(Reuters) – CVS Health Inc said its largest medical insurance plan for Medicare recipients received a lower performance rating from the Federal government program, sending shares of the corporate down around 5% in prolonged trade.
In a regulatory filing late on Thursday, CVS said the newly-released Star Rankings for Medicare Advantage plans in 2023 lowered the rating for the corporate’s Aetna National PPO plan to three.5 stars from 4.5.
The reduced rating means the plan, which incorporates greater than 1.9 million members, is ineligible for performance-based bonus payments from the federal government in 2024 and is more likely to impact earnings.
Medicare Advantage plans are run by private insurers and are an alternative choice to the unique Medicare – a government program for older Americans.
Star Rankings are a performance and quality rating given by the U.S. Centers for Medicare & Medicaid Services, since 2007, based on its annual consumer surveys.
Rankings range from one to 5 stars, with five representing the very best possible rating, and are utilized by customers to come to a decision which insurance coverage they wish to enroll. Enrollment typically drops with a drop in rankings.
CVS said it doesn’t expect any impact to its 2022 earnings forecast from the rating change and expects to mitigate any financial impact on its preliminary 2023 outlook.
Evercore analysts wrote in a note the rankings were down for the general medical insurance industry, however the move was expected as a part of normalizing elevated rankings that had reflected allowances related to disruptions from the pandemic.
CVS said it still goals to grow adjusted earnings per share “at low double-digit year-over-year rates in 2024.”
The Woonsocket Rhode Island-based company added it was evaluating some capital deployment alternatives, including share repurchases, to mitigate any possible impact on 2024 earnings.
CVS shares fell as much as 5.2% to $93.5 in prolonged trading.
(Reporting by Bhanvi Satija in Bengaluru; Editing by Krishna Chandra Eluri)
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