No Managed Care Organization FVE Changes Even as Medicare Advantage Star Ratings Contract

The Centers for Medicare and Medicaid, or CMS, released Star Ratings for its Medicare Advantage plans that appear to have declined across the board. In this rating system that is used to identify the highest quality plans and determine bonus payments that plans can share with provider networks, CMS standards appear to have changed, causing contractions in membership percentages in 4-Star plans or better, which could mildly affect financial results of some managed care organizations, or MCOs. For example, CVS's Star Ratings looked relatively weak, causing shares to decline in the midsingle digits in early trading Oct. 7. While we have pulled back on some intermediate-term assumptions for CVS, management has already announced plans to offset these headwinds to meet its longer-term earnings growth goals, including double-digit earnings growth by 2024. Overall, we are not materially changing our fair value estimates or narrow moat ratings for any of the MCOs that we cover based on our initial take of these Star Ratings.