Updated: CVS Health’s Medical Benefit Ratio Increases But Company Sees Better Path for 2025
CVS Health’s healthcare benefits segment saw its medical benefit ratio increase from 86.2% in 2022 to 92.5% to full year 2024, higher than what company officials had last year.
Although CVS Health’s total revenue for the company as a whole increased for the year compared with 2023, revenue within the healthcare benefit segment — which includes Aetna, and the company’s medical, pharmacy and dental services — decreased in 2024.
In a news release, company officials said the increase in the medical benefit ratio, which is healthcare costs as a percentage of premium revenue, was due to increased utilization, the unfavorable impact of the its Medicare Advantage star ratings for the 2024 payment year and higher acuity in Medicaid.
CVS Health’s total revenue for the full year 2024 increased 4.2% to $372.8 billion, which company officials said was driven by growth in both the healthcare segment and the pharmacy and consumer wellness segments.
David Joyner
David Joyner
“We have continued to see growth in key areas of our business, including the Pharmacy and Consumer Wellness segment, while we address the industry-wide challenges that have impacted our Health Care Benefits segment,” David Joyner, CVS Health President and CEO, said in the release.
Joyner took over as a CEO and president of CVS Health in October 2024 after former CEO Karen Lynch stepped down. And this was after Lynch assumed direct leadership of the health benefit segment after Aetna president Brian Kane left in August 2024.The announcement about Lynch leaving the company was made ahead of the company’s third quarter 2024 earnings call but the company has faced increasing medical cost trend in its Medicare/Medicaid health plans throughout 2024, which continued into the fourth quarter.
For the fourth quarter that ended that Dec. 31, 2024, revenue in the healthcare benefits segment increased 23.3% over the same period in 2023. But the medical benefit ratio in the fourth quarter increased to 94.8%, up from 88.5% in the same quarter in 2023.
Going forward, Joyner said in today’s investor call to discuss the fourth quarter and full year results that he is confident that CVS Health can improve Aetna’s margins, especially with the Medicare Advantage plans. The company is focused on core priorities and focused on developing integrated capability to make healthcare better, more affordable and more substantial.
“We are advancing our leading digital strategy and investing in emerging technologies that drive simplicity and efficiency while delivering better experiences for the people that we serve, and finally, ensuring that we strengthen our balance sheet, manage our portfolio of businesses and deploy capital to create value for our shareholders,” he said.
During the investor call, Joyner during his prepared remarks that he and the people at the company understand the challenges throughout the U.S. healthcare system, including the cost pressures on consumers. “Healthcare costs are increasing because of the combination of greater utilization, provider costs, labor shortages and dramatic prices increases for branded pharmaceuticals,” he said.Thomas F. Cowhey, executive vice president and chief financial officer, indicated in the investor call that results in the healthcare delivery business highly correlated to Medicare Advantage, medical cost trends and regulations. The company projects that 2025 growth will be below long-term expectations, but healthcare delivery performance is expected to improve starting in 2026.
During the question-and-answer part of the call Joyner indicated he now believes the company has the right leadership in place. For example, in November 2024, CVS Health appointed Steve Nelson as president of Aetna, a former CEO of UnitedHealthcare. Most recently, Nelson was CEO of ChenMed, a value-based primary care company. The company also promoted Prem Shah to group president, overseeing CVS Caremark, CVS Pharmacy and the company’s healthcare delivery business.
“My first 100 days was a leadership transition, and now the focus will be on becoming a transition to leadership,” Joyner said.
Nelson said during the investor call that Aetna is now positioned to return to tighter margins over a multiyear period and being a leader in the Medicare Advantage space. He highlighted the addition of North Carolina’s public employee benefit program, which brings about 600,000 new members.