Monthly Archives:
December 2017

Aetna and CVS Health Merger Would Make Healthcare History

Aetna and CVS Health Merger Would Make Healthcare History



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.

What Employees Need to Know About Open Enrollment and Their HSA and FSA Dollars at Year’s End

What Employees Need to Know About Open Enrollment and Their HSA and FSA Dollars at Year’s End



If you’re an employer or benefits administrator, it’s likely that you’ve received your fair share of questions from employees this fall about coverage adjustments during open enrollment. Some of those employees who already have tax-advantaged health savings and flexible spending accounts are also probably asking for clarification on what to do with the sums in these accounts at the end of 2017 and whether or not to continue with their plans.


Now is the ideal time to help employees understand how these universally underutilized accounts work and what makes them so valuable. It’s particularly important to educate employees about their flexible spending and health savings accounts in their first year (or during the first year that a company has made an HSA or FSA available) and during the first two open enrollment seasons. Here are the key messages that every employee needs to hear about HSAs, FSAs and open enrollment at the end of the year:


All HSA dollars roll over at the end of the year; most FSA dollars won’t


While there are many similarities between HSAs and FSAs, some of their most important distinctions arise at the end of the year. Most important, HSA balances can—and ideally will—stay and continue to grow, rolling over into the next year. On the other hand, FSA balances are largely “use it or lose it” by year’s end. Since 2013, however, the IRS has permitted FSA accountholders to carry over $500 annually for expenses in the next year. (Prior to 2013, any unspent funds reverted to the employer’s coffers at year’s end.) Employers can now either allow employees to carry over the $500 to the next year or to spend the remaining funds during a grace period that lasts until March 15 of the following year.


Further, employees can change how much they contribute to their HSA at any point during the year, but can only adjust their contribution amounts to FSAs during open enrollment or with a change in employment or family status. The bottom line: HSAs are for saving money for healthcare expenses, and FSAs are for spending it. HSAs are only for employees with high-deductible healthcare plans, while employers can make FSAs available to any employee.


Opt for an HSA during open enrollment to save for long-term healthcare expenses


HSAs are widely misunderstood. Many people think that these accounts are designed primarily to pay for out-of-pocket medical expenses in the near future (as is the case with FSAs). But the long-term savings value of HSAs is what makes them the most valuable, and during open enrollment, they should be presented to eligible employees as an important part of saving for future medical expenses and retirement.


According to a new report from the Employee Benefit Research Institute (EBRI), two-thirds of account holders ended 2016 with positive net contributions, and over 90 percent of HSAs with individual or employer contributions in 2016 ended the year with funds to roll over for future expenses. EBRI’s report also found that the average HSA balance among account holders with individual or employer contributions at the end of 2016 was $2,532, up from $1,604 at the beginning of the year.


In 2018, contributions to HSAs will be capped at $3,450 for individuals or $6,900 for families, up from $6,750 in 2017.


Opt for an FSA during open enrollment to cover short-term health expenses


A flexible spending arrangement, which employers offer to employees at their discretion, can help cover expenses not covered by an employee’s health plan, including deductibles, copayments and prescription costs.


In 2018, contributions to FSAs will be capped at $2,650, $50 more than the limit for 2017.


More important end-of-year HSA tax information


Not all HSA contributions have to be made by Dec. 31 for an employee to claim a tax deduction. Employees and employers can make contributions to an HSA up until April 16, 2018, for 2017.


Further, as long as an employee was eligible to contribute to an HSA as of Dec. 1, they are considered to be eligible for the whole year and can still make a maximum contribution for the full year. However, they must remain eligible for an HSA through Dec. 31, 2018. If they don’t, they will have to include the amount over-contributed in income and pay taxes and a 10 percent penalty on it.


How should employers communicate the value of FSAs and HSAs to employees? Find tips and ideas in our two part series here and here.