CVS Health (CVS) Stock Falls 10% on Health Insurance Plan Downgrade

  • CVS Health (CVS) stock is succumbing to double-digit losses this afternoon.
  • The company just announced that its largest health insurance plan for Medicare patients received a downgrade.
  • Management offered a no-earnings impact reassurance, but that isn’t helping CVS stock.

Shares of retail pharmacy chain and health solutions provider CVS Health (NYSE:CVS) are slipping more than 10% today. On Thursday, the company announced that its largest health insurance plan for Medicare recipients received a lower performance rating from the underlying federal program. Immediately following the news, CVS stock fell. Now it continues to print red ink.

According to Reuters, CVS filed a regulatory document late Thursday which revealed that the “newly-released Star Ratings for Medicare Advantage plans in 2023 lowered the rating for the company’s Aetna National PPO plan to 3.5 stars from 4.5.” Per the news outlet, the reduced rating means the plan is “ineligible for performance-based bonus payments from the government in 2024 and is likely to impact earnings.” The plan has more than 1.9 million members.

Star Ratings represent performance and quality scores handed down by the U.S. Centers for Medicare & Medicaid Services. These are based on annual consumer surveys.

Fortuitous Timing for CVS Stock

To be fair, Evercore analysts did report that the overall health insurance industry suffered a ratings dip. So, the challenge isn’t exclusive to CVS stock. However, experts had anticipated the industry downgrade due to normalization initiatives following an artificial lift stemming from the pandemic.

To help bolster CVS stock, management tried to reassure stakeholders that the company still aims to grow adjusted earnings per share (EPS) “at low double-digit year-over-year rates in 2024.”

Further, per TipRanks, the leadership team is “evaluating a variety of operational initiatives and capital deployment alternatives, including share repurchases, to help to offset this projected earnings headwind.”

Unfortunately, this news isn’t helping CVS stock on Friday. For now, though, the consensus analyst rating for CVS is still a “strong buy” on TipRanks. Wall Street experts have an average price target of $123 per share for CVS.

On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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