At the J.P. Morgan Healthcare Conference, CVS Health executives revealed that Medicare Advantage members are seeking healthcare services more frequently than anticipated, presenting a challenge for health insurance companies in 2023.
This unexpected surge in utilization is affecting profits derived from federally funded healthcare premiums.
Medicare Advantage Dynamics
The healthcare conglomerate, which owns Aetna, expects to enroll at least 800,000 members in its Medicare Advantage plans this year, surpassing its initial forecast of adding 600,000 individuals by 2024.
Unlike traditional Medicare, Medicare Advantage plans are provided by private insurers, receiving a fixed rate to manage healthcare for individuals aged 65 and older or those with disabilities.
CVS Health, including Aetna, competes with industry giants UnitedHealth and Humana in the Medicare Advantage market. The company’s plans have benefited from favorable “star ratings” from the Centers for Medicare & Medicaid Services, influencing reimbursement levels and shaping enrollee choices.
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Medicare Advantage Success Amidst Industry Giants
In a regulatory filing, CVS reiterated its adjusted profit forecast of at least $8.50 per share for 2024. The company anticipates 2023 profit to fall within the higher range of its previous estimate, ranging from $8.50 to $8.70 per share.
Analysts, on average, project adjusted profit at $8.59 per share in 2023. CVS had adjusted its 2024 earnings forecast in November, considering potential increases in medical costs at its insurance unit due to heightened healthcare service utilization by older adults.
In a separate announcement, CVS formally appointed Tom Cowhey as its Chief Financial Officer. Cowhey, who served in the interim position since October, succeeds Shawn Guertin.
Guertin, on leave of absence since October, will depart from the company on May 31, 2024. The leadership transition comes amidst evolving market dynamics and the need to navigate the changing landscape of healthcare utilization among Medicare Advantage members.
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