CVSHealth's Earnings Soar Beyond $4.6 Billion in 2024, Overcoming Increased Expenses
CVS Health reported a staggering $4.6 billion in profits for 2024, with $1.6 billion coming from the fourth quarter. The pharmacy giant, which operates over 9,000 drugstores and the nation's third-largest health insurance company, Aetna, has been grappling with rising medical expenses in its health insurance business, sharing the struggles faced by other health insurers.
The surge in medical expenses can be attributed to a few factors. Firstly, there's an uptick in claims submitted by patients, a trend linked to the post-pandemic demand for medical care that was put on hold. Secondly, hospitals are filled with more critically ill patients, placing a substantial burden on insurers.
CVS Health reports a loss in their "health care benefits segment," with adjusted operating loss of $439 million in 2024 compared to $676 million in the prior year. This shift is primarily due to increased utilization, the impact of the company's Medicare Advantage star ratings for the 2024 payment year, and the influence of higher acuity in Medicaid following the resumption of redeterminations.
Due to these reasons, CVS Health's medical benefit ratio, which represents the percentage of premium spent on medical care, increased to 94.8% in the fourth quarter compared to 88.5% in the year-ago period. The medical benefit ratio for the entire year of 2024 was 92.5%, a far cry from the 80% to 85% rates observed during the pandemic.
Despite these challenges, CVS Health remains a growing company with profitable ventures. With its diversified services including healthcare through drugstores, outpatient clinics, and assets like Caremark, a prominent pharmacy benefit manager, the company successfully offsets its losses to some extent.
The total revenues for CVS Health increased 4.2% to $372.8 billion in 2024 and 4.2% to $97.7 billion in the fourth quarter of 2024. Encouraged by their growth in various business segments, CVS Health's CEO, David Joyner, expressed confidence in the company's performance for 2025.
Joyner, newly promoted following Karen Lynch's replacement, stated, "Our integrated model allows us to uniquely deliver a simpler, connected experience that saves time, saves money, and improves health." CVS Health's full-year 2025 adjusted profit forecast of $5.75 to $6 per share aligns with expectations set by analysts.
In response to rising medical expenses, CVS Health, which also manages Aetna health insurance, has seen a loss in the "health care benefits segment." Despite this, CVS Pharmacy, a key component of CVS Health, continued to generate revenue, with total revenues increasing to $372.8 billion in 2024.