CVS, Humana dip amid new mental health guidelines, Leerink note

Shares of CVS Health (NYSE:CVS) and Humana (NYSE:HUM) moved lower Monday after the White House announced new health insurance requirements and Leerink warned that insurers could be facing heightened risk to their Medicare Advantage Star ratings.

Humana shares were down 3% while CVS shares slid 2% in midday trading. Shares of Centene (NYSE:CNC) and UnitedHealth were largely flat as Elevance (NYSE:ELV) stock rose 1% and Cigna (NYSE:CI) 2%.

Earlier Monday, the Biden Administration announced new requirements for health plans aimed at improving access to mental health services for people covered by private insurance, according to a statement issued by the White House.

Under a newly issued final rule, which is intended to strengthen the Mental Health Parity and Addiction Equity Act of 2008, or MHPAEA, health plans will be required to evaluate their provider networks, how much they pay out-of-network providers, and how often they require and deny prior authorizations for mental health services. The evaluations are intended to show where plans are failing to meet MHPAEA’s requirements.

The new rule also extends MHPAEA requirements to non-federal governmental health plans, such as those offered to state employees, the White House statement added.

The U.S. Department of Health and Human Services also plans to release new tools to ensure that private Medicaid health plans are also complying with MHPAEA requirements, the statement added.

Also on Monday, Leerink said in a note that 62% of the Medicare Advantage cut points for 2025 will be increasing, with many moved by the maximum allowable change of 5 points based on guardrails.

“Sixty-two percent of the cut points moved higher, which if plans don’t see similar movement higher in their performance could elevate the risk that Star ratings could decline,” Leerink said in its note.

Leerink said it estimates “nearly all plans would see risk to most large H contracts, with Elevance (ELV) faring perhaps the best.”

It added that United Health (NYSE:UNH) “could potentially see all five of its top H contracts decline making up 50% of its membership,” while Humana (HUM) “faces potential risk to four of its five top contracts with nearly 70% of its membership impacted.”