Executives of CVS Health, the company that owns Aetna, are giving early hints about why Medicare plan menus may shoot to the top of financial professionals' priority lists this fall.
Tom Cowhey, the CVS chief financial officer, warned securities analysts during a conference call Wednesday that many of its 2025 Medicare Advantage plans will be a lot leaner than the 2024 plans.
Aetna now covers 4.3 million people through Medicare Advantage plans. An analyst on the conference call asked about earlier CVS warnings that 2025 changes could cut Medicare plan enrollment by 10%.
"That's a good baseline," Cowhey said.
In some cases, enrollment may fall because Aetna is pulling out of certain counties, he said.
In other cases, he said, Aetna may lose enrollees because it has responded to economic pressure by replacing the 2024 plans with much different sets of benefits.
When Aetna tries to persuade current enrollees to sign up for the new, leaner plans, "those resells are going to happen at a much lower rate than what we have historically experienced," Cowey predicted.
What it means: Whether you sell life insurance, annuities or ordinary stocks and bonds, if you have clients who have Medicare Advantage plan coverage now, or who might become eligible for Medicare in 2025, you need to make sure they understand that their health coverage may be about to go through big changes.
The backdrop: The original Medicare program exposes enrollees to a big, complicated system of deductibles, co-payments and coinsurance bills.
Most enrollees use Medicare supplement insurance or the newer Medicare Advantage program to fill in the original Medicare holes.
Medicare Advantage plans use a combination of money from the federal government and enrollees' premium payments to provide what looks like an alternative to original Medicare for about 34 million of the 67 million Medicare enrollees.
The Medicare Advantage program descends from the Medicare+Choice program, a similar program that died in 2001 after insurers said unrealistic federal funding levels and operating rules made the program unsustainable.
Aetna covers 1.3 million people through Medicare supplement insurance policies. Those policies operate under different laws and regulations than Medicare Advantage and may benefit from turmoil in the Medicare Advantage program.
Medicare Advantage changes: The Medicare Advantage program has been humming along smoothly for more than a decade.
Critics have complained about high profits at Medicare Advantage programs, and rules and funding levels were starting to tighten.
This year, the Centers for Medicare and Medicaid Services, the agency that oversees Medicare, further tightened funding levels as enrollees' health care spending increased more than insurers had expected.
The result: Insurers' 2025 plan menus will shrink, the plans available will be skimpier, and insurers will pull out of some counties.
The Aetna perspective: Companies like UnitedHealth and Elevance Health posted their earnings for the second quarter before July 29. Executives from those companies used words like "thoughtful," "rational" and "disciplined" to describe what their 2025 plan menus might be like but gave no numbers.
CMS posted giant spreadsheets full of 2025 Medicare plan data July 29, and CVS released its earnings and held its earnings call Wednesday.
The timing put CVS executives in a better position to comment about what 2025 might be like.
Brian Kane, the CVS executive who served as president of Aetna, is out. Karen Lynch, the chief executive officer of CVS, will oversee the health benefits business and Katerina Guerraz, the chief strategy officer, will become the chief operating officer for the business.
"We are committed to returning health care benefits to its rightful place and will drive execution and address the challenges facing this business," Lynch said.
The company's Medicare plan prices could be significantly higher, because company executives noticed high claim costs early this year and assumed when pricing 2025 coverage that higher claim costs would continue.
"We took a very prudent approach," Lynch said.
More details about the effects of the changes on enrollees' costs and plan menus will be available when CMS posts more 2025 plan year data, Cowhey said.
Aetna's earnings: CVS as a whole reported $1.8 billion in net income for the second quarter on $91 billion in revenue, compared with $1.9 billion in net income on $89 billion in revenue.
The company's health care business, which includes Aetna, reported $574 million in operating income on $32 billion in revenue, compared with $1.2 billion in operating income on $28 billion in revenue for the year-earlier quarter.
The company ended the quarter providing or administering health coverage for 27 million people, up from 26 million people a year earlier.
Credit: CMS
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