CVS Health (CVS) shares fell about 2% on Friday to close at $86.16 after the new 2027 Medicare Advantage star ratings left its Aetna unit with fewer top-rated plans.
Aetna says more than 69% of its members will be in plans rated four stars or higher, and calls the results strong. TD Cowen read the same ratings as a $0.41 hit to 2028 adjusted EPS.
The Number Behind the Headline
TD Cowen estimates Aetna’s four-star-plus share fell to about 70% from 82%. The bigger drop is at the top: the share in plans rated 4.5 stars or higher fell to 35% from 63%.
That matters because the tiers pay differently. Four stars unlocks the quality bonus, but plans rated 4.5 stars or higher receive 70% of the difference between their benchmark and bid as a rebate, versus 65% for four-star plans. A downgrade from 4.5 to four stars can therefore reduce funding for member benefits even without losing bonus eligibility.
Sizing the Hit to CVS Earnings
Analysts expect CVS’s normalized EPS to rise from $6.75 in 2025 to $8.04 in 2026, $8.53 in 2027 and $9.71 in 2028.
For scale, $0.41 equals about 4% of the $9.71 consensus estimate. If the consensus doesn’t yet include the ratings hit, implied 2028 EPS growth falls from about 14% to about 9%, with 2027 unchanged.
UnitedHealth (UNH) faces a similar slide, to about 67% from 81%, per J.P. Morgan.
Two Ways to Read Aetna’s Ratings
Aetna’s case: nearly seven in ten members still sit in bonus-eligible plans, and its president, Steve Nelson, says the ratings support its push to restore appropriate margins. TD Cowen also says CVS can soften the hit by adjusting plan benefits.
TD Cowen’s case: the drop at 4.5 stars costs real money in 2028, the year the Street expects growth to reaccelerate.
The Street still leans bullish. The mean target of $116 sits about 34% above Friday’s close, with 18 buys, 7 outperforms and 2 holds. A 4% earnings trim doesn’t break that thesis, but CVS will need its November 4 report to show the margin recovery is on track.
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