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What the CVS-Aetna Deal Currently Means for Employers

The mega-deal could reshape the health care delivery landscape, according to industry experts.

CVS Health Corp. announced its intention to buy insurance giant Aetna for $69 billion, a move that has been touted as the largest health care deal in decades with the potential to reshape the nation’s health care industry.

This deal, announced Dec. 3, is intended to create a one-stop health care provider for both employers and consumers in the individual market and to create a health care organization that can withstand major changes in the industry, according to published reports. Some of these changes include Amazon’s entry into the pharmacy-retail space and the uncertainty around the future of the Affordable Care Act and the individual mandate.health care costs CVS Aetna

Employers are looking for ways to transform the health care delivery system, and this deal will likely push them further along that path, said Brian Marcotte, president and CEO of the National Business Group on Health, a large employer advocacy group. That being said, he added, it’s too soon to tell what the overall impact will be on employers.

“While there may be a retail play here that could drive cost down and shift the focus toward prevention and primary care,” he said, “the question employers will have is, can the merger disrupt an overly complex pharmaceutical supply chain that lacks transparency or will it further entrench an already entrenched business model and make it hard for others to enter the market?”

David Henka, CEO of RxTE Health, a health care company that works with employers to implement reference pricing, does not believe that employers will see any material change in prices, services or outcomes due to the acquisition. “This is about consolidating internal administrative processes and creating more efficient and profitable merged companies,” he said.

The health care delivery, payment and reimbursement system still remains fragmented and dysfunctional, he added. “We’re in an era of unprecedented consolidation which ultimately concentrates market share to a handful of companies. This has become business as usual for the PBM marketplace.”

Others have a more optimistic view of potential change. The acquisition could do a lot of good in the overall health care market, said Marcotte. It could create more convenience and access to primary and preventive care for consumers through CVS Health’s retail pharmacies and clinics. Also, it could improve care coordination and give consumers a better health care experience at a lower cost, he added.

“This is a different kind of vertical integration in health care, one that could drive care to less expensive settings,” Marcotte said. “If it does, it may result in lower costs unlike other examples involving mergers of hospitals and health systems with physician practices.”

Larry J. Merlo, CVS Health president and CEO, said in a statement that with the combined power of Aetna’s analytics capabilities and CVS Health’s “human touch,” the company can create a health care platform built around the individual.

“We look forward to working with the talented people at Aetna to position the combined company as America’s front door to quality health care, integrating more closely the work of doctors, pharmacists, other health care professionals and health benefits companies to create a platform that is easier to use and less expensive for consumers,” said Merlo.

Aetna echoed this message of individual empowerment. “Together with CVS Health, we will better understand our members’ health goals, guide them through the health care system and help them achieve their best health,” said Mark T. Bertolini, Aetna chairman and CEO, in a statement. “Aetna has a talented and dedicated group of employees working to build a healthier world every day. Our combined company will be more competitive in the marketplace and accelerate progress toward achieving this mission.”

While these supporters cite the potential for lower costs and a better, individualized customer experience, critics cite other concerns, according the New York Times. Patients could have less choice of where they can get care or where they can fill a prescription if those covered under by Aetna’s insurance are forced to go to CVS for most of their care.

Looking forward, employers do not need to make any immediate decisions on keeping or eliminating these carriers as part of their short-term health strategies, according to Jim Winkler, global innovation lead for Aon Health. Employers who are evaluating insurance carriers should continue to view CVS and Aetna as separate, independent firms, he said.

“While there are inevitable implications tied to this merger, it could take months or even a year to secure a final approval from the Department of Justice and for CVS and Aetna to determine future business plans and operations,” he said. “Even if the deal is approved, it is unlikely there will be any changes prior to 2019.” He added that most employers are taking the wait-and-see approach before reacting to this news because they know not all announced mergers make it through the regulatory review process.

Including CVS’s assumption of Aetna’s debt, the deal will be valued at $78 billion, the companies said. The deal is expected to close in the second half of 2018 and is subject to approval by federal regulators and shareholders of CVS and Aetna. That could stymie the deal, considering Aetna’s attempt to buy fellow insurance giant Humana was blocked by a federal judge earlier this year.

 

Andie Burjek is a Workforce associate editorComment below or email editors@workforce.com.