CVS Health, Centene lead health insurers lower after 2023 Medicare ratings (updated)

Alignment Healthcare

07/10/2022 18:24

(Adds analyst comment)
       Oct 7 (Reuters) - Shares of drugstore operator CVS
Health  CVS.N  fell as much as 10% and insurer Centene  CNC.N 
slumped 8%, leading declines in major U.S. health insurers after
performance ratings for health insurance plans from a federal
government program were released.
    CVS' largest health insurance plan for Medicare recipients
received a lower performance rating, the company said on
Thursday, leading to more than $11.6 billion being wiped off its
market value by 11:30 a.m. ET on Friday.
    The company's shares have fallen more than 13% this year.
    Centene, which has fallen more than 10% this year, also lost
$3.5 billion of its market value by 11:30 a.m. ET.
    Year-over-year declines in Star Ratings were expected due to
expiry of the one-time COVID-specific disaster relief program,
Oppenheimer analysts said, adding that CVS and Centene were
among the biggest decliners.
    "CVS will not reduce benefits to offset the impact, meaning
the company will fully absorb the 5% margin hit from lost
quality bonus payments," according to J.P. Morgan analysts.
    Health insurers UnitedHealth Group  UNH.N , Cigna Corp
 CI.N , Elevance Health  ELV.N , Alignment Healthcare  ALHC.O 
and Humana Inc  HUM.N  also fell between 1% and 3%.
    The downward shift in Star Ratings will present sector-wide
revenue headwind in 2024, Stephens analysts said, adding that a
sharp reduction in Centene and CVS members in 4+ Star plans for
2023 will lead to operational hurdles for both the companies.
 (Reporting by Bhanvi Satija in Bengaluru; Editing by Shounak
Dasgupta)
 ((Bhanvi.Satija@thomsonreuters.com; Outside U.S. +91
9873062788))