Linking the final federal guidelines to deals closed, abandoned, and still in play.
Would the final 2023 merger guidelines from the U.S. Department of Justice and the Federal Trade Commission have affected this year’s biggest deals? Here’s a look at the key guideline takeaways and the deals in question. They include one that’s still on the table following a state justice request to the DOJ.
One rule to rule them all.
The new guidelines combine and apply rules for all merger types into a single document. In addition to horizontal mergers, the final DOJ and FTC rules apply to vertical mergers (different provider types) and cross-market mergers (different geographies)
Tougher market share and market concentration limits for horizontal mergers.
The new guidelines change the market share and market concentration levels that would make a horizontal merger “presumptively unlawful”: a combined 30% market share or a market concentration of over 1,800 as calculated by the Herfindahl-Hirschman Index (HHI). Horizontal mergers consolidate the number of entities that offer similar services.
The HHI:
Reflects how evenly market share is distributed
Ranges from 0-10,000
Helps identify markets that are moderately concentrated (HHI of 1,500-2,500) or highly concentrated (more than 2,500)
With a new market concentration of 1,800 making a merger presumptively unlawful, the DOJ and FTC have signaled that middle-moderate deals may be at higher risk for review and blockage. For vertical mergers, the guidelines soften but essentially maintain the presumption that a 50% market share suggests a monopoly.
Market share and concentration aside, companies must report any deal valued at more than $101 million to the DOJ and FTC.
Cigna and Humana: Had the deal proceeded and with Cigna retaining its Medicare Advantage business, the companies combined MA market share would have been 20% (18% Humana, 2% Cigna). But the dollar value of the deal alone would have initiated government review — in addition to its consolidation of two of the largest Pharmacy Benefit Managers in the U.S., a space the FTC is also reviewing.
Claiming efficiency won’t cut it
The final merger guidelines reject cost savings and efficiencies as a general defense against mergers deemed illegal and anti-competitive. The DOJ and FTC permit a “narrow path” for this defense, including evidence that:
The merger will produce unique benefits not achievable any other way
These benefits can be proven
Said benefits do not decrease market competition
The government has been skeptical of merger savings and efficiency claims (Crowell). Alternatively and on the provider side, consolidation can raise prices without improving quality (KFF).
Prove your case — economically, competitively, comprehensively
Where the draft guidelines had relegated economic and evidentiary analysis the appendix, the final version elevates them to the main body and in front of market definitions. Companies are already used to more rigorous evidentiary standards when working with the FTC and DOJ, including potential merger harms. The final guidelines add labor market impacts to those harms.
UnitedHealth Group and Change Healthcare: UnitedHealth Group proved its case in one of the bigger recent M&A surprises. In March 2023, the DOJ dropped its appeal of a federal district court ruling that permitted United to acquire Change Healthcare in a $13 billion deal. That ruling required Change to sell its claims editing business, which was a part of the government’s anti-competitive claims.
The role of the states.
While the final guidelines do not address State roles in M&A review, they do come into play. States challenge mergers using federal antitrust law and/or their own statutes. The National Academy for State Health Policy (NASHP) has proposed model legislation that would require state review of mergers below the FTC/DOJ threshold of $101 million.
Elevance Health and BlueCross BlueShield of Louisiana: The deal that was off is now back on. In September, Elevance’s acquisition was delayed by state concerns including those of the Louisiana Department of Justice (LADOJ). At LADOJ’s request, the federal DOJ encouraged the Louisiana Department of Insurance to “carefully consider the competitive impacts” of the Elevance-BCBS-LA merger. Several factors — the state Blues’ plan conversion to a for-profit company and changes to a new joint nonprofit foundation, including profit distribution and board governance — appear to be shifting the tide for a deal that could close in early 2024.
The immediate outcome is only part of the picture as short-term versus long-term and growth versus transformation mark a shifting Medicare Advantage landscape.
The move could make HCSC the next Elevance and Elevance the hands-down dominant player among BlueCross BlueShield companies.
Here are seven things to know.
HCSC and Elevance competing in $3B bid.
Bloomberg notes that Cigna’s MA business could fetch more than $3 billion, with final bids due this week from the reported suitors.
How bad does Cigna want a deal?
The company is more likely to secure a richer asking price now that there are multiple bidders. If it can’t, Reuters reports that the insurer might be willing to delay a sale. We already know that Cigna is willing to walk away from a deal in a big way — i.e., its failed Humana acquisition, if you’ve been living under a rock.
How bad does Cigna want a deal now?
What might sweeten the pot if Cigna can’t quite get its asking price? Freedom and stronger finances overall. If Cigna sells, it will presumably avoid five years of HHS compliance oversight as part of its $172 settlement of MA reimbursement fraud charges. In addition, Cigna’s MA unit will reportedly lose money in 2024. A sale now could curtail losses in two areas and provide added funds for the “bolt-on acquisitions” that Cigna is still considering.
Price, alignment, desire: Then and now
Price: Cigna will want to fetch more than $3 billion for its MA portfolio, given that it paid $3.8B a decade ago to acquire it from HealthSpring. In 2011, that price tag equated to $10K per MA member and $500 per member for PDP. Since then, Cigna’s MA enrollment has grown from 340,000 to 600,000 and its PDP enrollment from 800,000 to 2.5 million.
Desire: Analysts were surprised in 2011 when Cigna hearted HealthSpring, with Forbes reporting: “Cigna hasn’t expressed a lot of interest recently in becoming bigger in government business, with their near universal focus on growing internationally.”
What a difference a decade makes.
Fast forward to a Goldman Sachs analysis from 2022: “Cigna said that it considered government business a significant growth driver, with a targeted annual growth rate of 10% to 15% . . . and that it had identified government business as an area where it could grow via M&A” (SeekingAlpha).
What a difference a year makes.
Alignment: Given that Cigna would be offloading its MA business, it doesn’t have to worry about the “limited cost and revenue synergies” that might have played in role with Humana. HCSC and Elevance won’t need this synergy either unless unique Cigna MA customer expectations significantly impact cost and revenue. What the two Blues plans will need is the ability to retain the customers they acquire and synergy with their existing business models.
Who is the likely buyer?
Based on buying power alone, Elevance is more likely to prevail. Its 2022 revenue was nearly triple that of HCSC ($156B versus $54B, respectively). If Elevance was Cigna’s second MA suiter, it likely made a more attractive bid in either pure dollars or other details. Being a publicly traded company, Elevance can make a cash-and-stock offer whereas HCSC would be limited to a cash-only deal.
Who is the ideal buyer?
Current and long-term factors affect how Elevance or HCSC would steward Cigna’s 600,000 MA lives:
Membership: HCSC’s current MA enrollment is roughly 1 million — 5.3% of its total 18.6 million enrollment. Elevance’s MA enrollment is larger and a bigger percentage of its total enrollment: 2.9 million of 47.3 million lives, or 6.3%. (In contrast, Cigna’s MA enrollment represents 3.3% of its 18 million lives.)
Footprint: Elevance has a much larger MA footprint, operating in 22 states compared to HCSC’s five (IL, TX, NM, OK and MT). Both plans overlap with current Cigna MA markets while operating in a few states that Cigna doesn’t.
Networks: Elevance’s footprint reflects an existing national infrastructure and provider network, which HCSC lacks.
Elevance has the size and scale to absorb 600,000 new MA members. That growth would increase its MA market share among BlueCross BlueShield plans from 67% to 81% (if other BCBS growth remains relatively flat). That’s significant but not transformational in the short term.
Conversely, HCSC’s acquisition would be transformational immediately, shifting it from a company that prides itself on its local approach to one that would become a national player overnight and would begin to resemble Elevance in the Medicare Advantage space.
7. All that glitters is not gold?
In the long term, a larger MA footprint could increase the buying power of both companies, particularly of other BCBS plans. Elevance is already demonstrating this with a $2.5B acquisition of BlueCross BlueShield of Louisiana that is now back on. The last time HCSC acquired a Blues company was in Montana in 2013.
There is also the longer long-term. Earlier this month, The Wall Street Journalnoted that the “Medicare Gold Rush” was slowing down, citing the now-dead Cigna-Humana deal and slower projected growth from UnitedHealth Group.
Cigna couldn’t take advantage of the Gold Rush. It remains to be seen if Elevance or HCSC can and what role a Cigna MA acquisition would play.
Year-to-date, Cigna share prices are down 10.3% (as of Dec. 10, 4:00 pm ET). But its investors netted big short-term gains after news broke that deal talks were off between Cigna and Humana.
Jackpot. On Monday, Cigna Group shareholders banked a 16% increase, the company’s biggest gain in 14 years (MarketWatch). Year-to-date, Cigna share prices are down 10.3% (as of Dec. 10, 4:00 pm ET). But its investors netted big short-term gains after news broke that deal talks were off between Cigna and Humana. More on that here.
Who’s reaping the gains?
Institutional investors make up nearly 89% of Cigna's ownership, not uncommon for managed healthcare companies (CNN Business). Among Cigna's largest investors are the world's two largest investment firms — Vanguard Group, Inc. and BlackRock. Vanguard holds nearly twice as many shares as BlackRock (8.01% versus 4.5%) and a handful of other institutional investors in the 4% club.
That club also includes Dodge & Cox and Massachusetts Financial Services (now known as MFS Investment Management), which have increased their shares by 11.67% and 3.01%, respectively (time frame unknown). Other top purchasers include Fidelity Management & Research (3.87% stake, +15.56% gained) and JPMorgan Investment Management (1.3% stake, +5.7% gained)
The rest of the top 10 is here, including Cigna’s biggest institutional buyers and sellers.
Is the deal off long-term, or simply just in "light of the current environment"?
It's not you, Humana; it's us—or rather, our shareholders.
One month after The Wall Street Journal reported that Cigna and Humana were in merger talks, it now reports that the deal is dead. This comes "after shareholders balked" and that the companies couldn't agree on what would have been a Cigna cash-and-stock acquisition of Humana "with a large stock component," the WSJ said.
It's a curious outcome given that "the current management [of Cigna] has wanted to own HUM for some time,” Yahoo! Finance said.
But what management might still want later and what shareholders want now appear to be two very different things.
In less than 3 days, 2 very different announcements
On a filing on Thursday, December 7, Humana voted to remove a board executive committee requirement from its bylaws and then disbanded the committee, according to a report by Bloomberg. Less than three days later — on Sunday, December 10, and before Monday's market open — Cigna announced a $10 billion stock buyback authorization.
Bloomberg reports that the change was "part of a regular governance review, with Humana spokesperson Mark Taylor stating via email: “The utility of the Executive Committee has diminished greatly over the years” with new ways of doing business like virtual meetings, said in an email.
Executive committees and virtual meetings are mutually exclusive?
On the news, Cigna shares jumped nearly 16% while Humana's declined 2.6%, according to Investopedia. This mirrors stock price fluctuations the day after the rumored deal broke on November 29 (an initial 8% drop for Cigna, roughly 5.5% for Humana).
The market spooked shareholders, Cigna rewarded them
The December 10, the WSJ story opens: "Cigna Group abandoned its pursuit of a tie-up with Humana."
No one pursues a tie-up. But that language reflects why shareholders may have balked at a deal that was predicted to spend 18-24 months in protracted regulatory review.
Predicted deal completion is one reason why share prices fluctuate when companies announce mergers. Except this merger was never announced, by Cigna or Humana. And Cigna did not comment on the matter in its stock buyback press release.
The scuttled deal is a “short-term win” for Cigna investors per one analyst at CNBC, who adds that “taking advantage of a negative reaction” to deal reports by announcing its stock buyback plan on Sunday is “music to Cigna shareholders’ value-sensitive ears.”
Who are these shareholders? And what is Cigna saying?
Cigna's shareholders and a word from CEO David Cordani
Institutional investors represent nearly 89% of Cigna's ownership, which is not uncommon for managed healthcare companies, according to CNN Business. The world's two largest investment firms — Vanguard Group, Inc. and BlackRock — are among Cigna's largest investors, but with Vanguard holding nearly double the shares (8.01% versus BlackRock's 4.5%).
(Get the specifics of Cigna's institutional owners and its internal trading activity in this HealthLeaders brief).
In the Cigna press release announcing the company's stock buy-back, Cordani states: "We believe Cigna's shares are significantly undervalued and repurchases represent a value-enhancing deployment of capital as we work to support high-quality care, improved affordability, and better health outcomes."
"As we look at the broader landscape and the strategic opportunities before us, we will remain financially disciplined with a clear focus on executing against our strategy, delivering value for our shareholders, and investing in our future.”
Cordani added that Cigna would “consider bolt-on acquisitions aligned with our strategy, as well as value-enhancing divestitures."
Isn’t this what the Humana deal was designed to deliver? A commercial-MA powerhouse that could better complete with UnitedHealth Group and just “made sense”— and would be worth the inevitable, painful, and protracted FTC and DOJ review? It’s certainly all anyone could talk about.
The stock buyback was framed “[i]n light of the current environment,” Cordani said in the press release.
Which environment? The years that Cigna has likely kept its sights set on Humana or the days marking the deal’s public birth and death?
Those are two very different environments. Deals like this don’t happen overnight. And if they are imminent, they aren’t generally halted this quickly. It’s possible, for any number of reasons, that the rumored deal was already headed in this direction by the time it made headlines.
The short-term versus the long-term
Several questions remain now that the Cigna-Humana deal talks are off:
Is Cigna still interested in acquiring Humana?
Will Cigna sell its Medicare Advantage portfolio?
If not now, what is the right time for such a deal?
As for the “bolt-on acquisitions” Cigna is also considering, WSJ reports that the company “continues to believe in the merits of a combination with Humana.” But would Humana be that bolt-on?
In the midst of the past month’s pro-deal coverage, Reuters noted the companies’ “limited cost and revenue strategies” and that these limitations would put pressure on Cigna “to deliver value by running Humana better than its current management."
These same limited synergies existed when Cigna entered the Medicare Advantage market by acquiring HealthSpring more than a decade ago — a market it wants now to exit.
In breaking the broken Humana deal, WSJ reported that Cigna "continues to explore the sale of its Medicare Advantage business, which could fetch several billion dollars in a divestment." Cigna’s buyback announcement confirmed that the company will “value-enhancing divestitures” and Bloomberg has reported that Health Care Service Corporation — an independent licensee of the Blue Cross Blue Shield Association — is eyeing Cigna’s Medicare Advantage portfolio.
So, will the time ever be right for a deal with Humana?
Factors may include the results of Cigna’s stock buyback, whether there will be an Administration change in Washington, and whether the Medicare Advantage market remains a “gold rush” for long enough for a Humana acquisition to make sense.
Bankrate notes that stock buybacks help those who want to exit and those who want to stay. Cigna’s stock buyback could help identify which investors are in which camp. Few are likely to exit in the near term, given that Cigna’s shares jumped 16% on Monday, the largest company increase in 14 years, per MarketWatch.
As for the MA gold rush, the WSJwrites: “Medicare Advantage is still a highly attractive business, and it will continue to grow indefinitely as seniors age into it. The opportunity just might not be as stellar as it once was as fewer seniors convert into it, competition grows and government scrutiny increases.”
While the industry prepares for an 18- to 24-month merger cycle, will watching the deal change the deal? A recap of key coverage and what's changed already.
Update 12/10/23: Humana Disbands Executive Committee, Cigna Disbands Deal
In quantum physics, which governs the smallest bodies, the act of observing an electron changes it. Could this also be true of the Cigna-Humana, two of the healthcare universe’s largest bodies? Will the act of looking at the deal — by media watchers, financial watchers, and anti-trust watchers — change the deal?
It would appear yes.
Last Thursday, news broke that Humana, Inc.'s boarded amended its bylaws to remove the requirement for an executive committee, which it then disbanded. But in breaking the potential Cigna-Humana merger on Nov. 29, the WSJ was careful to add “assuming the talks don’t fall apart.” It appears now they have. Cigna has called off the deal due to stockholder pushback and disagreement over financial terms in favor of a now-planned stock buyback and smaller acquisition targets.
Twenty-three days—plus eight years, give or take. That’s how long it took the headlines to change from “Cigna explores shedding Medicare Advantage (MA) business” to “Cigna, Humana in Talks for Blockbuster Merger.”
Twenty-three days because news like this travels fast. Eight years because "the current management [of Cigna] has wanted to own HUM for some time” (Yahoo! Finance) — since 2015, when the two agreed to a merger that the DOJ would ultimately block.
Will that happen again? Answer cloudy, ask again later. But is it worth trying? Apparently yes and for one significant reason: competing with the vertical size and strength of the industry’s largest player. “[T]he State of U.S. health insurance is UnitedHealthcare—all other insurance companies are just trying to keep up with them” (Healthcare Huddle).
Here’s what we know so far, and what we don’t, about how the merger-watching will evolve.
A Cigna MA sell off?
On Nov. 6, a Reuters exclusive announces that Cigna may be looking to sell its 600,000-member Medicare Advantage book of business. Bloomberg now reports that Health Care Service Corporation — an independent licensee of the Blue Cross Blue Shield Association — is eyeing Cigna’s MA portfolio.
The reality is Cigna has not captured MA market share and at desired margins like its competitors. Sometimes you have to break something to fix it. Or make it stronger.
Wait, maybe there’s more to this…
Just a week later, STAT asks if a “bigger move” is being planned, citing a Stephens healthcare stock analysis: ”We would see this action being one component of a potential pursuit of [Humana] as acquisition target, with the divestiture being a proactive move to reduce antitrust risk.”
While the STAT piece was one of the first to ask the question, it took another outlet to answer it . . .
WSJ breaks merger talks, world follows
On Nov. 29, The Wall Street Journal announcesthat a “cash-and-stock deal between [the] health-insurance giants could be struck by year-end.”
If a deal happens and the merger is approved, the entities will gain from what they’ve given. Cigna will have traded some 600,000 MA members for Humana’s 5 million. Likewise, Humana’s loss of 700,000 commercial lives would be more than offset by Cigna’s 16 million.
In its pro-merger analysis, Yahoo! Finance quotes Sachin Jain, CEO of SCAN Health Group and Plan, on this trade-off wisdom — noting that “while it might seem counterintuitive to dump the Medicare business, ‘these are very smart ppl running these companies. [Cigna CEO David] Cordani is a super strategic leader.’”
Which begs the question . . .
Who’s buying (and leading) who?
If Cigna and Humana strike a deal, Cigna's larger market cap and revenue ($83B, $181B) compared to Humana’s ($62, $93B) would make the latter the likely target. Executive leadership may move in the same direction. Bruce Broussard, Humana’s CEO since 2013, is stepping down in later 2024 as part of a “multi-year succession plan” that reads now like Merger 2.0 . David Cordani has been Cigna’s President and CEO since 2009.
A Cigna-Humana merger would be ... ?
Since the WSJ story, coverage has concluded that the deal would be:
Good: For the combined company, anyway. With a combined $140 billion+ market value, the new entity could leverage one another’s assets to better compete with United Health Group.
Bad: What is great for payers is rarely so for other players. The combined size and scale of a “Cigmana” would disadvantage provider contract negotiations and consumer choice.
Green-Lit: Regulators might be satisfied by the lack of commercial-MA overlap between the payer giants, but few analysts believe that these divestures will fully clear the merger decks.
Blocked:Axios and others continue to cite merger hurdles, including the current anti-trust environment and past unrequited deals (Cigna-Humana Cigna-Anthem).
But it’s the existing overlap of the two companies’ PBMs that is being raised most, with STAT noting: “Given how Lina Khan’s Federal Trade Commission already is scrutinizing PBM market power, it seems like that kind of deal would be an insta-block.”
Nearly a month since this assessment, not everyone agrees...
The observers and the observed
In addition to other outlets, HealthLeaders has also covered the merger, the characterization of which has ranged from making sense to making "some sense" (Forbes) to being a really bad idea for Humana (Jim Cramer, CNBC).
The market’s observation of a possible deal caused share prices to drop — 8% for Cigna, roughly 5.5% — the day the WSJ story appeared. After rebounding, Cigna stock dropped another 2% with Humana remaining flat as of Dec. 6.
Market temperature in turn impacts the leadership question. In its follow-up coverage noting the two companies' "limited cost and revenue strategies," Reuters notes: "The limited synergies will also add pressure on Cigna CEO David Cordani to deliver value by running Humana better than its current management."
And what about the government? Optics matter here too. Quoting one analyst on Cigna's proactive MA sale, Reuters adds: "It would be smart to do it even before announcing the deal" (Andre Barlow of Doyle, Barlow and Mazard PLLC).
On the will-it, won't-it be approved question, the WSJ's watchful David Wainersays it best: "A Cigna-Humana merger will be a headache for everyone involved and great business for the lawyers on both sides. But at the end of the day, it is too compelling for either side not to try" (Wall Street Journal).
The Medicare President talks health equity, CVS Health growth, and results optimization in part two of this HealthLeaders exclusive.
In 2024, Aetna will offer 747 individual Medicare Advantage (MA) plans, the largest number in company history. While this suggests a complicated strategy, Aetna Medicare President Terri Swanson likes to keep things simple as she and her organization optimize for better outcomes. Read part one of this conversation here.
Read on for more examples of how Swanson and Aetna are building traction, which updates HealthLeaders’ Payer Week conversation with the MA exec in June.
HealthLeaders: What are Aetna’s offerings in the emerging specialized population health plan space (e.g., plans for women, Spanish speakers, those with specific chronic conditions, etc.)?
Terri Swanson, President of Aetna Medicare: We are not in the Chronic Special Needs Plan space today, but we have — and as part of CVS Health — a broader initiative around health equity. We have a lot of work underway to truly improve the difference in healthcare outcomes.
We have an entire medical division that’s focused on health equity that's helping to drive initiatives end-to-end throughout our enterprise.
[Note: In 2020, Aetna launched its Multicultural Initiative, which is already generating results. Its components include data and technology, community and provider engagement, and multicultural care management. The latter includes care managers with diverse backgrounds, a focus on culturally relevant clinical and motivational interviewing training, and care planning that includes a Multicultural Clinical Assessment. Clinical focus areas include nutrition and medication support.]
HealthLeaders: What are the big topics that everyone is talking about with 2024 MA enrollment and what is different or unique this year?
Swanson: There are certainly things that are going to change but also, quite frankly, things that really don't. Starting with the things that don’t, people are going to continue to have a very high degree of choice. Figuring out how to cut through the clutter and choose the plan that’s right for them is something that all Medicare beneficiaries are going to need to be able to do.
There are a couple of key things here. The process doesn't have to be complicated or intimidating: Does the plan fit your budget, is your provider or pharmacy in your network, and are your prescription drugs covered at a preferred cost? Are you someone who likes to go to the gym? Do you need your plan to help pay for healthy food or transportation to the doctor's office? As needs change, I think there will be a plan for every person. There are a lot of good plans with those benefits.
HealthLeaders: What else would you add?
Swanson: The population that is going to come to our healthcare plan, they're going to compare us to buying things on Amazon or hailing an Uber. So, we have to ensure we provide the right digital and online experience that complements their experience with the healthcare system. We have to be prepared to meet people where they are and help them to engage in a way that works for them.
With CVS Health, a lot of that applies to what we're doing as an enterprise and a Medicare plan. We're delighted to have Signify Health and Oak Street Health now as part of the CVS Health family. Signify, for example, performs Healthy Home Visits that help us understand if a member has needs that haven't been identified yet. And Oak Street Health does a very comprehensive job of treating Medicare beneficiaries with complex conditions.
Being able to bring those types of organizations to bear — along with Aetna coverage, along with CVS Pharmacy — creates a really exciting path where we can bring all of that together. And hopefully, in a very simple and easy way for our customers.
HealthLeaders: How do you leverage your PBM and IT backgrounds to optimize results and what is a good example?
Swanson: My background allows me to take an analytical approach to solving complex problems in the healthcare space. I think having a background in technology helps shape and structure how I approach opportunities. For example, at Aetna, we’re always thinking about innovation and finding ways to create better solutions and simplify the way people get care.
I’m often able to leverage my PBM background here at Aetna and work closely with our Medicare Part D team to design our prescription drug plans. Data shows that 3.5 million Americans aged 65 and older have struggled to afford their needed prescription drugs. With my expertise, I can better help tailor our prescription drug benefits to ensure Medicare consumers have coverage for their medications at an affordable cost.
The Medicare President shares how Aetna expands and simplifies in part one of this HealthLeaders exclusive.
Terri Swanson, Medicare President for Aetna, has a lot on her plate. She’s also incredibly pragmatic about what it means to oversee historic Medicare Advantage (MA) growth while keeping members happy.
“In 2024, we took steps to simplify our product portfolio — even though we actually have more products,” says Swanson. “We've also put a lot of energy into making the member experience a good one.”
Aetna, a CVS Health company, has expanded its 2024 MA portfolio to include:
747 plans in 46 states and Washington, D.C., including 2,269 counties
More plans for beneficiaries who are dual-eligible or have institutional special needs (D-SNP and I-SNP), who qualify for a low-income subsidy, or who need an MA-only plan.
New plans and expanded benefits, including supplementals and those that address social drivers of health (SDOH).
The simplification targets benefits: strengthening Aetna’s MA core benefits; improving dental, vision, and hearing; and enhancing supplementals including ease of use.
Aetna now serves nearly 11 million Medicare members, with 3.4 million currently enrolled in an MA plan. The company reports that 87% of MA members are in a four-star-rated plan or higher for 2024. This includes a substantial boost to the payer’s member experience rating.
“We were really delighted to see that,” says Swanson.
Read on for more examples of how Aetna is building MA traction.
HealthLeaders: If you could sum up Aetna’s Medicare strategy in a single statement, what would it be and how is it differentiated from your competitors?
Terri Swanson, President of Aetna Medicare: I think at the core, our strategy is fairly simple. We want to provide older adults with access to affordable care that's convenient and that really helps them achieve their best health. We try to build products that are designed for different types of members so that, ideally, we’ve got something in our portfolio for everyone.
HealthLeaders: What does it take to stand out in a growing and very dynamic MA space?
Swanson: The good news for Medicare beneficiaries is that there are a lot of options out there. The bad news is, there are a lot of options out there. We try to focus on what I would call core benefits — to ensure people have what they need for their day-to-day healthcare needs. Then, we look at the supplemental benefits: dental, vision, and hearing — the things that Original Medicare doesn't cover. Last but not least are the broader supplemental benefits: healthy food, transportation, over-the-counter benefits, help with utilities or internet service.
HealthLeaders: I appreciate what you said about not losing the core benefits . . .
Swanson: I think some of the plans may sacrifice that. We think it's fundamentally important to ensure the core benefits are strong so people have good access to healthcare services.
HealthLeaders: What are some of the biggest changes in Aetna’s Medicare Advantage portfolio for 2024?
Swanson: It’s our largest launch and includes service area expansion in both our general population and for dual-eligible, low-income members [D-SNP plans]. We’ve made sure that dental, vision, and hearing are included in every product, and that every county has a plan with a $0 monthly premium, $0 PCP co-pay, and $0 co-pays for Tier 1 drugs. We think that simplicity is helpful — to members and to the brokers and advisors who help people select their plans.
We've also expanded some of our supplemental benefits, particularly for healthy foods. In the past, food delivered after an inpatient stay was frozen and we’ve replaced that with fresh. It may sound like a small thing, but it's actually big. The way that members use our Extra Benefits Card is also simplified. More benefits are added together, which puts larger allowances in their pocket. We also provide additional money for personal care items, transportation, and assistance with utility and housing payments.
We've also launched some products for people who have low incomes but don’t quite qualify for D-SNP plans. We're seeing a good response so far in the first couple of weeks [of the Annual Enrollment Period, or AEP].
There’s a whole variety of things where we’ve tried to expand flexibility and make things more customized to the individual.
In part two of HealthLeaders’ interview, Swanson details how Aetna is working to improve experience and outcomes for all members.
In this exclusive with HealthLeaders, Quane identifies three growth strategies, how key marketplace trends highlight both competition and collaboration, and how Oscar’s "Never Build Alone" and "Make It Right" approaches create a member-centric culture and plan designs.
HealthLeaders: If you could sum up Oscar Health’s market strategy in a single statement, what would it be and how does that differentiate you from your competitors?
Alessa Quane: For 2024, Oscar is really gearing up for growth. We've been very focused over the last few years on getting the fundamentals of our business right and moving the company to profitability. We feel really good about our progress on that path, so we’ve spent our time making sure we could use that as a springboard to get back to a larger growth narrative. From 2020 to 2022, we doubled in size. And while we’re not looking to do that again, we definitely want to grow profitably and serve as many people as possible in the growing ACA market.
HealthLeaders: Can you provide details on what it means for Oscar to gear up for growth?
Quane: Oscar has implemented a significant amount of expansion. First — while we're not entering any new states in 2024 — we are expanding to 165 new counties. This includes approximately 100 that meet the definition of a rural county. Often, there is less competition and less accessibility for people in those counties, so we’re hoping to offer more affordability and more options.
[Note: Oscar Health operates Marketplace plans in 11 states. Across all lines of business, as of March 2023, the company operates in 20 states.]
Second, we are enhancing our existing diabetes care plan and are introducing a chronic care plan for individuals with asthma and COPD called Breathe Easy. This plan offers a much lower cost share for benefits directly related to these illnesses to help members manage their chronic illnesses themselves.
The last thing we're doing, for our Spanish-speaking members, is offering an experience called Hola Oscar. A large part of the growing ACA population are Spanish speakers, so this program really allows us to deliver socially and linguistically authentic experiences when they call our concierge service — like matching members to providers who speak and can provide documentation in their language.
HealthLeaders: How are traditional benefits affected in specialty health plans — what is the impact, if any?
Quane: The other benefits pretty much stay the same. What these plans try to do is provide financial incentives for members to manage their disease in a way that is more specific and more affordable overall. For example, these plans put a member’s specialist copay [e.g., a frequently seen pulmonologist] on par with their PCP copay. For patients with asthma or COPD, a specialty plan lowers the cost of oxygen services and covers nicotine replacement [to discourage smoking].
Oscar Health's EVP and CIO, Alessa Quane. Photo courtesy of Oscar Health.
HealthLeaders: What is most important about the Marketplace, in 2024 and in coming years?
Quane: The continued growth in the market is a big topic: where that growth is coming from, including Medicaid Redeterminations and beyond that for populations that were previously uninsured. We've seen smaller employer groups — not in a material way at this point ACA — turning to the individual market. I think that's a real potential tailwind over the longer term.
I also think there's more stability in the market this year. We don’t have big insurer exits like the year before. We also have new entrants that are continuing to expand their footprint in new markets or engage in strategic retrenching in other markets. What I’m really looking for in our markets is: Are they doing what they need to do? Do our products meet members’ needs? And you know, from a business perspective, is this doing what we need it to do?
And so, the rationality of the players is good. I think that bodes well for the future of the market and to reduce overall volatility.
HealthLeaders:What are your thoughts on whether expanded subsidies will continue beyond 2025?
Quane:Quane: The last thing you want to see is a mass exodus from the market from an affordability perspective. That's an important topic for the industry to be thinking about, but beyond that Congress will have to take action. The expanded subsidies will expire if no action is taken. I think the Presidential election is key. There’s really no way to know what will happen until then.
HealthLeaders: An interesting component of Oscar’s values is “Never build alone.” How does that apply to your Marketplace strategy, as well as your own leadership style?
Quane: Never build alone is a subset of one of our values, Make It Right. Do your best work. When you make a mistake, admit it, and share what you're learning — whether it's through mistakes, innovation, or just your day-to-day.
No one is super successful on their own. When I think about how to go to market, Make It Right and Never Build Alone touches on every single part of the organization. Collaboration is super important. When we bring +Oscar and our technology to others in the market, it's to make the healthcare ecosystem more efficient, more affordable, and more accessible. That’s our mission.
HealthLeaders:What else is top of mind as we close, Alessa?
Quane: The one thing that I would want to say about Oscar generally is that we're not trying to get more members by just having a lower price. We strive to offer innovative plans and go after different markets — which is really for our members and to be a very member-centric company. The member is really the North Star. We have a Net Promoter Score, or NPS, that is substantially higher in the market, and we want to continue that. [NPS measures the loyalty of a customer to a company.]
Whatever we're building, wherever we're going, however we're innovating, the way in which we partner with or use our technology to support others is really all in service of the member. That’s an important point and differentiator about Oscar. It’s what drives me as a leader and what drives the teams we have at the company.
Who will dominate 2024 enrollment, what role will Humana's 2022 re-org play, and could Medicare Advantage plan stock prices skitter?
Half-way through Medicare Advantage (MA) open enrollment is a good time to ask what we know now and what we can only know later as the season progresses. CMS will post the first enrollment numbers on November 15, but until then . . .
UnitedHealthcare and Humana dominate, enrolling nearly half of MA members (47%)
BlueCross BlueShield (BCBS) plans and CVS Health/Aetna follow, capturing another 25%
Kaiser Permanente, Centene and Cigna trail, representing 6%, 4% and 2% of the market respectively
Don’t expect this picture to change significantly in 2024. United will continue to reign, but will Humana start to close the gap — it holds 18% of enrollment compared to United’s 29% — or remain closer to BCBS and CVS/Aetna (14%; 11%)?
It will be a telling year as market-watchers ask . . .
Will Humana’s re-org reap rewards?
In 2022, Humana made big moves. As part of its new “$1 billion value creation initiative,” the company reorganized into two business units — insurance services and health services — and reduced its lines of business.
After exiting the employer group commercial health market, as well as the Marketplace, a company spokesperson noted to HealthLeaders: “Humana's focus is its Medicare core (individual, group, supplement and prescription drug plans); Medicaid, Military, and Specialty dental, vision and life plans; and its CenterWell healthcare services business.”
Humana’s announcement came six months after the company’s stock price plunged on lower-than-expected MA growth projections. This prompts the question . . .
Who’s stock price will dip this year?
After Humana’s precipitous drop, healthcare’s 24-hour news cycle resembled TMZ. Industry media couldn’t get enough of the company’s 21% single-day tumble. HealthLeaders took the long view and sure enough, Humana’s stock not only rebounded but is up nearly 5% — 20% if you calculate from its late-October high.
Open Enrollment will always jostle the MA stock market. Who will be up and who will be down is uncertain and for how long but expect multiple insurers’ stock prices to move in sync again this year if projections shift.
Speaking of disruption, stay tuned for the next three questions that MA Open Enrollment can (and can’t) answer, including the impact of new marketing rules, new specialty-population plan designs, and how MA payers will behave now that they own more than half of the Medicare market.
Dr. Pushwaz Virk describes how development, innovation, and integration intersect to support members and providers.
In this Q&A with HealthLeaders, Dr. Pushwaz Virk describes clinical innovation at Blue Shield of California, which serves 4.8 million members in individual and family, Medicare Advantage, Medicaid, and group employer plans across California.
HealthLeaders: Describe your roles at Blue Shield and how they support product development.
Dr. Pushwaz Virk: I come from a healthcare delivery background and was Chief Medical Information Officer at a health system in Northern California. I joined Blue Shield of California two years ago and, from a provider perspective, my initial focus was around financial transactions and billing. But as I learned over time, health insurance companies do a lot more — especially with the alignment of processes and incentives so that our members get what they need, faster. I still practice clinically to keep my hands on the pulse of how I can serve patients in my current role.
My role at Blue Shield is Medical Director of Clinical Product Development, Care Innovation & Technology Integration. Clinical Product Development can involve development of any feature or service that either stands alone or is part of an existing application, benefit, or a partnership. We call our work clinical products because we have a clinical focus and like to take a product development approach: from ideation and prototyping to small pilots and expanding to tangible outcomes.
Care Innovation means providing healthcare in a better way, which reflects new ideas and business models. Technology Integration reflects how interwoven technology has become into how healthcare is delivered, monitored, and evaluated.
HealthLeaders: What is an example of a clinical product at Blue Shield?
Dr. Virk: DispatchHealth.
[Note: Dispatch provides “in-home, same-day, high-touch care that is delivered by a team of trained medical professionals who can treat more than 40 health conditions, including conditions like respiratory infections, pneumonia, and chronic obstructive pulmonary disease.”]
Instead of the member having to go to urgent care — especially if they have transportation issues, if urgent care is closed, or it's late at night — they call the DispatchHealth helpline. They'll be connected with a triage nurse, who will assess the initial complaint, then the Dispatch team will send an equipped vehicle to the member’s home.
DispatchHealth is deployed in five counties (Los Angeles, Orange, San Diego and parts of Riverside and San Bernardino) and across all lines of business. Now that the product is more mature, we’ve recently handed it off to another team.
HealthLeaders: How do you decide when to shift a product from innovation to operations?
Dr. Virk: It starts with the core of how my team is structured. They are involved early in the innovation process, from ideation and conceptualization. We test a minimum viable product and collect feedback from members and providers. When a solution is mature enough, we turn it on for members. We address any product dependencies — regulatory, data, EMR integration, and technology partners. Once the operational infrastructure, framework, and resources are in place, we can then scale to all of Blue Shield and transition to the team that has the experts in that area.
HealthLeaders: What factors are common to all members that Blue Shield leverages to develop and scale products?
Dr. Virk: This is a challenge for anyone in healthcare. Blue Shield of California looks for impact: benefits for members and providers, across the lines of business. On the provider side, for example, if a solution depends on integration, we will address that differently with health systems compared to smaller medical practices. We try to define our target audience and users as narrowly as possible, then look for commonalities. These include infrastructure and logistics for providers and, for members, tech literacy demands, solution delivery, and unmet needs.
If we’re not able to capture 100% of intended members with a product, we try to start with a large enough group and then fine tune later.
HealthLeaders: How does tech serve patients best and in what areas can it be a hindrance?
Dr. Virk: COVID was a turning point for technology adoption in healthcare. People are much more open to using smartphones, smartwatches with sensors, and health status monitors. Telemedicine is providing better access and care distribution. Another positive development is having more up-to-date data, more patients involved in their care, and combining patient-sourced data with AI to facilitate its use.
The challenge is getting all member data into the providers’ hands. Interoperability has improved but is still difficult, especially as patients move [across providers and health plans].
HealthLeaders: What top three strategic priorities are your currently focused on?
Dr. Virk: One area is improving claims processing for providers — ensuring they are accurate, up to date, and their status is communicated quickly to members. We are early in the process of working with technology partners and medical groups here. Second, is a focus on integrated community provider partnerships to increase healthcare access. Finally, we’re looking at newer value-based care models that serve more clinical scenarios and more diverse providers, specialties, and procedures.
HealthLeaders: What advice would you give leaders in a similar role at other health plans?
Dr. Virk: Healthcare is changing rapidly with technology, and we are working more with consumers and technology innovators. It’s important to get a good understanding of DTC healthcare companies [direct-to-consumer], for example, that provide services like musculoskeletal and mental health care.
The expectations for providers and members are changing, and we need to get used to that change — addressing how they want to be served. All of us in healthcare serve the mission to keep our members healthy. We can’t work in isolation. We need to be aware of the innovations going on in the market and bring some of that inside the organizations.
