3 Possible CVS-Aetna Deal Effects, for Agents

UnitedHealth already has a big PBM

(Image: Western Underwriter) (Image: Western Underwriter)

The Wall Street Journal set off a stock trading frenzy Thursday by reporting rumors that Woonsocket, Rhode Island-based CVS Corp. is offering about $60 billion to acquire Hartford, Connecticut-based Aetna Inc.

(Related: Aetna Rises After WSJ Reports CVS in Talks to Buy Insurer)

A sentimental insurance agent or broker's immediate reaction to the news of the CVS-Aetna deal rumors might be: How sad.

Aetna is not the biggest major medical players, but it's probably the best known. Aetna has been in business since 1853, and it's been offering health insurance since 1899. When members of the Supreme Court were debating a federal employee benefits law case in March, and they were hunting around for the name of an insurance company to use in a hypothetical example, they talked about Aetna.

But time marches forward, and the traditional commercial major medical is now a tough market, plagued by unpredictable policy moves in Washington.

Just 15 years ago, the picture was different. Big major medical insurers were recovering from the dark days of the old Medicare managed care program meltdown and class-action lawsuit attacks on the insurers' medical care management operations. The big insurers were happy with their profits, and growing opportunities in the Medicare plan and managed Medicaid plan markets. They were selling their pharmacy benefit manager (PBM)  units to other companies, and buying PBM services from companies like Express Scripts Inc. and Caremark, a company now that's now part of CVS and has helped turn CVS into a PBM giant.

UnitedHealth Group Inc. broke the mold in 2005, by acquiring PacifiCare, the parent of a large PBM, Prescription Solutions.

In recent years, however, some insurers have run into conflicts with outside PBMs.

Anthem Inc. recently announced that it will be breaking up with its PBM, Express Scripts, and starting its own PBM, IngenioRx, with help from a five-year agreement with CVS.

Now, CVS could take another approach to reuniting health insurance and PBM, by becoming a health insurer itself.

Here's a look at three ways that kind of deal could affect insurance agents and brokers.

 Mirror (Photo: Thinkstock)

(Photo: Thinkstock)

2. Executives at the big insurers might have even less time to think about you.

The Affordable Care Act changes in the individual major medical market have been a distraction for the big health insurers for years, now, and the opportunities in the Medicare plan and managed Medicaid markets have taken away even more of the big health insurers' attention.

Executives at the big, publicly traded health insurers tend to avoid using terms such as "agent," "broker," "distributor," or even "insurance" during their quarterly conference calls with securities analysts.

Talk about drug prices and drug discount negotiations may now take up even more of the top executives' attention.

Puzzle (Image: Thinkstock)

(Image: Thinkstock)

2. The big health insurers' shift away from the traditional commercial insurance market may expand opportunities for agents and brokers who can figure out how to get paid to put together alternatives. 

Frequently users of Amazon know that it can be wonderful, but that waiting around for the delivery people, resolving service problems and filling niche needs can be difficult. Amazon might carry 1,000 ads for a black raincoats, but the listings might all be listings for the same three weak brands of raincoats, with no ads showing how a consumer can find the nearest equivalent to a good raincoat that has just worn out.

The Amazonification of commercial major medical coverage, and, possibly, of administration services for small, employer-sponsored self-insured plans, could benefit agents and brokers who can find ways to identify and fill the gaps created by that shift.

(Related: Hartford to Acquire Aetna Group Life and Disability Unit)

Agents have already been putting more emphasis on sales of products such as critical insurance, hospital indemnity insurance and telemedicine services packages, and on helping to connect clients with smaller, lesser-known health insurers.

A continuing big insurer retreat from major medical, combined with continuing disarray in Washington, could expand the push into the "gap-filler" market, and major medical alternatives market, and make it more of a force in the small-group market.

Bulldog (Photo: Thinkstock_

(Photo: Thinkstock)

3. Employers and small plans may be looking for their own, buyer-side PBM.

One knock against pharmacy benefit managers is that they may conspire with the drug makers to push up the full list prices of drugs, then push the "discounted price" to the level the makers would have naturally charged, anyway, just to make it look as if the PBMs are doing a great job of negotiating.

Another knock against PBMs is that, in some cases, they might find ways to pass some discounts on to their customers but find ways to use some, or all, of the "savings" to boost their own profits.

Any employers with self-funded plans that continue to use coverage from health insurance-PBM hybrid companies might want an extra layer of scrutiny, to verify that the PBM operations are sending the right amount of discounts to the employer plans, and not finding ways to hog much, most or all of the discount-related cash for themselves. Some agents and brokers might end up creating what amount to PBM manager units to keep tabs on the PBMs.

Read CVS Health Is Sued Over `Clawbacks' of Prescription Drug Co-Pays on ThinkAdvisor.


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