Aetna to exit health insurance exchanges
By Lauren Berryman / May 1, 2025
Aetna will exit the individual exchange business next year as parent company CVS Health seeks to turn around its struggling health insurance subsidiary.
CVS Health expects to lose $350 million to $400 million on the Affordable Care Act of 2010 marketplaces this year, Chief Financial Officer Thomas Cowhey said during a call with analysts Thursday.
“We are disappointed by the continued underperformance from our individual exchange products and have recently determined there is not a near- or long-term pathway for Aetna to materially improve its position in this product,” CVS Health President and CEO David Joyner said on the call.
The healthcare giant took a $448 million premium deficiency reserve for its exchange business, which it blamed on an adverse risk pool and higher enrollment than anticipated despite a decline in membership, the company disclosed in its first-quarter earnings report Thursday.
Aetna recorded an 87.3% medical loss ratio, which measures the share of premiums spent on care, in the first quarter, down from 90.4% a year before.
Membership ticked up 1.1% to 27.1 million, with gains in fee-based commercial insurance slightly offsetting shrinkage in Medicare and the exchanges. CVS Health predicts Aetna will end the year with 26.4 million members, about 600,000 more than previously projected due to higher exchange and Medicare enrollment than expected.
CVS Health reported $1.8 billion in net income for the first quarter, a 58.5% leap, as revenue increased 7% to $94.6 billion.
The company has signaled that 2025 is a pivotal stage in its multiyear effort to improve Aetna’s finances. CVS Health unveiled a $2 billion cost-cutting plan in August to grapple with rising medical costs.
Aetna President Steve Nelson identified the group Medicare Advantage business as a “watch item” as cost trends run high. UnitedHealth Group first called out surprise medical costs in group Medicare Advantage last month, unnerving investors. Aetna is the second-largest group Medicare Advantage carrier behind UnitedHealth Group subsidiary UnitedHealthcare.
CVS Health projects high Medicare Advantage spending on inpatient care, outpatient care and pharmacy services this year. During the first quarter, the company also began to see early indications of elevated medical cost trends at its Oak Street Health subsidiary, which executives said they will closely monitor.
The company is pulling back from federal value-based care programs. CVS Health is selling its Medicare Shared Savings Program business and will quit the Medicare Accountable Care Organization Realizing Equity, Access and Community Health, or ACO REACH, model. This strategic shift led CVS Health to downgrade its annual revenue guidance from at least $385.9 billion to at least $382.6 billion.
CVS Health also announced a plan to bundle prior authorization requests for certain cancer tests, which it intends to expand to some musculoskeletal and cardiology services later this year.
Pharmacy benefit manager subsidiary CVS Caremark will prefer Novo Nordisk’s glucagon-like peptide-1 agonist, or GLP-1, Wegovy on its formulary beginning July 1, and the CVS Pharmacy subsidiary be the first retail drugstore to join the NovoCare pharmacy network.
CVS Health shares opened at $72.50 on the New York Stock Exchange on Thursday, up 8.7% from Wednesday and the highest opening price in more than a year. Shares closed at $69.45.