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CVS Health Makes Headway in Stabilizing Aetna: What's Driving It?
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Key Takeaways
CVS' Aetna struggled last year with utilization, Medicaid and weak Medicare Advantage ratings.
CVS enhances Aetna programs to simplify approvals, speed treatment and support members.
Effective 2026, CVS will exit the states where Aetna independently runs ACA plans.
CVS Health’s (CVS - Free Report) insurance arm, Aetna, faced several headwinds last year, stemming from elevated post-pandemic utilization trends, higher acuity from Medicaid redeterminations and unfavorable 2024 Medicare Advantage star ratings. The retailer offered rich benefits, intensifying these utilization challenges and leading to rapid membership growth. To stabilize the business, CVS has focused on strong execution, including leadership changes, realigning risk management processes, and operational enhancements through staffing, training and technology.
Aetna introduced an approach to bundling approvals for prior authorizations of certain cancer-related scans and tests, making it one upfront approval instead of multiple approvals over a period of months. This will ease the administrative load on providers, expedite treatment and reduce uncertainty for members. CVS plans to expand the program to other conditions, such as musculoskeletal and select cardiology services, by the end of this year. Additionally, the new Aetna Clinical Collaboration program partners with hospitals to support members as they change care settings, reducing readmissions and improving outcomes.
Medicare has really strong stars for the payment year 2025, supported by its unique and diverse set of capabilities. During the Annual Enrollment Period process, the company made efforts to rationalize both geographies and product mix, leading to an optimal mix of membership. In Medicaid, CVS is strongly executing rate advocacy, which is tracking in line with its full-year expectations.
Effective 2026, Aetna will exit the states where it independently operates ACA plans. During the first quarter of 2025, the company determined it had a premium deficiency in its individual exchange product line related to the remainder of the 2025 coverage year, which stood at $431 million as of June 30, 2025. Overall, CVS remains highly bullish on the progress it is making at Aetna.
Q2 Update From CVS Health’s Rivals
UnitedHealth Group’s (UNH - Free Report) revenues grew $12.8 billion year over year to $111.6 billion, driven by growth within UnitedHealthcare and Optum. UNH’s medical care ratio of 89.4% increased 430 basis points year over year, mainly due to medical cost trends, which significantly exceeded pricing trends, including both unit costs and the intensity of services delivered, and the ongoing effects of Medicare funding reductions.
Centene Corporation’s (CNC - Free Report) premium and service revenues increased 18% year over year to $42.5 billion, led by premium and membership growth in the PDP business, along with overall market growth in the Marketplace business and rate increases in the Medicaid business. However, growth was partially offset by lower Medicaid membership as a result of redeterminations and lower Marketplace net risk adjustment revenues.
CVS Stock Performance, Valuation and Estimates
Year to date, CVS Health shares have surged 64.8% against the industry’s 2.1% fall.
Image Source: Zacks Investment Research
CVS Health is trading at a forward five-year earnings multiple of 10.72, lower than the industry average of 15.03. The stock has a Value Score of A.
Image Source: Zacks Investment Research
Consensus estimates for the company’s 2025 earnings are showing a bullish trend.
Image: Bigstock
CVS Health Makes Headway in Stabilizing Aetna: What's Driving It?
Key Takeaways
CVS Health’s (CVS - Free Report) insurance arm, Aetna, faced several headwinds last year, stemming from elevated post-pandemic utilization trends, higher acuity from Medicaid redeterminations and unfavorable 2024 Medicare Advantage star ratings. The retailer offered rich benefits, intensifying these utilization challenges and leading to rapid membership growth. To stabilize the business, CVS has focused on strong execution, including leadership changes, realigning risk management processes, and operational enhancements through staffing, training and technology.
Aetna introduced an approach to bundling approvals for prior authorizations of certain cancer-related scans and tests, making it one upfront approval instead of multiple approvals over a period of months. This will ease the administrative load on providers, expedite treatment and reduce uncertainty for members. CVS plans to expand the program to other conditions, such as musculoskeletal and select cardiology services, by the end of this year. Additionally, the new Aetna Clinical Collaboration program partners with hospitals to support members as they change care settings, reducing readmissions and improving outcomes.
Medicare has really strong stars for the payment year 2025, supported by its unique and diverse set of capabilities. During the Annual Enrollment Period process, the company made efforts to rationalize both geographies and product mix, leading to an optimal mix of membership. In Medicaid, CVS is strongly executing rate advocacy, which is tracking in line with its full-year expectations.
Effective 2026, Aetna will exit the states where it independently operates ACA plans. During the first quarter of 2025, the company determined it had a premium deficiency in its individual exchange product line related to the remainder of the 2025 coverage year, which stood at $431 million as of June 30, 2025. Overall, CVS remains highly bullish on the progress it is making at Aetna.
Q2 Update From CVS Health’s Rivals
UnitedHealth Group’s (UNH - Free Report) revenues grew $12.8 billion year over year to $111.6 billion, driven by growth within UnitedHealthcare and Optum. UNH’s medical care ratio of 89.4% increased 430 basis points year over year, mainly due to medical cost trends, which significantly exceeded pricing trends, including both unit costs and the intensity of services delivered, and the ongoing effects of Medicare funding reductions.
Centene Corporation’s (CNC - Free Report) premium and service revenues increased 18% year over year to $42.5 billion, led by premium and membership growth in the PDP business, along with overall market growth in the Marketplace business and rate increases in the Medicaid business. However, growth was partially offset by lower Medicaid membership as a result of redeterminations and lower Marketplace net risk adjustment revenues.
CVS Stock Performance, Valuation and Estimates
Year to date, CVS Health shares have surged 64.8% against the industry’s 2.1% fall.
Image Source: Zacks Investment Research
CVS Health is trading at a forward five-year earnings multiple of 10.72, lower than the industry average of 15.03. The stock has a Value Score of A.
Image Source: Zacks Investment Research
Consensus estimates for the company’s 2025 earnings are showing a bullish trend.
Image Source: Zacks Investment Research
CVS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.