Employer Group Health Plans

CVS Health Corp.’s Caremark is the latest big PBM to offer clients new pricing models that the company claims will increase transparency and reduce overhead. Experts say that the new offerings are not as transparent as CVS claims they are, and constitute a response to various pressures including likely federal PBM reforms, scrutiny from plan sponsors and disruptive business trends like the growth of Mark Cuban Cost Plus Drug Co.

Most experts expect that the new CVS offerings, called CostVantage and TrueCost, will only make a marginal difference — if any — in either drug costs or price transparency. Industry observers point to similar product rollouts by the other two of the Big Three PBMs, UnitedHealth Group’s Optum Rx and The Cigna Group’s Express Scripts, neither of which seemed to dampen the firms' PBM earnings. Express Scripts’ ClearCareRx and Optum Rx’s Cost Clarity launched in April and May, respectively. Express Scripts also rolled out a new “cost-plus pharmacy pricing” option, called ClearNetwork, in November.

As of the third quarter of 2023, enrollment in both employer-based plans and Medicare Advantage plans had risen compared to the same period in 2022, according to AIS’s Directory of Health Plans. Managed Medicaid membership dropped year over year by approximately 2.1 million lives and plummeted by nearly 5 million lives from the fourth quarter of 2022, as states starting in April resumed their Medicaid eligibility redeterminations processes. Meanwhile, the Affordable Care Act marketplace scooped up many disenrolled Medicaid beneficiaries, adding more than 3.1 million new members year over year.

While deal talks between The Cigna Group and Humana Inc. have reportedly fizzled, Cigna’s desire to sell its Medicare Advantage business is apparently still alive and well. Health Care Service Corp. and Elevance Health, Inc., are the two contenders for Cigna’s MA segment, which could fetch more than $3 billion, according to a report from Bloomberg, citing anonymous sources.

Industry observers say they aren’t surprised that Cigna is still trying to offload its MA book of business, even if doing so is no longer necessary to fend off antitrust scrutiny associated with a Cigna-Humana megamerger. What’s less clear, they say, is what Cigna’s growth strategy would then look like.

As of the third quarter of 2023, enrollment in both employer-based plans and Medicare Advantage plans had risen compared to the same period in 2022, according to AIS’s Directory of Health Plans. Managed Medicaid membership dropped year over year by approximately 2.1 million lives and plummeted by nearly 5 million lives from the fourth quarter of 2022, as states starting in April resumed their Medicaid eligibility redeterminations processes. Meanwhile, the Affordable Care Act marketplace scooped up many disenrolled Medicaid beneficiaries, adding more than 3.1 million new members year over year.

Call it the blockbuster deal that never was. The Wall Street Journal reported on Dec. 10 that The Cigna Group abandoned merger talks with Humana Inc., ending a multiweek stir over a report from the same publication that the companies were discussing a deal that would have created a $140 billion megainsurer. With the dust now settling, analysts and industry observers are speculating about what comes next for the two firms — with some suggesting that Cigna may eventually wind up back at the negotiating table.

Neither Cigna nor Humana ever officially confirmed their reported deal discussions. But on the same day that the WSJ reported Cigna was abandoning its pursuit of Humana, Cigna said its board of directors had approved an additional $10 billion in share repurchases. Cigna CEO David Cordani also issued a telling statement hinting at what might have derailed the merger talks — per the WSJ, the firms couldn’t agree on financial terms — and addressing the company’s merger and acquisition (M&A) strategy.

During their Dec. 12 investor day, Centene Corp. executives promised 12% to 15% in annual earnings growth and declared victory in their multiyear value creation and cost-cutting plan. Wall Street analysts responded warmly to the firm’s presentation, which featured a bold plan to grow Affordable Care Act marketplace enrollment by courting small businesses.

That plan would leverage Individual Coverage Health Reimbursement Arrangements (ICHRAs) to exploit what CEO Sarah London called a “long-term disruption opportunity” in the small-business health insurance market. Centene is the first major carrier to promise long-term, substantive growth in ICHRAs. The long-term growth prospects of ICHRAs, which allow employers and employees to buy marketplace plans, are far from clear.

In a move decried by the major PBM trade group but hailed by employer plan sponsors and a pro-reform coalition of smaller PBMs, the U.S. House of Representatives on Dec. 11 passed legislation that would usher in a host of new transparency requirements for what has become a heavily criticized industry.

The Lower Costs, More Transparency Act (H.R. 5378) passed on a 320-71 vote, but an uncertain fate awaits the measure in the Senate. The bill was initially due to be voted on in September but was tabled amid concerns over lawmakers’ support and the House’s focus at the time on passing a stopgap government spending package.

CVS Health Corp.’s Caremark is the latest big PBM to offer clients new pricing models that the company claims will increase transparency and reduce overhead. Experts say that the new offerings are not as transparent as CVS claims they are, and constitute a response to various pressures including likely federal PBM reforms, scrutiny from plan sponsors and disruptive business trends like the growth of Mark Cuban Cost Plus Drug Co.

Most experts expect that the new CVS offerings, called CostVantage and TrueCost, will only make a marginal difference — if any — in either drug costs or price transparency. Industry observers point to similar product rollouts by the other two of the Big Three PBMs, UnitedHealth Group’s Optum Rx and The Cigna Group’s Express Scripts, neither of which seemed to dampen the firms' PBM earnings. Express Scripts’ ClearCareRx and Optum Rx’s Cost Clarity launched in April and May, respectively. Express Scripts also rolled out a new “cost-plus pharmacy pricing” option, called ClearNetwork, in November.

A megamerger reportedly brewing between The Cigna Group and Humana Inc. could create a health insurance giant with 31 million members that’s capable of rivaling UnitedHealth Group and CVS Health Corp — if the deal could weather antitrust challenges.

Cigna’s health insurance products cover more than 17 million people nationwide, and almost 80% of its members are enrolled in administrative services only (ASO) employer-based health plans, according to the latest data from AIS’s Directory of Health Plans (DHP). Humana, meanwhile, enrolls over 13.7 million people, with nearly 42% in Medicare Advantage plans, including those serving people who are dually eligible for Medicare and Medicaid. It also has a large contract with TRICARE, the health insurance program serving military service members, retirees and their families.

During UnitedHealth Group’s annual Investor Day, analysts focused largely on looming challenges for the firm’s Medicare Advantage business. Yet the company’s executives also revealed some intriguing details about new benefit designs gaining traction in the company’s commercial insurance book of business.

In reviewing the updated 2024 financial estimates that UnitedHealth released before its Nov. 29 Investor Day, Wells Fargo analyst Stephen Baxter advised investors that “we see higher-than-expected MLR [medical loss ratio] and more modest MA membership growth as items to pick at.”