicare Advantage plan ratings, according to Barron's. Aetna announced that more than 69% of its members in the program are covered by plans rated 4 stars or higher for 2027. The results carry financial significance for the company, as the U.S. Centers for Medicare & Medicaid Services links star ratings to quality bonus payments for insurance contracts. The new ratings cycle affects quality bonuses scheduled for 2028, according to CMS, later than the plan year covered by the assessment. TD Cowen estimated that the lower ratings would weigh on the group's adjusted earnings per share by $0.41 that year, according to Investing.com.
In its previous annual announcement, Aetna said more than 81% of its members were in Medicare Advantage plans with prescription drug coverage rated 4 stars or higher for 2026. That announcement covered plans combining medical and prescription drug coverage, while the company framed its latest percentage in terms of its Medicare Advantage membership. Across the industry, CMS said about 71% of members in plans with prescription drug coverage are currently in contracts that will receive 4 stars or higher for 2027. The regulatory assessment of these contracts includes up to 43 different quality and performance measures, according to the CMS ratings document. Star ratings help beneficiaries compare plan quality when choosing among plans.
CMS explains in its 2027 final rule that the financial role of star ratings also extends to rebates associated with Medicare Advantage contracts. In the same rule, CMS retained the historical reward factor, which encourages consistently high performance across quality measures and for all beneficiaries. Describing the decision, it said it would continue applying the factor that "encourages consistently high performance for all enrollees across all quality measures." In assessing the ratings' impact on Aetna's business, TD Cowen believes the group can offset some of the pressure by adjusting the design of the insurance benefits offered by its plans. That assessment, like the firm's estimate of the earnings-per-share impact, remains an analyst view of the company's ability to manage the financial consequences of the ratings.
The ratings announcement followed a decline in the medical benefit ratio in CVS's insurance segment during the three months ended June 30, 2026. The group said in its second-quarter earnings release that the ratio was 87.4% during the period, compared with 89.9% in the corresponding period a year earlier. The comparison presented by the group concerned the insurance segment's performance during the quarter, while Aetna's latest announcement concerns plan quality ratings for next year. Aetna President Steve Nelson said in the company's ratings statement: "We continue to strengthen our business through a steadfast focus on the fundamentals and disciplined execution." Nelson thus linked the company's efforts to strengthen its business to its operational priorities in his comments accompanying the announcement of plan quality and member experience results.
For next year's offerings, Aetna plans to offer Medicare Advantage plans with prescription drug coverage in 41 states plus Washington, D.C., according to its announcement of 2027 plans. The company said those plans' availability covers 57 million eligible Medicare beneficiaries. Aetna described the scope of its offering by saying: "We will offer Medicare Advantage plans with prescription drug coverage in 41 states plus Washington, D.C., available to 57 million eligible Medicare beneficiaries." The annual enrollment period allows beneficiaries to search for and compare Aetna plans and select a new plan, according to information published on the company's website. The window opens on October 15 and runs through December 7, making it the next opportunity to select from the plans whose availability the company announced.
CVS has scheduled its next financial results announcement for Wednesday, November 4, 2026, according to its earnings call announcement. On the call, the company will discuss financial results for the third quarter, the quarter following the period in which it reported a decline in the insurance segment's medical benefit ratio. The discussion is scheduled to begin at 8:00 a.m. U.S. Eastern time, according to the schedule published for investors. The call falls within the annual enrollment period for Medicare Advantage plans, which remains open to beneficiaries until December. After the plan selection cycle is completed and 2027 offerings become available, the regulatory financial impact of the new ratings will arrive through quality bonus payments for 2028.