CVS Health Flags Medicare Advantage Cost Pressures While Advancing Aetna Performance Improvements

CVS Health executives stated that the final 2027 Medicare Advantage rate notice does not fully reflect current medical cost trends, as the company continues efforts to improve operations within its Aetna insurance business.

During the company’s earnings call, CEO David Joyner said reimbursement rates from the Centers for Medicare & Medicaid Services have not kept pace with rising medical costs. He said the company has focused on managing its business despite these conditions.

“As you know, the rates have not been supportive of the elevated medical trends, and I think our team has proven, at least now in two consecutive years, that we’ve been able to manage, prioritizing margin over growth,” Joyner said.

Joyner also said he was proud of the team’s focus on restoring performance in the business. Steve Nelson, executive vice president of CVS Health and president of Aetna, said the company has maintained a strong rapport with the Centers for Medicare & Medicaid Services in discussions on reimbursement and regulatory matters. He said the company appreciated changes made between the Advance Notice and the final rule, including the decision to delay further updates to the risk adjustment model.

Nelson said Aetna has emphasized disciplined execution in its operations, including its approach to 2026 bids and the annual enrollment period. He said this resulted in a favorable geographic, product, and membership mix. He also said the company has invested in improving its star ratings over several years, which will carry into the 2027 plan year.

He added that the company plans to take the same approach into 2027 and expressed confidence in making progress toward target margins in 2027 and reaching those targets in 2028.

CVS reported that its medical loss ratio declined to 84.6% in the first quarter from 87.3% a year earlier. The company said this was due in part to improved performance in Aetna’s government plans, which had been affected by rising medical costs.

Executives said medical costs remain above historical levels and are expected to continue. Chief Financial Officer Brian Newman said the company has improved its forecasting capability and that the cost trend did not come as a surprise. He said the company may focus on pricing changes or consider adjustments to benefits to address differences between costs and reimbursement levels.

Aetna reported $35.97 billion in revenue in the quarter, up from $34.8 billion in the same period last year, even as membership declined from 27.1 million to 26 million. The company said the decrease was largely due to its exit from the individual marketplaces and was partially offset by growth in self-insured commercial plans.

Caremark reported revenue growth of 11%, increasing from $43.5 billion to $48.2 billion. CVS Pharmacy revenue rose from $31.9 billion to $32 billion, and the company filled 451.2 million prescriptions in the quarter, including contributions from Rite Aid assets acquired late last year.

The company said operating income in its pharmacy business declined due to increased operating costs related to regulatory changes affecting drug pricing and lower demand for treatments tied to seasonal illnesses. It said these factors are expected to be temporary.

CVS also said it reached a settlement with the Federal Trade Commission in April regarding Caremark’s payment model, which has shifted to a flat-fee structure.

CVS Health is navigating ongoing challenges in the Medicare Advantage market while continuing to improve operational performance within its Aetna insurance division.   recently highlighted rising healthcare utilization costs but emphasized that strategic initiatives are helping strengthen Aetna’s long-term financial and clinical performance.

CVS Health Faces Medicare Advantage Cost Pressures

CVS Health reported increasing medical costs tied to Medicare Advantage plans, reflecting broader industry trends impacting major health insurers. Higher patient utilization, increased hospital visits, and rising medical service expenses have placed additional pressure on profit margins across the sector.

Despite these challenges, CVS Health stated that it continues to actively manage healthcare spending through care coordination programs, data-driven analytics, and operational efficiency improvements.

Looking ahead, CVS Health is expected to continue investing in technology, value-based care initiatives, and integrated healthcare services to manage cost pressures and improve patient outcomes.

Future growth strategies may also include expanded digital health offerings, enhanced pharmacy services, and deeper integration across its healthcare business segments.