CVS Health, the third-largest Medicare Advantage insurer in the United States, made an announcement this week that affects the lives of at least 420,000 people, about 10% of its total policyholders. The company made the decision to cut Aetna’s health insurance plans, seeking to prioritize profit margins and leaving the well-being of insured people in second place.
“The goal next year is margin over membership,” CFO Thomas Cowhey said. “Could we lose up to 10% of our existing Medicare members? It’s entirely possible. And that’s okay, because we need to get this business back on track.”
And it is that CVS earned 900 million dollars less than they expected in the first quarter of 2024 in the healthcare category, with $400 million lost due to the strong utilization of outpatient services.
What’s Next for 420,000 Unprotected Medicare Advantage Users?
The problem, the company argues, is that rising medical costs far exceed the reimbursement sent by the federal government. That’s why the company is prioritizing profit margins over membership growth for its Medicare Advantage plans. This strategy would affect benefits and availability for many retirees who are in this group of the 420,000 individuals who are affected by this cut.
All this has to do with an increasing number of Baby Boomers who are retiring: these people are looking for more care, and the costs of this care are higher. At the same time, for now, there is no indication that the Medicare Advantage payment rates for 2025 will cover the growing costs for provider companies.
“CVS has bluntly said the new rates are insufficient ‘to cover overall cost trends,’” Michael Ryan, a finance expert and founder of michaelryanmoney.com, told Newsweek. . “So they’re taking steps to recover profit margins, targeting a 4-5 percent margin for their Medicare plans by 2025.”
What happens to CVS Health Medicare Advantage beneficiaries?
Basically, the options are few… two to be exact. Of course, the first option is always to enroll in another Medicare Advantage plan. There are dozens of companies in the United States that offer an important range of possibilities, and you should compare the available options to find one that fits your medical needs and your budget.
You can also return to Original Medicare, the traditional Medicare program that offers coverage through a network of participating providers. If you choose this option, you must select an additional prescription drug plan known as Medicare Part D; otherwise, medications could be left out and the costs of these without Medicare coverage are very high in some cases.
Remember that the Medicare Advantage annual enrollment period runs from October 15th to December 15th. During that time, you can change plans or return to original Medicare, and there are resources available to help you pick the right medical plan. That’s several months away and now you have time to start patiently informing yourself and reading the different plans and visiting the different Medicare Advantage providers to find one that fits into your budget and offers you all the coverage you’re needing.
“I don’t think CVS wants to gut their Medicare Advantage plans to the point of being uncompetitive,” Ryan said. “They’re banking on efforts to better capture members’ health conditions and boost risk-adjusted reimbursement rates down the line. Insurers have to continually re-evaluate and rebalance their models as medical inflation, regulations, and reimbursement rates shift.”
