Preview: Health Plan Weekly

What Does Failed Aon/WTW Deal Mean for Health Benefits?

July 30, 2021

An announced acquisition of Willis Towers Watson PLC (WTW) by fellow insurance broker Aon PLC fell apart after the Dept. of Justice (DOJ) sued to block the transaction due to antitrust concerns. Experts say that the collapse of the deal — which would have created the world’s largest insurance broker — is proof of the Biden administration’s commitment to undoing consolidation, and they say WTW will likely reimagine its business, perhaps by acquiring smaller players.

An announced acquisition of Willis Towers Watson PLC (WTW) by fellow insurance broker Aon PLC fell apart after the Dept. of Justice (DOJ) sued to block the transaction due to antitrust concerns. Experts say that the collapse of the deal — which would have created the world’s largest insurance broker — is proof of the Biden administration’s commitment to undoing consolidation, and they say WTW will likely reimagine its business, perhaps by acquiring smaller players.

“Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the U.S. Department of Justice,” said Aon CEO Greg Case in a July 26 press release. “The DOJ position overlooks that our complementary businesses operate across broad, competitive areas of the economy. We are confident that the combination would have accelerated our shared ability to innovate on behalf of clients, but the inability to secure an expedited resolution of the litigation brought us to this point.”

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Insulin Copay Laws Are Unlikely to Impact Insurer Bottom Lines

Chart: A Closer Look at States’ Insulin Price Regulations

July 30, 2021

Seven states have moved this year to cap out-of-pocket expenses for diabetic patients’ insulin, a trend that should help a small group of people who generally are uninsured or have high-deductible plans and have struggled to afford their medication. But it is unlikely to expand beyond insulin or impact health plans’ bottom lines, industry observers say.

The states that have enacted insulin legislation this year — Colorado, Maine, New Mexico, New York, Utah, Washington and West Virginia — generally cap out-of-pocket costs for some or most patients at $100 per month. Those new state laws join insulin copay legislation already on the books in eight other states, including Alabama, Delaware, Kentucky, New Hampshire, Oklahoma, Oregon, Rhode Island, Texas and Virginia, according to a report from the National Conference of State Legislatures (NCSL).

Seven states have moved this year to cap out-of-pocket expenses for diabetic patients’ insulin, a trend that should help a small group of people who generally are uninsured or have high-deductible plans and have struggled to afford their medication. But it is unlikely to expand beyond insulin or impact health plans’ bottom lines, industry observers say.

The states that have enacted insulin legislation this year — Colorado, Maine, New Mexico, New York, Utah, Washington and West Virginia — generally cap out-of-pocket costs for some or most patients at $100 per month. Those new state laws join insulin copay legislation already on the books in eight other states, including Alabama, Delaware, Kentucky, New Hampshire, Oklahoma, Oregon, Rhode Island, Texas and Virginia, according to a report from the National Conference of State Legislatures (NCSL).

Jeff Myers, senior vice president of market access and reimbursement strategies at Catalyst Healthcare Consulting, Inc., says he doesn’t expect insulin copay caps to cost health plans a significant amount of money. However, the funds have to come from somewhere, because the states by themselves can’t force the price of insulin down.

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Moody’s: Jury’s Still Out on Value of Big Insurer Deals

July 30, 2021

Although health insurance companies in the past decade have significantly grown and diversified — thus strengthening their businesses — their credit ratings haven’t benefitted very much, at least according to one prominent rating firm. The reason, according to Dean Ungar of Moody’s Investors Service, is that insurers have taken on more debt in order to finance their acquisition sprees, and it’s not yet certain whether those moves will pay off.

Ultimately, “we think if the leverage can kind of stabilize and maybe come down a little bit, you [will] see a stronger business profile in terms of capabilities, scale and scope,” Ungar tells AIS Health, a division of MMIT.

Although health insurance companies in the past decade have significantly grown and diversified — thus strengthening their businesses — their credit ratings haven’t benefitted very much, at least according to one prominent rating firm. The reason, according to Dean Ungar of Moody’s Investors Service, is that insurers have taken on more debt in order to finance their acquisition sprees, and it’s not yet certain whether those moves will pay off.

Ultimately, “we think if the leverage can kind of stabilize and maybe come down a little bit, you [will] see a stronger business profile in terms of capabilities, scale and scope,” Ungar tells AIS Health, a division of MMIT.

In a report published earlier this month, Ungar and other Moody’s analysts argue that the health insurance industry has come a long way since 2010. The shift from fee-for-service to a value-based care model is ongoing, insurers are paying more attention to social determinants of health, and the changing business environment “has driven a significant amount of consolidation and vertical integration among our rated companies,” according to the report.

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Centene, Humana Post Solid Second-Quarter Results

July 30, 2021

Centene Corp. and Humana Inc. both reported slightly better-than-expected second quarter 2021 results, which Wall Street met with cautious optimism. While executives from both health insurers preached caution due to the Delta variant-driven resurgence of the COVID-19 pandemic, analysts projected both firms to be profitable for the rest of the year.

Centene generated $1.25 in adjusted earnings per share, which beat Wall Street’s consensus EPS projection of $1.21. Meanwhile, Humana reported adjusted EPS of $6.89, exceeding Wall Street’s projected EPS of $6.83.

Centene Corp. and Humana Inc. both reported slightly better-than-expected second quarter 2021 results, which Wall Street met with cautious optimism. While executives from both health insurers preached caution due to the Delta variant-driven resurgence of the COVID-19 pandemic, analysts projected both firms to be profitable for the rest of the year.

Centene generated $1.25 in adjusted earnings per share, which beat Wall Street’s consensus EPS projection of $1.21. Meanwhile, Humana reported adjusted EPS of $6.89, exceeding Wall Street’s projected EPS of $6.83.

Delta Overshadows Centene Results

Centene CEO Michael Neidorff sounded a note of caution during a July 27 conference call discussing the results.

“With the continued rise in the highly virulent Delta strain of COVID-19, I must open our call with similar comments to those made this time last year,” Neidorff said, according to a transcript from the Motley Fool. “The variant is real, and we are taking it very seriously. You have seen us execute strongly throughout the pandemic, and that will not change, especially as it remains clear that the pandemic is not over and the environment could remain choppy for the balance of the year.”

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News Briefs

July 30, 2021

The bipartisan infrastructure package that U.S. senators are currently negotiating will further delay a never-implemented regulation that would restructure the Medicare Part D drug rebate system, various news outlets reported. The Biden administration had already delayed the so-called rebate rule until 2023, a move hailed by PBMs and health insurers but criticized by the pharmaceutical industry. Because the CMS Office of the Actuary had predicted that banning PBMs and plan sponsors from pocketing rebates would cause Part D premiums to rise, delaying the rule allows the government to generate budgetary savings.

The bipartisan infrastructure package that U.S. senators are currently negotiating will further delay a never-implemented regulation that would restructure the Medicare Part D drug rebate system, various news outlets reported. The Biden administration had already delayed the so-called rebate rule until 2023, a move hailed by PBMs and health insurers but criticized by the pharmaceutical industry. Because the CMS Office of the Actuary had predicted that banning PBMs and plan sponsors from pocketing rebates would cause Part D premiums to rise, delaying the rule allows the government to generate budgetary savings.

Humana Inc. and Anthem, Inc. unveiled a new PBM joint venture with SS&C Technologies dubbed DomaniRx, according to a document filed with the Securities and Exchange Commission (SEC). The SEC filling states that SS&C holds an 80.2% interest in the joint venture and Humana and Anthem each hold a minority interest. Assets invested in the PBM add up to “an aggregate of approximately $925,000,000,” per the filing. A press release from SS&C pitched the new PBM as more transparent and technically advanced than the competition. “DomaniRx will focus on disrupting the industry through open source technology to interface with other systems quickly,” said Danny Delmastro, DomaniRx’s general manager, adding the firm “will draw from hundreds of millions of claims transactions, powered by DomaniRx’s advanced processing platform.” Anthem launched its own in-house PBM, IngenioRx, in 2019.

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