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Aetna and CVS Health Merger Would Make Healthcare History

Aetna and CVS Health Merger Would Make Healthcare History

12/11/2017

 

The announcement this past Sunday that CVS Health will move forward with plans to acquire Aetna, the United States’ third largest health insurer, marks the largest healthcare M&A transaction in 2017. The $69 billion deal is also historic in that it would bridge a healthcare benefits company with a drugstore giant for the first time, a move that the two companies say will make healthcare costs more manageable for both of their clients.

 

According to a joint statement from CVS and Aetna, “This transaction fills an unmet need in the current healthcare system and presents a unique opportunity to redefine access to high-quality care in lower cost, local settings whether in the community, at home or through digital tools.”

 

The news comes at a time of industry unrest—the result of ballooning medical and prescription costs, the Republicans’ looming tax plan and an uncertain future for the Affordable Care Act and government programs like Medicare—leading more consumers to take responsibility for their healthcare. Aetna and CVS, both headquartered in New England, say these consumers will benefit from a transaction that melds Aetna’s data and analytics with CVS’s local, human touch. Their merger, they say in their statement, will ensure that the two companies are better positioned to meet the health needs of the 50 percent of Americans with chronic conditions who account for more than 80 percent of all healthcare costs.

 

In the days since the announcement, media, investors and industry players have scrambled to predict what the merger would mean for the future of the healthcare industry and for primary care physician practices in particular. Healthcare DIVE calls it “the kind of deal that can upend an industry” while one Forbes contributor says it’s a “mortal threat to U.S. hospitals.” Moody’s has said that together the two companies will have “unsurpassed scale and reach in the industry and the potential to reshape the entire health plan market.” The New York Times said that the transaction “reflects the increasingly blurred lines between the traditionally separate spheres of a rapidly changing industry.”

 

Mark T. Bertolini, who is Aetna’s CEO, told the Times that by gaining access to CVS’s 9,700 CVS Pharmacy locations and 1,100 MinuteClinic walk-in clinics, Aetna will be better able to reach consumers by creating destinations for care. “It’s in their community. It’s in their home,” he said. “CVS has the draw. People trust their pharmacist.”

 

“We think of it as creating a new front door to healthcare in America,” said CVS Health’s CEO Larry J. Merlo.

 

Aetna serves an estimated 44.6 million people, while CVS Health claims nearly 90 million plan members through its pharmacy benefits manager.

 

The proposed acquisition must now face the federal government’s antitrust reviews. As a financial services executive told Fortune, “Given the prolonged regulatory process, we do not expect any changes (if any) in the competitive landscape until the 2020 coverage plan year.”

 

For more on the state of the healthcare industry, read why the latest healthcare reform defeat shouldn’t be a distraction from companies’ health benefits strategy.

By the Numbers: The Latest in Mobile Payments Data

By the Numbers: The Latest in Mobile Payments Data

11/20/2017

 

By most accounts, consumer adoption of the mobile payments trend has increased steadily, as consumers grow to understand its value and their concerns about security are assuaged. While some analysts say that B2B and retail can be expected to embrace mobile payments in the greatest numbers in the years to come, companies across industries, including healthcare, have used 2017 to explore emerging mobile payments opportunities, capabilities and challenges.

 

Some recent stats on mobile payments:

 

  • 83 percent: Percentage of U.S. consumers who owned a smartphone in June 2017 as compared to 79 percent in October 2016 (JPMorgan)

 

  • 360.4 million: Number of mobile payments users in 2017; this is expected to nearly double by 2021 to 663.8 million users (Statista)

 

  • $622.75: How much the average mobile payments user will have spent on mobile payments in 2017; this is expected to grow to $1,303.85 by 2021 (Statista)

 

  • 41 percent: Percentage of consumers who are likely to try digital wallets in the next year (JPMorgan)

 

  • 64 percent: Percentage of consumers who plan to use a mobile wallet in 2020 (Accenture)

 

  • 61 percent: Percentage of consumers who welcome open access to their finances so they can see checking account or credit card balances when paying with any mobile app (Accenture)

 

  • 25 percent: Percentage of U.S. retailers that currently have terminals that accept mobile payments. Apple Pay and PayPal are retailers’ two most widely accepted digital payment methods, though Android Pay is gaining in popularity with retailers and can be expected to overtake Masterpass by Mastercard within the next 12 months. (Statista)

 

  • 83 percent: Percentage of healthcare providers who plan to meet the rise in patient consumerism with more retail-like technology solutions and practices (Black Book)

 

  • 62 percent: Percentage of medical bills that were paid online in the first half of 2017 (Black Book)

 

  • 95 percent: Percentage of consumers who would pay online if a healthcare provider’s website had the option (Black Book)

 

  • 71 percent: Percentage of patients who say that mobile pay and billing alerts have improved their actual satisfaction with a healthcare provider (Black Book)

 

Mobile payments are likely to be critical to the future of healthcare benefits, as deductibles and out-of-pocket maximum costs rise, resulting in millions of dollars of unpaid medical bills. Through the WEX Health Cloud platform, members can streamline the funding, purchasing and payment processes required for informed healthcare financial decision making.

Want more? Read why consumers are turning to their smartphones for health information.

IRS Issues Guidance on Small Employer HRAs

IRS Issues Guidance on Small Employer HRAs

11/03/2017

by Chris Byrd

 

This week, the IRS released guidance (Notice 2017-67) addressing qualified small employer health reimbursement arrangements (QSEHRA).

In the form of 79 questions and answers, the IRS explains the rules and requirements for providing a QSEHRA under section 9831(d) of its code, the tax consequences of the arrangement and the requirements for providing written notice of the arrangement to employees. A qualified small employer HRA may be offered by employers that have fewer than 50 full-time employees and do not offer group health plans to any of their employees.

The proposed guidance attempts to respond in part to President Trump’s executive order of Oct. 12, which called for expanded availability and permitted use of HRAs. It should be noted, however, that the response is only in the context of QSEHRAs and does not address potential further expansion of HRAs. The primary purpose of the proposed guidance is to address many questions that have arisen since QSEHRAs were created last December.

The guidance is intended to be incorporated into proposed regulations to be issued by the IRS and Treasury Department. It provides for public comments on the guidance and the proposed regulations through Jan. 19, 2018.

Chris Byrd, WEX Health’s executive vice president of operations, says, “The IRS ruling is proposed and not final. It answers many, if not most, of the questions that the industry had asked it to. That’s good, as it eliminates some of the uncertainty about how these accounts are to be administered, which should help adoption of QSEHRAs. Much of what is outlined is helpful, but it’s not perfect, and I would expect we and other industry participants will provide input during the comment period.”

HRAs were created by the IRS in 2002 to allow employers to fund medical care expenses for their employees on a pre-tax basis. In December 2016, the 21st Century Cures Act additionally created QSEHRAs, amending the IRS code, Patient Protection and Affordable Care Act and other laws to exempt QSEHRAs from certain requirements that apply to group health plans.

To read the IRS’s notice in full, go here.

 


Chris Byrd

Executive Vice President, WEX Health Operations & Corporate Development Officer

Chris Byrd brings more than 25 years of experience in employee benefits and banking to his role at WEX Health. A founder of Evolution Benefits in 2000, Chris played a key role in designing the proprietary architecture for the company’s prepaid benefits card.

Chris oversees the daily execution of WEX Health’s business and leads the company’s operations and service delivery, corporate development, merger and acquisition activity, and legal, industry, and government relations efforts.

He began his career in commercial banking, and prior to 2000, he focused on finance, strategy, and business development for Value Health and two start-up healthcare companies. He joined WEX Health in July 2014.

Chris, who serves on numerous industry boards, is a frequent speaker on emerging trends in financial services and benefits and is active in industry and government relations. He earned a degree in economics from Brown University.  


Why the Latest Healthcare Reform Defeat Shouldn’t Be a Distraction from Your Health Benefits Strategy

Why The Latest Healthcare Reform Defeat Shouldn’t Be a Distraction from Your Health Benefits Strategy

10/09/2017

by Chris Byrd

 

Now that the Graham-Cassidy healthcare bill has failed, Congress will move on. We can expect it to concentrate instead on some pressing items on the calendar—things like agreeing on a continuing resolution to keep the government operating, raising the debt ceiling and reauthorizing programs like the Children’s Health Insurance Program. And of course, as we all know, congressional leadership is poised to take on the very complex issue of tax reform. In other words, after a six-month-long healthcare debate during which politicians expended a considerable amount of political and emotional energy, healthcare is largely off the table for now, barring the (unlikely) inclusion of healthcare in a tax reform package.

 

This means the Affordable Care Act remains the law of the land. While it is far from a perfect framework (and both sides of the aisle agree on that), the employer market has adjusted to it. The repeal and replace efforts of the past six months led some employers to place their benefit strategies on hold pending an understanding of what a new world order might look like. My advice: Don’t put off making decisions about your benefits strategy any longer. The deliberation and debate over a wholesale overhaul of the present system is finished. There will be some targeted efforts, most notably to stabilize the individual market, but the employer market framework is known—more of the same.

 

If there is disappointment among supporters of consumer-directed healthcare approaches, it is over the missed opportunity to pass reforms that would have expanded HSAs, restored the OTC tax benefit, eliminated the cap on FSA contributions and further delayed the implementation of the Cadillac Tax. In the absence of a broad reform bill, these supporters will continue to advocate for these provisions in separate pieces of legislation. But much of that effort may have to wait until after the end of the year, given that the attention of the tax-writing committees is fully focused on tax reform. The industry’s biggest priority continues to be to repeal, reform or delay the Cadillac Tax.

 

The market forces that are causing employers to continue to move toward consumer-directed, higher-deductible healthcare plans haven’t changed, and the trend of consumers having more skin in the game is inexorable because it works. Even without the legislative changes that would have been favorable to consumers with tax-advantaged accounts had the broad healthcare reform bills passed, these accounts will remain a very effective and attractive tool for both employers and consumers. Consumers should be making use of them, as they provide a significant benefit by helping them save money and become wise stewards of their healthcare dollars. Consumer-directed health approaches—and the tools and products that have sprung up around them—continue to be an effective part of the answer to the challenges presented by healthcare’s ever-increasing costs. As Congress gathers its energy for another round of discussion and debate—this time around tax reform—employers and consumers should not be distracted by what’s happening in Washington as it relates to their health benefits strategy.

 


Chris Byrd

Executive Vice President, WEX Health Operations & Corporate Development Officer

Chris Byrd brings more than 25 years of experience in employee benefits and banking to his role at WEX Health. A founder of Evolution Benefits in 2000, Chris played a key role in designing the proprietary architecture for the company’s prepaid benefits card.

Chris oversees the daily execution of WEX Health’s business and leads the company’s operations and service delivery, corporate development, merger and acquisition activity, and legal, industry, and government relations efforts.

He began his career in commercial banking, and prior to 2000, he focused on finance, strategy, and business development for Value Health and two start-up healthcare companies. He joined WEX Health in July 2014.

Chris, who serves on numerous industry boards, is a frequent speaker on emerging trends in financial services and benefits and is active in industry and government relations. He earned a degree in economics from Brown University.  


What’s Driving Medical Cost Trend Upward in 2018?

Medical cost trend is projected to have a slight uptick next year compared to the last three years, according to PwCs Health Research Institute (HRI) Medical Cost Trend: behind the numbers 2018 report.

Medical cost trend is the projected percentage increase in the cost to treat patients, assuming benefits stay the same. Insurers use the projection to calculate health plan premiums for the following year.

Annual Medical Cost Trend Expected to Be 6.5%

The anticipated growth rate for 2018 is 6.5 percent, half a percentage point higher than this year. Benefit design changes such as higher copays and narrower provider networks typically help hold down spending growth and is expected to do so next year by a percentage point, putting the net growth rate at 5.5 percent.

There are several factors affecting both sides of medical trend. While single digit increases have become the new normal for projections, the report notes that health organizations and businesses will have to tackle the price of services and the rate of utilization in the future to keep healthcare affordable.

Upward Pressure

For 2018, these three factors are expected to put upward pressure on medical cost trend:

Rising Inflation

The US economy is heating up and impacting all prices, healthcare costs included. With employers hiring and businesses and consumers spending, general inflation is rising and will likely put pressure on wages, medical prices and cost trend.

Movement to High Deductible Health Plans Slow

Less employers (28%) are considering only high deductible health plan offerings over the next three years, compared to (44%) in 2014, according to the 2017 PwC Touchstone Survey. A slowdown in the shift to HDHPs means employers may see an increase in utilization and will therefore have to look on the service-side of things such as narrower provider network and centers of excellence to bring down price instead of utilization.

Less Branded Drugs are Going Off Patent Protection

Fewer branded drugs have been coming off patent since 2016, meaning savings cannot be realized by generics coming onto the market in 2018. Generic prices are typically 80 – 85% less than branded originals within a few years of a patent expiring and create significant cost savings. Employers often use formularies with generics and encourage their use to help decrease medical costs.

Downward Pressure

There are also two emerging forces that may put downward pressure on health spending increases:

Public and Political Pressure to Keep Drug Prices in Check

Negative pressure is causing pharmaceutical companies to address pricing and value. Heightened political and public attention has the ability to cause drug-makers to hold price hikes in check, while for some drugs in the past year have had triple and quadruple digit percentage increases.

Employers Target New Treatments and Technologies to Reduce Waste

Employers looking to maintain access to care and minimize waste are turning to where treatments are administered, coordinating care, artificial intelligence, new technologies and traditional strategies to effectively keep employees covered and maintain costs.

Source:  PwC Health Research Institute. Medical cost trend: Behind the numbers 2018.

National Health Trends Show Mixed Progress 

As if there aren’t enough reasons to live in Hawaii, it just ranked first in the nation for the fifth year in a row for having the healthiest residents, according to the 2016 America’s Health Rankings Annual Report from the United Health Foundation.

The annual health rankings report has been tracking trends in health behaviors, policies, care and outcomes since 1990. It offers a comprehensive look at the nation’s health as a whole in addition to the health of people in individual states. Hawaii had the lowest rates of preventable hospitalizations and low rates of uninsurance along with the second-highest public health funding rate in the country. It also ranked second for low rates of obesity and cancer death. Massachusetts, Connecticut, Minnesota, and Vermont received the next highest rankings.

Positive National Trends

As reported in The Nation’s Health Feb/March issue, some positive national trends identified a decrease in unhealthy health activities. For example, smoking rates dropped by 41 percent since 1990. The uninsured rate has decreased by 35 percent from 16.2 percent in 2011 and preventable hospitalization for those on Medicare decreased by 35 percent over the past 10 years.

Individual Behaviors Need Improvement

Other trends need to address individual behaviors to make the U.S. healthier. The obesity rate increased to 29.8 percent, which is up from 11.6 recorded in the first report. Also for the first time since 1990, cardiovascular death rates increased to 251.7 from 250.8 deaths per 100,000 people. Additionally, drug deaths rose 4 percent from 2015 to 2016.

Efforts at the community or workplace level can be impactful in helping alleviate unhealthy habits/lifestyles such as physical inactivity and obesity by encouraging participation in wellness initiatives and providing access to healthy food options. Improving individual outcomes will positively influence state and national trends as well. Opportunities for progress need to continue for more promising results to be yielded next year.

Source:  The Nation’s Health. Rankings find improvements in health, but concerns linger. February/March. PP 1.