CVS margin reprieve, retreat

CVS Health got a lift from Washington on Medicare Advantage payments even as it prepares to leave the Affordable Care Act marketplace business. (cms.gov) On April 7, 2025, the Centers for Medicare & Medicaid Services said Medicare Advantage plans would see an average 5.06% payment increase for 2026, up from the 2.23% increase proposed in January. The agency tied the change to updated data on fee-for-service spending and other technical factors. (cms.gov) That increase matters for CVS because Aetna is one of the country’s biggest Medicare Advantage insurers, and higher government payments can ease pressure on margins after a stretch of elevated medical costs. CVS has said Medicare Advantage utilization ran higher than expected in 2024 and into 2025. (cms.gov) (cvshealth.com) At the same time, CVS said it will exit the individual exchange business for 2026, ending Aetna’s Affordable Care Act marketplace coverage in 17 states. About 1 million members will need to pick new coverage for next year. (ajmc.com) (cvshealth.com) CVS disclosed the exchange exit with its first-quarter 2025 results and said the move fit a broader effort to focus its portfolio. The company also raised its full-year 2025 adjusted earnings guidance to $6.00 to $6.20 a share from $5.75 to $6.00. (cvshealth.com) The two moves point in opposite directions inside the same insurer. Medicare Advantage is a government-paid business for people age 65 and older, while the exchange business sells individual plans to people who buy coverage on Affordable Care Act marketplaces. (cms.gov) (ajmc.com) The exchange retreat also lands as the individual market faces another pressure point: enhanced federal premium subsidies are set to expire after 2025 unless Congress extends them. Analysts have warned that 2026 premiums could jump sharply if those subsidies lapse. (ajmc.com 1) (ajmc.com 2) CVS is not leaving government-backed insurance altogether. Aetna continues to sell Medicare Advantage plans for 2026 and promoted those products in October 2025 as a core part of its business. (cvshealth.com) For CVS, the near-term picture is a company getting better payment terms in a large federal program while shrinking a different insurance line that covered about 1 million exchange members. (cms.gov) (ajmc.com)