By Amina Niasse
NEW YORK (Reuters) -The U.S. government announced quality ratings for 2025 Medicare health and prescription drug plans on Thursday, the first indication of which large health insurers, including CVS Health (NYSE:CVS), UnitedHealth Group (NYSE:UNH) and Humana (NYSE:HUM), will get bonus payments in 2026.
Sixty-two percent of people currently enrolled in Medicare Advantage plans that cover prescription drugs are covered by plans rated four or more stars, the Medicare agency said in its release, down from 74% last year.
About 40% of plans being offered are four stars or higher, down from 42% in 2024.
The agency scores health plans between one to five stars, with five being the highest performing.
Low ratings can discourage older Americans from renewing their Medicare coverage with certain insurers and reduce plan enrollments, said Joanna Gajuk, a research analyst at Bank of America, in a note.
Research firm KFF said in September that the government was on track to pay out nearly $12 billion in star ratings-related bonuses to Medicare Advantage plans in 2024.
CVS RATINGS RISE
CVS said separately that 88% of its MA members are enrolled in plans that are rated 4 stars or higher, with more than two-thirds in a 4.5-star plan. It said that includes its health insurance unit Aetna's two largest national plans.
In 2024, 87% of members were enrolled in highly rated plans and 21% in 2023.
"This is just another demonstration and evidence that we are putting ourselves on a path to improve the performance of Aetna," CVS CEO Karen Lynch said in an interview.
CVS has been under pressure from investors including activist hedge fund Glenview after a year in which it missed several financial targets due to weakness in Aetna. The company is also grappling with increased costs associated with higher demand for medical care, and lower-than-expected reimbursements from the government.
Reuters reported earlier this month that CVS was considering separating its pharmacy and insurance business. Its shares have fallen 15% so far this year to around $66.
Humana is "likely to track in line" with its estimates last week, which pointed to only a quarter of its members remaining enrolled in 2025 for its 4+ rating plans, compared with 94% in 2024, Oppenheimer analyst Michael Wiederhorn said in a note.
CVS is likely to gain members from Humana due to its lower ratings, Barclays analyst Andrew Mok wrote in a note.