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CVS Health Exits Obamacare Market by 2026 Amid Strong Q1 Earnings

Market IntelThursday, May 1, 2025 12:04 pm ET
1min read

CVS Health, a major player in the U.S. healthcare sector, announced on Thursday that it plans to exit the individual health insurance market, commonly known as the "Obamacare" plan, by 2026. This decision comes as the company reported strong financial performance for the first quarter, driven by robust growth in its health benefits and pharmacy segments, as well as a strategic partnership with Novo Nordisk for weight management drugs.

The company's insurance subsidiary, Aetna, will cease operations in the Affordable Care Act (ACA) individual market by 2026. Aetna was acquired by CVS in 2018 for $78 billion. The primary reason for the exit is the anticipated loss in the individual health insurance segment for the 2025 insurance year, with the company setting aside $448 million in reserve for underwriting losses in the current quarter.

Despite the planned exit from the ACA market, CVS Health's health benefits segment showed strong performance. The segment's revenue grew approximately 8% year-over-year to $34.8 billion, surpassing market expectations of $33.2 billion. The medical loss ratio for the segment improved from 90.4% in the previous year to 87.3%, indicating enhanced profitability, largely due to better-than-expected performance in the Medicare program.

In the pharmacy and consumer health segment, CVS also delivered impressive results. The segment's revenue reached $31.9 billion, a year-over-year increase of approximately 11%, exceeding market expectations. The company processed about 435.5 million prescription orders during the quarter, a 4.3% increase from the previous year.

CVS Health's health services division, which includes its pharmacy benefit management arm CVS Caremark, generated $43.5 billion in revenue, an 8% year-over-year increase. This growth was driven by optimized drug combinations and rising brand drug prices, with overall revenue exceeding market expectations.

Notably, CVS Caremark announced a partnership with Novo Nordisk to enhance the accessibility of the popular weight management drug Wegovy in the U.S. In the weight management market, Wegovy competes with Eli Lilly's Zepbound. CVS will prioritize Wegovy in its health plans starting July 1, providing members with greater convenience in accessing the drug.

Overall, the company reported total revenue of $94.6 billion for the quarter, exceeding market expectations by $1.2 billion. Adjusted earnings per share increased by approximately 72% year-over-year to $2.25, surpassing market expectations by $0.58. Given the strong performance across all segments, CVS Health raised its full-year 2025 adjusted earnings per share guidance to $6.00 to $6.20, up from the previous range of $5.75 to $6.00, and higher than the market consensus of $5.91.

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United-Dot-6129
05/01
$CVS Tariff-proof and doing well
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Defiant-Tomatillo851
05/01
8% revenue growth in health benefits is solid. Anyone riding this segment for long-term gains? I'm holding steady.
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battle_rae
05/01
Holding $CVS long-term, bullish on PBM growth
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cfeltus23
05/01
$94.6B revenue and $2.25 EPS beat sound good to me. Long $CVS in my portfolio, feels right for 2025.
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MyNi_Redux
05/01
2025 losses got 'em spooked, but CVS smashing Q1 shows they're not afraid to pivot. 🚀
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sundowner89
05/01
@MyNi_Redux What do you think about their pivot strategy?
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Urselff
05/01
Aetna bailing on Obamacare makes sense; Medicaid & Medicare seem where the big bucks are at now.
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maximalsimplicity
05/01
CVS Caremark partnership with Novo Nordisk could shake up weight management. Wegovy vs. Zepbound is getting spicy. 💸
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bottlethecat
05/01
Strong Q1 for $CVS, but weight management is key. 🚀
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SuperNewk
05/01
CVS exiting Obamacare? Big move. Might shift more to $CVS Caremark and pharmacy services for growth. Anyone else thinking this?
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Gejdhd
05/01
@SuperNewk What do you think about their pharmacy segment?
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Ditty-Bop
05/01
@SuperNewk Agree, CVS Caremark might get more spotlight.
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ServentOfReason
05/01
CVS exiting Obamacare? Not surprising with underwriting losses.
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maxckmfk
05/01
Strong Q1 from $CVS. Earnings beat, guidance up. But what's next for those Obamacare customers? 🤔
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Anteater_Able
05/01
Damn!!The CVS stock was in an easy trading mode with Premium tools, and I made $183 from it!
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