Summary
Elevance Health, Inc. (ELV) has disclosed via an 8-K filing on October 13, 2023, that its 2024 Medicare Advantage Star Ratings are projected to significantly decline. Specifically, the percentage of members in plans rated 4 Stars or higher is expected to drop from approximately 64% (based on 2023 ratings) to about 34%. This decline is primarily attributed to three large contracts, representing 36% of Medicare Advantage members, that are moving from 4 or 4.5 Stars to 3.5 Stars. The company attributes this performance dip to challenges in Consumer Assessment of Healthcare Providers and Systems (CAHPS) measures, such as perceived access to care, and the impact of CMS's new outlier methodology, which raised cut points for ratings. While the company expresses disappointment and outlines ongoing investments in service, product, network, and operations to improve future performance, it also notes that the financial impact on Star quality bonus payments and plan-level rebates will not be felt until 2025. Elevance Health is actively exploring mitigation strategies, including contract diversification and operational initiatives, to offset potential earnings headwinds. Despite this anticipated rating decline, the company highlights positive performance in specific areas, such as all plans in Florida achieving at least 4.5 Stars, with two receiving a perfect 5 Stars, and strong ratings in Puerto Rico and other select states. Investors should monitor the company's efforts to improve Star ratings and its success in mitigating the financial consequences of this development.
Key Highlights
- 12024 Medicare Advantage Star Ratings are expected to drop significantly, with only ~34% of members in plans rated 4 Stars or higher, down from ~64% in 2023.
- 2Three major contracts, representing 36% of Medicare Advantage members, are forecasted to decrease from 4 or 4.5 Stars to 3.5 Stars.
- 3Key drivers for the decline include lower performance in CAHPS survey measures (e.g., access to care) and CMS's new outlier methodology impacting rating cut points.
- 4The financial impact on Star quality bonus payments and plan rebates will not occur until 2025.
- 5Elevance Health is investing in service, product, network access, and operations to improve future Star ratings.
- 6Despite the overall decline, specific plans and regions showed strong performance, with all Florida plans achieving at least 4.5 Stars and two receiving 5 Stars.
- 7The company is exploring mitigation strategies, including contract diversification and operational initiatives, to offset potential earnings headwinds.