CVS plans to let Aetna fully insured group enrollment shrink
The insurer's parent, CVS Health, is worried that claim costs could soar.
Aetna, CVS Health’s insurance business, is trying to increase 2025 group health rates enough to cope with the possibility that claim costs could soar, and it’s predicting that the higher rates will hurt enrollment.
CVS announced Tuesday that it’s spending $1.2 billion to restructure Aetna because of concerns about unexpectedly high medical claim costs at the Medicare plan division and the individual major medical insurance division.
“We continue to closely watch our group commercial business,” Tom Cowhey, the CVS chief financial officer, said during a conference with securities analysts. “To date, pressures in this business have largely been manageable as we have proactively pushed rates up to cover emerging cost trends.”
The move to increase rates “will result in lower commercial risk membership in 2025, hindering our ability to grow earnings in this business,” Cowhey said.
CVS held the call to go over earnings for the third quarter. The company reported $71 million in net income for the quarter on $95 billion in revenue, compared with $2.3 billion in net income on $90 billion in revenue for the third quarter of 2023.
The company’s “health care benefits segment,” which includes Aetna, reported a $1.2 billion operating loss on $33 billion in revenue, compared with $1.1 billion in operating income on $26 billion in revenue for the year-earlier quarter, because of the increase in benefits costs and the restructuring charges.
CVS did not break out separate enrollment figures for fully insured group health plans when it posted its earnings. Enrollment in self-funded employer plans that Aetna administers increased to 14.2 million, from 14.1 million.
Enrollment in all fully insured coverage increased to 4.8 million, from 4.2 million. About 1.9 million of the people who had fully insured commercial coverage in the third quarter had individual major medical insurance purchased through an Affordable Care Act public exchange.
CVS is just the latest company to talk about worries about group health claim costs. Voya executives said rate increases for its stop-loss insurance policies, or health insurance policies for self-insured employer health plan plans, will be twice as big in 2025 as they were in 2024.
Related: Voya is doubling stop-loss price increases for 2025
But CVS has expressed more public concern about its health insurance business than some other insurers have.
CVS acquired Aetna in 2018. In October, CVS replaced Karen Lynch, the former chief executive officer, with David Joyner, who had been the president of the CVS Caremark pharmacy benefit manager business.
Bloomberg reported that CVS has been thinking of separating Aetna from the core pharmacy business.
Joyner, the new CEO, told analysts during the conference call that the health insurance business is essential to CVS Health’s strategy. “This business has incredible earnings potential,” Joyner said.