CVS reported a higher than expected Benefit Ratio this week and warned that 2024 would be more of the same. I find it helpful to keep in mind that all MCOs (including mutts like CVS) employ rafts of actuaries and their consultants. It is safe to assume, then, that when their is pricing is off - premiums are not high enough to account for benefit costs - it is at least in part intentional.
The demographics of the Medicare population is shifting. The number of people age-in has and will continue to slow as the post-war population exhausts its influence. At the same time, the largest post-war cohorts (~1947-ish) are hitting their highest utilization years. The obvious answer is to increase premiums so the younger Medicare cohorts can support the higher medical costs of the older group.
Obvious, of course, unless you are in a very competitive market. Admittedly, Medicare Advantage members can be very sticky unless there is a change in benefit design. In recent years, most plans have been low/no premium so it is difficult to know how price increases will affect behavior. We can hazard a guess.
For those market participants with enough power, which includes influence over the drug channel, keeping premiums low to acquire share as the weaker players struggle with benefit costs is a not-exactly-secret-strategy. Will The Street tolerate it? That is going to be the money question over the next 12-18 months.
Let me know what you think.
Emily Evans
Managing Director – Health Policy
X
LinkedIn
Calendly Meeting Set-up
