CVS Health Exits Obamacare Market by 2026 Amid Strong Q1 Earnings
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.
Ask Aime: How will CVS Health's exit from individual health insurance affect the health sector?
