CVS taps ex-UnitedHealth exec as Aetna president, skips guidance

CVS Health Corp.’s new Chief Executive Officer David Joyner offered investors no guidance on the company’s expected financial performance for 2024 or 2025 in Wednesday’s earnings report, the first of his tenure.

The company did announce a new president for its troubled Aetna insurance unit, where Steve Nelson, a former CEO of UnitedHealth Group Inc.’s insurance division will start today. He will have to grapple with the rising medical costs and decreased government payments that crimped the unit’s returns and attracted the ire of activist investor Glenview Capital Management. 

CVS needs to “work across our enterprise and address macro challenges” in the insurance business, Joyner said in a statement.

The company’s shares rose as much as 7.2% before US markets opened Wednesday. They had fallen 30% so far this year through Tuesday’s close, compared to a 21% gain in the S&P 500 Index.

The challenges led CVS to cut its profit outlook three times this year before withdrawing it completely last month when Joyner took over from former CEO Karen Lynch.  

The company’s pharmacy benefits manager has faced government scrutiny, Aetna has struggled to contain costs, and the retail pharmacy has closed hundreds of brick-and-mortar stores. Glenview has been pushing for changes, including a refreshing of the board, without giving specific details.

Revenue in the third quarter was $95.4 billion, up 6.3% from the prior year. Adjusted earnings per share were $1.09. They included a charge accounting for anticipated losses in the fourth quarter in Medicare and individual exchange health plans, which caused a 63 cents per share drop, the company said.

CVS expects the deficit will be substantially made up for in the fourth quarter.

Aetna has struggled as its Medicare Advantage business got lower quality ratings from the government. This cut its reimbursement levels even as it faced rising medical costs. While the government quality ratings have improved, it takes time for those metrics to lead to increased payouts.

Aetna spent a larger percentage of healthcare premiums on medical expenses in the third quarter than it did last year, recording a medical benefit ratio of 95.2% that includes charges related to anticipated future losses.

Joyner is also starting to build out his executive team, elevating Prem Shah to group president overseeing the company’s pharmacy benefit manager services, pharmacies and healthcare delivery. 

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