The US government unveiled its quality ratings for Medicare health and prescription drug plans for 2025, providing the first indication of which major health insurers, including CVS Health, UnitedHealth Group, and Humana, will qualify for bonus payments in 2026, Reuters reports.
According to the Medicare agency, 62% of individuals currently enrolled in Medicare Advantage plans that include prescription drug coverage are covered by plans rated four stars or higher. This marks a decline from 74% in the previous year. Additionally, about 40% of the plans offered received a rating of four stars or above, down from 42% in 2024. The agency assigns ratings to health plans on a scale from one to five stars, with five being the highest rating.
Low star ratings may deter older Americans from renewing their Medicare coverage with certain insurers and could lead to a decline in plan enrollments, noted Joanna Gajuk, a research analyst at Bank of America.
Research firm KFF projected earlier this month that the government is expected to distribute nearly $12 billion in bonuses related to star ratings to Medicare Advantage plans in 2024.
In a separate announcement, CVS reported that 88% of its Medicare Advantage (MA) members are enrolled in plans rated four stars or higher, with more than two-thirds in plans rated 4.5 stars. This is an improvement from 87% of members in 2024 and 21% in 2023. CVS CEO Karen Lynch highlighted this progress, stating it reflects the company’s commitment to enhancing the performance of its Aetna health insurance unit.
CVS has faced pressure from investors, including activist hedge fund Glenview, following a year in which it missed several financial targets due to challenges at Aetna. The company is also dealing with rising costs linked to increased medical care demand and lower-than-expected government reimbursements.
Earlier this month, reports surfaced indicating that CVS is contemplating a separation of its pharmacy and insurance divisions. So far this year, its shares have fallen 15%, trading around $66.
Meanwhile, analyst Michael Wiederhorn from Oppenheimer remarked that Humana is likely to see a decrease in its enrollment for plans rated four stars or higher, with only a quarter of its members expected to remain enrolled in 2025, compared to 94% in 2024. According to Barclays analyst Andrew Mok, CVS is poised to gain members from Humana due to the latter’s lower ratings.
