We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
CVS Health Delivers MBR Improvement: Is More Progress in the Cards?
Read MoreHide Full Article
Key Takeaways
CVS Health's MBR fell to 92.8% in Q3 2025 as prior PDR effects and gov business gains lifted results.
CVS' improvement stemmed from nonrecurring PDR, favorable prior period development and better gov performance.
CVS expects about 91% full-year 2025 MBR, keeping a prudent view of medical cost trends through year-end.
CVS Health’s (CVS - Free Report) Health Care Benefits segment recorded a medical benefit ratio (MBR) of 92.8% in the third quarter of 2025 compared with 95.2% in the prior year. The metric shows the percentage of premium revenues spent on medical benefits for the Insured members. Management uses MBR to assess the underlying business performance and underwriting of its insurance products, compare actual results with expected results and identify the trends across reporting periods.
The improvement in the quarter was driven by the year-over-year impact of premium deficiency reserves (PDR) recorded as healthcare costs. During the third quarter of 2024, CVS recorded approximately $1.1 billion in PDR, which did not repeat this time, while $174 million of PDR recorded during the first half of 2025 was utilized. Additionally, higher favorable prior-period development and better underlying performance in the Government business drove the improvement.
However, the decrease in MBR was partially offset by changes in the seasonality of the Medicare Part D program due to the impact of the Inflation Reduction Act, as well as higher acuity in the individual exchange product line. MBR was impacted by approximately 100 basis points from provider liabilities for matters dating back to 2018 and worsening individual exchange risk adjustment expectations, with both contributing roughly the same.
CVS Health continues to expect full-year 2025 MBR at approximately 91% at the low end of the Health Care Benefits adjusted operating income guidance range. This outlook takes into account a “thoughtful and prudent view” on medical cost trends through the rest of the year.
CVS Health’s Peer Updates
The Cigna Group’s (CI - Free Report) health benefits division has launched Clearity by Cigna Healthcare — a new copay-only health plan designed to bring greater transparency, predictability and simplicity to the care experience. Leveraging Cigna Healthcare’s new AI-powered digital tools, the Clearity plan empowers customers to make confident, informed healthcare decisions with upfront pricing, verified patient reviews, and a user-friendly digital experience designed for simplicity and trust.
Cencora (COR - Free Report) announced plans to invest $1 billion through 2030 to bolster and expand its U.S. pharmaceutical distribution network. The investments — headlined by the opening of its second national distribution center in Ohio and an expanded presence in Alabama and California — will increase Cencora’s capacity, improve efficiency and enhance the resilience of its national distribution network, strengthening the company’s ability to support its customers’ evolving needs.
CVS Stock Performance, Valuation and Estimates
In the past six months, CVS Health shares have risen 27.2% compared with the industry’s 11.4% growth.
Image Source: Zacks Investment Research
CVS Health is trading at a forward five-year price/sales (P/S) ratio of 0.24, lower than the industry average of 0.49.
Image Source: Zacks Investment Research
Analysts remain bullish on CVS Health, supported by their rising earnings estimates for 2025 and 2026.
Image: Bigstock
CVS Health Delivers MBR Improvement: Is More Progress in the Cards?
Key Takeaways
CVS Health’s (CVS - Free Report) Health Care Benefits segment recorded a medical benefit ratio (MBR) of 92.8% in the third quarter of 2025 compared with 95.2% in the prior year. The metric shows the percentage of premium revenues spent on medical benefits for the Insured members. Management uses MBR to assess the underlying business performance and underwriting of its insurance products, compare actual results with expected results and identify the trends across reporting periods.
The improvement in the quarter was driven by the year-over-year impact of premium deficiency reserves (PDR) recorded as healthcare costs. During the third quarter of 2024, CVS recorded approximately $1.1 billion in PDR, which did not repeat this time, while $174 million of PDR recorded during the first half of 2025 was utilized. Additionally, higher favorable prior-period development and better underlying performance in the Government business drove the improvement.
However, the decrease in MBR was partially offset by changes in the seasonality of the Medicare Part D program due to the impact of the Inflation Reduction Act, as well as higher acuity in the individual exchange product line. MBR was impacted by approximately 100 basis points from provider liabilities for matters dating back to 2018 and worsening individual exchange risk adjustment expectations, with both contributing roughly the same.
CVS Health continues to expect full-year 2025 MBR at approximately 91% at the low end of the Health Care Benefits adjusted operating income guidance range. This outlook takes into account a “thoughtful and prudent view” on medical cost trends through the rest of the year.
CVS Health’s Peer Updates
The Cigna Group’s (CI - Free Report) health benefits division has launched Clearity by Cigna Healthcare — a new copay-only health plan designed to bring greater transparency, predictability and simplicity to the care experience. Leveraging Cigna Healthcare’s new AI-powered digital tools, the Clearity plan empowers customers to make confident, informed healthcare decisions with upfront pricing, verified patient reviews, and a user-friendly digital experience designed for simplicity and trust.
Cencora (COR - Free Report) announced plans to invest $1 billion through 2030 to bolster and expand its U.S. pharmaceutical distribution network. The investments — headlined by the opening of its second national distribution center in Ohio and an expanded presence in Alabama and California — will increase Cencora’s capacity, improve efficiency and enhance the resilience of its national distribution network, strengthening the company’s ability to support its customers’ evolving needs.
CVS Stock Performance, Valuation and Estimates
In the past six months, CVS Health shares have risen 27.2% compared with the industry’s 11.4% growth.
Image Source: Zacks Investment Research
CVS Health is trading at a forward five-year price/sales (P/S) ratio of 0.24, lower than the industry average of 0.49.
Image Source: Zacks Investment Research
Analysts remain bullish on CVS Health, supported by their rising earnings estimates for 2025 and 2026.
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.