CVS Health has chopped its 2024 forecast for a third time as the health care giant continues to struggles with its health insurance business.
The leader of that segment, Executive Vice President Brian Kane, has left the company, CVS said Wednesday, and CEO Karen Lynch would take over.
The company’s adjusted operating income from that segment plunged 39% in the quarter to $938 million, helping to drag down the company’s overall profit. CVS Health has been struggling with rising claims in its Medicare Advantage business and a drop in quality ratings for those plans, which affects government funding for them.
CVS Health said it also dealt with higher costs from people covered by the state and federally funded Medicaid program.
Overall, the company’s profit dropped more than 7% to $1.77 billion in the quarter.
CVS Health had adjusted earnings of $1.83 per share on $91.2 billion in revenue. Analysts projected earnings of $1.73 per share on $91.41 billion in revenue.
CVS Health now expects adjusted per-share earnings for the year to be between $6.40 and $6.65. The company in May cut its per-share expectations to at least $7.
Wall Street had been expecting per-share earnings of $6.96, according to FactSet.
CVS Health Corp. runs one of the nation’s largest drugstore chains and a huge pharmacy benefit management business that operates prescription drug coverage for big clients like insurers and employers. It also covers more than 26 million people with health insurance through its Aetna arm.
Shares of the Woonsocket, Rhode Island, company slipped 2% to $56.99 in premarket trading.
The stock has already shed a quarter of their value this year while the Standard & Poor’s 500 index has climbed about 10%.
CVS Health, one of the largest healthcare companies in the United States, recently announced that it has revised its 2024 forecast due to challenges in the insurance sector. The company, which operates a chain of pharmacies, clinics, and health insurance plans, had initially projected strong growth for the next few years. However, changing market conditions and regulatory challenges have forced CVS Health to adjust its expectations.
One of the main factors contributing to the revision of CVS Health’s forecast is the uncertainty surrounding healthcare policy in the United States. The company has been closely monitoring the ongoing debate over healthcare reform and how it will impact the insurance sector. With the potential for changes to Medicaid and Medicare programs, as well as the Affordable Care Act, CVS Health is facing increased uncertainty about its future revenue streams.
In addition to policy changes, CVS Health is also grappling with rising healthcare costs and increasing competition in the insurance sector. The company has been investing heavily in expanding its healthcare services and digital capabilities to stay competitive in the rapidly evolving industry. However, these investments have put pressure on CVS Health’s bottom line, leading to a need for a revised forecast.
Despite these challenges, CVS Health remains optimistic about its long-term prospects. The company has a strong track record of innovation and a diverse portfolio of businesses that position it well for future growth. CVS Health’s CEO, Karen Lynch, stated that the company is committed to adapting to the changing landscape of healthcare and finding new ways to deliver value to its customers.
In conclusion, CVS Health’s decision to revise its 2024 forecast highlights the challenges facing the insurance sector in the United States. As the company navigates uncertain policy changes, rising costs, and increased competition, it will be important for CVS Health to continue innovating and adapting to ensure its long-term success. Investors and stakeholders will be closely watching how CVS Health responds to these challenges in the coming years.
