(State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) | |||||
Registrant’s telephone number, including area code: | ||||||
Former name or former address, if changed since last report: | N/A |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
☑ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |
TABLE OF CONTENTS | Page | |
Part I | Financial Information | |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II | Other Information | |
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3 | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
Part I. | Financial Information |
Item 1. | Financial Statements |
Page | |
Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2019 and 2018 | |
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and six months ended June 30, 2019 and 2018 | |
Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2019 and December 31, 2018 | |
Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2019 and 2018 | |
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the three months ended June 30, 2019 and 2018 and the three months ended March 31, 2019 and 2018 | |
Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Report of the Independent Registered Public Accounting Firm | |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In millions, except per share amounts | 2019 | 2018 | 2019 | 2018 | |||||||||||
Revenues: | |||||||||||||||
Products | $ | $ | $ | $ | |||||||||||
Premiums | |||||||||||||||
Services | |||||||||||||||
Net investment income | |||||||||||||||
Total revenues | |||||||||||||||
Operating costs: | |||||||||||||||
Cost of products sold | |||||||||||||||
Benefit costs | |||||||||||||||
Goodwill impairment | |||||||||||||||
Operating expenses | |||||||||||||||
Total operating costs | |||||||||||||||
Operating income (loss) | ( | ) | |||||||||||||
Interest expense | |||||||||||||||
Other expense (income) | ( | ) | ( | ) | |||||||||||
Income (loss) before income tax provision | ( | ) | ( | ) | |||||||||||
Income tax provision | |||||||||||||||
Income (loss) from continuing operations | ( | ) | ( | ) | |||||||||||
Loss from discontinued operations, net of tax | ( | ) | ( | ) | |||||||||||
Net income (loss) | ( | ) | ( | ) | |||||||||||
Net (income) loss attributable to noncontrolling interests | ( | ) | |||||||||||||
Net income (loss) attributable to CVS Health | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Basic earnings (loss) per share: | |||||||||||||||
Income (loss) from continuing operations attributable to CVS Health | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Loss from discontinued operations attributable to CVS Health | $ | $ | $ | $ | |||||||||||
Net income (loss) attributable to CVS Health | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Weighted average shares outstanding | |||||||||||||||
Diluted earnings (loss) per share: | |||||||||||||||
Income (loss) from continuing operations attributable to CVS Health | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Loss from discontinued operations attributable to CVS Health | $ | $ | $ | $ | |||||||||||
Net income (loss) attributable to CVS Health | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Weighted average shares outstanding | |||||||||||||||
Dividends declared per share | $ | $ | $ | $ | |||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Net unrealized investment gains | |||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | |||||||||||
Net cash flow hedges | ( | ) | ( | ) | ( | ) | |||||||||
Other comprehensive income (loss) | ( | ) | |||||||||||||
Comprehensive income (loss) | ( | ) | ( | ) | |||||||||||
Comprehensive (income) loss attributable to noncontrolling interests | ( | ) | |||||||||||||
Comprehensive income (loss) attributable to CVS Health | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
In millions, except per share amounts | June 30, 2019 | December 31, 2018 | |||||
Assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Investments | |||||||
Accounts receivable, net | |||||||
Inventories | |||||||
Other current assets | |||||||
Total current assets | |||||||
Long-term investments | |||||||
Property and equipment, net | |||||||
Operating lease right-of-use assets | — | ||||||
Goodwill | |||||||
Intangible assets, net | |||||||
Separate accounts assets | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
Liabilities: | |||||||
Accounts payable | $ | $ | |||||
Pharmacy claims and discounts payable | |||||||
Health care costs payable | |||||||
Policyholders’ funds | |||||||
Accrued expenses | |||||||
Other insurance liabilities | |||||||
Current portion of operating lease liabilities | — | ||||||
Short-term debt | |||||||
Current portion of long-term debt | |||||||
Total current liabilities | |||||||
Long-term operating lease liabilities | — | ||||||
Long-term debt | |||||||
Deferred income taxes | |||||||
Separate accounts liabilities | |||||||
Other long-term insurance liabilities | |||||||
Other long-term liabilities | |||||||
Total liabilities | |||||||
Shareholders’ equity: | |||||||
Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding | |||||||
Common stock, par value $0.01: 3,200 shares authorized; 1,724 shares issued and 1,299 shares outstanding at June 30, 2019 and 1,720 shares issued and 1,295 shares outstanding at December 31, 2018 and capital surplus | |||||||
Treasury stock, at cost: 425 shares at June 30, 2019 and December 31, 2018 | ( | ) | ( | ) | |||
Retained earnings | |||||||
Accumulated other comprehensive income | |||||||
Total CVS Health shareholders’ equity | |||||||
Noncontrolling interests | |||||||
Total shareholders’ equity | |||||||
Total liabilities and shareholders’ equity | $ | $ | |||||
Six Months Ended June 30, | |||||||
In millions | 2019 | 2018 | |||||
Cash flows from operating activities: | |||||||
Cash receipts from customers | $ | $ | |||||
Cash paid for inventory and prescriptions dispensed by retail network pharmacies | ( | ) | ( | ) | |||
Insurance benefits paid | ( | ) | ( | ) | |||
Cash paid to other suppliers and employees | ( | ) | ( | ) | |||
Interest and investment income received | |||||||
Interest paid | ( | ) | ( | ) | |||
Income taxes paid | ( | ) | ( | ) | |||
Net cash provided by operating activities | |||||||
Cash flows from investing activities: | |||||||
Proceeds from sales and maturities of investments | |||||||
Purchases of investments | ( | ) | ( | ) | |||
Purchases of property and equipment | ( | ) | ( | ) | |||
Acquisitions (net of cash acquired) | ( | ) | ( | ) | |||
Proceeds from sale of subsidiary | |||||||
Other | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities: | |||||||
Net repayments of short-term debt | ( | ) | ( | ) | |||
Proceeds from issuance of long-term debt | |||||||
Repayments of long-term debt | ( | ) | ( | ) | |||
Derivative settlements | |||||||
Dividends paid | ( | ) | ( | ) | |||
Proceeds from exercise of stock options | |||||||
Payments for taxes related to net share settlement of equity awards | ( | ) | ( | ) | |||
Other | |||||||
Net cash provided by (used in) financing activities | ( | ) | |||||
Net increase in cash, cash equivalents and restricted cash | |||||||
Cash, cash equivalents and restricted cash at the beginning of the period | |||||||
Cash, cash equivalents and restricted cash at the end of the period | $ | $ | |||||
Six Months Ended June 30, | |||||||
In millions | 2019 | 2018 | |||||
Reconciliation of net income (loss) to net cash provided by operating activities: | |||||||
Net income (loss) | $ | $ | ( | ) | |||
Adjustments required to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Goodwill impairment | |||||||
Stock-based compensation | |||||||
Deferred income taxes and other noncash items | ( | ) | |||||
Change in operating assets and liabilities, net of effects from acquisitions: | |||||||
Accounts receivable, net | ( | ) | ( | ) | |||
Inventories | |||||||
Other assets | ( | ) | ( | ) | |||
Accounts payable and pharmacy claims and discounts payable | |||||||
Health care costs payable and other insurance liabilities | |||||||
Other liabilities | |||||||
Net cash provided by operating activities | $ | $ | |||||
Attributable to CVS Health | ||||||||||||||||||||||||||
Number of shares outstanding | Common | Accumulated | Total | |||||||||||||||||||||||
Stock and | Other | CVS Health | Total | |||||||||||||||||||||||
Common | Treasury | Capital | Treasury | Retained | Comprehensive | Shareholders’ | Noncontrolling | Shareholders’ | ||||||||||||||||||
In millions | Shares | Shares (1) | Surplus (2) | Stock (1) | Earnings | Income (Loss) | Equity | Interests | Equity | |||||||||||||||||
Balance at December 31, 2018 | ( | ) | $ | $ | ( | ) | $ | $ | $ | $ | $ | |||||||||||||||
Adoption of new accounting standard (Note 1) | — | — | — | — | — | — | ||||||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | ||||||||||||||||||||
Stock option activity, stock awards and other | — | — | — | — | — | |||||||||||||||||||||
Purchase of treasury shares, net of ESPP issuances | — | — | — | — | — | |||||||||||||||||||||
Common stock dividends | — | — | — | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||
Other decreases in noncontrolling interests | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||
Balance at March 31, 2019 | ( | ) | ( | ) | ||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | ( | ) | |||||||||||||||||||
Other comprehensive income (Note 8) | — | — | — | — | — | — | ||||||||||||||||||||
Stock option activity, stock awards and other | — | — | — | — | — | |||||||||||||||||||||
Purchase of treasury shares, net of ESPP issuances | — | ( | ) | — | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||
Common stock dividends | — | — | — | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||
Other increases in noncontrolling interests | — | — | — | — | — | — | — | |||||||||||||||||||
Balance at June 30, 2019 | ( | ) | $ | $ | ( | ) | $ | $ | $ | $ | $ | |||||||||||||||
(1) | Treasury shares include |
(2) | Common stock and capital surplus includes the par value of common stock of $ |
Attributable to CVS Health | ||||||||||||||||||||||||||
Number of shares outstanding | Common | Accumulated | Total | |||||||||||||||||||||||
Stock and | Other | CVS Health | Total | |||||||||||||||||||||||
Common | Treasury | Capital | Treasury | Retained | Comprehensive | Shareholders’ | Noncontrolling | Shareholders’ | ||||||||||||||||||
In millions | Shares | Shares (1) | Surplus (2) | Stock (1) | Earnings | Income (Loss) | Equity | Interests | Equity | |||||||||||||||||
Balance at December 31, 2017 | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Adoption of new accounting standards (3) | — | — | — | — | ( | ) | ( | ) | ( | ) | — | ( | ) | |||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | ||||||||||||||||||||
Stock option activity, stock awards and other | — | — | — | — | — | |||||||||||||||||||||
Purchase of treasury shares, net of ESPP issuances | — | — | — | — | — | — | ||||||||||||||||||||
Common stock dividends | — | — | — | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||
Balance at March 31, 2018 | ( | ) | ( | ) | ||||||||||||||||||||||
Net loss | — | — | — | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||
Other comprehensive income (loss) (Note 8) | — | — | — | — | — | ( | ) | ( | ) | — | ( | ) | ||||||||||||||
Stock option activity, stock awards and other | — | — | — | — | — | |||||||||||||||||||||
Purchase of treasury shares, net of ESPP issuances | — | ( | ) | — | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||
Common stock dividends | — | — | — | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||
Balance at June 30, 2018 | ( | ) | $ | $ | ( | ) | $ | $ | $ | $ | $ | |||||||||||||||
(1) | Treasury shares include |
(2) | Common stock and capital surplus includes the par value of common stock of $ |
(3) | Reflects the adoption of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which resulted in a reduction to retained earnings of $ |
1. | Significant Accounting Policies |
• | Management and administrative expenses to support the overall operations of the Company, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments and acquisition-related transaction and integration costs; and |
• | Products for which the Company no longer solicits or accepts new customers such as its large case pensions and long-term care insurance products. |
In millions | June 30, 2019 | December 31, 2018 | |||||
Cash and cash equivalents | $ | $ | |||||
Restricted cash (included in other current assets) | |||||||
Restricted cash (included in other assets) | |||||||
Total cash, cash equivalents and restricted cash in the statements of cash flows | $ | $ | |||||
In millions | June 30, 2019 | December 31, 2018 | |||||
Trade receivables | $ | $ | |||||
Vendor and manufacturer receivables | |||||||
Premium receivables | |||||||
Other receivables | |||||||
Total accounts receivable, net | $ | $ | |||||
• | Revenues generated from prescription drugs sold by mail service dispensing pharmacies are recognized when the prescription drug is delivered to the client plan member. At the time of delivery, the Company has performed substantially |
• | Revenues generated from prescription drugs sold by third-party pharmacies in the Company’s retail pharmacy network and associated administrative fees are recognized at the Company’s point-of-sale, which is when the claim is adjudicated by the Company’s online claims processing system and the Company has transferred control of the prescription drug and performed all of its performance obligations. |
• | ASC fees are received in exchange for performing certain claim processing and member services for ASC members. ASC fee revenue is recognized over the period the service is provided. Some of the Company’s administrative services contracts include guarantees with respect to certain functions, such as customer service response time, claim processing accuracy and claim processing turnaround time, as well as certain guarantees that a plan sponsor’s benefit claim experience will fall within a certain range. With any of these guarantees, the Company is financially at risk if the conditions of the arrangements are not met, although the maximum amount at risk is typically limited to a percentage of the fees otherwise payable to the Company by the customer involved. Each period the Company estimates its obligations under the terms of these guarantees and records its estimate as an offset to service revenues. |
• | Workers’ compensation administrative services consist of fee-based managed care services. Workers’ compensation administrative services revenue is recognized once the service is provided. |
Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
Three Months Ended June 30, 2019 | |||||||||||||||||||||||
Major goods/services lines: | |||||||||||||||||||||||
Pharmacy | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Front Store | |||||||||||||||||||||||
Premiums | |||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Pharmacy Services distribution channel: | |||||||||||||||||||||||
Pharmacy network (1) | $ | ||||||||||||||||||||||
Mail choice (2) | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | ||||||||||||||||||||||
Three Months Ended June 30, 2018 | |||||||||||||||||||||||
Major goods/services lines: | |||||||||||||||||||||||
Pharmacy | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Front Store | |||||||||||||||||||||||
Premiums | |||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Pharmacy Services distribution channel: | |||||||||||||||||||||||
Pharmacy network (1) | $ | ||||||||||||||||||||||
Mail choice (2) | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ |
(1) | Pharmacy Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice® activity, which is included within the mail choice category. |
(2) | Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a CVS Pharmacy retail store, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program, which permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS Pharmacy retail store for the same price as mail order. |
Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
Six Months Ended June 30, 2019 | |||||||||||||||||||||||
Major goods/services lines: | |||||||||||||||||||||||
Pharmacy | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Front Store | |||||||||||||||||||||||
Premiums | |||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Pharmacy Services distribution channel: | |||||||||||||||||||||||
Pharmacy network (1) | $ | ||||||||||||||||||||||
Mail choice (2) | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | ||||||||||||||||||||||
Six Months Ended June 30, 2018 | |||||||||||||||||||||||
Major goods/services lines: | |||||||||||||||||||||||
Pharmacy | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Front Store | |||||||||||||||||||||||
Premiums | |||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Pharmacy Services distribution channel: | |||||||||||||||||||||||
Pharmacy network (1) | $ | ||||||||||||||||||||||
Mail choice (2) | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ |
(1) | Pharmacy Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice® activity, which is included within the mail choice category. |
(2) | Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a CVS Pharmacy retail store, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program, which permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS Pharmacy retail store for the same price as mail order. |
In millions | June 30, 2019 | December 31, 2018 | |||||
Trade receivables (included in accounts receivable, net) | $ | $ | |||||
Contract liabilities (included in accrued expenses) | |||||||
In millions | |||
Balance at December 31, 2018 | $ | ||
Loyalty program earnings and gift card issuances | |||
Redemption and breakage | ( | ) | |
Balance at June 30, 2019 | $ | ||
Impact of Change in Accounting Policy | ||||||||||||
As Reported | Adjusted | |||||||||||
In millions | December 31, 2018 | Adjustments | January 1, 2019 | |||||||||
Condensed Consolidated Balance Sheets: | ||||||||||||
Other current assets | $ | $ | ( | ) | $ | |||||||
Total current assets | ( | ) | ||||||||||
Property and equipment, net | ||||||||||||
Operating lease right-of-use assets | ||||||||||||
Intangible assets, net | ( | ) | ||||||||||
Other assets | ( | ) | ||||||||||
Total assets | ||||||||||||
Accrued expenses | ( | ) | ||||||||||
Current portion of operating lease liabilities | ||||||||||||
Current portion of long-term debt | ||||||||||||
Total current liabilities | ||||||||||||
Long-term operating lease liabilities | ||||||||||||
Long-term debt | ( | ) | ||||||||||
Deferred income taxes | ||||||||||||
Other long-term liabilities | ( | ) | ||||||||||
Total liabilities | ||||||||||||
Retained earnings | ||||||||||||
Total CVS Health shareholders’ equity | ||||||||||||
Total shareholders’ equity |
2. | Acquisition of Aetna |
In millions | |||
Cash and cash equivalents | $ | ||
Accounts receivable | |||
Other current assets | |||
Investments (current and long-term) | |||
Goodwill | |||
Intangible assets | |||
Other long-term assets | |||
Total assets acquired | |||
Health care costs payable | |||
Other current liabilities | |||
Debt (current and long-term) | |||
Deferred income taxes | |||
Other long-term liabilities | |||
Total liabilities assumed | |||
Noncontrolling interests | |||
Total consideration transferred | $ |
In millions, except per share amounts | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | ||||||
Total revenues | $ | $ | ||||||
Income (loss) from continuing operations attributable to CVS Health | ( | ) | ( | ) | ||||
Basic earnings (loss) per share from continuing operations attributable to CVS Health | $ | ( | ) | $ | ( | ) | ||
Diluted earnings (loss) per share from continuing operations attributable to CVS Health | $ | ( | ) | $ | ( | ) | ||
• | Elimination of intercompany transactions between CVS Health and Aetna; |
• | Elimination of estimated foregone interest income associated with (i) cash assumed to have been used to partially fund the Aetna Acquisition and (ii) adjusting the amortized cost of Aetna’s investment portfolio to fair value as of the completion of the Aetna Acquisition; |
• | Elimination of historical intangible asset, deferred acquisition cost and capitalized software amortization expense and addition of amortization expense based on the current preliminary values of identified intangible assets; |
• | Additional interest expense from (i) the long-term debt issued to partially fund the Aetna Acquisition and (ii) the amortization of the fair value adjustment to assumed long-term debt. |
• | Additional depreciation expense related to the adjustment of Aetna’s property and equipment to fair value; |
• | Adjustments to align CVS Health’s and Aetna’s accounting policies; |
• | Elimination of transaction related costs; and |
• | Tax effects of the adjustments noted above. |
3. | Investments |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
In millions | Current | Long-term | Total | Current | Long-term | Total | |||||||||||||||||
Debt securities available for sale | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Mortgage loans | |||||||||||||||||||||||
Other investments | |||||||||||||||||||||||
Total investments | $ | $ | $ | $ | $ | $ |
In millions | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
June 30, 2019 | |||||||||||||||
Debt securities: | |||||||||||||||
U.S. government securities | $ | $ | $ | $ | |||||||||||
States, municipalities and political subdivisions | |||||||||||||||
U.S. corporate securities | ( | ) | |||||||||||||
Foreign securities | ( | ) | |||||||||||||
Residential mortgage-backed securities | |||||||||||||||
Commercial mortgage-backed securities | |||||||||||||||
Other asset-backed securities | ( | ) | |||||||||||||
Redeemable preferred securities | |||||||||||||||
Total debt securities (1) | $ | $ | $ | ( | ) | $ | |||||||||
December 31, 2018 | |||||||||||||||
Debt securities: | |||||||||||||||
U.S. government securities | $ | $ | $ | $ | |||||||||||
States, municipalities and political subdivisions | ( | ) | |||||||||||||
U.S. corporate securities | ( | ) | |||||||||||||
Foreign securities | ( | ) | |||||||||||||
Residential mortgage-backed securities | |||||||||||||||
Commercial mortgage-backed securities | |||||||||||||||
Other asset-backed securities | ( | ) | |||||||||||||
Redeemable preferred securities | ( | ) | |||||||||||||
Total debt securities (1) | $ | $ | $ | ( | ) | $ | |||||||||
(1) | Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At June 30, 2019, debt securities with a fair value of $ |
In millions | Amortized Cost | Fair Value | |||||
Due to mature: | |||||||
Less than one year | $ | $ | |||||
One year through five years | |||||||
After five years through ten years | |||||||
Greater than ten years | |||||||
Residential mortgage-backed securities | |||||||
Commercial mortgage-backed securities | |||||||
Other asset-backed securities | |||||||
Total | $ | $ |
In millions, except number of securities | Number of Securities | Fair Value | Unrealized Losses | |||||||
June 30, 2019 | ||||||||||
Debt securities: | ||||||||||
U.S. government securities | $ | $ | ||||||||
States, municipalities and political subdivisions | ||||||||||
U.S. corporate securities | ||||||||||
Foreign securities | ||||||||||
Residential mortgage-backed securities | ||||||||||
Other asset-backed securities | ||||||||||
Total debt securities | $ | $ | ||||||||
December 31, 2018 | ||||||||||
Debt securities: | ||||||||||
U.S. government securities | $ | $ | ||||||||
States, municipalities and political subdivisions | ||||||||||
U.S. corporate securities | ||||||||||
Foreign securities | ||||||||||
Residential mortgage-backed securities | ||||||||||
Other asset-backed securities | ||||||||||
Redeemable preferred securities | ||||||||||
Total debt securities | $ | $ | ||||||||
Supporting experience-rated products | Supporting remaining products | Total | |||||||||||||||||||||
In millions | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||
Due to mature: | |||||||||||||||||||||||
Less than one year | $ | $ | $ | $ | $ | $ | |||||||||||||||||
One year through five years | |||||||||||||||||||||||
After five years through ten years | |||||||||||||||||||||||
Greater than ten years | |||||||||||||||||||||||
Residential mortgage-backed securities | |||||||||||||||||||||||
Other asset-backed securities | |||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||
In millions | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||
New mortgage loans | $ | $ | |||||
Mortgage loans fully repaid | |||||||
Mortgage loans foreclosed | |||||||
• | Category 1 - Represents loans of superior quality. |
• | Categories 2 to 4 - Represent loans where credit risk is minimal to acceptable; however, these loans may display some susceptibility to economic changes. |
• | Categories 5 and 6 - Represent loans where credit risk is not substantial, but these loans warrant management’s close attention. |
• | Category 7 - Represents loans where collections are potentially at risk; if necessary, an impairment is recorded. |
In millions, except credit ratings indicator | June 30, 2019 | December 31, 2018 | |||||
1 | $ | $ | |||||
2 to 4 | |||||||
5 and 6 | |||||||
7 | |||||||
Total | $ | $ | |||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Debt securities | $ | $ | $ | $ | |||||||||||
Mortgage loans | |||||||||||||||
Other investments | |||||||||||||||
Gross investment income | |||||||||||||||
Investment expenses | ( | ) | ( | ) | |||||||||||
Net investment income (excluding net realized capital gains or losses) | |||||||||||||||
Net realized capital gains (1) | |||||||||||||||
Net investment income (2) | $ | $ | $ | $ | |||||||||||
(1) | Other-than-temporary impairment (“OTTI”) losses on debt securities recognized in the unaudited condensed consolidated statements of operations were $ |
(2) | Net investment income includes $ |
In millions | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||
Proceeds from sales | $ | $ | |||||
Gross realized capital gains | |||||||
Gross realized capital losses | |||||||
4. | Fair Value |
• | Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets. |
• | Level 2 – Valuation inputs other than Level 1 that are based on observable market data. These include: quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, valuation inputs that are observable that are not prices (such as interest rates and credit risks) and valuation inputs that are derived from or corroborated by observable markets. |
• | Level 3 – Developed from unobservable data, reflecting the Company’s assumptions. |
In millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||
June 30, 2019 | |||||||||||||||
Debt securities: | |||||||||||||||
U.S. government securities | $ | $ | $ | $ | |||||||||||
States, municipalities and political subdivisions | |||||||||||||||
U.S. corporate securities | |||||||||||||||
Foreign securities | |||||||||||||||
Residential mortgage-backed securities | |||||||||||||||
Commercial mortgage-backed securities | |||||||||||||||
Other asset-backed securities | |||||||||||||||
Redeemable preferred securities | |||||||||||||||
Total debt securities | |||||||||||||||
Equity securities | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
December 31, 2018 | |||||||||||||||
Debt securities: | |||||||||||||||
U.S. government securities | $ | $ | $ | $ | |||||||||||
States, municipalities and political subdivisions | |||||||||||||||
U.S. corporate securities | |||||||||||||||
Foreign securities | |||||||||||||||
Residential mortgage-backed securities | |||||||||||||||
Commercial mortgage-backed securities | |||||||||||||||
Other asset-backed securities | |||||||||||||||
Redeemable preferred securities | |||||||||||||||
Total debt securities | |||||||||||||||
Equity securities | |||||||||||||||
Total | $ | $ | $ | $ |
Carrying Value | Estimated Fair Value | ||||||||||||||||||
In millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
June 30, 2019 | |||||||||||||||||||
Assets: | |||||||||||||||||||
Mortgage loans | $ | $ | $ | $ | $ | ||||||||||||||
Equity securities (1) | N/A | N/A | N/A | N/A | |||||||||||||||
Liabilities: | |||||||||||||||||||
Investment contract liabilities: | |||||||||||||||||||
With a fixed maturity | |||||||||||||||||||
Without a fixed maturity | |||||||||||||||||||
Long-term debt | |||||||||||||||||||
December 31, 2018 | |||||||||||||||||||
Assets: | |||||||||||||||||||
Mortgage loans | $ | $ | $ | $ | $ | ||||||||||||||
Equity securities (1) | N/A | N/A | N/A | N/A | |||||||||||||||
Liabilities: | |||||||||||||||||||
Investment contract liabilities: | |||||||||||||||||||
With a fixed maturity | |||||||||||||||||||
Without a fixed maturity | |||||||||||||||||||
Long-term debt | |||||||||||||||||||
(1) | It was not practical to estimate the fair value of these cost-method investments as it represents shares of unlisted companies. |
June 30, 2019 | December 31, 2018 | |||||||||||||||||||||||||||||||
In millions | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Debt securities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Equity securities | ||||||||||||||||||||||||||||||||
Common/collective trusts | ||||||||||||||||||||||||||||||||
Total (1) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1) | Excludes $ |
5. | Leases |
In millions | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||
Operating lease cost | $ | $ | |||||
Finance lease cost: | |||||||
Amortization of right-of-use assets | |||||||
Interest on lease liabilities | |||||||
Total finance lease costs | |||||||
Short-term lease costs | |||||||
Variable lease costs | |||||||
Less: sublease income | |||||||
Net lease cost | $ | $ |
In millions | |||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows paid for operating leases | $ | ||
Operating cash flows paid for interest portion of finance leases | |||
Financing cash flows paid for principal portion of finance leases | |||
Right-of-use assets obtained in exchange for lease obligations: | |||
Operating leases | |||
Finance leases |
In millions, except lease term and discount rate | |||
Operating leases: | |||
Operating lease right-of-use assets | $ | ||
Current portion of operating lease liabilities | $ | ||
Long-term operating lease liabilities | |||
Total operating lease liabilities | $ | ||
Finance leases: (1) | |||
Property and equipment, net | $ | ||
Current portion of long-term debt | $ | ||
Long-term debt | |||
Total finance lease liabilities | $ | ||
Weighted average remaining lease term | |||
Operating leases | |||
Finance leases | |||
Weighted average discount rate | |||
Operating leases | % | ||
Finance leases | % |
(1) | Finance lease right-of-use assets are included within property and equipment, net and the respective finance lease liabilities are included in the current portion of long-term debt and long-term debt lines on the unaudited condensed consolidated balance sheets. |
Finance | Operating | ||||||||||
In millions | Leases | Leases (1) | Total | ||||||||
2019 (remaining six months) | $ | $ | $ | ||||||||
2020 | |||||||||||
2021 | |||||||||||
2022 | |||||||||||
2023 | |||||||||||
Thereafter | |||||||||||
Total lease payments (2) | |||||||||||
Less: imputed interest | ( | ) | ( | ) | ( | ) | |||||
Total lease liabilities | $ | $ | $ |
(1) | Future operating lease payments have not been reduced by minimum sublease rentals of $ |
(2) | The Company leases pharmacy and clinic space from Target Corporation. Amounts related to such finance and operating leases are reflected above. Pharmacy lease amounts due in excess of the remaining estimated economic life of the buildings of approximately $ |
6. | Health Care Costs Payable |
In millions | |||
Health care costs payable, beginning of the period | $ | ||
Less: Reinsurance recoverables | |||
Health care costs payable, beginning of the period, net | |||
Add: Components of incurred health care costs | |||
Current year | |||
Prior years | ( | ) | |
Total incurred health care costs (1) | |||
Less: Claims paid | |||
Current year | |||
Prior years | |||
Total claims paid | |||
Add: Premium deficiency reserve | |||
Health care costs payable, end of period, net | |||
Add: Reinsurance recoverables | |||
Health care costs payable, end of period | $ | ||
(1) | Total incurred health care costs during the six months ended June 30, 2019 in the table above exclude (i) $ |
7. | Shareholders’ Equity |
8. | Other Comprehensive Income (Loss) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net unrealized investment gains (losses): | |||||||||||||||
Beginning of period balance | $ | $ | $ | $ | |||||||||||
Other comprehensive income before reclassifications ($309, $0, $719 and $0 pretax) | |||||||||||||||
Amounts reclassified from accumulated other comprehensive income ($(11), $0, $(30) and $0 pretax) (1) | ( | ) | ( | ) | |||||||||||
Other comprehensive income | |||||||||||||||
End of period balance | |||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||
Beginning of period balance | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||
Other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||
End of period balance | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net cash flow hedges: | |||||||||||||||
Beginning of period balance | ( | ) | |||||||||||||
Adoption of new accounting standard (2) | — | — | — | ( | ) | ||||||||||
Other comprehensive income before reclassifications ($(4), $0, $0 and $464 pretax) | ( | ) | |||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) ($0, $(6), $(9), and $(7) pretax) (3) | ( | ) | ( | ) | ( | ) | |||||||||
Other comprehensive income (loss) | ( | ) | ( | ) | ( | ) | |||||||||
End of period balance | |||||||||||||||
Pension and OPEB plans: | |||||||||||||||
Beginning of period balance | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Adoption of new accounting standard (2) | — | — | — | ( | ) | ||||||||||
End of period balance | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total beginning of period accumulated other comprehensive income (loss) | ( | ) | |||||||||||||
Adoption of new accounting standard (2) | — | — | — | ( | ) | ||||||||||
Total other comprehensive income (loss) | ( | ) | |||||||||||||
Total end of period accumulated other comprehensive income | $ | $ | $ | $ | |||||||||||
(1) | Amounts reclassified from accumulated other comprehensive income for specifically identified debt securities are included in net investment income within the unaudited condensed consolidated statements of operations. |
(2) | Reflects the adoption of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income during the first quarter of 2018. |
(3) | Amounts reclassified from accumulated other comprehensive loss for specifically identified cash flow hedges are included within interest expense in the unaudited condensed consolidated statements of operations. The Company expects to reclassify approximately $ |
9. | Earnings (Loss) Per Share |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In millions, except per share amounts | 2019 | 2018 | 2019 | 2018 | |||||||||||
Numerator for earnings (loss) per share calculation: | |||||||||||||||
Income (loss) from continuing operations | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Income from continuing operations allocated to participating securities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
(Income) loss from continuing operations attributable to noncontrolling interest | ( | ) | |||||||||||||
Income (loss) from continuing operations attributable to CVS Health | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Denominator for earnings (loss) per share calculation: | |||||||||||||||
Weighted average shares, basic | |||||||||||||||
Effect of dilutive securities | |||||||||||||||
Weighted average shares, diluted | |||||||||||||||
Earnings (loss) per share from continuing operations: | |||||||||||||||
Basic | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Diluted | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
10. | Reinsurance |
11. | Commitments and Contingencies |
12. | Segment Reporting |
Three Months Ended June 30, 2018 | |||||||||||||||||||||||
Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
Revenues, as previously reported | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Adjustments | ( | ) | |||||||||||||||||||||
Revenues, as adjusted | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Cost of products sold (1) | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Adjustments | ( | ) | |||||||||||||||||||||
Cost of products sold, as adjusted | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Benefit costs (1) | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Adjustments | ( | ) | |||||||||||||||||||||
Benefit costs, as adjusted | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Operating expenses, as previously reported | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Adjustments | ( | ) | ( | ) | |||||||||||||||||||
Operating expenses, as adjusted | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Operating income (loss), as previously reported | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||
Adjustments | |||||||||||||||||||||||
Operating income (loss), as adjusted | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||
Segment measure adjustments | ( | ) | |||||||||||||||||||||
Adjusted operating income (loss) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ |
(1) | The total of cost of products sold and benefit costs were previously reported as cost of revenues. |
Six Months Ended June 30, 2018 | |||||||||||||||||||||||
Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
Revenues, as previously reported | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Adjustments | ( | ) | |||||||||||||||||||||
Revenues, as adjusted | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Cost of products sold (1) | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Adjustments | ( | ) | |||||||||||||||||||||
Cost of products sold, as adjusted | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Benefit costs (1) | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Adjustments | ( | ) | |||||||||||||||||||||
Benefit costs, as adjusted | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Operating expenses, as previously reported | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Adjustments | ( | ) | ( | ) | |||||||||||||||||||
Operating expenses, as adjusted | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Operating income (loss), as previously reported | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Adjustments | ( | ) | |||||||||||||||||||||
Operating income (loss), as adjusted | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||
Segment measure adjustments | ( | ) | |||||||||||||||||||||
Adjusted operating income (loss) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ |
(1) |
Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
In millions | Services(1) | LTC | Benefits | Other | Eliminations(2) | Totals | |||||||||||||||||
Three Months Ended | |||||||||||||||||||||||
June 30, 2019 | |||||||||||||||||||||||
Revenues from customers | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Net investment income | |||||||||||||||||||||||
Total revenues | ( | ) | |||||||||||||||||||||
Adjusted operating income (loss) | ( | ) | ( | ) | |||||||||||||||||||
June 30, 2018 | |||||||||||||||||||||||
Revenues from customers | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Net investment income | |||||||||||||||||||||||
Total revenues | ( | ) | |||||||||||||||||||||
Adjusted operating income (loss) | ( | ) | ( | ) | |||||||||||||||||||
Six Months Ended | |||||||||||||||||||||||
June 30, 2019 | |||||||||||||||||||||||
Revenues from customers | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Net investment income | |||||||||||||||||||||||
Total revenues | ( | ) | |||||||||||||||||||||
Adjusted operating income (loss) | ( | ) | ( | ) | |||||||||||||||||||
June 30, 2018 | |||||||||||||||||||||||
Revenues from customers | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Net investment income | |||||||||||||||||||||||
Total revenues | ( | ) | |||||||||||||||||||||
Adjusted operating income (loss) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
(1) | Revenues of the Pharmacy Services segment include approximately $ |
(2) | Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services segment, the Retail/LTC segment and/or the Health Care Benefits segment. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Operating income (loss) (GAAP measure) | $ | $ | ( | ) | $ | $ | |||||||||
Amortization of intangible assets (1) | |||||||||||||||
Acquisition-related transaction and integration costs (2) | |||||||||||||||
Store rationalization charge (3) | |||||||||||||||
Goodwill impairment (4) | |||||||||||||||
Loss on divestiture of subsidiary (5) | |||||||||||||||
Interest income on financing for the Aetna Acquisition (6) | ( | ) | ( | ) | |||||||||||
Adjusted operating income | $ | $ | $ | $ | |||||||||||
(1) | Intangible assets relate to the Company’s acquisition activities and are amortized over their useful lives. The amortization of intangible assets is reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within each segment. The amortization of intangible assets is not directly related to the core performance of the Company’s business operations since this amortization does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Subsequent to the applicable acquisition date, the Company’s revenues and results of operations include the results of each of the Company’s acquisitions, which are supported by these intangible assets. |
(2) | During the three and six months ended June 30, 2019 and 2018, acquisition-related transaction and integration costs relate to the Aetna Acquisition. During the six months ended June 30, 2018, acquisition-related integration costs also relate to the acquisition of Omnicare, Inc. The acquisition-related transaction and integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses primarily within the Corporate/Other segment. |
(3) | During the six months ended June 30, 2019, the store rationalization charge primarily relates to operating lease right-of-use asset impairment charges in connection with the planned closure of |
(4) | During the three and six months ended June 30, 2018, the goodwill impairment charge relates to the LTC reporting unit within the Retail/LTC segment. |
(5) | During the six months ended June 30, 2018, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of the Company’s RxCrossroads subsidiary for $ |
(6) | During the three and six months ended June 30, 2018, the Company recorded interest income of $ |
13. | Subsequent Event |
• | Management and administrative expenses to support the overall operations of the Company, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments and acquisition-related transaction and integration costs; and |
• | Products for which the Company no longer solicits or accepts new customers such as large case pensions and long-term care insurance products. |
Change | |||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, 2019 vs 2018 | Six Months Ended June 30, 2019 vs 2018 | ||||||||||||||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | $ | % | $ | % | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Products | $ | 45,531 | $ | 45,652 | $ | 88,874 | $ | 89,701 | $ | (121 | ) | (0.3 | )% | $ | (827 | ) | (0.9 | )% | |||||||||||
Premiums | 15,791 | 751 | 32,073 | 2,057 | 15,040 | 2,002.7 | % | 30,016 | 1,459.2 | % | |||||||||||||||||||
Services | 1,816 | 305 | 3,588 | 643 | 1,511 | 495.4 | % | 2,945 | 458.0 | % | |||||||||||||||||||
Net investment income | 293 | 214 | 542 | 264 | 79 | 36.9 | % | 278 | 105.3 | % | |||||||||||||||||||
Total revenues | 63,431 | 46,922 | 125,077 | 92,665 | 16,509 | 35.2 | % | 32,412 | 35.0 | % | |||||||||||||||||||
Operating costs: | |||||||||||||||||||||||||||||
Cost of products sold | 38,970 | 38,876 | 76,217 | 76,381 | 94 | 0.2 | % | (164 | ) | (0.2 | )% | ||||||||||||||||||
Benefit costs | 13,087 | 631 | 26,546 | 1,960 | 12,456 | 1,974.0 | % | 24,586 | 1,254.4 | % | |||||||||||||||||||
Goodwill impairment | — | 3,921 | — | 3,921 | (3,921 | ) | (100.0 | )% | (3,921 | ) | (100.0 | )% | |||||||||||||||||
Operating expenses | 8,042 | 4,867 | 16,292 | 9,780 | 3,175 | 65.2 | % | 6,512 | 66.6 | % | |||||||||||||||||||
Total operating costs | 60,099 | 48,295 | 119,055 | 92,042 | 11,804 | 24.4 | % | 27,013 | 29.3 | % | |||||||||||||||||||
Operating income (loss) | 3,332 | (1,373 | ) | 6,022 | 623 | 4,705 | 342.7 | % | 5,399 | 866.6 | % | ||||||||||||||||||
Interest expense | 772 | 689 | 1,554 | 1,212 | 83 | 12.0 | % | 342 | 28.2 | % | |||||||||||||||||||
Other expense (income) | (31 | ) | 3 | (62 | ) | 6 | (34 | ) | (1,133.3 | )% | (68 | ) | (1,133.3 | )% | |||||||||||||||
Income (loss) before income tax provision | 2,591 | (2,065 | ) | 4,530 | (595 | ) | 4,656 | 225.5 | % | 5,125 | 861.3 | % | |||||||||||||||||
Income tax provision | 660 | 497 | 1,172 | 969 | 163 | 32.8 | % | 203 | 20.9 | % | |||||||||||||||||||
Income (loss) from continuing operations | 1,931 | (2,562 | ) | 3,358 | (1,564 | ) | 4,493 | 175.4 | % | 4,922 | 314.7 | % | |||||||||||||||||
Loss from discontinued operations, net of tax | — | (1 | ) | — | (1 | ) | 1 | (100.0 | )% | 1 | (100.0 | )% | |||||||||||||||||
Net income (loss) | 1,931 | (2,563 | ) | 3,358 | (1,565 | ) | 4,494 | 175.3 | % | 4,923 | 314.6 | % | |||||||||||||||||
Net (income) loss attributable to noncontrolling interests | 5 | — | (1 | ) | — | 5 | 100.0 | % | (1 | ) | (100.0 | )% | |||||||||||||||||
Net income (loss) attributable to CVS Health | $ | 1,936 | $ | (2,563 | ) | $ | 3,357 | $ | (1,565 | ) | $ | 4,499 | 175.5 | % | $ | 4,922 | 314.5 | % |
• | Total revenues increased $16.5 billion, or 35.2%, in the three months ended June 30, 2019, as compared to the prior year. The increase in total revenues was primarily driven by the impact of the Aetna Acquisition (primarily reflected in the Health Care Benefits segment) which occurred in November 2018, a 4.2% increase in Pharmacy Services segment revenue, and a 3.7% increase in Retail/LTC segment revenue. |
• | Please see “Segment Analysis” later in this report for additional information about the revenues of the Company’s segments. |
• | Operating expenses increased $3.2 billion, or 65.2%, in the three months ended June 30, 2019 compared to the prior year. Operating expenses as a percentage of total revenues were 12.7% in the three months ended June 30, 2019, an increase of 230 basis points compared to the prior year. The increase in operating expenses was primarily driven by the impact of the Aetna Acquisition (including intangible asset amortization) and an increase in acquisition-related integration costs. |
• | Please see “Segment Analysis” later in this report for additional information about the operating expenses of the Company’s segments. |
• | Operating income increased $4.7 billion in the three months ended June 30, 2019 compared to the prior year. The increase was primarily due to (i) the absence of the $3.9 billion pre-tax goodwill impairment charge related to the LTC reporting unit within the Retail/LTC segment recorded in the three months ended June 30, 2018, (ii) the impact of the Aetna Acquisition and (iii) increased claims volume and improved purchasing economics in the Pharmacy Services segment. The increase was partially offset by reimbursement pressure and the investment of a portion of the savings from tax reform in wages and benefits in the Retail/LTC segment and continued price compression in the Pharmacy Services segment. |
• | Please see “Segment Analysis” later in this report for additional information about the operating income of the Company’s segments. |
• | Interest expense increased $83 million in the three months ended June 30, 2019 compared to the prior year, primarily due to the financing activity associated with the Aetna Acquisition and the assumption of Aetna’s debt as of the Aetna Acquisition Date. See “Liquidity and Capital Resources” later in this report for additional information. |
• | The Company’s effective income tax rate was 25.5% in the three months ended June 30, 2019 compared to (24.1)% for the prior year. The difference in the effective income tax rate was primarily due to the $3.9 billion goodwill impairment charge recognized in the three months ended June 30, 2018, which was not deductible for income tax purposes. |
• | Total revenues increased $32.4 billion, or 35.0%, in the six months ended June 30, 2019, as compared to the prior year. The increase in total revenues was primarily driven by the impact of the Aetna Acquisition (primarily reflected in the Health Care Benefits segment) which occurred in November 2018, a 3.7% increase in Pharmacy Services segment revenue, and a 3.5% increase in Retail/LTC segment revenue. |
• | Please see “Segment Analysis” later in this report for additional information about the revenues of the Company’s segments. |
• | Operating expenses increased $6.5 billion, or 66.6%, in the six months ended June 30, 2019 compared to the prior year. Operating expenses as a percentage of total revenues were 13.0% in the six months ended June 30, 2019, an increase of 240 basis points compared to the prior year. The increase in operating expenses is due to the impact of the Aetna Acquisition (including intangible asset amortization) and an increase in acquisition-related integration costs. |
• | Please see “Segment Analysis” later in this report for additional information about the operating expenses of the Company’s segments. |
• | Operating income increased $5.4 billion in the six months ended June 30, 2019 compared to the prior year. The increase was primarily due to the absence of the $3.9 billion pre-tax goodwill impairment charge related to the LTC reporting unit within the Retail/LTC segment recorded in the six months ended June 30, 2018 and the impact of the Aetna Acquisition. |
• | Please see “Segment Analysis” later in this report for additional information about the operating income of the Company’s segments. |
• | Interest expense increased $342 million in the six months ended June 30, 2019 compared to the prior year, primarily due to the financing activity associated with the Aetna Acquisition and the assumption of Aetna’s debt as of the Aetna Acquisition Date. See “Liquidity and Capital Resources” later in this report for additional information. |
• | The Company’s effective income tax rate was 25.9% in the six months ended June 30, 2019 compared to (162.9)% for the prior year. The difference in the effective income tax rate was primarily due to the $3.9 billion goodwill impairment charge recognized in the six months ended June 30, 2018, which was not deductible for income tax purposes. |
• | Ongoing pharmacy reimbursement pressure in the Retail/LTC segment and pricing compression in the Pharmacy Services segment and reductions in the traditional offsets to those challenges, including a declining benefit from the introduction of new multi-source generic prescription drugs and lower benefits from generic dispensing rate increases; |
• | The Retail/LTC segment is projected to be impacted by structural and Company specific challenges in the long-term care space as well as the annualization of the Company’s 2018 investment of a portion of the savings from the Tax Cuts and Job Act (the “TCJA”) in wages and benefits; and |
• | The pricing compression in the Pharmacy Services segment is projected to be exacerbated by the cumulative effect on rebate guarantees of lower brand name drug price inflation and a modest 2019 selling season. |
Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
In millions | Services(1) | LTC | Benefits | Other | Eliminations(2) | Totals | |||||||||||||||||
Three Months Ended | |||||||||||||||||||||||
June 30, 2019 | |||||||||||||||||||||||
Total revenues | $ | 34,842 | $ | 21,447 | $ | 17,403 | $ | 161 | $ | (10,422 | ) | $ | 63,431 | ||||||||||
Adjusted operating income (loss) | 1,296 | 1,669 | 1,438 | (202 | ) | (170 | ) | 4,031 | |||||||||||||||
June 30, 2018 | |||||||||||||||||||||||
Total revenues | 33,427 | 20,672 | 764 | 210 | (8,151 | ) | 46,922 | ||||||||||||||||
Adjusted operating income (loss) | 1,181 | 1,821 | — | (216 | ) | (187 | ) | 2,599 | |||||||||||||||
Six Months Ended | |||||||||||||||||||||||
June 30, 2019 | |||||||||||||||||||||||
Total revenues | $ | 68,400 | $ | 42,562 | $ | 35,273 | $ | 271 | $ | (21,429 | ) | $ | 125,077 | ||||||||||
Adjusted operating income (loss) | 2,243 | 3,158 | 3,000 | (433 | ) | (342 | ) | 7,626 | |||||||||||||||
June 30, 2018 | |||||||||||||||||||||||
Total revenues | 65,973 | 41,104 | 2,082 | 258 | (16,752 | ) | 92,665 | ||||||||||||||||
Adjusted operating income (loss) | 2,168 | 3,657 | (137 | ) | (434 | ) | (362 | ) | 4,892 | ||||||||||||||
(1) | Revenues of the Pharmacy Services segment include approximately $2.9 billion and $2.8 billion of retail co-payments for the three months ended June 30, 2019 and 2018, respectively, as well as $6.2 billion and $6.1 billion of retail co-payments for the six months ended June 30, 2019 and 2018, respectively |
(2) | Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services segment, the Retail/LTC segment and/or the Health Care Benefits segment. |
Three Months Ended June 30, 2019 | |||||||||||||||||||||||
Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
Operating income (loss) (GAAP measure) | $ | 1,197 | $ | 1,551 | $ | 1,062 | $ | (308 | ) | $ | (170 | ) | $ | 3,332 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Amortization of intangible assets (1) | 99 | 118 | 376 | — | — | 593 | |||||||||||||||||
Acquisition-related integration costs (2) | — | — | — | 106 | — | 106 | |||||||||||||||||
Adjusted operating income (loss) | $ | 1,296 | $ | 1,669 | $ | 1,438 | $ | (202 | ) | $ | (170 | ) | $ | 4,031 | |||||||||
Three Months Ended June 30, 2018 | |||||||||||||||||||||||
Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
Operating income (loss) (GAAP measure) | $ | 1,092 | $ | (2,225 | ) | $ | — | $ | (53 | ) | $ | (187 | ) | $ | (1,373 | ) | |||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Amortization of intangible assets (1) | 89 | 125 | — | — | — | 214 | |||||||||||||||||
Acquisition-related transaction and integration costs (2) | — | — | — | 39 | — | 39 | |||||||||||||||||
Goodwill impairment (3) | — | 3,921 | — | — | — | 3,921 | |||||||||||||||||
Interest income on financing for the Aetna Acquisition (4) | — | — | — | (202 | ) | — | (202 | ) | |||||||||||||||
Adjusted operating income (loss) | $ | 1,181 | $ | 1,821 | $ | — | $ | (216 | ) | $ | (187 | ) | $ | 2,599 | |||||||||
Six Months Ended June 30, 2019 | |||||||||||||||||||||||
Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
Operating income (loss) (GAAP measure) | $ | 2,047 | $ | 2,789 | $ | 2,217 | $ | (689 | ) | $ | (342 | ) | $ | 6,022 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Amortization of intangible assets (1) | 196 | 234 | 783 | 2 | — | 1,215 | |||||||||||||||||
Acquisition-related integration costs (2) | — | — | — | 254 | — | 254 | |||||||||||||||||
Store rationalization charge (5) | — | 135 | — | — | — | 135 | |||||||||||||||||
Adjusted operating income (loss) | $ | 2,243 | $ | 3,158 | $ | 3,000 | $ | (433 | ) | $ | (342 | ) | $ | 7,626 | |||||||||
Six Months Ended June 30, 2018 | |||||||||||||||||||||||
Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
Operating income (loss) (GAAP measure) | $ | 1,993 | $ | (601 | ) | $ | (138 | ) | $ | (269 | ) | $ | (362 | ) | $ | 623 | |||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Amortization of intangible assets (1) | 175 | 248 | 1 | — | — | 424 | |||||||||||||||||
Acquisition-related transaction and integration costs (2) | — | 3 | — | 79 | — | 82 | |||||||||||||||||
Goodwill impairment (3) | — | 3,921 | — | — | — | 3,921 | |||||||||||||||||
Loss on divestiture of subsidiary (6) | — | 86 | — | — | — | 86 | |||||||||||||||||
Interest income on financing for the Aetna Acquisition (4) | — | — | — | (244 | ) | — | (244 | ) | |||||||||||||||
Adjusted operating income (loss) | $ | 2,168 | $ | 3,657 | $ | (137 | ) | $ | (434 | ) | $ | (362 | ) | $ | 4,892 | ||||||||
(1) | Intangible assets relate to the Company’s acquisition activities and are amortized over their useful lives. The amortization of intangible assets is reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within each segment. The amortization of intangible assets is not directly related to the core performance of the Company’s business operations since this amortization does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Subsequent to the applicable acquisition date, the Company’s revenues and results of operations include the results of each of the Company’s acquisitions, which are supported by these intangible assets. |
(2) | During the three and six months ended June 30, 2019 and 2018, acquisition-related transaction and integration costs relate to the Aetna Acquisition. During the six months ended June 30, 2018, acquisition-related integration costs also relate to the acquisition of Omnicare, Inc. The acquisition-related transaction and integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses primarily within the Corporate/Other segment. |
(3) | During the three and six months ended June 30, 2018, the goodwill impairment charge relates to the LTC reporting unit within the Retail/LTC segment. |
(4) | During the three and six months ended June 30, 2018, the Company recorded interest income of $202 million and $244 million, respectively, on the proceeds of its unsecured notes issued in March 2018 to partially fund the Aetna Acquisition. All amounts are for the periods prior to the close of the Aetna Acquisition, which occurred on November 28, 2018, and were recorded within the Corporate/Other segment. |
(5) | During the six months ended June 30, 2019, the store rationalization charge primarily relates to operating lease right-of-use asset impairment charges in connection with the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charge is reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Retail/LTC segment. |
(6) | During the six months ended June 30, 2018, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of the Company’s RxCrossroads subsidiary for $725 million and is reflected in operating expenses in the Company’s unaudited GAAP condensed consolidated statement of operations within the Retail/LTC segment. |
Change | |||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, 2019 vs 2018 | Six Months Ended June 30, 2019 vs 2018 | ||||||||||||||||||||||||||
In millions, except percentages | 2019 | 2018 | 2019 | 2018 | $ | % | $ | % | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Products | $ | 34,723 | $ | 33,316 | $ | 68,173 | $ | 65,747 | $ | 1,407 | 4.2 | % | $ | 2,426 | 3.7 | % | |||||||||||||
Services | 119 | 111 | 227 | 226 | 8 | 7.2 | % | 1 | 0.4 | % | |||||||||||||||||||
Total revenues | 34,842 | 33,427 | 68,400 | 65,973 | 1,415 | 4.2 | % | 2,427 | 3.7 | % | |||||||||||||||||||
Cost of products sold | 33,279 | 31,973 | 65,618 | 63,280 | 1,306 | 4.1 | % | 2,338 | 3.7 | % | |||||||||||||||||||
Operating expenses | 366 | 362 | 735 | 700 | 4 | 1.1 | % | 35 | 5.0 | % | |||||||||||||||||||
Operating expenses as a % of revenues | 1.1 | % | 1.1 | % | 1.1 | % | 1.1 | % | |||||||||||||||||||||
Operating income | $ | 1,197 | $ | 1,092 | $ | 2,047 | $ | 1,993 | $ | 105 | 9.6 | % | $ | 54 | 2.7 | % | |||||||||||||
Operating income as a % of revenues | 3.4 | % | 3.3 | % | 3.0 | % | 3.0 | % | |||||||||||||||||||||
Adjusted operating income (1) | $ | 1,296 | $ | 1,181 | $ | 2,243 | $ | 2,168 | $ | 115 | 9.7 | % | $ | 75 | 3.5 | % | |||||||||||||
Adjusted operating income as a % of revenues | 3.7 | % | 3.5 | % | 3.3 | % | 3.3 | % | |||||||||||||||||||||
Revenues (by distribution channel): | |||||||||||||||||||||||||||||
Pharmacy network (2) | $ | 22,028 | $ | 21,506 | $ | 43,602 | $ | 42,704 | $ | 522 | 2.4 | % | $ | 898 | 2.1 | % | |||||||||||||
Mail choice (3) | 12,670 | 11,787 | 24,509 | 22,995 | 883 | 7.5 | % | 1,514 | 6.6 | % | |||||||||||||||||||
Other | 144 | 134 | 289 | 274 | 10 | 7.5 | % | 15 | 5.5 | % | |||||||||||||||||||
Pharmacy claims processed: (4) | |||||||||||||||||||||||||||||
Total | 489.0 | 470.1 | 970.8 | 938.9 | 18.9 | 4.0 | % | 31.9 | 3.4 | % | |||||||||||||||||||
Pharmacy network (2) | 412.1 | 398.2 | 819.8 | 797.7 | 13.9 | 3.5 | % | 22.1 | 2.8 | % | |||||||||||||||||||
Mail choice (3) | 76.9 | 71.9 | 151.0 | 141.2 | 5.0 | 7.0 | % | 9.8 | 6.9 | % | |||||||||||||||||||
Generic dispensing rate: (4) | |||||||||||||||||||||||||||||
Total | 88.5 | % | 87.6 | % | 88.4 | % | 87.6 | % | |||||||||||||||||||||
Pharmacy network (2) | 89.1 | % | 88.2 | % | 89.0 | % | 88.3 | % | |||||||||||||||||||||
Mail choice (3) | 85.2 | % | 84.0 | % | 85.0 | % | 83.9 | % | |||||||||||||||||||||
Mail choice penetration rate (4) | 15.7 | % | 15.3 | % | 15.5 | % | 15.0 | % |
(1) | See “Segment Analysis” above in this report for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Pharmacy Services segment. |
(2) | Pharmacy network revenues, pharmacy claims processed and generic dispensing rate do not include Maintenance Choice® activity, which is included within the mail choice category. Pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and long-term care pharmacies, but excluding Maintenance Choice activity. Maintenance Choice permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS pharmacy retail store for the same price as mail order. |
(3) | Mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at retail, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program. |
(4) | Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription. |
• | Total revenues increased $1.4 billion, or 4.2%, to $34.8 billion for the three months ended June 30, 2019 compared to the prior year. The increase was primarily due to brand name drug price inflation as well as increased total pharmacy claims volume, partially offset by continued price compression and an increased generic dispensing rate. |
• | As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about the business: |
• | The Company’s mail choice claims processed, on a 30-day equivalent basis, increased 7.0% to 76.9 million claims in the three months ended June 30, 2019 compared to 71.9 million claims in the prior year. The increase in mail choice claims was primarily driven by the continued adoption of Maintenance Choice offerings. |
• | During the three months ended June 30, 2019, the average revenue per mail choice claim, on a 30-day equivalent basis, increased by 0.4% compared to the prior year primarily due to growth in specialty pharmacy prescriptions. |
• | The Company’s pharmacy network claims processed, on a 30-day equivalent basis, increased 3.5% to 412.1 million claims in the three months ended June 30, 2019, compared to 398.2 million claims in the prior year. The increase in the pharmacy network claim volume was primarily due to net new business. |
• | During the three months ended June 30, 2019, the average revenue per pharmacy network claim processed, on a 30-day equivalent basis, decreased 1.0% compared to the prior year as a result of continued price compression. |
• | The Company’s total generic dispensing rate increased to 88.5% in the three months ended June 30, 2019 compared to 87.6% in the prior year. The continued increase in the Company’s generic dispensing rate was primarily due to the impact of new generic drug introductions and the Company’s ongoing efforts to encourage plan members to use generic drugs when they are available and clinically appropriate. The Company believes its generic dispensing rate will continue to increase in future periods, albeit at a slower pace. This increase will be affected by, among other things, the number of new brand and generic drug introductions and the Company’s success at encouraging plan members to utilize generic drugs when they are available and clinically appropriate. |
• | Operating expenses in the Pharmacy Services segment include selling, general and administrative expenses; depreciation and amortization related to selling, general and administrative activities; and expenses related to specialty retail pharmacies, which include store and administrative payroll, employee benefits and occupancy costs. |
• | Operating expenses remained relatively consistent in the three months ended June 30, 2019 as compared to the prior year. Operating expenses as a percentage of total revenues also remained consistent at 1.1% in each of the three-month periods ended June 30, 2019 and 2018. |
• | Operating income increased $105 million, or 9.6%, and adjusted operating income increased $115 million, or 9.7%, in the three months ended June 30, 2019 compared to the prior year. The increase in both operating income and adjusted operating income was primarily driven by increased claims volume and improved purchasing economics, partially offset by continued price compression. The increase in operating income was also partially offset by increased intangible amortization related to Aetna’s mail order and specialty pharmacy operations. |
• | As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about the business: |
• | The Company’s efforts to (i) retain existing clients, (ii) obtain new business and (iii) maintain or improve the rebates and/or discounts the Company receives from manufacturers, wholesalers and retail pharmacies continue to have an impact on operating income. In particular, competitive pressures in the PBM industry have caused the Company and other PBMs to continue to share with clients a larger portion of rebates and/or discounts received from pharmaceutical manufacturers. In addition, marketplace dynamics and regulatory changes have limited the Company’s ability to offer plan sponsors pricing that includes retail network “differential” or “spread,” and the Company expects these trends to continue. The “differential” or “spread” is any difference between the drug price charged to plan sponsors, including Medicare Part D plan sponsors, by a PBM and the price paid for the drug by the PBM to the dispensing provider. |
• | Total revenues increased $2.4 billion, or 3.7%, to $68.4 billion for the six months ended June 30, 2019 compared to the prior year. The increase was primarily due to brand name drug price inflation as well as increased total pharmacy claims volume, partially offset by continued price compression and an increased generic dispensing rate. |
• | As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about the business: |
• | The Company’s mail choice claims processed, on a 30-day equivalent basis, increased 6.9% to 151.0 million claims in the six months ended June 30, 2019 compared to 141.2 million claims in the prior year. The increase in mail choice claims was primarily driven by the continued adoption of Maintenance Choice offerings. |
• | During the six months ended June 30, 2019, the average revenue per mail choice claim, on a 30-day equivalent basis, decreased by 0.3% compared to the prior year as a result of continued price compression. |
• | The Company’s pharmacy network claims processed, on a 30-day equivalent basis, increased 2.8% to 819.8 million claims in the six months ended June 30, 2019, compared to 797.7 million claims in the prior year. The increase in the pharmacy network claim volume was primarily due to net new business. |
• | During the six months ended June 30, 2019, the average revenue per pharmacy network claim processed, on a 30-day equivalent basis, decreased 0.6% compared to the prior year as a result of continued price compression. |
• | The Company’s total generic dispensing rate increased to 88.4% in the six months ended June 30, 2019 compared to 87.6% in the prior year. The continued increase in the Company’s generic dispensing rate was primarily due to the impact of new generic drug introductions and the Company’s ongoing efforts to encourage plan members to use generic drugs when they are available and clinically appropriate. |
• | Operating expenses increased $35 million, or 5.0%, in the six months ended June 30, 2019 compared to the prior year. The year over year increase in operating expenses was primarily due to operating expenses associated with Aetna’s mail order and specialty pharmacy operations (including intangible amortization) and investments related to the Company’s agreement with Anthem during the six months ended June 30, 2019. |
• | Operating expenses as a percentage of total revenues remained consistent at 1.1% in each of the six-month periods ended June 30, 2019 and 2018. |
• | Operating income increased $54 million, or 2.7%, and adjusted operating income increased $75 million, or 3.5%, in the six months ended June 30, 2019 compared to the prior year. The increase in both operating income and adjusted operating income was primarily driven by increased claims volume and improved purchasing economics, partially offset by continued price compression. The increase in operating income was also partially offset by increased intangible amortization related to Aetna’s mail order and specialty pharmacy operations. |
Change | |||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, 2019 vs 2018 | Six Months Ended June 30, 2019 vs 2018 | ||||||||||||||||||||||||||
In millions, except percentages | 2019 | 2018 | 2019 | 2018 | $ | % | $ | % | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Products | $ | 21,230 | $ | 20,487 | $ | 42,130 | $ | 40,706 | $ | 743 | 3.6 | % | $ | 1,424 | 3.5 | % | |||||||||||||
Services | 217 | 185 | 432 | 398 | 32 | 17.3 | % | 34 | 8.5 | % | |||||||||||||||||||
Total revenues | 21,447 | 20,672 | 42,562 | 41,104 | 775 | 3.7 | % | 1,458 | 3.5 | % | |||||||||||||||||||
Cost of products sold | 15,551 | 14,760 | 30,848 | 29,276 | 791 | 5.4 | % | 1,572 | 5.4 | % | |||||||||||||||||||
Goodwill impairment | — | 3,921 | — | 3,921 | (3,921 | ) | (100.0 | )% | (3,921 | ) | (100.0 | )% | |||||||||||||||||
Operating expenses | 4,345 | 4,216 | 8,925 | 8,508 | 129 | 3.1 | % | 417 | 4.9 | % | |||||||||||||||||||
Operating expenses as a % of revenues | 20.3 | % | 20.4 | % | 21.0 | % | 20.7 | % | |||||||||||||||||||||
Operating income (loss) | $ | 1,551 | $ | (2,225 | ) | $ | 2,789 | $ | (601 | ) | $ | 3,776 | 169.7 | % | $ | 3,390 | 564.1 | % | |||||||||||
Operating income (loss) as a % of revenues (1) | 7.2 | % | NM | 6.6 | % | NM | |||||||||||||||||||||||
Adjusted operating income (2) | $ | 1,669 | $ | 1,821 | $ | 3,158 | $ | 3,657 | $ | (152 | ) | (8.3 | )% | $ | (499 | ) | (13.6 | )% | |||||||||||
Adjusted operating income as a % of revenues | 7.8 | % | 8.8 | % | 7.4 | % | 8.9 | % | |||||||||||||||||||||
Revenues (by major goods/service lines): | |||||||||||||||||||||||||||||
Pharmacy | $ | 16,392 | $ | 15,805 | $ | 32,510 | $ | 31,305 | $ | 587 | 3.7 | % | $ | 1,205 | 3.8 | % | |||||||||||||
Front Store | 4,875 | 4,707 | 9,674 | 9,433 | 168 | 3.6 | % | 241 | 2.6 | % | |||||||||||||||||||
Other | 180 | 160 | 378 | 366 | 20 | 12.5 | % | 12 | 3.3 | % | |||||||||||||||||||
Prescriptions filled (3) | 349.1 | 329.7 | 695.9 | 658.5 | 19.4 | 5.9 | % | 37.4 | 5.7 | % | |||||||||||||||||||
Revenues increase: | |||||||||||||||||||||||||||||
Total | 3.7 | % | 5.7 | % | 3.5 | % | 5.7 | % | |||||||||||||||||||||
Pharmacy | 3.7 | % | 8.3 | % | 3.8 | % | 7.8 | % | |||||||||||||||||||||
Front Store | 3.6 | % | 0.2 | % | 2.6 | % | 1.2 | % | |||||||||||||||||||||
Total prescription volume increase (3) | 5.9 | % | 9.3 | % | 5.7 | % | 8.9 | % | |||||||||||||||||||||
Same store sales increase (decrease): (4) | |||||||||||||||||||||||||||||
Total | 4.2 | % | 5.9 | % | 4.0 | % | 5.9 | % | |||||||||||||||||||||
Pharmacy | 4.7 | % | 8.3 | % | 4.8 | % | 7.8 | % | |||||||||||||||||||||
Front Store | 2.9 | % | (1.0 | )% | 1.6 | % | 0.3 | % | |||||||||||||||||||||
Prescription volume (3) | 7.2 | % | 9.5 | % | 7.0 | % | 9.0 | % | |||||||||||||||||||||
Generic dispensing rate (3) | 89.0 | % | 88.1 | % | 88.9 | % | 88.1 | % |
(1) | Percentages for the three and six months ended June 30, 2018 are not meaningful. |
(2) | See “Segment Analysis” above in this report for a reconciliation of operating income (loss) (GAAP measure) to adjusted operating income for the Retail/LTC segment. |
(3) | Includes an adjustment to convert 90-day non-specialty prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription. |
(4) | Same store sales and prescription volume exclude revenues from MinuteClinic, and revenue and prescriptions from stores in Brazil and LTC operations. |
• | Total revenues increased $775 million, or 3.7%, to $21.4 billion in the three months ended June 30, 2019 compared to the prior year. The increase was primarily driven by increased prescription volume and brand name drug price inflation, partially offset by continued reimbursement pressure and the impact of generic drug introductions. |
• | As you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business: |
• | Front store same store sales increased 2.9% in the three months ended June 30, 2019 compared to the prior year. The increase in front store revenues in 2019 was primarily driven by increases in health product sales, which benefited from an extended cough and cold season and the impact of the shift of sales associated with the Easter holiday from the first quarter of 2018 to the second quarter of 2019. |
• | Pharmacy same store sales increased 4.7% in the three months ended June 30, 2019 compared to the prior year. The increase was driven by the 7.2% increase in pharmacy same store prescription volumes on a 30-day equivalent basis driven mainly by (i) continued adoption of patient care programs, (ii) collaborations with PBMs, (iii) the Company’s preferred status in a number of Medicare Part D networks, and (iv) a stronger allergy season as compared to prior year. |
• | Pharmacy revenue continues to be adversely affected by the conversion of brand name drugs to equivalent generic drugs, which typically have a lower selling price. The generic dispensing rate grew to 89.0% in the three months ended June 30, 2019 compared to 88.1% in the prior year. Pharmacy revenue growth also has been negatively affected by continued reimbursement pressure. |
• | Pharmacy revenue growth has been adversely affected by industry challenges in the LTC business, such as continuing lower occupancy rates at skilled nursing facilities, as well as the deteriorating financial health of many skilled nursing facilities. |
• | Pharmacy revenue in 2019 continued to benefit from the Company’s ability to attract and retain managed care customers and the increased use of pharmaceuticals by an aging population as the first line of defense for health care. |
• | Operating expenses in the Retail/LTC segment include store payroll, store employee benefits, store occupancy costs, selling expenses, advertising expenses, depreciation and amortization expense and certain administrative expenses. |
• | Operating expenses increased $129 million, or 3.1%, in the three months ended June 30, 2019 compared to the prior year. |
• | Operating expenses as a percentage of total revenues remained relatively consistent at 20.3% in the three months ended June 30, 2019 compared to 20.4% in the prior year. |
• | Operating income increased $3.8 billion, or 169.7%, and adjusted operating income decreased $152 million, or 8.3%, in the three months ended June 30, 2019 compared to the prior year. The increase in operating income was primarily due to the absence of the $3.9 billion pre-tax goodwill impairment charge related to the LTC reporting unit recorded in the three months ended June 30, 2018. Operating income and adjusted operating income were both negatively impacted by (i) continued reimbursement pressure, (ii) increased operating expenses primarily driven by the investment of a portion of the savings from tax reform in wages and benefits and (iii) declining year-over-year performance in the Company’s long-term care business. |
• | As you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business: |
• | The Company’s pharmacy operating income has been adversely affected by the efforts of managed care organizations, PBMs and governmental and other third-party payors to reduce their prescription drug costs, including the use of restrictive networks, as well as changes in the mix of business within the pharmacy portion of the Retail/LTC Segment. If the reimbursement pressure accelerates, the Company may not be able grow revenues, and its operating income could be adversely affected. |
• | The increased use of generic drugs has positively impacted the Company’s operating income but has resulted in third-party payors augmenting their efforts to reduce reimbursement payments to retail pharmacies for prescriptions. This trend, which the Company expects to continue, reduces the benefit the Company realizes from brand to generic drug conversions. |
• | Total revenues increased $1.5 billion, or 3.5%, to $42.6 billion in the six months ended June 30, 2019 compared to the prior year. The increase was primarily driven by increased prescription volume and brand name drug price inflation, partially offset by continued reimbursement pressure and the impact of generic drug introductions. |
• | As you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business: |
• | Front store same store sales increased 1.6% in the six months ended June 30, 2019 compared to the prior year. The increase in front store revenues in 2019 was primarily driven by increases in health product sales, which benefited from an extended cough and cold season. |
• | Pharmacy same store sales increased 4.8% in the six months ended June 30, 2019 compared to the prior year. The increase was driven by the 7.0% increase in pharmacy same store prescription volumes on a 30-day equivalent basis driven mainly by (i) continued adoption of patient care programs, (ii) collaborations with PBMs, (iii) the Company’s preferred status in a number of Medicare Part D networks, and (iv) a stronger allergy season as compared to prior year. |
• | Pharmacy revenue continues to be adversely affected by the conversion of brand name drugs to equivalent generic drugs, which typically have a lower selling price. The generic dispensing rate grew to 88.9% in the six months ended June 30, 2019 compared to 88.1% in the prior year. Pharmacy revenue growth also has been negatively affected by continued reimbursement pressure. |
• | Operating expenses increased $417 million, or 4.9%, in the six months ended June 30, 2019 compared to the prior year, primarily due to the following: |
• | A $135 million store rationalization charge recorded during the first quarter of 2019 primarily related to operating lease right-of-use asset impairment charges in connection with the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019; |
• | The investment of a portion of the savings from the TCJA in wages and benefits; and |
• | The increased prescription volume described previously, partially offset by: |
• | The absence of the $86 million pre-tax loss on the sale of the Company’s RxCrossroads subsidiary recorded in the six months ended June 30, 2018. |
• | Operating expenses as a percentage of total revenues were 21.0% in the six months ended June 30, 2019 compared to 20.7% in the prior year. The increase in operating expenses as a percentage of total revenues was primarily driven by the increases in operating expenses described above. |
• | Operating income increased $3.4 billion, or 564.1%, and adjusted operating income decreased $499 million, or 13.6%, in the six months ended June 30, 2019 compared to the prior year. The increase in operating income was primarily due to the absence of the $3.9 billion pre-tax goodwill impairment charge related to the LTC reporting unit and the $86 million pre-tax loss on the sale of the Company’s RxCrossroads subsidiary recorded in the six months ended June 30, 2018, partially offset by the $135 million store rationalization charge recorded in the six months ended June 30, 2019. Operating income and adjusted operating income were both negatively impacted by the following (i) continued reimbursement pressure, (ii) increased operating expenses primarily driven by the investment of a portion of the savings from tax reform in wages and benefits and (iii) declining year-over-year performance in the Company’s long-term care business. |
Change | |||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, 2019 vs 2018 | Six Months Ended June 30, 2019 vs 2018 | ||||||||||||||||||||||||||
In millions, except percentages | 2019 | 2018 | 2019 | 2018 | $ | % | $ | % | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Premiums | $ | 15,777 | $ | 751 | $ | 32,036 | $ | 2,057 | $ | 15,026 | 2,000.8 | % | $ | 29,979 | 1,457.4 | % | |||||||||||||
Services | 1,478 | 9 | 2,925 | 19 | 1,469 | 16,322.2 | % | 2,906 | 15,294.7 | % | |||||||||||||||||||
Net investment income | 148 | 4 | 312 | 6 | 144 | 3,600.0 | % | 306 | 5,100.0 | % | |||||||||||||||||||
Total revenues | 17,403 | 764 | 35,273 | 2,082 | 16,639 | 2,177.9 | % | 33,191 | 1,594.2 | % | |||||||||||||||||||
Benefit costs | 13,246 | 631 | 26,901 | 1,960 | 12,615 | 1,999.2 | % | 24,941 | 1,272.5 | % | |||||||||||||||||||
MBR (Benefit costs as a % of premium revenues) (1) | 84.0 | % | NM | 84.0 | % | NM | |||||||||||||||||||||||
Operating expenses | $ | 3,095 | $ | 133 | $ | 6,155 | $ | 260 | $ | 2,962 | 2,227.1 | % | $ | 5,895 | 2,267.3 | % | |||||||||||||
Operating expenses as a % of revenues | 17.8 | % | 17.4 | % | 17.4 | % | 12.5 | % | |||||||||||||||||||||
Operating income (loss) | $ | 1,062 | $ | — | $ | 2,217 | $ | (138 | ) | $ | 1,062 | 100.0 | % | $ | 2,355 | 1,706.5 | % | ||||||||||||
Operating income (loss) as a % of revenues | 6.1 | % | NM | 6.3 | % | NM | |||||||||||||||||||||||
Adjusted operating income (loss) (2) | $ | 1,438 | $ | — | $ | 3,000 | $ | (137 | ) | $ | 1,438 | 100.0 | % | $ | 3,137 | 2,289.8 | % | ||||||||||||
Adjusted operating income (loss) as a % of revenues | 8.3 | % | NM | 8.5 | % | NM |
(1) | The Health Care Benefits segment for the three and six months ended June 30, 2018 consisted solely of the Company’s SilverScript PDP business. Accordingly, the MBRs for the three and six months ended June 30, 2018 are not meaningful and are not directly comparable to the MBRs for the three and six months ended June 30, 2019. |
(2) | See “Segment Analysis” above in this report for a reconciliation of operating income (loss) (GAAP measure) to adjusted operating income for the Health Care Benefits segment. |
• | Total revenues increased $16.6 billion for the three months ended June 30, 2019 compared to the prior year primarily driven by the Aetna Acquisition. |
• | Operating expenses in the Health Care Benefits segment include selling, general and administrative expenses and depreciation and amortization expenses. |
• | Operating expenses increased $3.0 billion in the three months ended June 30, 2019 compared to the prior year primarily driven by the Aetna Acquisition (including the amortization of intangible assets). |
• | Operating income and adjusted operating income increased $1.1 billion and $1.4 billion, respectively, in the three months ended June 30, 2019 compared to the prior year. The increases were primarily driven by the Aetna Acquisition. The increase in operating income was partially offset by an increase in intangible amortization related to the Aetna Acquisition. Operating income and adjusted operating income for the three months ended June 30, 2018 reflect the seasonality of earnings for the Company’s SilverScript PDP business. The quarterly earnings of the Company’s SilverScript PDP business generally increase as the year progresses. |
• | Total revenues increased $33.2 billion for the six months ended June 30, 2019 compared to the prior year primarily driven by the Aetna Acquisition. |
• | Operating expenses increased $5.9 billion in the six months ended June 30, 2019 compared to the prior year primarily driven by the Aetna Acquisition (including the amortization of intangible assets). |
• | Operating income and adjusted operating income increased $2.4 billion and $3.1 billion, respectively, in the six months ended June 30, 2019 compared to the prior year. The increases were primarily driven by the Aetna Acquisition. The increase in operating income was partially offset by an increase in intangible amortization related to the Aetna Acquisition. Operating loss and adjusted operating loss for the six months ended June 30, 2018 reflect the seasonality of earnings for the Company’s SilverScript PDP business. The quarterly earnings of the Company’s SilverScript PDP business generally increase as the year progresses. |
June 30, 2019 | March 31, 2019 | December 31, 2018 | ||||||||||||||||||||||||
In thousands | Insured | ASC | Total | Insured | ASC | Total | Insured | ASC | Total | |||||||||||||||||
Medical membership: | ||||||||||||||||||||||||||
Commercial | 3,571 | 14,276 | 17,847 | 3,611 | 14,302 | 17,913 | 3,871 | 13,888 | 17,759 | |||||||||||||||||
Medicare Advantage | 2,264 | — | 2,264 | 2,231 | — | 2,231 | 1,758 | — | 1,758 | |||||||||||||||||
Medicare Supplement | 819 | — | 819 | 804 | — | 804 | 793 | — | 793 | |||||||||||||||||
Medicaid | 1,344 | 562 | 1,906 | 1,315 | 571 | 1,886 | 1,128 | 663 | 1,791 | |||||||||||||||||
Total medical membership | 7,998 | 14,838 | 22,836 | 7,961 | 14,873 | 22,834 | 7,550 | 14,551 | 22,101 | |||||||||||||||||
Supplementary membership information: | ||||||||||||||||||||||||||
Medicare Prescription Drug Plan (standalone) (1) | 6,004 | 6,044 | 6,134 | |||||||||||||||||||||||
(1) | Represents the Company’s SilverScript PDP membership only. Excludes 2.5 million, 2.4 million and 2.3 million members as of June 30, 2019, March 31, 2019, and December 31, 2018, respectively, related to Aetna’s standalone PDPs that were sold effective December 31, 2018. The Company will retain the financial results of the divested plans in 2019 through a reinsurance agreement. |
• | Total revenues decreased $49 million in the three months ended June 30, 2019 compared to the prior year. |
• | In 2019, revenues relate to products for which the Company no longer solicits or accepts new customers, such as large case pensions and long-term care insurance products, that were acquired in the Aetna Acquisition. Revenues in the three months ended June 30, 2019 include $57 million of realized capital gains, primarily related to the sale of debt securities and other invested assets. In 2018, revenues relate to interest income related to the $40 billion of 2018 Notes issued to partially fund the Aetna Acquisition. |
• | Operating expenses within the Corporate/Other segment include certain aspects of costs related to executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments and acquisition-related transaction and integration costs. After the Aetna Acquisition Date, such operating expenses also include operating costs to support the large case pensions and long-term care insurance products acquired in the Aetna Acquisition. |
• | Operating expenses increased $206 million in the three months ended June 30, 2019 compared to the prior year. The increase was primarily driven by an increase in acquisition-related integration costs of $67 million in the three months ended June 30, 2019 as compared to the prior period and incremental operating expenses to support the large case pensions and long-term care insurance products described above. |
• | Total revenues increased $13 million in the six months ended June 30, 2019 compared to the prior year. |
• | In 2019, revenues relate to products for which the Company no longer solicits or accepts new customers, such as large case pensions and long-term care insurance products, that were acquired in the Aetna Acquisition. Revenues in the six months ended June 30, 2019 include $75 million of realized capital gains, primarily related to the sale of debt securities and other invested assets. In 2018, revenues relate to interest income related to the $40 billion of 2018 Notes issued to partially fund the Aetna Acquisition. |
• | Operating expenses increased $433 million in the six months ended June 30, 2019 compared to the prior year. The increase was primarily driven by an increase in acquisition-related integration costs of $175 million in the six months ended June 30, 2019 as compared to the prior period and incremental operating expenses to support the large case pensions and long-term care insurance products described above. |
Six Months Ended June 30, | Change | |||||||||||||
In millions | 2019 | 2018 | $ | % | ||||||||||
Net cash provided by operating activities | $ | 7,286 | $ | 5,289 | $ | 1,997 | 37.8 | % | ||||||
Net cash used in investing activities | (1,801 | ) | (752 | ) | (1,049 | ) | 139.5 | % | ||||||
Net cash provided by (used in) financing activities | (3,442 | ) | 37,620 | (41,062 | ) | (109.1 | )% | |||||||
Net increase in cash, cash equivalents and restricted cash | $ | 2,043 | $ | 42,157 | $ | (40,114 | ) | 95.2 | % |
• | Net cash provided by operating activities increased by $2.0 billion in the six months ended June 30, 2019 compared to the prior year due primarily to the Aetna Acquisition and the timing of cash collections, partially offset by an advance payment from CMS recorded in June 2018 related to July 2018. |
• | Net cash used in investing activities increased by $1.0 billion in the six months ended June 30, 2019 compared to the prior year largely driven by the six months ended June 30, 2018 reflecting $725 million in proceeds from the sale of RxCrossroads and higher net purchases of investments in the six months ended June 30, 2019 as compared to the prior year. |
• | Net cash used in financing activities was $3.4 billion in the six months ended June 30, 2019 compared to net cash provided by financing activities of $37.6 billion in the prior year. The decrease in cash provided by financing activities primarily related to long-term borrowings during 2018 to partially fund the Aetna Acquisition, as well as debt repayments during 2019 including (i) $1.5 billion in repayments of the term loan used to partially fund the Aetna Acquisition and (ii) the repayment of $375 million of senior notes upon maturity. |
In millions | |||
3.125% senior notes due March 2020 | $ | 2,000 | |
Floating rate notes due March 2020 | 1,000 | ||
3.35% senior notes due March 2021 | 3,000 | ||
Floating rate notes due March 2021 | 1,000 | ||
3.7% senior notes due March 2023 | 6,000 | ||
4.1% senior notes due March 2025 | 5,000 | ||
4.3% senior notes due March 2028 | 9,000 | ||
4.78% senior notes due March 2038 | 5,000 | ||
5.05% senior notes due March 2048 | 8,000 | ||
Total debt principal | $ | 40,000 |
• | Risks to our brand and reputation, the Aetna Acquisition, data governance risks, effectiveness of our talent management and alignment of talent to our business needs, and potential changes in public policy, laws and regulations present overarching risks to our enterprise in 2019 and beyond. |
• | Our brand and reputation are two of our most important assets; negative public perception of the industries in which we operate, or of our industries’ or our practices, can adversely affect our businesses, results of operations, cash flows and prospects. |
• | Data governance failures can adversely affect our reputation, businesses and prospects. Our use and disclosure of members’, customers’ and other constituents’ sensitive information is subject to complex regulations at multiple levels. We would be adversely affected if we or our business associates or other vendors fail to adequately protect members’, customers’ or other constituents’ sensitive information. |
• | We face significant competition in attracting and retaining talented employees. Further, managing succession for, and retention of, key executives is critical to our success, and our failure to do so could adversely affect our future performance. |
• | We are subject to potential changes in public policy, laws and regulations, including reform of the United States health care system, that can adversely affect the markets for our products and services and our businesses, operations, results of operations, cash flows and prospects. |
• | Our enterprise strategy may not be an effective response to the changing dynamics in the industries in which we operate, or we may not be able to implement our strategy and related strategic projects. |
• | Efforts to reduce reimbursement levels and alter health care financing practices could adversely affect our businesses. |
• | Gross margins in the industries in which we operate may decline. |
• | Our results of operations are affected by the health of the economy in general and in the geographies we serve. |
• | We operate in a highly competitive business environment. Competitive and economic pressures may limit our ability to increase pricing to reflect higher costs or may force us to accept lower margins. If customers elect to self-insure, reduce benefits or adversely renegotiate or amend their agreements with us, our revenues and results of operations will be adversely affected. We may not be able to obtain appropriate pricing on new or renewal business. |
• | We may lose clients and/or fail to win new business. If we fail to compete effectively in the geographies and product areas in which we operate, including maintaining or increasing membership in our Health Care Benefits segment, our results of operations, financial condition and cash flows could be materially and adversely affected. |
• | We are exposed to risks relating to the solvency of our customers and of other insurers. |
• | We face risks relating to the market availability, pricing, suppliers and safety profiles of prescription drugs that we purchase and sell. |
• | We face risks related to the frequency and rate of the introduction and pricing of generic drugs and brand name prescription drug products. |
• | Possible changes in industry pricing benchmarks and drug pricing generally can adversely affect our PBM business. |
• | Product liability, product recall or personal injury issues could damage our reputation. |
• | We face challenges in growing our Medicare Advantage and Medicare Part D membership. |
• | We face challenges in growing our Medicaid membership, and expanding our Medicaid membership exposes us to additional risks. |
• | A change in our Health Care Benefits product mix may adversely affect our profit margins. |
• | We may not be able to accurately forecast health care and other benefit costs, which could adversely affect our Health Care Benefits segment’s results of operations. There can be no assurance that the future health care and other benefit costs of our Insured Health Care Benefits products will not exceed our projections. |
• | A number of factors, many of which are beyond our control, contribute to rising health care and other benefit costs. If we are unable to satisfactorily manage our health care and other benefit costs, our Health Care Benefits segment’s results of operations and competitiveness will be adversely affected. |
• | The reserves we hold for expected claims in our Insured Health Care Benefits products are based on estimates that involve an extensive degree of judgment and are inherently variable. Any reserve, including a premium deficiency reserve, may be insufficient. If actual claims exceed our estimates, our results of operations could be materially adversely affected, and our ability to take timely corrective actions to limit future costs may be limited. |
• | Extreme events, or the threat of extreme events, could materially increase our health care (including behavioral health) costs. We cannot predict whether or when any such events will occur. |
• | Legislative and regulatory changes could create significant challenges to our Medicare Advantage and Medicare Part D revenues and results of operations, and proposed changes to these programs could create significant additional challenges. Entitlement program reform, if it occurs, could have a material adverse effect on our businesses, operations and/or results of operations. |
• | We may not be able to obtain adequate premium rate increases in our Insured Health Care Benefits products, which would have an adverse effect on our revenues, MBRs and results of operations and could magnify the adverse impact of increases in health care and other benefit costs and of ACA assessments, fees and taxes. |
• | Minimum MLR rebate requirements limit the level of margin we can earn in our Insured Health Care Benefits products while leaving us exposed to higher than expected medical costs. Challenges to our minimum MLR rebate methodology and/or reports could adversely affect our results of operations. |
• | Our business activities are highly regulated. Our Pharmacy Services, Medicare Advantage, Medicare Part D, Medicaid, dual eligible, dual eligible special needs plan, small group and certain other products are subject to particularly extensive and complex regulations. If we fail to comply with applicable laws and regulations, we could be subject to significant adverse regulatory actions or suffer brand and reputational harm which may have a material adverse effect on our businesses. Compliance with existing and future laws, regulations and/or judicial decisions may reduce our profitability and limit our growth. |
• | If our compliance or other systems and processes fail or are deemed inadequate, we may suffer brand and reputational harm and become subject to regulatory actions or litigation which could adversely affect our businesses, results of operations, cash flows and/or financial condition. |
• | Our litigation and regulatory risk profile are changing as a result of the Aetna Acquisition and as we offer new products and services and expand in business areas beyond our historical core businesses of Retail/LTC and Pharmacy Services. |
• | We routinely are subject to litigation and other adverse legal proceedings, including class actions and qui tam actions. Many of these proceedings seek substantial damages which may not be covered by insurance. These proceedings may be costly to defend, result in changes in our business practices, harm our brand and reputation and adversely affect our businesses and results of operations. |
• | We frequently are subject to regular and special governmental audits, investigations and reviews that could result in changes to our business practices and also could result in material refunds, fines, penalties, civil liabilities, criminal liabilities and other sanctions. |
• | We are subject to retroactive adjustments to and/or withholding of certain premiums and fees, including as a result of CMS RADV audits. We generally rely on health care providers to appropriately code claim submissions and document their medical records. If these records do not appropriately support our risk adjusted premiums, we may be required to refund premium payments to CMS and/or pay fines and penalties under the False Claims Act. |
• | Programs funded in whole or in part by the U.S. federal government account for a significant portion of our revenues. The U.S. federal government and our other government customers may reduce funding for health care or other programs, cancel or decline to renew contracts with us, or make changes that adversely affect the number of persons eligible for certain programs, the services provided to enrollees in such programs, our premiums and our administrative and health care and other benefit costs, any of which could have a material adverse effect on our businesses, results of operations and cash flows. In addition, an extended federal government shutdown or a delay by Congress in raising the federal government’s debt ceiling could lead to a delay, reduction, suspension or cancellation of federal government spending and a significant increase in interest rates that could, in turn, have a material adverse effect on our businesses, results of operations and cash flows. |
• | Our results of operations may be adversely affected by changes in laws and policies governing employers and by union organizing activity. |
• | We must develop and maintain a relevant omni-channel experience for our retail customers. |
• | We must maintain and improve our relationships with our retail and specialty pharmacy customers and increase the demand for our products and services, including proprietary brands. If we fail to develop new products, differentiate our products from those of our competitors or demonstrate the value of our products to our customers and members, our ability to retain or grow our customer base may be adversely affected. |
• | In order to be competitive in the increasingly consumer-oriented marketplace for our health care products and services, we will need to develop and deploy consumer-friendly products and services and make investments in consumer engagement, reduce our cost structure and compete successfully with new entrants into our businesses. If we are unsuccessful, our future growth and profitability may be adversely affected. |
• | Our results of operations may be adversely affected if we are unable to contract with manufacturers, providers, suppliers and vendors on competitive terms and develop and maintain attractive networks with high quality providers. |
• | If our service providers fail to meet their contractual obligations to us or to comply with applicable laws or regulations, we may be exposed to brand and reputational harm, litigation or regulatory action. This risk is particularly high in our Medicare, Medicaid, dual eligible and dual eligible special needs plan programs. |
• | Continuing consolidation and integration among providers and other suppliers may increase our medical and other covered benefits costs, make it difficult for us to compete in certain geographies and create new competitors. |
• | We may experience increased medical and other benefit costs, litigation risk and customer and member dissatisfaction when providers that do not have contracts with us render services to our Health Care Benefits members. |
• | Customers, particularly large sophisticated customers, expect us to implement their contracts and onboard their employees and members efficiently and effectively. Failure to do so could adversely affect our reputation, businesses, results of operations, cash flows and prospects. If we or our vendors fail to provide our customers with quality service that meets their expectations, our ability to retain and grow our membership and customer base will be adversely affected. |
• | We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and disrupt our business operations. |
• | Our and our vendors’ operations are subject to a variety of business continuity hazards and risks, any of which could interrupt our operations or otherwise adversely affect our performance and results of operations. |
• | We and our vendors have experienced cyber attacks. We can provide no assurance that we or our vendors will be able to detect, prevent or contain the effects of such attacks or other information security (including cybersecurity) risks or threats in the future. |
• | The failure or disruption of our information technology systems or the failure of our information technology infrastructure to support our businesses could adversely affect our reputation, businesses, results of operations and cash flows. |
• | Our business success and results of operations depend in part on effective information technology systems and on continuing to develop and implement improvements in technology. Pursuing multiple initiatives simultaneously could make this continued development and implementation significantly more challenging. |
• | Sales of our products and services are dependent on our ability to attract and motivate internal sales personnel and independent third-party brokers, consultants and agents. New distribution channels create new disintermediation risk. We may be subject to penalties or other regulatory actions as a result of the marketing practices of brokers and agents selling our products. |
• | We also face other risks that could adversely affect our businesses, results of operations, financial condition and/or cash flows, which include: |
• | Failure of our corporate governance policies or procedures, for example significant financial decisions being made at an inappropriate level in our organization; |
• | Inappropriate application of accounting principles or a significant failure of internal control over financial reporting, which could lead to a restatement of our results of operations and/or a deterioration in the soundness and accuracy of our reported results of operations; and |
• | Failure to adequately manage our run-off businesses and/or our regulatory and financial exposure to businesses we have sold, including Aetna’s divested standalone Medicare Part D, domestic group life insurance, group disability insurance and absence management businesses. |
• | Goodwill and other intangible assets could, in the future, become impaired. |
• | We would be adversely affected if we do not effectively deploy our capital. Downgrades or potential downgrades in our credit ratings, should they occur, could adversely affect our brand and reputation, businesses, cash flows, financial condition and results of operations. |
• | Adverse conditions in the U.S. and global capital markets can significantly and adversely affect the value of our investments in debt and equity securities, mortgage loans, alternative investments and other investments, our results of operations and/or our financial condition. |
• | We have limited experience in the insurance and managed health care industry, which may hinder our ability to achieve our objectives as a combined company. |
• | The Aetna Acquisition may not be accretive, and may be dilutive, to our earnings per share, which may adversely affect our stock price. |
• | We may fail to successfully combine the businesses and operations of CVS Health and Aetna to realize the anticipated benefits and cost savings of the Aetna Acquisition within the anticipated timeframe or at all, which could adversely affect our stock price. |
• | Our future results may be adversely impacted if we do not effectively manage our expanded operations following completion of the Aetna Acquisition. |
• | We may have difficulty attracting, motivating and retaining executives and other key employees following completion of the Aetna Acquisition. |
• | The Aetna integration process could disrupt our ongoing businesses and/or operations. |
• | Our indebtedness following completion of the Aetna Acquisition is substantially greater than our indebtedness on a stand-alone basis and greater than the combined indebtedness of CVS Health and Aetna existing prior to the announcement of |
• | We will continue to incur significant integration-related costs in connection with the Aetna Acquisition. |
• | We expect to continue to pursue acquisitions, joint ventures, strategic alliances and other inorganic growth opportunities, which may be unsuccessful, cause us to assume unanticipated liabilities, disrupt our existing businesses, be dilutive or lead us to assume significant debt, among other things. |
• | We may be unable to successfully integrate companies we acquire. |
• | As a result of our expanded international operations, we face political, legal and compliance, operational, regulatory, economic and other risks that we do not face or are more significant than in our domestic operations. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
Part II. | Other Information |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Approximate Dollar | ||||||||||||||
Total Number of Shares | Value of Shares that | |||||||||||||
Total Number | Average | Purchased as Part of | May Yet Be | |||||||||||
of Shares | Price Paid per | Publicly Announced | Purchased Under the | |||||||||||
Fiscal Period | Purchased | Share | Plans or Programs | Plans or Programs | ||||||||||
April 1, 2019 through April 30, 2019 | — | $ | — | — | $ | 13,869,392,446 | ||||||||
May 1, 2019 through May 31, 2019 | — | $ | — | — | $ | 13,869,392,446 | ||||||||
June 1, 2019 through June 30, 2019 | — | $ | — | — | $ | 13,869,392,446 | ||||||||
— | — |
10 | |
10.1 | |
10.2 | |
10.3 | |
10.4 | |
10.5 | |
15 | Letter re: unaudited interim financial information |
15.1 | |
31 | Rule 13a-14(a)/15d-14(a) Certifications |
31.1 | |
31.2 | |
32 | Section 1350 Certifications |
32.1 | |
32.2 | |
101 | |
101 | The following materials from the CVS Health Corporation Quarterly Report on Form 10-Q for the three and six months ended June 30, 2019 formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash flows, (v) the Condensed Consolidated Statements of Shareholders’ Equity and (vi) the related Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
CVS HEALTH CORPORATION | ||
Date: | August 7, 2019 | By: | /s/ Eva C. Boratto |
Eva C. Boratto | |||
Executive Vice President and Chief Financial Officer | |||
PAGE | |||
1. | DEFINITIONS AND PRINCIPLES OF CONSTRUCTION .......................................... | 1 | |
1.1 | Definitions ............................................................................................................. | 1 | |
1.2 | Principles of Construction ...................................................................................... | 18 | |
2. | AMOUNT AND TERMS OF LOANS ............................................................................... | 19 | |
2.1 | Revolving Credit Loans .......................................................................................... | 19 | |
2.2 | Term-out Option ..................................................................................................... | 20 | |
2.3 | Notice of Borrowing Revolving Credit Loans ....................................................... | 20 | |
2.4 | Competitive Bid Loans and Procedure ................................................................... | 21 | |
2.5 | Use of Proceeds ...................................................................................................... | 23 | |
2.6 | Termination, Reduction or Increase of Commitments ........................................... | 23 | |
2.7 | Prepayments of Loans ............................................................................................ | 25 | |
2.8 | Reserved ................................................................................................................. | 25 | |
2.9 | Reserved ................................................................................................................. | 25 | |
2.10 | Reserved ................................................................................................................. | 25 | |
2.11 | Notes ....................................................................................................................... | 26 | |
2.12 | Extension of Commitment Termination Date | 26 | |
2.13 | Defaulting Lenders | 27 | |
3. | PROCEEDS, PAYMENTS, CONVERSIONS, INTEREST, YIELD PROTECTION AND FEES ................................................................................................ | 28 | |
3.1 | Disbursement of the Proceeds of the Loans ........................................................... | 28 | |
3.2 | Payments ................................................................................................................ | 28 | |
3.3 | Conversions; Other Matters .................................................................................... | 29 | |
3.4 | Interest Rates and Payment Dates .......................................................................... | 31 | |
3.5 | Indemnification for Loss ........................................................................................ | 32 | |
3.6 | Reimbursement for Costs, Etc ................................................................................ | 32 | |
3.7 | Illegality of Funding ............................................................................................... | 33 | |
3.8 | Option to Fund; Substituted Interest Rate .............................................................. | 34 | |
3.9 | Certificates of Payment and Reimbursement ......................................................... | 36 | |
3.10 | Taxes; Net Payments .............................................................................................. | 36 | |
3.11 | Facility Fees ........................................................................................................... | 40 | |
3.12 | Reserved ................................................................................................................. | 40 | |
3.13 | Replacement of Lender .......................................................................................... | 40 | |
4. | REPRESENTATIONS AND WARRANTIES ................................................................... | 41 | |
4.1 | Existence and Power .............................................................................................. | 41 | |
4.2 | Authority; EEA Financial Institution ..................................................................... | 41 | |
4.3 | Binding Agreement ................................................................................................. | 41 | |
4.4 | Litigation ................................................................................................................ | 42 | |
4.5 | No Conflicting Agreements .................................................................................... | 42 | |
4.6 | Taxes ....................................................................................................................... | 42 | |
4.7 | Compliance with Applicable Laws; Filings ........................................................... | 42 | |
4.8 | Governmental Regulations ..................................................................................... | 42 | |
4.9 | Federal Reserve Regulations; Use of Proceeds ...................................................... | 42 | |
4.10 | No Misrepresentation ............................................................................................. | 43 |
4.11 | Plans ....................................................................................................................... | 43 | |
4.12 | Environmental Matters ........................................................................................... | 43 | |
4.13 | Financial Statements ............................................................................................... | 43 | |
4.14 | Anti-Corruption Laws and Sanctions ..................................................................... | 43 | |
5. | CONDITIONS TO EFFECTIVENESS ............................................................................. | 44 | |
5.1 | Agreement .............................................................................................................. | 44 | |
5.2 | Notes ....................................................................................................................... | 44 | |
5.3 | Corporate Action .................................................................................................... | 44 | |
5.4 | Opinion of Counsel to the Borrower ...................................................................... | 44 | |
5.5 | No Default and Representations and Warranties .................................................... | 44 | |
5.6 | Fees ......................................................................................................................... | 44 | |
5.7 | Due Diligence; “Know Your Customer” ................................................................ | 45 | |
6. | CONDITIONS OF LENDING ‑ ALL LOANS ................................................................. | 45 | |
6.1 | Compliance ............................................................................................................. | 45 | |
6.2 | Requests .................................................................................................................. | 45 | |
7. | AFFIRMATIVE COVENANTS ........................................................................................ | 45 | |
7.1 | Legal Existence ...................................................................................................... | 45 | |
7.2 | Taxes ....................................................................................................................... | 46 | |
7.3 | Insurance ................................................................................................................ | 46 | |
7.4 | Performance of Obligations .................................................................................... | 46 | |
7.5 | Condition of Property ............................................................................................. | 46 | |
7.6 | Observance of Legal Requirements ....................................................................... | 46 | |
7.7 | Financial Statements and Other Information .......................................................... | 46 | |
7.8 | Records ................................................................................................................... | 48 | |
7.9 | Authorizations ........................................................................................................ | 48 | |
8. | NEGATIVE COVENANTS ................................................................................................ | 48 | |
8.1 | Subsidiary Indebtedness ......................................................................................... | 48 | |
8.2 | Liens ....................................................................................................................... | 48 | |
8.3 | Dispositions ............................................................................................................ | 48 | |
8.4 | Merger or Consolidation, Etc ................................................................................. | 48 | |
8.5 | Acquisitions ............................................................................................................ | 48 | |
8.6 | Restricted Payments ............................................................................................... | 48 | |
8.7 | Limitation on Upstream Dividends by Subsidiaries ............................................... | 48 | |
8.8 | Limitation on Negative Pledges ............................................................................. | 50 | |
8.9 | Ratio of Consolidated Indebtedness to Total Capitalization .................................. | 50 | |
9. | DEFAULT ............................................................................................................................ | 51 | |
9.1 | Events of Default .................................................................................................... | 51 | |
9.2 | Remedies ................................................................................................................ | 52 | |
10. | AGENT ................................................................................................................................. | 53 | |
10.1 | Appointment and Authority .................................................................................... | 53 | |
10.2 | Rights as a Lender .................................................................................................. | 54 | |
10.3 | Exculpatory Provisions ........................................................................................... | 54 | |
10.4 | Reliance by Administrative Agent .......................................................................... | 55 | |
10.5 | Delegation of Duties ............................................................................................... | 55 | |
10.6 | Resignation of Administrative Agent ..................................................................... | 55 |
10.7 | Non-Reliance on Administrative Agent and Other Credit Parties .......................... | 56 | |
10.8 | No Other Duties, etc ............................................................................................... | 56 | |
11. | OTHER PROVISIONS ....................................................................................................... | 56 | |
11.1 | Amendments, Waivers, Etc .................................................................................... | 56 | |
11.2 | Notices .................................................................................................................... | 57 | |
11.3 | No Waiver; Cumulative Remedies ......................................................................... | 60 | |
11.4 | Survival of Representations and Warranties ........................................................... | 60 | |
11.5 | Payment of Expenses; Indemnified Liabilities ....................................................... | 60 | |
11.6 | Lending Offices ...................................................................................................... | 61 | |
11.7 | Successors and Assigns .......................................................................................... | 61 | |
11.8 | Counterparts; Electronic Execution of Assignments .............................................. | 66 | |
11.9 | Set‑off and Sharing of Payments ............................................................................ | 67 | |
11.10 | Indemnity ................................................................................................................ | 67 | |
11.11 | Governing Law ....................................................................................................... | 70 | |
11.12 | Severability ............................................................................................................. | 70 | |
11.13 | Integration .............................................................................................................. | 70 | |
11.14 | Treatment of Certain Information .......................................................................... | 70 | |
11.15 | Acknowledgments .................................................................................................. | 71 | |
11.16 | Consent to Jurisdiction ........................................................................................... | 71 | |
11.17 | Service of Process .................................................................................................. | 72 | |
11.18 | No Limitation on Service or Suit ........................................................................... | 72 | |
11.19 | WAIVER OF TRIAL BY JURY ............................................................................. | 72 | |
11.20 | Patriot Act Notice ................................................................................................... | 72 | |
11.21 | No Fiduciary Duty .................................................................................................. | 72 | |
11.22 | Acknowledgement and Consent to Bail-In of EEA Financial Institutions ............. | 73 | |
11.23 | Certain ERISA Matters ........................................................................................... | 73 |
Pricing Level | ABR Advances | Eurodollar Advances | Facility Fee |
Pricing Level I | 0.000% | 0.700% | 0.050% |
Pricing Level II | 0.000% | 0.815% | 0.060% |
Pricing Level III | 0.000% | 0.930% | 0.070% |
Pricing Level IV | 0.035% | 1.035% | 0.090% |
Pricing Level V | 0.140% | 1.140% | 0.110% |
Pricing Level VI | 0.350% | 1.350% | 0.150% |
LOANS | RATE |
Revolving Credit Loans constituting ABR Advances | Alternate Base Rate plus the Applicable Margin. |
Revolving Credit Loans constituting Eurodollar Advances | Eurodollar Rate applicable thereto plus the Applicable Margin. |
Competitive Bid Loans | Fixed rate of interest applicable thereto accepted by the Borrower pursuant to Section 2.4(d). |
1. | DEFINITIONS AND PRINCIPLES OF CONSTRUCTION ............................................... | 1 | |
1.1 | Definitions .............................................................................................................. | 1 | |
1.2 | Principles of Construction ...................................................................................... | 20 | |
2. | AMOUNT AND TERMS OF LOANS ................................................................................. | 22 | |
2.1 | Revolving Credit Loans .......................................................................................... | 22 | |
2.2 | Swing Line Loans ................................................................................................... | 22 | |
2.3 | Notice of Borrowing Revolving Credit Loans and Swing Line Loans .................. | 24 | |
2.4 | Competitive Bid Loans and Procedure ................................................................... | 24 | |
2.5 | Use of Proceeds ...................................................................................................... | 26 | |
2.6 | Termination, Reduction or Increase of Commitments ........................................... | 27 | |
2.7 | Prepayments of Loans ............................................................................................ | 29 | |
2.8 | Letter of Credit Sub-facility ................................................................................... | 29 | |
2.9 | Letter of Credit Participation .................................................................................. | 31 | |
2.10 | Absolute Obligation with respect to Letter of Credit Payments ............................ | 32 | |
2.11 | Notes ....................................................................................................................... | 32 | |
2.12 | Extension of Commitment Termination Date ......................................................... | 32 | |
2.13 | Defaulting Lenders ................................................................................................. | 33 | |
3. | PROCEEDS, PAYMENTS, CONVERSIONS, INTEREST, YIELD PROTECTION AND FEES ............................................................................................................................ | 35 | |
3.1 | Disbursement of the Proceeds of the Loans ........................................................... | 35 | |
3.2 | Payments ................................................................................................................ | 36 | |
3.3 | Conversions; Other Matters .................................................................................... | 37 | |
3.4 | Interest Rates and Payment Dates .......................................................................... | 38 | |
3.5 | Indemnification for Loss ........................................................................................ | 39 | |
3.6 | Reimbursement for Costs, Etc ................................................................................ | 40 | |
3.7 | Illegality of Funding ............................................................................................... | 41 | |
3.8 | Option to Fund; Substituted Interest Rate .............................................................. | 41 | |
3.9 | Certificates of Payment and Reimbursement ......................................................... | 44 | |
3.10 | Taxes; Net Payments .............................................................................................. | 44 | |
3.11 | Facility Fees ........................................................................................................... | 48 | |
3.12 | Letter of Credit Participation Fee ........................................................................... | 48 | |
3.13 | Replacement of Lender .......................................................................................... | 48 | |
4. | REPRESENTATIONS AND WARRANTIES ...................................................................... | 49 | |
4.1 | Existence and Power .............................................................................................. | 49 | |
4.2 | Authority; EEA Financial Institution ..................................................................... | 49 | |
4.3 | Binding Agreement ................................................................................................. | 50 | |
4.4 | Litigation ................................................................................................................ | 50 | |
4.5 | No Conflicting Agreements .................................................................................... | 50 | |
4.6 | [Reserved] .............................................................................................................. | 50 | |
4.7 | [Reserved] .............................................................................................................. | 50 | |
4.8 | Governmental Regulations ..................................................................................... | 50 | |
4.9 | Federal Reserve Regulations; Use of Proceeds ...................................................... | 50 | |
4.10 | No Misrepresentation ............................................................................................. | 51 | |
4.11 | [Reserved] .............................................................................................................. | 51 | |
4.12 | [Reserved] .............................................................................................................. | 51 | |
4.13 | Financial Statements ............................................................................................... | 51 |
4.14 | Anti-Corruption Laws and Sanctions ..................................................................... | 51 | |
5. | CONDITIONS TO EFFECTIVENESS ................................................................................ | 52 | |
5.1 | Agreement .............................................................................................................. | 52 | |
5.2 | Notes ....................................................................................................................... | 52 | |
5.3 | Corporate Action .................................................................................................... | 52 | |
5.4 | Opinion of Counsel to the Borrower ...................................................................... | 52 | |
5.5 | Termination of Existing 2015 Credit Agreement ................................................... | 52 | |
5.6 | No Default and Representations and Warranties .................................................... | 53 | |
5.7 | Fees ......................................................................................................................... | 53 | |
5.8 | Due Diligence; “Know Your Customer” ................................................................ | 53 | |
6. | CONDITIONS OF LENDING ‑ ALL LOANS .................................................................... | 53 | |
6.1 | Compliance ............................................................................................................. | 53 | |
6.2 | Requests .................................................................................................................. | 54 | |
7. | AFFIRMATIVE COVENANTS ........................................................................................... | 54 | |
7.1 | Legal Existence ...................................................................................................... | 54 | |
7.2 | Taxes ....................................................................................................................... | 54 | |
7.3 | [Reserved] .............................................................................................................. | 54 | |
7.4 | [Reserved] .............................................................................................................. | 54 | |
7.5 | [Reserved] .............................................................................................................. | 54 | |
7.6 | Observance of Legal Requirements ....................................................................... | 54 | |
7.7 | Financial Statements and Other Information .......................................................... | 55 | |
7.8 | Records ................................................................................................................... | 56 | |
8. | NEGATIVE COVENANTS .................................................................................................. | 56 | |
8.1 | [Reserved] .............................................................................................................. | 57 | |
8.2 | Liens ....................................................................................................................... | 57 | |
8.3 | Dispositions ............................................................................................................ | 57 | |
8.4 | Merger or Consolidation, Etc ................................................................................. | 58 | |
8.5 | [Reserved] .............................................................................................................. | 58 | |
8.6 | [Reserved] .............................................................................................................. | 58 | |
8.7 | Limitation on Upstream Dividends by Subsidiaries ............................................... | 58 | |
8.8 | [Reserved] .............................................................................................................. | 59 | |
8.9 | Ratio of Consolidated Indebtedness to Total Capitalization | 59 | |
9. | DEFAULT ............................................................................................................................. | 59 | |
9.1 | Events of Default .................................................................................................... | 59 | |
9.2 | Remedies ................................................................................................................ | 61 | |
10. | AGENT ................................................................................................................................. | 62 | |
10.1 | Appointment and Authority .................................................................................... | 62 | |
10.2 | Rights as a Lender .................................................................................................. | 62 | |
10.3 | Exculpatory Provisions ........................................................................................... | 63 | |
10.4 | Reliance by Administrative Agent .......................................................................... | 64 | |
10.5 | Delegation of Duties ............................................................................................... | 64 | |
10.6 | Resignation of Administrative Agent ..................................................................... | 64 | |
10.7 | Non-Reliance on Administrative Agent and Other Credit Parties .......................... | 65 | |
10.8 | No Other Duties, etc ............................................................................................... | 66 |
11. | OTHER PROVISIONS ......................................................................................................... | 66 | |
11.1 | Amendments, Waivers, Etc .................................................................................... | 66 | |
11.2 | Notices .................................................................................................................... | 67 | |
11.3 | No Waiver; Cumulative Remedies ......................................................................... | 70 | |
11.4 | Survival of Representations and Warranties ........................................................... | 70 | |
11.5 | Payment of Expenses; Indemnified Liabilities ....................................................... | 70 | |
11.6 | Lending Offices ...................................................................................................... | 71 | |
11.7 | Successors and Assigns .......................................................................................... | 71 | |
11.8 | Counterparts; Electronic Execution of Assignments .............................................. | 77 | |
11.9 | Set‑off and Sharing of Payments ............................................................................ | 77 | |
11.10 | Indemnity ................................................................................................................ | 78 | |
11.11 | Governing Law ....................................................................................................... | 81 | |
11.12 | Severability ............................................................................................................. | 81 | |
11.13 | Integration .............................................................................................................. | 81 | |
11.14 | Treatment of Certain Information .......................................................................... | 81 | |
11.15 | Acknowledgments .................................................................................................. | 82 | |
11.16 | Consent to Jurisdiction ........................................................................................... | 82 | |
11.17 | Service of Process .................................................................................................. | 83 | |
11.18 | No Limitation on Service or Suit ........................................................................... | 83 | |
11.19 | WAIVER OF TRIAL BY JURY ............................................................................. | 83 | |
11.20 | Patriot Act Notice ................................................................................................... | 83 | |
11.21 | No Fiduciary Duty .................................................................................................. | 83 | |
11.22 | Acknowledgement and Consent to Bail-In of EEA Financial Institutions ............. | 84 | |
11.23 | Certain ERISA Matters ........................................................................................... | 84 |
1. | DEFINITIONS AND PRINCIPLES OF CONSTRUCTION |
Pricing Level | ABR Advances | Eurodollar Advances/ Swing Line Loans | Facility Fee | Participation Fee - Standby | Participation Fee – Commercial |
Pricing Level I | 0.000% | 0.685% | 0.065% | 0.685% | 0.3425% |
Pricing Level II | 0.000% | 0.795% | 0.080% | 0.795% | 0.3975% |
Pricing Level III | 0.000% | 0.910% | 0.090% | 0.910% | 0.4550% |
Pricing Level IV | 0.015% | 1.015% | 0.110% | 1.015% | 0.5075% |
Pricing Level V | 0.125% | 1.125% | 0.125% | 1.125% | 0.5625% |
Pricing Level VI | 0.275% | 1.275% | 0.225% | 1.275% | 0.6375% |
2. | AMOUNT AND TERMS OF LOANS |
3. | PROCEEDS, PAYMENTS, CONVERSIONS, INTEREST, YIELD PROTECTION AND FEES |
LOANS | RATE |
Revolving Credit Loans constituting ABR Advances | Alternate Base Rate plus the Applicable Margin. |
Revolving Credit Loans constituting Eurodollar Advances | Eurodollar Rate applicable thereto plus the Applicable Margin. |
Competitive Bid Loans | Fixed rate of interest applicable thereto accepted by the Borrower pursuant to Section 2.4(d). |
Swing Line Loans | Negotiated Rate applicable thereto as provided in Section 2.2(a) (or if not available, the LIBOR Daily Floating Rate plus the Applicable Margin). |
4. | REPRESENTATIONS AND WARRANTIES |
5. | CONDITIONS TO EFFECTIVENESS |
6. | CONDITIONS OF LENDING ‑ ALL LOANS AND LETTERS OF CREDIT‑ |
7. | AFFIRMATIVE COVENANTS |
8. | NEGATIVE COVENANTS |
9. | DEFAULT |
10. | AGENT |
11. | OTHER PROVISIONS |
1. | Pursuant and subject to the provisions of the 2017 Incentive Compensation Plan (the “Plan”), of CVS Health Corporation (the “Company”), on the date set forth above (the “Grant Date”), the Company has awarded and hereby evidences the Performance Stock Unit (“PSU”) Award to the person named below (the “Participant”), subject to the terms and conditions set forth and incorporated in this Performance Stock Unit agreement (this “Agreement”). The Plan is hereby made a part hereof, and the Participant agrees to be bound by all the provisions of the Plan. Capitalized terms not otherwise defined herein shall have the meaning assigned to such term(s) in the Plan. On the Grant Date specified above, the fair value, as determined utilizing the methodology approved by the Management Planning and Development Committee of the Board of Directors (the “Committee”) or its delegate, of each PSU equals $XX.XX. |
Participant: | |
Employee ID: | |
Target Number of PSUs (#): |
2. | Each PSU represents a right to a future payment of one share (“Share”) of Common Stock ($0.01 par value) of the Company, subject to required tax withholding. The actual number of Shares (if any) that the Participant receives shall be subject to the terms and conditions of the Plan and this Agreement, including, without limitation, the Company’s achievement of the performance goals set forth in Appendix A and Section 10 of this Agreement. |
3. | (a) Subject to the terms and conditions of the Plan and this Agreement and subject to the Participant’s continued employment, the PSUs shall vest and become non-forfeitable on DATE or such other date as may be provided in Section 6 (the “Vesting Date”), based on the level of achievement of the performance goals set forth in Appendix A, and shall be determined by multiplying the number of PSUs that are subject to this Agreement by the applicable performance adjustment shown in Appendix A for the attained level of the performance goals. The “Performance Period” shall be the three-year period commencing on January 1, 20xx and ending on December 31, 20xx. |
4. | (a) In accordance with rules promulgated by the Committee, the Participant, to the extent eligible under the CVS Health Deferred Stock Compensation Plan, may elect to defer delivery of Shares in settlement of PSUs covered by this Agreement. Any such deferred delivery date elected by the Participant shall become the Settlement Date for purposes of this Agreement. |
5. | On the Settlement Date, the number of Shares to be delivered by the Company to the Participant shall be reduced by the smallest number of Shares having a Fair Market Value at least equal to the dollar amount of federal, state and local tax withholding required to be withheld by the Company with respect to such PSUs on such date. |
6. | (a) Except as provided in Sections 6(b)-(e) below, if, for any reason, the Participant’s employment with the Company and any subsidiary of the Company terminates, all PSUs not then vested in accordance with Section 3 above shall be immediately forfeited. |
7. | A PSU does not represent an equity interest in the Company and carries no voting rights. The Participant shall have no rights of a shareholder with respect to the PSUs prior to the Vesting Date. |
8. | Neither the execution and delivery hereof nor the granting of the Award evidenced hereby shall constitute or be evidence of any agreement or understanding, express or implied, on the part of the Company or its subsidiaries to employ the Participant for any specific period. |
9. | Any notice required to be given hereunder to the Company shall be in writing. If by regular mail, any required notice shall be addressed to: CVS Health Corporation, Attention: Senior Director, Executive Compensation, One CVS Drive, Woonsocket, RI 02895. If by electronic mail, any notice required shall be sent to: equityadministration@cvshealth.com. |
10. | All decisions and interpretations made by the Board of Directors or the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive on all persons. In the event of any inconsistency between the terms hereof and the provisions of the Plan, the Plan shall govern. Furthermore, the determination of the achievement of any performance goals under this Agreement, and the amounts used in making such determination, shall be in the Board of Directors’ or the Committee’s sole discretion and such determination shall be final, binding and conclusive for all purposes and upon all parties. The Committee (or, if applicable, the Chief Executive Officer of the Company) may, in its discretion, reduce or increase the amount of a settlement otherwise to be made in connection with the PSUs to the extent permissible under the Plan. |
11. | The award of PSUs pursuant to this Agreement is expressly subject to and contingent upon the requirement that the Participant shall have fully executed and delivered to the Company the Restrictive Covenant Agreement that may be required and provided by the Company. The applicable agreement containing the restrictive covenants that the Company may require in connection with this award is hereafter referred to as the “Restrictive Covenant Agreement”. |
12. | By accepting this Award, the Participant acknowledges that a copy of the Plan has been made available by the Company for the Participant’s reference and agrees to be bound by the terms and conditions set forth in this Agreement and the Plan as in effect from time to time. |
13. | By accepting this Award, the Participant further acknowledges that the Federal securities laws and/or the Company’s policies regarding trading in its securities may limit or restrict the Participant’s right to trade Shares, including, without limitation, sales of Shares acquired in connection with PSUs. The Participant agrees to comply with such Federal securities law requirements and the Company’s policies, as such laws and policies may be amended from time to time. |
14. | The Company intends that this Agreement not violate any applicable provision of, or result in any additional tax or penalty under, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and that to the extent any provisions of this Agreement do not comply with Code Section 409A the Company shall make such changes in order to comply with Code Section 409A to the extent it considers reasonable. In all events, the provisions of CVS Health Corporation’s 409A Universal Definitions Document are hereby incorporated by reference and to the extent required to avoid a violation of the applicable rules under Section 409A by reason of Section 409A(a)(2)(B)(i) of the Code, payment of any amounts subject to Section 409A of the Code shall be delayed until the first business day of the seventh month immediately following the employment termination date. For purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment, references to the “termination of employment” (and corollary terms) shall be construed to refer to “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)). Notwithstanding the foregoing, the Company makes no representations as to the tax treatment or consequences of any payment made hereunder, and the Participant, by accepting this Award, acknowledges that the Participant shall be solely responsible for same. |
15. | The Award subject to this PSU Agreement under the Plan shall be subject to the terms of the Company’s Recoupment Policy as it exists from time to time, which may require the Participant to immediately repay to the Company the value of any pre-tax economic benefit that he or she may derive from the Award. By accepting this Award, the Participant acknowledges that the Company’s Recoupment Policy has been made available for the Participant’s reference. |
16. | This Agreement shall be governed by the laws of Delaware, without giving effect to its choice of law provisions. |
17. | This Agreement shall be fully effective only upon the Participant’s formal acceptance of the terms and conditions set forth above as required by the Company. |
1. | I have reviewed this quarterly report on Form 10-Q of CVS Health Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | August 7, 2019 | /S/ LARRY J. MERLO | |
Larry J. Merlo | |||
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of CVS Health Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | August 7, 2019 | /S/ EVA C. BORATTO | |
Eva C. Boratto | |||
Executive Vice President and Chief Financial Officer |
Date: | August 7, 2019 | /S/ LARRY J. MERLO |
Larry J. Merlo | ||
President and Chief Executive Officer |
Date: | August 7, 2019 | /S/ EVA C. BORATTO |
Eva C. Boratto | ||
Executive Vice President and Chief Financial Officer |
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 1,931 | $ (2,563) | $ 3,358 | $ (1,565) |
Other comprehensive income (loss), net of tax: | ||||
Net unrealized investment gains | 251 | 0 | 585 | 0 |
Foreign currency translation adjustments | 3 | (27) | 4 | (26) |
Net cash flow hedges | (3) | (4) | (7) | 339 |
Other comprehensive income (loss) | 251 | (31) | 582 | 313 |
Comprehensive income (loss) | 2,182 | (2,594) | 3,940 | (1,252) |
Comprehensive (income) loss attributable to noncontrolling interests | 5 | 0 | (1) | 0 |
Comprehensive income (loss) attributable to CVS Health | $ 2,187 | $ (2,594) | $ 3,939 | $ (1,252) |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 100,000.0 | 100,000.0 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 3,200,000,000 | 3,200,000,000 |
Common stock, shares issued (in shares) | 1,724,000,000 | 1,720,000,000 |
Common stock, shares outstanding (in shares) | 1,299,000,000 | 1,295,000,000 |
Treasury stock (in shares) | 425,000,000 | 425,000,000 |
Condensed Consolidated Statements of Shareholders' Equity (Parentheticals) - USD ($) shares in Millions, $ in Millions |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|---|---|
Treasury Shares Held in Trust (in shares) | 1 | 1 | 1 | 1 | 1 | 1 |
Treasury shares held in trust value | $ 29 | $ 29 | $ 29 | $ 31 | $ 31 | $ 31 |
Common stock par value | $ 17 | $ 17 | $ 17 | 17 | $ 17 | $ 17 |
Accounting Standards Update 2014-09 | ||||||
Adoption of new accounting standard | 13 | |||||
Accounting Standards Update 2018-02 | ||||||
Adoption of new accounting standard | $ 7 |
Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies | Significant Accounting Policies Description of business CVS Health Corporation, together with its subsidiaries (collectively, “CVS Health,” the “Company,” “we,” “our” or “us”), is the nation’s premier health innovation company helping people on their path to better health. Whether in one of its pharmacies or through its health services and plans, CVS Health is pioneering a bold new approach to total health by making quality care more affordable, accessible, simple and seamless. CVS Health is community-based and locally focused, engaging consumers with the care they need when and where they need it. The Company has approximately 9,900 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with more than 102 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year and expanding specialty pharmacy services. CVS Health also serves an estimated 38 million people through traditional, voluntary and consumer-directed health insurance products and related services, including rapidly expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs. On November 28, 2018 (the “Aetna Acquisition Date”), the Company acquired Aetna Inc. (“Aetna”). As a result of the acquisition of Aetna (the “Aetna Acquisition”), the Company added the Health Care Benefits segment. Certain aspects of Aetna’s operations, including products for which the Company no longer solicits or accepts new customers, such as large case pensions and long-term care insurance products, are included in the Company’s Corporate/Other segment. Effective for the first quarter of 2019, the Company realigned the composition of its segments to correspond with changes to its operating model and reflect how its Chief Operating Decision Maker (the “CODM”) reviews information and manages the business. As a result of this realignment, the Company’s SilverScript® PDP moved from the Pharmacy Services segment to the Health Care Benefits segment. In addition, the Company moved Aetna’s mail order and specialty pharmacy operations from the Health Care Benefits segment to the Pharmacy Services segment. Segment financial information for the three and six months ended June 30, 2018, has been retrospectively adjusted to reflect these changes. The Company has four reportable segments: Pharmacy Services, Retail/LTC, Health Care Benefits and Corporate/Other, which are described below. Pharmacy Services Segment The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services, mail order pharmacy, specialty pharmacy and infusion services, clinical services, disease management services and medical spend management. The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on public health insurance exchanges (“Public Exchanges”) and private health insurance exchanges, other sponsors of health benefit plans and individuals throughout the United States. The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services. Retail/LTC Segment The Retail/LTC segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products, cosmetics and personal care products, provides health care services through its MinuteClinic® walk-in medical clinics and conducts long-term care (“LTC”) pharmacy operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to chronic care facilities and other care settings. As of June 30, 2019, the Retail/LTC segment operated approximately 9,900 retail locations, approximately 1,100 MinuteClinic® locations as well as online retail pharmacy websites, LTC pharmacies and onsite pharmacies. Health Care Benefits Segment The Health Care Benefits segment is one of the nation’s leading diversified health care benefits providers, serving an estimated 38 million people as of June 30, 2019. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, Medicaid health care management services, workers’ compensation administrative services and health information technology products and services. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.” Corporate/Other Segment The Company presents the remainder of its financial results in the Corporate/Other segment, which consists of:
Basis of Presentation The accompanying unaudited condensed consolidated financial statements of CVS Health Corporation and its subsidiaries have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In accordance with such rules and regulations, certain information and accompanying note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in Exhibit 13.1 to the Company’s Annual Report on Form 10‑K for the year ended December 31, 2018 (the “2018 Form 10‑K”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Because of the influence of various factors on the Company’s operations, including business combinations, certain holidays and other seasonal influences, net income for any interim period may not be comparable to the same interim period in previous years or necessarily indicative of income for the full year. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of CVS Health Corporation and its majority-owned subsidiaries and the variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated. The Company continually evaluates its investments to determine if they represent variable interests in a VIE. If the Company determines that it has a variable interest in a VIE, the Company then evaluates if it is the primary beneficiary of the VIE. The evaluation is a qualitative assessment as to whether the Company has the ability to direct the activities of a VIE that most significantly impact the entity’s economic performance. The Company consolidates a VIE if it is considered to be the primary beneficiary. Assets and liabilities of VIEs for which the Company is the primary beneficiary were not significant to the Company’s unaudited condensed consolidated financial statements. VIE creditors do not have recourse against the general credit of the Company. Reclassifications Certain prior year amounts have been reclassified to conform with the current year presentation. Restricted Cash Restricted cash included in other current assets in the unaudited condensed consolidated balance sheets represents amounts held in escrow accounts in connection with certain recent acquisitions. Restricted cash included in other assets in the unaudited condensed consolidated balance sheets represents amounts held in a trust in one of the Company’s captive insurance companies to satisfy collateral requirements associated with the assignment of certain insurance polices. All restricted cash is invested in time deposits, money market funds or commercial paper. The following represents a reconciliation of cash and cash equivalents in the unaudited condensed consolidated balance sheets to total cash, cash equivalents and restricted cash in the unaudited condensed consolidated statements of cash flows:
Accounts Receivable Accounts receivable are stated net of allowances for doubtful accounts, customer credit allowances, contractual allowances and estimated terminations. Accounts receivable, net is composed of the following:
Revenue Recognition The following is a discussion of the Company’s revenue recognition policies by segment. Pharmacy Services Segment The Pharmacy Services segment sells prescription drugs directly through its mail service dispensing pharmacies and indirectly through the Company’s retail pharmacy network. The Company’s pharmacy benefit arrangements are accounted for in a manner consistent with a master supply arrangement as there are no contractual minimum volumes and each prescription is considered a separate purchasing decision and distinct performance obligation transferred at a point in time. PBM services performed in connection with each prescription claim are considered part of a single performance obligation which culminates in the dispensing of prescription drugs. The Company recognizes revenue using the gross method at the contract price negotiated with its clients when the Company has concluded it controls the prescription drug before it is transferred to the client plan members. The Company controls prescriptions dispensed indirectly through its retail pharmacy network because it has separate contractual arrangements with those pharmacies, has discretion in setting the price for the transaction and assumes primary responsibility for fulfilling the promise to provide prescription drugs to its client plan members while also performing the related PBM services. Revenues include (i) the portion of the price the client pays directly to the Pharmacy Services segment, net of any discounts earned on brand name drugs or other discounts and refunds paid back to the client (see “Drug Discounts” and “Guarantees” below), (ii) the price paid to the Pharmacy Services segment by client plan members for mail order prescriptions and the price paid to retail network pharmacies by client plan members for retail prescriptions (“Retail Co-Payments”), and (iii) claims based administrative fees for retail pharmacy network contracts. Sales taxes are not included in revenue. The Company recognizes revenue when control of the prescription drugs is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those prescription drugs. The following revenue recognition policies have been established for the Pharmacy Services segment:
all of its performance obligations under its client contracts and does not experience a significant level of returns or reshipments.
For contracts under which the Pharmacy Services segment acts as an agent or does not control the prescription drugs prior to transfer to the client plan member, revenue is recognized using the net method. Drug Discounts The Pharmacy Services segment records revenue net of manufacturers’ rebates earned by its clients based on their plan members’ utilization of brand name formulary drugs. The Pharmacy Services segment estimates these rebates at period-end based on actual and estimated claims data and its estimates of the manufacturers’ rebates earned by its clients. The estimates are based on the best available data at period-end and recent history for the various factors that can affect the amount of rebates due to the client. The Pharmacy Services segment adjusts its rebates payable to clients to the actual amounts paid when these rebates are paid or as significant events occur. Any cumulative effect of these adjustments is recorded against revenues as identified. Adjustments generally result from contract changes with clients or manufacturers that have retroactive rebate adjustments, differences between the estimated and actual product mix subject to rebates, or whether the brand name drug was included in the applicable formulary. The effect of adjustments between estimated and actual manufacturers’ rebate amounts has not been material to the Company’s operating results or financial condition. Guarantees The Pharmacy Services segment also adjusts revenues for refunds owed to clients resulting from pricing guarantees and performance against defined service and performance metrics. The inputs to these estimates are not subject to a high degree of subjectivity or volatility. The effect of adjustments between estimated and actual pricing and performance refund amounts has not been material to the Company’s operating results or financial condition. Retail/LTC Segment Retail Pharmacy The Company’s retail drugstores recognize revenue at the time the customer takes possession of the merchandise. For pharmacy sales, each prescription claim is its own arrangement with the customer and is a performance obligation, separate and distinct from other prescription claims under other retail network arrangements. Revenues are adjusted for refunds owed to third party payers for pricing guarantees and performance against defined value-based service and performance metrics. The inputs to these estimates are not subject to a high degree of subjectivity or volatility. The effect of adjustments between estimated and actual pricing and performance refund amounts has not been material to the Company’s operating results or financial condition. Revenue from Company gift cards purchased by customers is deferred as a contract liability until goods or services are transferred. Any amounts not expected to be redeemed by customers (i.e., breakage) are recognized based on historical redemption patterns. Customer returns are not material to the Company’s operating results or financial condition. Sales taxes are not included in revenue. Loyalty Program The Company’s customer loyalty program, ExtraCare®, consists of two components, ExtraSavingsTM and ExtraBucks® Rewards. ExtraSavings are coupons that are recorded as a reduction of revenue when redeemed as the Company has concluded that they do not represent a promise to the customer to deliver additional goods or services at the time of issuance because they are not tied to a specific transaction or spending level. ExtraBucks Rewards are accumulated by customers based on their historical spending levels. Thus, the Company has determined that there is an additional performance obligation to those customers at the time of the initial transaction. The Company allocates the transaction price to the initial transaction and the ExtraBucks Rewards transaction based upon the relative standalone selling price, which considers historical redemption patterns for the rewards. Revenue allocated to ExtraBucks Rewards is recognized as those rewards are redeemed. At the end of each period, unredeemed rewards are reflected as a contract liability. Long-term Care Revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. Each prescription claim represents a separate performance obligation of the Company, separate and distinct from other prescription claims under customer arrangements. A significant portion of Long-term Care revenue from sales of pharmaceutical and medical products is reimbursed by the federal Medicare Part D program and, to a lesser extent, state Medicaid programs. The Company monitors its revenues and receivables from these reimbursement sources, as well as other third-party insurance payors, and reduces revenue at the revenue recognition date to properly account for the variable consideration due to anticipated differences between billed and reimbursed amounts. Accordingly, the total revenues and receivables reported in the Company’s unaudited condensed consolidated financial statements are recorded at the amount expected to be ultimately received from these payors. Patient co-payments associated with Medicare Part D, certain state Medicaid programs, Medicare Part B and certain third-party payors are typically not collected at the time products are delivered or services are rendered, but are billed to the individuals as part of normal billing procedures and subject to normal accounts receivable collections procedures. Walk-In Medical Clinics For services provided by the Company’s walk-in medical clinics, revenue recognition occurs for completed services provided to patients, with adjustments taken for third-party payor contractual obligations and patient direct bill historical collection rates. Health Care Benefits Segment Premium Revenue Premiums are recognized as revenue in the month in which the enrollee is entitled to receive health care services. Premiums are reported net of an allowance for estimated terminations and uncollectible amounts. Additionally, premium revenue subject to the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010’s (as amended, collectively, the “ACA’s”) minimum medical loss ratio (“MLR”) rebate requirements is recorded net of the estimated minimum MLR rebates for the current calendar year. Premiums related to unexpired contractual coverage periods (unearned premiums) are reported as other insurance liabilities on the unaudited condensed consolidated balance sheets and recognized as revenue when earned. Some of the Company’s contracts allow for premiums to be adjusted to reflect actual experience or the relative health status of Insured members. Such adjustments are reasonably estimable at the outset of the contract, and adjustments to those estimates are made based on actual experience of the customer emerging under the contract and the terms of the underlying contract. Services Revenue Services revenue relates to contracts that can include various combinations of services or series of services which generally are capable of being distinct and accounted for as separate performance obligations. Health Care Benefits segment services revenue primarily consists of the following components:
Disaggregation of Revenue The following tables disaggregate the Company’s revenue by major source in each segment for the three and six months ended June 30, 2019 and 2018:
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Contract Balances Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration, for example ExtraBucks® Rewards and unredeemed Company gift cards. The consideration received remains a contract liability until goods or services have been provided to the customer. In addition, the Company recognizes breakage on Company gift cards based on historical redemption patterns. The following table provides information about receivables and contract liabilities from contracts with customers:
During the six months ended June 30, 2019, the contract liabilities balance includes increases related to customers’ earnings in ExtraBucks Rewards or issuances of Company gift cards and decreases for revenues recognized during the period as a result of the redemption of ExtraBucks Rewards or Company gift cards and breakage of Company gift cards. Below is a summary of such changes:
Related Party Transactions The Company has an equity method investment in SureScripts, LLC (“SureScripts”), which operates a clinical health information network. The Company utilizes this clinical health information network in providing services to its client plan members and retail customers. The Company expensed fees for the use of this network of approximately $2 million and $8 million in the three months ended June 30, 2019 and 2018, respectively, and expensed fees for the use of this network of approximately $12 million and $30 million in the six months ended June 30, 2019 and 2018, respectively. The Company’s investment in and equity in the earnings of SureScripts for all periods presented is immaterial. The Company has an equity method investment in Heartland Healthcare Services (“Heartland”). Heartland operates several LTC pharmacies in four states. Heartland paid the Company approximately $27 million and $36 million for pharmaceutical inventory purchases during the three months ended June 30, 2019 and 2018, respectively, and $52 million and $71 million for pharmaceutical inventory purchases during the six months ended June 30, 2019 and 2018, respectively. Additionally, the Company performs certain collection functions for Heartland and then passes those customer cash collections back to Heartland. The Company’s investment in and equity in the earnings of Heartland for all periods presented is immaterial. New Accounting Pronouncements Recently Adopted Leases In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (Topic 842). Lessees are required to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability is equal to the present value of lease payments. The asset is based on the liability, subject to certain adjustments, such as for initial direct costs. For income statement purposes, a dual model was retained, requiring leases to be classified as either operating or finance leases. Operating leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result in a front-loaded expense pattern (similar to capital leases under the prior accounting standard). Lessor accounting is similar to the prior model, but updated to align with certain changes to the lessee model (e.g., certain definitions, such as initial direct costs, have been updated) and the new revenue recognition standard that was adopted in 2018. The Company adopted this new accounting standard on January 1, 2019 on a modified retrospective basis and applied the new standard to all leases through a cumulative-effect adjustment to beginning retained earnings. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which includes, among other things, the ability to carry forward the existing lease classification. On January 1, 2019, the Company recorded an after-tax transition adjustment to increase retained earnings by approximately $178 million ($241 million prior to tax effect). The new standard had a material impact on the unaudited condensed consolidated balance sheet, but did not materially impact the Company’s consolidated operating results and had no impact on the Company’s cash flows. The following is a discussion of the Company’s lease policy under the new lease accounting standard: The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and exclude lease incentives. The Company’s real estate leases typically contain options that permit renewals for additional periods of up to five years each. For real estate leases, the options to extend are not considered reasonably certain at lease commencement because the Company reevaluates each lease on a regular basis to consider the economic and strategic incentives of exercising the renewal options, and regularly opens or closes stores to align with its operating strategy. Generally, the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the right-of-use asset and lease liability. Similarly, renewal options are not included in the lease term for non-real estate leases because they are not considered reasonably certain of being exercised at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheets and lease expense is recognized on a straight-line basis over the term of the short-term lease. For real estate leases, the Company accounts for lease components and nonlease components as a single lease component. Certain real estate leases require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities. See Note 5 ‘‘Leases’’ for additional information. Impact of New Lease Standard on Balance Sheet Line Items As a result of applying the new lease standard using a modified retrospective method, the following adjustments were made to accounts on the condensed consolidated balance sheet as of January 1, 2019:
Accounting for Interest Associated with the Purchase of Callable Debt Securities In March 2017, the FASB issued ASU 2017-08, Accounting for Interest Associated with the Purchase of Callable Debt Securities (Topic 310). Under this standard, premiums on callable debt securities are amortized to the earliest call date rather than to the contractual maturity date. Callable debt securities held at a discount will continue to be amortized to the contractual maturity date. The Company adopted this new accounting guidance on January 1, 2019 on a modified retrospective basis and recorded an immaterial cumulative effect adjustment from accumulated other comprehensive income to retained earnings on the condensed consolidated balance sheet. New Accounting Pronouncements Not Yet Adopted Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This standard requires the use of a forward-looking expected loss impairment model for trade and other receivables, held-to-maturity debt securities, loans and other instruments. This standard also requires impairments and recoveries for available-for-sale debt securities to be recorded through an allowance account and revises certain disclosure requirements. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures. Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and other - Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Topic 350-40 to determine which implementation costs to capitalize as assets. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures. Targeted Improvements to the Accounting for Long-Duration Insurance Contracts In August 2018, the FASB issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (Topic 944). This standard requires the Company to review cash flow assumptions for its long-duration insurance contracts at least annually and recognize the effect of changes in future cash flow assumptions in net income. This standard also requires the Company to update discount rate assumptions quarterly and recognize the effect of changes in these assumptions in other comprehensive income. The rate used to discount the Company’s liability for future policy benefits will be based on an estimate of the yield for an upper-medium-grade fixed-income instrument. In addition, this standard changes the amortization method for deferred acquisition costs and requires additional disclosures regarding the long duration insurance contract liabilities in the Company’s interim and annual financial statements. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.
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Acquisition of Aetna |
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Acquisition of Aetna | Acquisition of Aetna On the Aetna Acquisition Date, the Company acquired 100% of the outstanding shares and voting interests of Aetna for a combination of cash and stock. Under the terms of the merger agreement, Aetna shareholders received $145.00 in cash and 0.8378 CVS Health shares for each Aetna share. The transaction valued Aetna at approximately $212 per share or approximately $70 billion. Including the assumption of Aetna’s debt, the total value of the transaction was approximately $78 billion. The Company financed the cash portion of the purchase price through a combination of cash on hand and by issuing approximately $45 billion of new debt, including senior notes and term loans. Aetna is a leading health care benefits company that offers a broad range of traditional, voluntary, and consumer-directed health insurance products and related services. The Company acquired Aetna to help improve the consumer health care experience by combining Aetna’s health care benefits products and services with CVS Health’s approximately 9,900 retail locations, approximately 1,100 walk-in medical clinics and integrated pharmacy capabilities with the goal of becoming the new, trusted front door to health care. The transaction has been accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values at the date of acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
The assessment of fair value is preliminary and is based on information that was available to management at the time the unaudited condensed consolidated financial statements were prepared. The most significant open item relates to the accounting for income taxes as management is awaiting additional information to complete its assessment. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. Measurement period adjustments to assets acquired and liabilities assumed during the six months ended June 30, 2019 primarily related to additional information received related to certain valuations and contingencies and the related impact on the accounting for income taxes and goodwill. There were no material income statement measurement period adjustments recorded during the three and six months ended June 30, 2019. Unaudited pro forma financial information The following unaudited pro forma information presents a summary of the Company’s combined operating results for the three and six months ended June 30, 2018 as if the Aetna acquisition and the related financing transactions had occurred on January 1, 2017. The following pro forma financial information is not necessarily indicative of the Company’s operating results as they would have been had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses.
The pro forma results for the three and six months ended June 30, 2018 include adjustments related to the following purchase accounting and acquisition-related items:
• Tax effects of the adjustments noted above.
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Investments |
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Investments | Investments Total investments at June 30, 2019 and December 31, 2018 were as follows:
Debt Securities Debt securities available for sale at June 30, 2019 and December 31, 2018 were as follows:
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The fair value of debt securities at June 30, 2019 is shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity.
Summarized below are the debt securities the Company held at June 30, 2019 and December 31, 2018 that were in an unrealized capital loss position:
Since Aetna’s investment portfolio was measured at fair value as of the Aetna Acquisition Date, each of the securities in the table above were in an unrealized loss position for less than 12 months. The Company reviewed the securities in the table above and concluded that these are performing assets generating investment income to support the needs of the Company’s business. In performing this review, the Company considered factors such as the quality of the investment security based on research performed by the Company’s internal credit analysts and external rating agencies and the prospects of realizing the carrying value of the security based on the investment’s current prospects for recovery. As of June 30, 2019, the Company did not intend to sell these securities, and did not believe it was more likely than not that it would be required to sell these securities prior to anticipated recovery of their amortized cost basis. The maturity dates for debt securities in an unrealized capital loss position at June 30, 2019 were as follows:
Mortgage Loans The Company’s mortgage loans are collateralized by commercial real estate. The Company did not have any mortgage loans during the three and six months ended June 30, 2018. During the three and six months ended June 30, 2019, the Company had the following activity in its mortgage loan portfolio:
The Company assesses mortgage loans on a regular basis for credit impairments, and annually assigns a credit quality indicator to each loan. The Company’s credit quality indicator is internally developed and categorizes its portfolio on a scale from 1 to 7. These indicators are based upon several factors, including current loan to value ratios, property condition, market trends, creditworthiness of the borrower and deal structure. The vast majority of the Company’s mortgage loans fall into categories 2 to 4.
Based upon the Company’s assessments at June 30, 2019 and December 31, 2018, the Company’s mortgage loans were given the following credit quality indicators:
Net Investment Income Sources of net investment income for the three and six months ended June 30, 2019 and 2018 were as follows:
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The portion of unrealized capital gains and losses recognized during the three and six months ended June 30, 2019 related to investments in equity securities held as of the reporting date was not material. The Company did not have any material proceeds from the sale of available for sale debt securities or related gross realized capital gains or losses for the three and six months ended June 30, 2018. Excluding amounts related to experience-rated products, proceeds from the sale of available for sale debt securities and the related gross realized capital gains and losses for the three and six months ended June 30, 2019 were as follows:
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Fair Value |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Fair Value The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. The Company’s assets and liabilities carried at fair value have been classified within one of three levels of a hierarchy established by GAAP. The following are the levels of the hierarchy and a brief description of the type of valuation information (“valuation inputs”) that qualifies a financial asset or liability for each level:
For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see Note 4 “Fair Value” of Notes to Consolidated Financial Statements in Exhibit 13.1 to the 2018 Form 10-K. There were no financial liabilities measured at fair value on a recurring basis on the condensed consolidated balance sheets at June 30, 2019 or December 31, 2018. Financial assets measured at fair value on a recurring basis on the condensed consolidated balance sheets at June 30, 2019 and December 31, 2018 were as follows:
There were no transfers between Levels 1 and 2 during the three and six months ended June 30, 2019 or 2018. During the three and six months ended June 30, 2019 and 2018, there were no transfers into or out of Level 3. The carrying value and estimated fair value classified by level of fair value hierarchy for financial instruments carried on the condensed consolidated balance sheets at adjusted cost or contract value at June 30, 2019 and December 31, 2018 were as follows:
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Separate Accounts assets related to the Company’s large case pensions products represent funds maintained to meet specific objectives of contract holders. Since contract holders bear the investment risk of these assets, a corresponding Separate Accounts liability has been established equal to the assets. These assets and liabilities are carried at fair value. Separate Accounts financial assets as of June 30, 2019 and December 31, 2018 were as follows:
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases The Company leases most of its retail stores and mail order facilities and certain distribution centers and corporate offices under operating or finance leases, typically with initial terms of 15 to 25 years. The Company also leases certain equipment and other assets under operating or finance leases, typically with initial terms of 3 to 10 years. The Company maintains certain lease agreements for which the noncancelable contractual term of the pharmacy lease arrangement exceeds the remaining estimated economic life of the buildings being leased. For these pharmacy lease agreements, the Company concluded that for accounting purposes the lease term was the remaining economic life of the buildings. Consequently, most of these individual pharmacy leases are finance leases. The following table is a summary of the Company’s components of net lease cost for the three and six months ended June 30, 2019:
Supplemental cash flow information related to leases for the six months ended June 30, 2019 is as follows:
Supplemental balance sheet information related to leases as of June 30, 2019 is as follows:
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The following table summarizes the maturity of lease liabilities under finance and operating leases as of June 30, 2019:
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The Company finances a portion of its store development program through sale-leaseback transactions. The properties are generally sold at net book value, which generally approximates fair value, and the resulting leases generally qualify and are accounted for as operating leases. The operating leases that resulted from these transactions are included in the table above. The Company does not have any retained or contingent interests in the stores and does not provide any guarantees, other than a guarantee of lease payments, in connection with the sale-leaseback transactions. Sale-leaseback transactions resulted in an immaterial gain and proceeds of $5 million in the six months ended June 30, 2019. There were no sale-leaseback transactions in the three months ended June 30, 2019 or the three and six months ended June 30, 2018. Store Rationalization Charge During the six months ended June 30, 2019, the Company performed a review of its retail stores and determined it would close 46 underperforming retail pharmacy stores during the second quarter of 2019. As a result, management determined that there were indicators of impairment with respect to the impacted stores, including the operating lease right-of-use assets. Accordingly, an interim long lived asset impairment test was performed. The results of the impairment test indicated that the fair value of each store asset group was lower than the carrying value. The fair value was determined using a discounted cash flow method based on estimated sublease income. In the six months ended June 30, 2019, the Company recorded a store rationalization charge of $135 million, primarily related to these operating lease right-of-use asset impairment charges, which was recorded within operating expenses in the Retail/LTC Segment.
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Leases | Leases The Company leases most of its retail stores and mail order facilities and certain distribution centers and corporate offices under operating or finance leases, typically with initial terms of 15 to 25 years. The Company also leases certain equipment and other assets under operating or finance leases, typically with initial terms of 3 to 10 years. The Company maintains certain lease agreements for which the noncancelable contractual term of the pharmacy lease arrangement exceeds the remaining estimated economic life of the buildings being leased. For these pharmacy lease agreements, the Company concluded that for accounting purposes the lease term was the remaining economic life of the buildings. Consequently, most of these individual pharmacy leases are finance leases. The following table is a summary of the Company’s components of net lease cost for the three and six months ended June 30, 2019:
Supplemental cash flow information related to leases for the six months ended June 30, 2019 is as follows:
Supplemental balance sheet information related to leases as of June 30, 2019 is as follows:
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The following table summarizes the maturity of lease liabilities under finance and operating leases as of June 30, 2019:
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The Company finances a portion of its store development program through sale-leaseback transactions. The properties are generally sold at net book value, which generally approximates fair value, and the resulting leases generally qualify and are accounted for as operating leases. The operating leases that resulted from these transactions are included in the table above. The Company does not have any retained or contingent interests in the stores and does not provide any guarantees, other than a guarantee of lease payments, in connection with the sale-leaseback transactions. Sale-leaseback transactions resulted in an immaterial gain and proceeds of $5 million in the six months ended June 30, 2019. There were no sale-leaseback transactions in the three months ended June 30, 2019 or the three and six months ended June 30, 2018. Store Rationalization Charge During the six months ended June 30, 2019, the Company performed a review of its retail stores and determined it would close 46 underperforming retail pharmacy stores during the second quarter of 2019. As a result, management determined that there were indicators of impairment with respect to the impacted stores, including the operating lease right-of-use assets. Accordingly, an interim long lived asset impairment test was performed. The results of the impairment test indicated that the fair value of each store asset group was lower than the carrying value. The fair value was determined using a discounted cash flow method based on estimated sublease income. In the six months ended June 30, 2019, the Company recorded a store rationalization charge of $135 million, primarily related to these operating lease right-of-use asset impairment charges, which was recorded within operating expenses in the Retail/LTC Segment.
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Health Care Costs Payable |
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Health Care and Other Insurance Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Health Care Costs Payable | Health Care Costs Payable Prior to the Aetna Acquisition, the Company’s health care costs payable balance was immaterial and related to unpaid pharmacy claims for its SilverScript PDP. Accordingly, the Company has not included disclosures for health care costs payable for periods prior to the Aetna Acquisition Date. The following table shows the components of the change in health care costs payable during the six months ended June 30, 2019:
The Company’s estimates of prior years’ health care costs payable decreased by $489 million in the six months ended June 30, 2019, because claims were settled for amounts less than originally estimated (i.e., the amount of claims incurred was lower than originally estimated), primarily due to lower health care cost trends as well as the actual claim submission time being faster than originally assumed (i.e., the Company’s completion factors were higher than originally assumed) in estimating health care costs payable at the end of the prior year. At June 30, 2019, the Company’s liabilities for the ultimate cost of (i) services rendered to members but not yet reported to the Company and (ii) claims which have been reported to the Company but not yet paid (collectively, “IBNR”) plus expected development on reported claims totaled approximately $5.1 billion. The majority of the Company’s liabilities for IBNR plus expected development on reported claims at June 30, 2019 related to the current year.
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Shareholders' Equity |
6 Months Ended |
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Jun. 30, 2019 | |
Equity [Abstract] | |
Shareholders' Equity | Shareholders’ Equity Share Repurchases On November 2, 2016, the Company’s Board of Directors (the “Board”) authorized the 2016 share repurchase program (“2016 Repurchase Program”) for up to $15.0 billion of the Company’s common shares. The 2016 Repurchase Program permits the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase transactions, and/or other derivative transactions. The 2016 Repurchase Program can be modified or terminated by the Board at any time. During the six months ended June 30, 2019 and 2018, the Company did not repurchase any shares of its common stock. At June 30, 2019, the Company had remaining authorization to repurchase an aggregate of up to approximately $13.9 billion of its common shares under the 2016 Repurchase Program. Dividends |
Other Comprehensive Income (Loss) |
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Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) Shareholders’ equity included the following activity in accumulated other comprehensive income for the three and six months ended June 30, 2019 and 2018:
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(3) Amounts reclassified from accumulated other comprehensive loss for specifically identified cash flow hedges are included within interest expense in the unaudited condensed consolidated statements of operations. The Company expects to reclassify approximately $18 million, net of tax, in gains associated with its cash flow hedges into net income within the next 12 months.
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Earnings (Loss) Per Share |
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Earnings (Loss) Per Share | Earnings (Loss) Per Share Earnings (loss) per share is computed using the two-class method. For periods in which the Company reports net income, diluted earnings per share is determined by using the weighted average number of common and dilutive common equivalent shares outstanding during the period, unless the effect is antidilutive. Stock appreciation rights and options to purchase 23.3 million and 19.3 million shares of common stock were outstanding, but were excluded from the calculation of diluted earnings per share, for the three and six months ended June 30, 2019, respectively, because their exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. For the same reason, options to purchase 15.3 million and 14.3 million shares of common stock were outstanding, but were excluded from the calculation of diluted earnings per share, for the three and six months ended June 30, 2018, respectively. Due to the loss from continuing operations attributable to CVS Health in the three and six months ended June 30, 2018, 1.9 million and 2.3 million, respectively, of potentially dilutive common equivalent shares were also excluded from the calculation of diluted earnings per share, as the impact of these shares was antidilutive. The following is a reconciliation of basic and diluted earnings (loss) per share from continuing operations for the respective periods:
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Reinsurance |
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Jun. 30, 2019 | |
Reinsurance Disclosures [Abstract] | |
Reinsurance | Reinsurance The Company utilizes reinsurance agreements primarily to reduce required capital and to facilitate the acquisition or disposition of certain insurance contracts. Ceded reinsurance agreements permit the Company to recover a portion of its losses from reinsurers, although they do not discharge the Company’s primary liability as the direct insurer of the risks reinsured. On November 30, 2018, Aetna completed the sale of its standalone Medicare Part D prescription drug plans to a subsidiary of WellCare, effective December 31, 2018. In connection with that sale, subsidiaries of WellCare and Aetna entered into reinsurance agreements under which WellCare has ceded to Aetna 100% of the insurance risk related to the divested standalone Medicare Part D prescription drug plans for the 2019 PDP plan year. In January 2019, the Company entered into two four-year reinsurance agreements with an unrelated reinsurer that allow it to reduce required capital and provide collateralized excess of loss reinsurance coverage on a portion of the Health Care Benefits segment’s group Commercial Insured business.
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Commitments and Contingencies |
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Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Lease Guarantees Between 1995 and 1997, the Company sold or spun off a number of subsidiaries, including Bob’s Stores and Linens ‘n Things, each of which subsequently filed for bankruptcy, and Marshalls. In many cases, when a former subsidiary leased a store, the Company provided a guarantee of the former subsidiary’s lease obligations. When the subsidiaries were disposed of and accounted for as discontinued operations, the Company’s guarantees remained in place, although each initial purchaser agreed to indemnify the Company for any lease obligations the Company was required to satisfy. If any of the purchasers or any of the former subsidiaries fail to make the required payments under a store lease, the Company could be required to satisfy those obligations. As of June 30, 2019, the Company guaranteed approximately 79 such store leases (excluding the lease guarantees related to Linens ‘n Things, which have been recorded as a liability on the unaudited condensed consolidated balance sheet), with the maximum remaining lease term extending through 2029. Guaranty Fund Assessments, Market Stabilization and Other Non-Voluntary Risk Sharing Pools Under guaranty fund laws existing in all states, insurers doing business in those states can be assessed (in most states up to prescribed limits) for certain obligations of insolvent insurance companies to policyholders and claimants. The life and health insurance guaranty associations in which the Company participates that operate under these laws respond to insolvencies of long-term care insurers as well as health insurers. The Company’s assessments generally are based on a formula relating to the Company’s health care premiums in the state compared to the premiums of other insurers. Certain states allow assessments to be recovered over time as offsets to premium taxes. Some states have similar laws relating to HMOs and/or other payors such as not-for-profit consumer-governed health plans established under the ACA. In 2009, the Pennsylvania Insurance Commissioner placed long-term care insurer Penn Treaty Network America Insurance Company and one of its subsidiaries (collectively, “Penn Treaty”) in rehabilitation, an intermediate action before insolvency, and subsequently petitioned a state court to convert the rehabilitation into a liquidation. Penn Treaty was placed in liquidation in March 2017. The Company has recorded a liability for its estimated share of future assessments by applicable life and health guaranty associations. It is reasonably possible that in the future the Company may record a liability and expense relating to other insolvencies which could have a material adverse effect on the Company’s operating results, financial condition and cash flows. While historically the Company has ultimately recovered more than half of guaranty fund assessments through statutorily permitted premium tax offsets, significant increases in assessments could lead to legislative and/or regulatory actions that may limit future offsets. HMOs in certain states in which the Company does business are subject to assessments, including market stabilization and other risk-sharing pools, for which the Company is assessed charges based on incurred claims, demographic membership mix and other factors. The Company establishes liabilities for these assessments based on applicable laws and regulations. In certain states, the ultimate assessments the Company pays are dependent upon the Company’s experience relative to other entities subject to the assessment, and the ultimate liability is not known at the financial statement date. While the ultimate amount of the assessment is dependent upon the experience of all pool participants, the Company believes it has adequate reserves to cover such assessments. Litigation and Regulatory Proceedings The Company is a party to numerous legal proceedings, investigations, audits and claims arising, for the most part, in the ordinary course of its businesses, including the matters described below. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and reasonably estimable, the Company does not establish an accrued liability. None of the Company’s accruals for outstanding legal matters are material individually or in the aggregate to the Company’s financial condition. Except as otherwise noted, the Company cannot predict with certainty the timing or outcome of the legal matters described below, and the Company is unable to reasonably estimate a possible loss or range of possible loss in excess of amounts already accrued for these matters. It is reasonably possible that the outcome of such legal matters could be material to the Company. Usual and Customary Litigation The Company is named as a defendant in a number of litigations that allege that the Company’s retail stores overcharged for prescription drugs by not providing the correct usual and customary charge. State of Texas ex rel. Myron Winkelman and Stephani Martinson, et al. v. CVS Health Corporation (Travis County Texas District Court). In February 2012, the Attorney General of the State of Texas issued Civil Investigative Demands (“CIDs”) to the Company and subsequently has issued a series of requests for documents and information in connection with its investigation concerning the CVS Health Savings Pass program and other pricing practices with respect to claims for reimbursement from the Texas Medicaid program. In January 2017, the Travis County Court unsealed a first amended qui tam petition filed in April 2014. The government has intervened in this case. The amended petition alleges the Company violated the Texas Medicaid Fraud Prevention Act by submitting false claims for reimbursement to the Texas Medicaid program by, among other things, failing to use the price available to members of the CVS Health Savings Pass program as the pharmacies’ usual and customary price. The amended petition was unsealed following the Company’s December 2016 filing of CVS Pharmacy, Inc. v. Charles Smith, et al. (Travis County Texas District Court), a declaratory judgment action against the State of Texas seeking a declaration that the prices charged to members of the CVS Health Savings Pass program do not constitute usual and customary prices under the applicable Medicaid regulation. In March 2018, the Travis County Court denied the State of Texas’s request for temporary injunctive relief. In June 2019, the Company and the Texas Attorney General commenced a civil jury trial in the qui tam action. Prior to the conclusion of that trial, the parties reached a settlement in principle on the remaining issues. Corcoran et al. v. CVS Health Corporation (U.S. District Court for the Northern District of California) and Podgorny et al. v. CVS Health Corporation (U.S. District Court for the Northern District of Illinois). These putative class actions were filed against the Company in July and September 2015. The cases were consolidated in the U.S. District Court for the Northern District of California. Plaintiffs seek damages and injunctive relief under the consumer protection statutes and common laws of certain states on behalf of a class of consumers who purchased certain prescription drugs. Several third-party payors filed similar putative class actions on behalf of payors captioned Sheet Metal Workers Local No. 20 Welfare and Benefit Fund v. CVS Health Corp. and Plumbers Welfare Fund, Local 130 v. CVS Health Corporation (both pending in the U.S. District Court for the District of Rhode Island) in February and August 2016. In all of these cases the plaintiffs allege the Company overcharged for certain prescription drugs by not submitting the price available to members of the CVS Health Savings Pass program as the pharmacy’s usual and customary price. In the Corcoran case, the U.S. District Court granted summary judgment to CVS on plaintiffs’ claims in their entirety and certified certain subclasses in September 2017. In June 2019, the Ninth Circuit reversed the District Court’s granting of summary judgment and reversed the District Court’s narrowing of the requested class. The Sheet Metal Workers plaintiffs have amended their complaint to assert a claim under the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) premised on an alleged conspiracy between the Company and other PBMs. The Company is defending itself against these claims. State of California ex rel. Matthew Omlansky v. CVS Caremark Corporation (Superior Court of the State of California, County of Sacramento). In April 2016, the California Superior Court unsealed a first amended qui tam complaint filed in July 2013. The government has declined to intervene in this case. The relator alleges that the Company submitted false claims for payment to the California Medicaid program in connection with reimbursement for drugs available through the CVS Health Savings Pass program as well as certain other generic drugs. The case has been stayed pending the relator’s appeal of the judgment against him in a similar case against another retailer. The Company is defending itself against these claims. State of Mississippi v. CVS Health Corporation, et al. (Circuit Court of DeSoto County, Mississippi, Third Judicial District). In July 2016, the Company was served with a complaint filed on behalf of the State of Mississippi, originally in the Chancery Court, but later transferred to the Circuit Court. The complaint alleged that CVS retail pharmacies in Mississippi submitted false claims for reimbursement to the Mississippi Medicaid program by not submitting the price available to members of the CVS Health Savings Pass program as the pharmacy’s usual and customary price. In June 2019, the Company’s motion for judgment on the pleadings was granted in part and denied in part. Also in June 2019, the State of Mississippi’s motion to dismiss the Company’s counterclaim for declaratory relief was granted. The Company is defending itself against these claims. PBM Litigation and Investigations The Company is named as a defendant in a number of lawsuits and is subject to a number of investigations concerning its PBM practices. Bewley, et al. v. CVS Health Corporation, et al. and Prescott, et al. v. CVS Health Corporation, et al. (both pending in the U.S. District Court for the Western District of Washington). These putative class actions were filed against the Company and other PBMs and manufacturers of glucagon kits (Bewley) and diabetes test strips (Prescott) in May 2017. Both cases allege that, by contracting for rebates with the manufacturers of these diabetes products, the Company and other PBMs caused list prices for these products to increase, thereby harming certain consumers. The plaintiffs’ primary claims are made under federal antitrust laws, RICO, state unfair competition and consumer protection laws and the federal Employee Retirement Income Security Act of 1974 (“ERISA”). Both of these cases have been transferred to the U.S. District Court for the District of New Jersey on defendants’ motions. In April 2019, the named plaintiffs in both the Bewley and Prescott cases voluntarily dismissed all of their claims without prejudice, ending both cases. Klein, et al. v. Prime Therapeutics, et al. (U.S. District Court for the District of Minnesota). This putative class action was filed against the Company and other PBMs in June 2017 on behalf of ERISA plan members who purchased and paid for EpiPen or EpiPen Jr. Plaintiffs allege that the PBMs are ERISA fiduciaries to plan members and have violated ERISA by allegedly causing higher inflated prices for EpiPens through the process of negotiating increased rebates from EpiPen manufacturer Mylan. This case has been consolidated with a similar matter and is now proceeding as In re EpiPen ERISA Litigation. The Company is defending itself against these claims. The Company has received subpoenas, CIDs, and other requests for documents and information from, and is being investigated by, Attorneys General of several states regarding its PBM practices, including pricing and rebates. In addition, the Company received an inquiry from the U.S. Senate Committee on Finance regarding insulin pricing. The Company has been providing documents and information in response to these subpoenas, CIDs and requests for information. Controlled Substances Litigation, Audits and Subpoenas In December 2017, the U.S. Judicial Panel on Multidistrict Litigation consolidated numerous cases filed against various defendants by plaintiffs such as counties, cities, hospitals, Indian tribes and third-party payors, alleging claims generally concerning the impacts of widespread opioid abuse. The consolidated multidistrict litigation captioned In re National Prescription Opiate Litigation (MDL No. 2804) is pending in the U.S. District Court for the Northern District of Ohio. This multidistrict litigation presumptively includes hundreds of relevant federal court cases that name the Company as a defendant. A significant number of similar cases that name the Company as a defendant in some capacity are pending in state courts. In addition, the Company has been named as a defendant in similar cases brought by certain state Attorneys General. The Company is defending itself against all such claims. Additionally, the Company has received subpoenas, CIDs and/or other requests for information regarding opioids from the Attorneys General of several states. The Company has been cooperating with the government with respect to these subpoenas, CIDs and other requests for information. The Company routinely is audited by the United States Drug Enforcement Administration (“DEA”). In some instances, the Company is in discussions with the DEA and U.S. Attorney’s Offices concerning allegations that the Company violated certain requirements of the Controlled Substance Act. In September 2015, the DEA served the Company with an administrative subpoena. The subpoena seeks documents related to controlled substance policies, procedures and practices at eight Omnicare pharmacy locations from May 2012 to the present. In September 2017, the DEA expanded the investigation to include an additional Omnicare pharmacy location. The Company has been cooperating with the government and providing documents and witnesses in response to this subpoena. Prescription Processing Investigations In October 2015, the Company received a CID from the U.S. Attorney’s Office for the Southern District of New York requesting documents and information concerning the Company’s Omnicare pharmacies’ cycle fill process for assisted living facilities. The Company has been cooperating with the government and providing documents and information in response to this CID. In July 2017, the Company also received a subpoena from the California Department of Insurance requesting documents concerning similar subject matter. The Company has been cooperating with the California Department of Insurance and providing documents and information in response to this subpoena. In December 2016, the Company received a CID from the U.S. Attorney’s Office for the Northern District of New York requesting documents and information in connection with a federal False Claims Act investigation concerning whether the Company’s retail pharmacies improperly submitted certain insulin claims to Part D of the Medicare program rather than Part B of the Medicare program. The Company has been cooperating with the government and providing documents and information in response to this CID. In May 2017, the Company received a CID from the U.S. Attorney’s Office for the Southern District of New York requesting documents and information concerning possible false claims submitted to Medicare in connection with reimbursements for prescription drugs under the Medicare Part D program. The Company has been cooperating with the government and providing documents and information in response to this CID. Provider Proceedings The Company is named as a defendant in purported class actions and individual lawsuits arising out of its practices related to the payment of claims for services rendered to its members by health care providers with whom the Company has a contract and with whom the Company does not have a contract (“out-of-network providers”). Among other things, these lawsuits allege that the Company paid too little to its health plan members and/or providers for these services and/or otherwise allege that the Company failed to timely or appropriately pay or administer claims and benefits (including the Company’s post payment audit and collection practices and reductions in payments to providers due to sequestration). Other major health insurers are the subject of similar litigation or have settled similar litigation. On October 28, 2016, Aetna was named as a respondent in an arbitration proceeding that had commenced as a lawsuit in Florida state court on August 25, 2015. The arbitration proceeding was brought by hospitals owned by HCA Holdings, Inc. with respect to Aetna’s out-of-network benefit payment and administration practices in Florida relating to services and care rendered to members in Aetna’s individual Public Exchange products from 2014 through 2016. Coverage under Aetna’s individual Public Exchange products in Florida was not available after December 31, 2016. On October 15, 2018, the trial arbitrator awarded the claimant hospitals approximately $150 million. Aetna appealed the trial arbitrator’s decision. On March 28, 2019, the appellate arbitrator reduced the award to approximately $86 million. The proceeding has ended. During the six months ended June 30, 2019, the Company recorded the reduction in the required reserve amount for this proceeding as a measurement period adjustment to its Aetna Acquisition accounting and recorded a reduction to goodwill. The Company also has received subpoenas and/or requests for documents and other information from, and been investigated by, Attorneys General and other state and/or federal regulators, legislators and agencies relating to, and the Company is involved in other litigation regarding, its out-of-network benefit payment and administration practices. It is reasonably possible that others could initiate additional litigation or additional regulatory action against the Company with respect to its out-of-network benefit payment and/or administration practices. CMS Actions The United States Centers for Medicare & Medicaid Services (“CMS”) regularly audits the Company’s performance to determine its compliance with CMS’s regulations and its contracts with CMS and to assess the quality of services it provides to Medicare beneficiaries. CMS uses various payment mechanisms to allocate and adjust premium payments to the Company’s and other companies’ Medicare plans by considering the applicable health status of Medicare members as supported by information prepared, maintained and provided by health care providers. The Company collects claim and encounter data from providers and generally relies on providers to appropriately code their submissions to the Company and document their medical records, including the diagnosis data submitted to the Company with claims. CMS pays increased premiums to Medicare Advantage plans and Medicare PDP plans for members who have certain medical conditions identified with specific diagnosis codes. Federal regulators review and audit the providers’ medical records to determine whether those records support the related diagnosis codes that determine the members’ health status and the resulting risk-adjusted premium payments to the Company. In that regard, CMS has instituted risk adjustment data validation (“RADV”) audits of various Medicare Advantage plans, including certain of the Company’s plans, to validate coding practices and supporting medical record documentation maintained by health care providers and the resulting risk adjusted premium payments to the plans. CMS may require the Company to refund premium payments if the Company’s risk adjusted premiums are not properly supported by medical record data. The Office of Inspector General (the “OIG”) also is auditing the Company’s risk adjustment-related data and that of other companies. The Company expects CMS and the OIG to continue these types of audits. In 2012, CMS revised its audit methodology for RADV audits to determine refunds payable by Medicare Advantage plans for contract year 2011 and forward. Under the revised methodology, among other things, CMS will project the error rate identified in the audit sample of approximately 200 members to all risk adjusted premium payments made under the contract being audited. For contract years prior to 2011, CMS did not project sample error rates to the entire contract. As a result, the revised methodology may increase the Company’s exposure to premium refunds to CMS based on incomplete medical records maintained by providers. Since 2013, CMS has selected certain of the Company’s Medicare Advantage contracts for various contract years for RADV audit. The Company is currently unable to predict which of its Medicare Advantage contracts will be selected for future audit, the amounts of any retroactive refunds of, or prospective adjustments to, Medicare Advantage premium payments made to the Company, the effect of any such refunds or adjustments on the actuarial soundness of the Company’s Medicare Advantage bids, or whether any RADV audit findings would require the Company to change its method of estimating future premium revenue in future bid submissions to CMS or compromise premium assumptions made in the Company’s bids for prior contract years, the current contract year or future contract years. Any premium or fee refunds or adjustments resulting from regulatory audits, whether as a result of RADV, Public Exchange related or other audits by CMS, the OIG, the United States Department of Health and Human Services or otherwise, including audits of the Company’s minimum MLR rebates, methodology and/or reports, could be material and could adversely affect the Company’s operating results, financial condition and/or cash flows. Medicare CIDs The Company has received CIDs from the Civil Division of the United States Department of Justice (the “DOJ”) in connection with a current investigation of the Company’s patient chart review processes in connection with risk adjustment data submissions under Parts C and D of the Medicare program. The Company has been cooperating with the government and providing documents and information in response to these CIDs. Tunney Act Proceeding On October 10, 2018, the Company and Aetna entered into a consent decree with the DOJ that allowed CVS Health’s proposed acquisition of Aetna to proceed, provided Aetna agreed to sell its individual standalone Medicare Part D prescription drug plans. As permitted by the asset preservation stipulation and order dated October 25, 2018, CVS Health completed its acquisition of Aetna on November 28, 2018, and Aetna completed the sale of such plans on November 30, 2018. The consent decree remains subject to the court approval process under the Antitrust Procedures and Penalties Act, which could result in a revision in or delay in receiving approval of the consent decree. The approval process is for the limited purpose of determining whether the consent decree is in the public interest. The Company believes that the consent decree will not have a material impact on the Company’s operating results, cash flows or financial condition. Shareholder Matters Between February and June 2019, five class action complaints were filed by putative plaintiffs against the Company and certain current and former officers and directors: Anarkat v. CVS Health Corp., et al., Case No. 1:19-cv-01725 (S.D.N.Y.); Labourers’ Pension Fund of Central and Eastern Canada v. CVS Health Corp., et al., Case No. 651700/2019 (N.Y. Sup. Ct.); City of Warren Police and Fire Retirement Sys.v. CVS Health Corp., et. al., Case No. PC-2019-5658 (R.I. Super. Ct.); Cambria Co. Employees Retirement Sys. v. CVS Health Corp., et al., Case No. 653223/2019 (N.Y. Sup. Ct.); and Freundlich v. CVS Health Corp., et al., Case No. PC-2019-6685 (R.I. Super. Ct.). The plaintiffs in these cases assert a variety of causes of action under federal securities laws that are premised on allegations that the defendants made certain omissions and misrepresentations relating to the performance of the Company’s LTC business unit, which allegedly injured investors who acquired CVS Health securities between May 21, 2015 and February 20, 2019. The Freundlich case also alleges that defendants misrepresented anticipated synergies of the Aetna Acquisition. The Company is defending itself against these claims. Other Legal and Regulatory Proceedings. The Company is also a party to other legal proceedings and is subject to government investigations, inquiries and audits and has received and is cooperating with the government in response to CIDs, subpoenas or similar process from various governmental agencies requesting information, all arising in the ordinary course of its businesses. These other legal proceedings include claims of or relating to bad faith, medical or professional malpractice, claims processing, dispensing, non-compliance with state and federal regulatory regimes, marketing misconduct, failure to timely or appropriately pay or administer claims and benefits, provider network structure (including the use of performance-based networks and termination of provider contracts), rescission of insurance coverage, improper disclosure or use of personal information, anticompetitive practices, general contractual matters, product liability, intellectual property litigation and employment litigation. Some of these other legal proceedings are or are purported to be class actions or derivative claims. The Company is defending itself against the claims brought in these matters. Awards to the Company and others of certain government contracts, particularly Medicaid contracts and other contracts with government customers in the Company’s Health Care Benefits segment, are subject to increasingly frequent protests by unsuccessful bidders. These protests may result in awards to the Company being reversed, delayed or modified. The loss or delay in implementation of any government contract could adversely affect the Company’s operating results. The Company will continue to defend contract awards it receives. There also continues to be a heightened level of review and/or audit by regulatory authorities and legislators of, and increased litigation regarding, the Company’s and the rest of the health care and related benefits industry’s business and reporting practices, including premium rate increases, utilization management, development and application of medical policies, complaint, grievance and appeal processing, information privacy, provider network structure (including provider network adequacy, the use of performance-based networks and termination of provider contracts), provider directory accuracy, calculation of minimum medical loss ratios and/or payment of related rebates, delegated arrangements, rescission of insurance coverage, limited benefit health products, student health products, pharmacy benefit management practices (including manufacturers’ rebates, pricing, the use of narrow networks and the placement of drugs in formulary tiers), sales practices, customer service practices, vendor oversight and claim payment practices (including payments to out-of-network providers). As a leading national health care company, the Company regularly is the subject of government actions of the types described above. These government actions may prevent or delay the Company from implementing planned premium rate increases and may result, and have resulted, in restrictions on the Company’s businesses, changes to or clarifications of the Company’s business practices, retroactive adjustments to premiums, refunds or other payments to members, beneficiaries, states or the federal government, withholding of premium payments to the Company by government agencies, assessments of damages, civil or criminal fines or penalties, or other sanctions, including the possible suspension or loss of licensure and/or suspension or exclusion from participation in government programs. The Company can give no assurance, however, that its businesses, financial condition, operating results and/or cash flows will not be materially adversely affected, or that the Company will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations as they may relate to one or more of the Company’s businesses, one or more of the industries in which the Company competes and/or the health care industry generally; (iii) pending or future federal or state governmental investigations of one or more of the Company’s businesses, one or more of the industries in which the Company competes and/or the health care industry generally; (iv) pending or future government audits, investigations or enforcement actions against the Company; (v) adverse developments in any pending qui tam lawsuit against the Company, whether sealed or unsealed, or in any future qui tam lawsuit that may be filed against the Company; or (vi) adverse developments in pending or future legal proceedings against the Company or affecting one or more of the industries in which the Company competes and/or the health care industry generally.
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Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting The Company has three operating segments, Pharmacy Services, Retail/LTC and Health Care Benefits, as well as a Corporate/Other segment. The Company’s segments maintain separate financial information, and the CODM evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company’s segments based on adjusted operating income. Effective for the first quarter of 2019, adjusted operating income is defined as operating income (loss) (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. Segment financial information for the three and six months ended June 30, 2018 has been retrospectively adjusted to conform with the current period presentation. See the reconciliation of consolidated operating income (loss) (GAAP measure) to adjusted operating income below for further context regarding the items excluded from operating income (loss) in determining adjusted operating income. The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying business performance and trends. Non-GAAP financial measures the Company discloses, such as consolidated adjusted operating income, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP. Effective for the first quarter of 2019, the Company realigned the composition of its segments to correspond with changes to its operating model and reflect how the CODM reviews information and manages the business. See Note 1 ‘‘Significant Accounting Policies’’ for further discussion. Segment financial information for the three and six months ended June 30, 2018, has been retrospectively adjusted to reflect these changes as shown below:
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The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:
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The following is a reconciliation of consolidated operating income (loss) to adjusted operating income for the three and six months ended June 30, 2019 and 2018:
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(6) During the three and six months ended June 30, 2018, the Company recorded interest income of $202 million and $244 million, respectively on the proceeds of its unsecured senior notes issued in March 2018 to partially fund the Aetna Acquisition. All amounts are for the periods prior to the close of the Aetna Acquisition, which occurred on November 28, 2018, and were recorded within the Corporate/Other segment.
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Subsequent Event |
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Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event On July 1, 2019, the Company sold its Brazilian subsidiary, Drogaria Onofre Ltda. (“Onofre”) for an immaterial amount. Onofre operates 50 retail pharmacy stores, the results of which have historically been reported within the Retail/LTC segment. The Company expects to record a loss on the divestiture of approximately $200 million in the third quarter of 2019, which primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income.
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Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment reporting | The Company has four reportable segments: Pharmacy Services, Retail/LTC, Health Care Benefits and Corporate/Other, which are described below. Pharmacy Services Segment The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services, mail order pharmacy, specialty pharmacy and infusion services, clinical services, disease management services and medical spend management. The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on public health insurance exchanges (“Public Exchanges”) and private health insurance exchanges, other sponsors of health benefit plans and individuals throughout the United States. The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services. Retail/LTC Segment The Retail/LTC segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products, cosmetics and personal care products, provides health care services through its MinuteClinic® walk-in medical clinics and conducts long-term care (“LTC”) pharmacy operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to chronic care facilities and other care settings. As of June 30, 2019, the Retail/LTC segment operated approximately 9,900 retail locations, approximately 1,100 MinuteClinic® locations as well as online retail pharmacy websites, LTC pharmacies and onsite pharmacies. Health Care Benefits Segment The Health Care Benefits segment is one of the nation’s leading diversified health care benefits providers, serving an estimated 38 million people as of June 30, 2019. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, Medicaid health care management services, workers’ compensation administrative services and health information technology products and services. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.” Corporate/Other Segment The Company presents the remainder of its financial results in the Corporate/Other segment, which consists of:
• Products for which the Company no longer solicits or accepts new customers such as its large case pensions and long-term care insurance products.
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Basis of presentation | The accompanying unaudited condensed consolidated financial statements of CVS Health Corporation and its subsidiaries have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In accordance with such rules and regulations, certain information and accompanying note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in Exhibit 13.1 to the Company’s Annual Report on Form 10‑K for the year ended December 31, 2018 (the “2018 Form 10‑K”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Because of the influence of various factors on the Company’s operations, including business combinations, certain holidays and other seasonal influences, net income for any interim period may not be comparable to the same interim period in previous years or necessarily indicative of income for the full year.
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Principles of Consolidation | The unaudited condensed consolidated financial statements include the accounts of CVS Health Corporation and its majority-owned subsidiaries and the variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated. The Company continually evaluates its investments to determine if they represent variable interests in a VIE. If the Company determines that it has a variable interest in a VIE, the Company then evaluates if it is the primary beneficiary of the VIE. The evaluation is a qualitative assessment as to whether the Company has the ability to direct the activities of a VIE that most significantly impact the entity’s economic performance. The Company consolidates a VIE if it is considered to be the primary beneficiary. Assets and liabilities of VIEs for which the Company is the primary beneficiary were not significant to the Company’s unaudited condensed consolidated financial statements. VIE creditors do not have recourse against the general credit of the Company.
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Reclassifications | Certain prior year amounts have been reclassified to conform with the current year presentation.
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Restricted Cash | Restricted cash included in other current assets in the unaudited condensed consolidated balance sheets represents amounts held in escrow accounts in connection with certain recent acquisitions. Restricted cash included in other assets in the unaudited condensed consolidated balance sheets represents amounts held in a trust in one of the Company’s captive insurance companies to satisfy collateral requirements associated with the assignment of certain insurance polices. All restricted cash is invested in time deposits, money market funds or commercial paper.
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Accounts Receivable | Accounts receivable are stated net of allowances for doubtful accounts, customer credit allowances, contractual allowances and estimated terminations. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | The following is a discussion of the Company’s revenue recognition policies by segment. Pharmacy Services Segment The Pharmacy Services segment sells prescription drugs directly through its mail service dispensing pharmacies and indirectly through the Company’s retail pharmacy network. The Company’s pharmacy benefit arrangements are accounted for in a manner consistent with a master supply arrangement as there are no contractual minimum volumes and each prescription is considered a separate purchasing decision and distinct performance obligation transferred at a point in time. PBM services performed in connection with each prescription claim are considered part of a single performance obligation which culminates in the dispensing of prescription drugs. The Company recognizes revenue using the gross method at the contract price negotiated with its clients when the Company has concluded it controls the prescription drug before it is transferred to the client plan members. The Company controls prescriptions dispensed indirectly through its retail pharmacy network because it has separate contractual arrangements with those pharmacies, has discretion in setting the price for the transaction and assumes primary responsibility for fulfilling the promise to provide prescription drugs to its client plan members while also performing the related PBM services. Revenues include (i) the portion of the price the client pays directly to the Pharmacy Services segment, net of any discounts earned on brand name drugs or other discounts and refunds paid back to the client (see “Drug Discounts” and “Guarantees” below), (ii) the price paid to the Pharmacy Services segment by client plan members for mail order prescriptions and the price paid to retail network pharmacies by client plan members for retail prescriptions (“Retail Co-Payments”), and (iii) claims based administrative fees for retail pharmacy network contracts. Sales taxes are not included in revenue. The Company recognizes revenue when control of the prescription drugs is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those prescription drugs. The following revenue recognition policies have been established for the Pharmacy Services segment:
all of its performance obligations under its client contracts and does not experience a significant level of returns or reshipments.
For contracts under which the Pharmacy Services segment acts as an agent or does not control the prescription drugs prior to transfer to the client plan member, revenue is recognized using the net method. Drug Discounts The Pharmacy Services segment records revenue net of manufacturers’ rebates earned by its clients based on their plan members’ utilization of brand name formulary drugs. The Pharmacy Services segment estimates these rebates at period-end based on actual and estimated claims data and its estimates of the manufacturers’ rebates earned by its clients. The estimates are based on the best available data at period-end and recent history for the various factors that can affect the amount of rebates due to the client. The Pharmacy Services segment adjusts its rebates payable to clients to the actual amounts paid when these rebates are paid or as significant events occur. Any cumulative effect of these adjustments is recorded against revenues as identified. Adjustments generally result from contract changes with clients or manufacturers that have retroactive rebate adjustments, differences between the estimated and actual product mix subject to rebates, or whether the brand name drug was included in the applicable formulary. The effect of adjustments between estimated and actual manufacturers’ rebate amounts has not been material to the Company’s operating results or financial condition. Guarantees The Pharmacy Services segment also adjusts revenues for refunds owed to clients resulting from pricing guarantees and performance against defined service and performance metrics. The inputs to these estimates are not subject to a high degree of subjectivity or volatility. The effect of adjustments between estimated and actual pricing and performance refund amounts has not been material to the Company’s operating results or financial condition. Retail/LTC Segment Retail Pharmacy The Company’s retail drugstores recognize revenue at the time the customer takes possession of the merchandise. For pharmacy sales, each prescription claim is its own arrangement with the customer and is a performance obligation, separate and distinct from other prescription claims under other retail network arrangements. Revenues are adjusted for refunds owed to third party payers for pricing guarantees and performance against defined value-based service and performance metrics. The inputs to these estimates are not subject to a high degree of subjectivity or volatility. The effect of adjustments between estimated and actual pricing and performance refund amounts has not been material to the Company’s operating results or financial condition. Revenue from Company gift cards purchased by customers is deferred as a contract liability until goods or services are transferred. Any amounts not expected to be redeemed by customers (i.e., breakage) are recognized based on historical redemption patterns. Customer returns are not material to the Company’s operating results or financial condition. Sales taxes are not included in revenue. Loyalty Program The Company’s customer loyalty program, ExtraCare®, consists of two components, ExtraSavingsTM and ExtraBucks® Rewards. ExtraSavings are coupons that are recorded as a reduction of revenue when redeemed as the Company has concluded that they do not represent a promise to the customer to deliver additional goods or services at the time of issuance because they are not tied to a specific transaction or spending level. ExtraBucks Rewards are accumulated by customers based on their historical spending levels. Thus, the Company has determined that there is an additional performance obligation to those customers at the time of the initial transaction. The Company allocates the transaction price to the initial transaction and the ExtraBucks Rewards transaction based upon the relative standalone selling price, which considers historical redemption patterns for the rewards. Revenue allocated to ExtraBucks Rewards is recognized as those rewards are redeemed. At the end of each period, unredeemed rewards are reflected as a contract liability. Long-term Care Revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. Each prescription claim represents a separate performance obligation of the Company, separate and distinct from other prescription claims under customer arrangements. A significant portion of Long-term Care revenue from sales of pharmaceutical and medical products is reimbursed by the federal Medicare Part D program and, to a lesser extent, state Medicaid programs. The Company monitors its revenues and receivables from these reimbursement sources, as well as other third-party insurance payors, and reduces revenue at the revenue recognition date to properly account for the variable consideration due to anticipated differences between billed and reimbursed amounts. Accordingly, the total revenues and receivables reported in the Company’s unaudited condensed consolidated financial statements are recorded at the amount expected to be ultimately received from these payors. Patient co-payments associated with Medicare Part D, certain state Medicaid programs, Medicare Part B and certain third-party payors are typically not collected at the time products are delivered or services are rendered, but are billed to the individuals as part of normal billing procedures and subject to normal accounts receivable collections procedures. Walk-In Medical Clinics For services provided by the Company’s walk-in medical clinics, revenue recognition occurs for completed services provided to patients, with adjustments taken for third-party payor contractual obligations and patient direct bill historical collection rates. Health Care Benefits Segment Premium Revenue Premiums are recognized as revenue in the month in which the enrollee is entitled to receive health care services. Premiums are reported net of an allowance for estimated terminations and uncollectible amounts. Additionally, premium revenue subject to the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010’s (as amended, collectively, the “ACA’s”) minimum medical loss ratio (“MLR”) rebate requirements is recorded net of the estimated minimum MLR rebates for the current calendar year. Premiums related to unexpired contractual coverage periods (unearned premiums) are reported as other insurance liabilities on the unaudited condensed consolidated balance sheets and recognized as revenue when earned. Some of the Company’s contracts allow for premiums to be adjusted to reflect actual experience or the relative health status of Insured members. Such adjustments are reasonably estimable at the outset of the contract, and adjustments to those estimates are made based on actual experience of the customer emerging under the contract and the terms of the underlying contract. Services Revenue Services revenue relates to contracts that can include various combinations of services or series of services which generally are capable of being distinct and accounted for as separate performance obligations. Health Care Benefits segment services revenue primarily consists of the following components:
• Workers’ compensation administrative services consist of fee-based managed care services. Workers’ compensation administrative services revenue is recognized once the service is provided.
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New Accounting Pronouncements Recently Adopted and Not Yet Adopted | Leases In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (Topic 842). Lessees are required to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability is equal to the present value of lease payments. The asset is based on the liability, subject to certain adjustments, such as for initial direct costs. For income statement purposes, a dual model was retained, requiring leases to be classified as either operating or finance leases. Operating leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result in a front-loaded expense pattern (similar to capital leases under the prior accounting standard). Lessor accounting is similar to the prior model, but updated to align with certain changes to the lessee model (e.g., certain definitions, such as initial direct costs, have been updated) and the new revenue recognition standard that was adopted in 2018. The Company adopted this new accounting standard on January 1, 2019 on a modified retrospective basis and applied the new standard to all leases through a cumulative-effect adjustment to beginning retained earnings. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which includes, among other things, the ability to carry forward the existing lease classification. On January 1, 2019, the Company recorded an after-tax transition adjustment to increase retained earnings by approximately $178 million ($241 million prior to tax effect). The new standard had a material impact on the unaudited condensed consolidated balance sheet, but did not materially impact the Company’s consolidated operating results and had no impact on the Company’s cash flows. The following is a discussion of the Company’s lease policy under the new lease accounting standard: The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and exclude lease incentives. The Company’s real estate leases typically contain options that permit renewals for additional periods of up to five years each. For real estate leases, the options to extend are not considered reasonably certain at lease commencement because the Company reevaluates each lease on a regular basis to consider the economic and strategic incentives of exercising the renewal options, and regularly opens or closes stores to align with its operating strategy. Generally, the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the right-of-use asset and lease liability. Similarly, renewal options are not included in the lease term for non-real estate leases because they are not considered reasonably certain of being exercised at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheets and lease expense is recognized on a straight-line basis over the term of the short-term lease. For real estate leases, the Company accounts for lease components and nonlease components as a single lease component. Certain real estate leases require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities. See Note 5 ‘‘Leases’’ for additional information. Impact of New Lease Standard on Balance Sheet Line Items As a result of applying the new lease standard using a modified retrospective method, the following adjustments were made to accounts on the condensed consolidated balance sheet as of January 1, 2019:
Accounting for Interest Associated with the Purchase of Callable Debt Securities In March 2017, the FASB issued ASU 2017-08, Accounting for Interest Associated with the Purchase of Callable Debt Securities (Topic 310). Under this standard, premiums on callable debt securities are amortized to the earliest call date rather than to the contractual maturity date. Callable debt securities held at a discount will continue to be amortized to the contractual maturity date. The Company adopted this new accounting guidance on January 1, 2019 on a modified retrospective basis and recorded an immaterial cumulative effect adjustment from accumulated other comprehensive income to retained earnings on the condensed consolidated balance sheet. New Accounting Pronouncements Not Yet Adopted Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This standard requires the use of a forward-looking expected loss impairment model for trade and other receivables, held-to-maturity debt securities, loans and other instruments. This standard also requires impairments and recoveries for available-for-sale debt securities to be recorded through an allowance account and revises certain disclosure requirements. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures. Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and other - Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Topic 350-40 to determine which implementation costs to capitalize as assets. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures. Targeted Improvements to the Accounting for Long-Duration Insurance Contracts In August 2018, the FASB issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (Topic 944). This standard requires the Company to review cash flow assumptions for its long-duration insurance contracts at least annually and recognize the effect of changes in future cash flow assumptions in net income. This standard also requires the Company to update discount rate assumptions quarterly and recognize the effect of changes in these assumptions in other comprehensive income. The rate used to discount the Company’s liability for future policy benefits will be based on an estimate of the yield for an upper-medium-grade fixed-income instrument. In addition, this standard changes the amortization method for deferred acquisition costs and requires additional disclosures regarding the long duration insurance contract liabilities in the Company’s interim and annual financial statements. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.
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Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash, Cash Equivalents, and Restricted Cash | The following represents a reconciliation of cash and cash equivalents in the unaudited condensed consolidated balance sheets to total cash, cash equivalents and restricted cash in the unaudited condensed consolidated statements of cash flows:
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Accounts Receivable, Net | Accounts receivable, net is composed of the following:
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Disaggregation of Revenue | The following tables disaggregate the Company’s revenue by major source in each segment for the three and six months ended June 30, 2019 and 2018:
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(2) Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a CVS Pharmacy retail store, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program, which permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS Pharmacy retail store for the same price as mail order.
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Contracts With Customers, Assets and Liabilities | The following table provides information about receivables and contract liabilities from contracts with customers:
During the six months ended June 30, 2019, the contract liabilities balance includes increases related to customers’ earnings in ExtraBucks Rewards or issuances of Company gift cards and decreases for revenues recognized during the period as a result of the redemption of ExtraBucks Rewards or Company gift cards and breakage of Company gift cards. Below is a summary of such changes:
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Impact of New Lease Standard on Balance Sheet Line Items | As a result of applying the new lease standard using a modified retrospective method, the following adjustments were made to accounts on the condensed consolidated balance sheet as of January 1, 2019:
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Acquisition of Aetna (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Fair Values Of The Assets Acquired And Liabilities Assumed | The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
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Unaudited Pro Forma Financial Information | The following unaudited pro forma information presents a summary of the Company’s combined operating results for the three and six months ended June 30, 2018 as if the Aetna acquisition and the related financing transactions had occurred on January 1, 2017. The following pro forma financial information is not necessarily indicative of the Company’s operating results as they would have been had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses.
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Investments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Investments | Total investments at June 30, 2019 and December 31, 2018 were as follows:
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Debt and Equity Securities Available For Sale | Debt securities available for sale at June 30, 2019 and December 31, 2018 were as follows:
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Fair Value of Debt Securities by Contractual Maturity | The fair value of debt securities at June 30, 2019 is shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity.
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Debt and Equity Securities In An Unrealized Capital Loss Position | The maturity dates for debt securities in an unrealized capital loss position at June 30, 2019 were as follows:
Summarized below are the debt securities the Company held at June 30, 2019 and December 31, 2018 that were in an unrealized capital loss position:
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Activity in Mortgage Loan Portfolio | During the three and six months ended June 30, 2019, the Company had the following activity in its mortgage loan portfolio:
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Mortgage Loan Internal Credit Rating | Based upon the Company’s assessments at June 30, 2019 and December 31, 2018, the Company’s mortgage loans were given the following credit quality indicators:
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Net Investment Income | Sources of net investment income for the three and six months ended June 30, 2019 and 2018 were as follows:
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Proceeds and Related Gross Realized Capital Gains and Losses From the Sale of Debt Securities | Excluding amounts related to experience-rated products, proceeds from the sale of available for sale debt securities and the related gross realized capital gains and losses for the three and six months ended June 30, 2019 were as follows:
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Fair Value (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | Financial assets measured at fair value on a recurring basis on the condensed consolidated balance sheets at June 30, 2019 and December 31, 2018 were as follows:
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Fair Value, by Balance Sheet Grouping | The carrying value and estimated fair value classified by level of fair value hierarchy for financial instruments carried on the condensed consolidated balance sheets at adjusted cost or contract value at June 30, 2019 and December 31, 2018 were as follows:
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Schedule of Fair Value of Separate Accounts by Major Category of Investment | Separate Accounts financial assets as of June 30, 2019 and December 31, 2018 were as follows:
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Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease Costs and Supplemental Cash Flow Information | The following table is a summary of the Company’s components of net lease cost for the three and six months ended June 30, 2019:
Supplemental cash flow information related to leases for the six months ended June 30, 2019 is as follows:
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Supplemental Balance Sheet Information | Supplemental balance sheet information related to leases as of June 30, 2019 is as follows:
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Maturities of Operating Lease Liabilities | The following table summarizes the maturity of lease liabilities under finance and operating leases as of June 30, 2019:
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(2) The Company leases pharmacy and clinic space from Target Corporation. Amounts related to such finance and operating leases are reflected above. Pharmacy lease amounts due in excess of the remaining estimated economic life of the buildings of approximately $2.2 billion are not reflected herein since the estimated economic life of the buildings is shorter than the contractual term of the pharmacy lease arrangement.
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Maturities of Financing Lease Liabilities | The following table summarizes the maturity of lease liabilities under finance and operating leases as of June 30, 2019:
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Health Care Costs Payable (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Health Care and Other Insurance Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Liability for Unpaid Claims and Claims Adjustment Expense | The following table shows the components of the change in health care costs payable during the six months ended June 30, 2019:
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Other Comprehensive Income (Loss) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | Shareholders’ equity included the following activity in accumulated other comprehensive income for the three and six months ended June 30, 2019 and 2018:
_____________________________________________
(3) Amounts reclassified from accumulated other comprehensive loss for specifically identified cash flow hedges are included within interest expense in the unaudited condensed consolidated statements of operations. The Company expects to reclassify approximately $18 million, net of tax, in gains associated with its cash flow hedges into net income within the next 12 months.
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Earnings (Loss) Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | The following is a reconciliation of basic and diluted earnings (loss) per share from continuing operations for the respective periods:
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Segment Reporting (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Error Corrections and Prior Period Adjustments | Segment financial information for the three and six months ended June 30, 2018, has been retrospectively adjusted to reflect these changes as shown below:
_____________________________________________
_____________________________________________ (1) The total of cost of products sold and benefit costs were previously reported as cost of revenues.
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Summarized Financial Information Of Segments | The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:
_____________________________________________
(2) Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services segment, the Retail/LTC segment and/or the Health Care Benefits segment.
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Reconciliation of Operating Earnings to Net Income | The following is a reconciliation of consolidated operating income (loss) to adjusted operating income for the three and six months ended June 30, 2019 and 2018:
_____________________________________________
(6) During the three and six months ended June 30, 2018, the Company recorded interest income of $202 million and $244 million, respectively on the proceeds of its unsecured senior notes issued in March 2018 to partially fund the Aetna Acquisition. All amounts are for the periods prior to the close of the Aetna Acquisition, which occurred on November 28, 2018, and were recorded within the Corporate/Other segment.
|
Significant Accounting Policies - Narrative (Details) person in Millions, patient in Millions, Plans in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019
USD ($)
person
Plans
building
clinic
patient
state
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
person
Plans
building
clinic
patient
Segment
state
|
Jun. 30, 2018
USD ($)
|
Jan. 01, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Number of stores | building | 9,900 | 9,900 | ||||
Number of walk in medical clinics | clinic | 1,100 | 1,100 | ||||
Number of Pharmacy Plan Members | Plans | 102 | 102 | ||||
Number of patients served per year | patient | 1 | 1 | ||||
Number of people served through health insurance products and related services | person | 38 | 38 | ||||
Number of reportable segments | Segment | 4 | |||||
Related party transaction, expenses from transactions with related party | $ 2 | $ 8 | $ 12 | $ 30 | ||
Related party transaction, other revenues from transactions with related party | 27 | $ 36 | 52 | $ 71 | ||
Retained earnings | $ 43,136 | $ 43,136 | $ 41,089 | $ 40,911 | ||
Retail Long-Term Care Segment | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Number of stores | building | 9,900 | 9,900 | ||||
Number of walk in medical clinics | clinic | 1,100 | 1,100 | ||||
Health Care Benefits Segment | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Number of people served through health insurance products and related services | person | 38 | 38 | ||||
Accounting Standards Update 2016-02 | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Retained earnings | 178 | |||||
Retained earnings, pre-tax | $ 241 | |||||
Equity Method Investee | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Number of states in which entity operates | state | 4 | 4 |
Significant Accounting Policies - Cash and Cash Equivalents, Restricted Cash and Cash Equivalents (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 6,063 | $ 4,059 | ||
Restricted cash (included in other current assets) | 6 | 6 | ||
Restricted cash (included in other assets) | 269 | 230 | ||
Total cash, cash equivalents and restricted cash in the statements of cash flows | $ 6,338 | $ 4,295 | $ 44,057 | $ 1,900 |
Significant Accounting Policies - Accounts Receivable (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Accounting Policies [Abstract] | ||
Trade receivables | $ 6,966 | $ 6,896 |
Vendor and manufacturer receivables | 8,358 | 7,655 |
Premium receivables | 2,098 | 2,259 |
Other receivables | 752 | 821 |
Total accounts receivable, net | $ 18,174 | $ 17,631 |
Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | $ 63,138 | $ 46,708 | $ 124,535 | $ 92,401 |
Net investment income | 293 | 214 | 542 | 264 |
Total revenues | 63,431 | 46,922 | 125,077 | 92,665 |
Pharmacy | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 40,668 | 40,947 | 79,192 | 80,252 |
Front Store | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 4,875 | 4,707 | 9,674 | 9,433 |
Premiums | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 15,791 | 751 | 32,073 | 2,057 |
Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 1,804 | 303 | 3,596 | 659 |
Operating Segments | Pharmacy Services Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 34,842 | 33,427 | 68,400 | 65,973 |
Net investment income | 0 | 0 | 0 | 0 |
Total revenues | 34,842 | 33,427 | 68,400 | 65,973 |
Operating Segments | Retail Long-Term Care Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 21,447 | 20,672 | 42,562 | 41,104 |
Net investment income | 0 | 0 | 0 | 0 |
Total revenues | 21,447 | 20,672 | 42,562 | 41,104 |
Operating Segments | Health Care Benefits Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 17,255 | 760 | 34,961 | 2,076 |
Net investment income | 148 | 4 | 312 | 6 |
Total revenues | 17,403 | 764 | 35,273 | 2,082 |
Operating Segments | Corporate / Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 16 | 0 | 41 | 0 |
Net investment income | 145 | 210 | 230 | 258 |
Total revenues | 161 | 210 | 271 | 258 |
Operating Segments | Pharmacy | Pharmacy Services Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 34,698 | 33,293 | 68,111 | 65,699 |
Operating Segments | Pharmacy | Retail Long-Term Care Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 16,392 | 15,805 | 32,510 | 31,305 |
Operating Segments | Pharmacy | Health Care Benefits Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 0 | 0 | 0 | 0 |
Operating Segments | Pharmacy | Corporate / Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 0 | 0 | 0 | 0 |
Operating Segments | Front Store | Pharmacy Services Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 0 | 0 | 0 | 0 |
Operating Segments | Front Store | Retail Long-Term Care Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 4,875 | 4,707 | 9,674 | 9,433 |
Operating Segments | Front Store | Health Care Benefits Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 0 | 0 | 0 | 0 |
Operating Segments | Front Store | Corporate / Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 0 | 0 | 0 | 0 |
Operating Segments | Premiums | Pharmacy Services Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 0 | 0 | 0 | 0 |
Operating Segments | Premiums | Retail Long-Term Care Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 0 | 0 | 0 | 0 |
Operating Segments | Premiums | Health Care Benefits Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 15,777 | 751 | 32,036 | 2,057 |
Operating Segments | Premiums | Corporate / Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 14 | 0 | 37 | 0 |
Operating Segments | Other | Pharmacy Services Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 144 | 134 | 289 | 274 |
Operating Segments | Other | Retail Long-Term Care Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 180 | 160 | 378 | 366 |
Operating Segments | Other | Health Care Benefits Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 1,478 | 9 | 2,925 | 19 |
Operating Segments | Other | Corporate / Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 2 | 0 | 4 | 0 |
Operating Segments | Pharmacy network | Pharmacy Services Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 22,028 | 21,506 | 43,602 | 42,704 |
Operating Segments | Mail choice | Pharmacy Services Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 12,670 | 11,787 | 24,509 | 22,995 |
Operating Segments | Other | Pharmacy Services Segment | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 144 | 134 | 289 | 274 |
Intersegment Eliminations | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | (10,422) | (8,151) | (21,429) | (16,752) |
Net investment income | 0 | 0 | 0 | 0 |
Total revenues | (10,422) | (8,151) | (21,429) | (16,752) |
Intersegment Eliminations | Pharmacy | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | (10,422) | (8,151) | (21,429) | (16,752) |
Total revenues | (10,422) | (8,151) | (21,429) | (16,752) |
Intersegment Eliminations | Front Store | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 0 | 0 | 0 | 0 |
Intersegment Eliminations | Premiums | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | 0 | 0 | 0 | 0 |
Intersegment Eliminations | Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues from customers | $ 0 | $ 0 | $ 0 | $ 0 |
Significant Accounting Policies - Contract Balances (Details) - USD ($) $ in Millions |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Accounting Policies [Abstract] | |||
Trade receivables (included in accounts receivable, net) | $ 6,966 | $ 6,896 | |
Contract liabilities (included in accrued expenses) | $ 76 | $ 76 | $ 67 |
Change in Contract with Customer, Liability [Roll Forward] | |||
Contract liabilities (included in accrued expenses) beginning balance | 67 | ||
Loyalty program earnings and gift card issuances | 181 | ||
Redemption and breakage | (172) | ||
Contract liabilities (included in accrued expenses) ending balance | $ 76 |
Significant Accounting Policies - Impact of New Lease Standard On Balance Sheet Line Items (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Mar. 31, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Other current assets | $ 4,691 | $ 4,533 | $ 4,581 | ||||
Total current assets | 46,901 | 45,195 | 45,243 | ||||
Property and equipment, net | 11,483 | 11,360 | 11,349 | ||||
Operating lease right-of-use assets | 20,865 | 20,987 | 0 | ||||
Intangible assets, net | 34,163 | 36,307 | 36,524 | ||||
Other assets | 4,763 | 4,525 | 5,046 | ||||
Total assets | 218,904 | 216,668 | 196,456 | ||||
Accrued expenses | 10,562 | 10,659 | 10,711 | ||||
Current portion of operating lease liabilities | 1,793 | 1,803 | 0 | ||||
Current portion of long-term debt | 3,894 | 1,267 | 1,265 | ||||
Total current liabilities | 49,376 | 45,762 | 44,009 | ||||
Long-term operating lease liabilities | 18,849 | 18,832 | 0 | ||||
Long-term debt | 66,941 | 71,348 | 71,444 | ||||
Deferred income taxes | 7,375 | 7,740 | 7,677 | ||||
Other long-term liabilities | 2,528 | 2,262 | 2,780 | ||||
Total liabilities | 157,305 | 157,947 | 137,913 | ||||
Retained earnings | 43,136 | 41,089 | 40,911 | ||||
Total CVS Health shareholders’ equity | 61,282 | 58,403 | 58,225 | ||||
Total shareholders’ equity | $ 61,599 | $ 60,006 | 58,721 | $ 58,543 | $ 35,611 | $ 38,677 | $ 37,695 |
Accounting Standards Update 2016-02 | |||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Other current assets | (48) | ||||||
Total current assets | (48) | ||||||
Property and equipment, net | 11 | ||||||
Operating lease right-of-use assets | 20,987 | ||||||
Intangible assets, net | (217) | ||||||
Other assets | (521) | ||||||
Total assets | 20,212 | ||||||
Accrued expenses | (52) | ||||||
Current portion of operating lease liabilities | 1,803 | ||||||
Current portion of long-term debt | 2 | ||||||
Total current liabilities | 1,753 | ||||||
Long-term operating lease liabilities | 18,832 | ||||||
Long-term debt | (96) | ||||||
Deferred income taxes | 63 | ||||||
Other long-term liabilities | (518) | ||||||
Total liabilities | 20,034 | ||||||
Retained earnings | 178 | ||||||
Total CVS Health shareholders’ equity | 178 | ||||||
Total shareholders’ equity | $ 178 |
Acquisition of Aetna (Details) $ / shares in Units, $ in Billions |
Nov. 28, 2018
USD ($)
$ / shares
|
Jun. 30, 2019
building
clinic
|
---|---|---|
Business Acquisition [Line Items] | ||
Number of stores | building | 9,900 | |
Number of walk in medical clinics | clinic | 1,100 | |
Aetna Inc. | ||
Business Acquisition [Line Items] | ||
Percentage of voting interests acquired | 100.00% | |
Cash received by shareholders (in dollars per share) | $ / shares | $ 145.00 | |
Per share exchange ratio (in shares) | $ / shares | 0.8378 | |
Acquisition value per share acquired (in dollars per share) | $ / shares | $ 212 | |
Consideration transferred | $ | $ 70 | |
Acquisition assigned value of acquiree | $ | 78 | |
Business combination, long-term debt | $ | $ 45 |
Acquisition of Aetna - Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
Nov. 28, 2018 |
---|---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Goodwill | $ 79,485 | $ 78,678 | |
Aetna Inc. | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Cash and cash equivalents | $ 6,565 | ||
Accounts receivable | 4,094 | ||
Other current assets | 3,894 | ||
Investments (current and long-term) | 17,984 | ||
Goodwill | 47,492 | ||
Intangible assets | 22,571 | ||
Other long-term assets | 8,249 | ||
Total assets acquired | 110,849 | ||
Health care costs payable | 5,302 | ||
Other current liabilities | 9,990 | ||
Debt (current and long-term) | 8,098 | ||
Deferred income taxes | 4,295 | ||
Deferred income taxes | 13,078 | ||
Total liabilities assumed | 40,763 | ||
Noncontrolling interests | 320 | ||
Total consideration transferred | $ 69,766 |
Acquisition of Aetna - Pro Forma Financials (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2018 |
|
Business Combinations [Abstract] | ||
Total revenues | $ 60,206 | $ 119,299 |
Income (loss) from continuing operations attributable to CVS Health | $ (1,940) | $ (133) |
Basic earnings (loss) per share from continuing operations attributable to CVS Health (in dollars per share) | $ (1.50) | $ (0.10) |
Diluted earnings (loss) per share from continuing operations attributable to CVS Health (in dollars per share) | $ (1.50) | $ (0.10) |
Investments (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Total Investments [Line Items] | ||
Current investments | $ 2,462 | $ 2,522 |
Long-term investments | 16,973 | 15,732 |
Total investments | 19,435 | 18,254 |
Debt securities available for sale | ||
Total Investments [Line Items] | ||
Current investments | 2,270 | 2,359 |
Long-term investments | 14,199 | 12,896 |
Total investments | 16,469 | 15,255 |
Mortgage loans | ||
Total Investments [Line Items] | ||
Current investments | 175 | 145 |
Long-term investments | 1,170 | 1,216 |
Total investments | 1,345 | 1,361 |
Other investments | ||
Total Investments [Line Items] | ||
Current investments | 17 | 18 |
Long-term investments | 1,604 | 1,620 |
Total investments | $ 1,621 | $ 1,638 |
Investments - Debt and Equity Securities (Details) - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | $ 15,588,000,000 | $ 15,119,000,000 |
Available-for-sale Securities, Gross Unrealized Loss | 888,000,000 | 172,000,000 |
Available-for-sale Securities, Gross Unrealized Gain | 7,000,000 | 36,000,000 |
Fair Value | 16,469,000,000 | 15,255,000,000 |
U.S. government securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 1,675,000,000 | 1,662,000,000 |
Available-for-sale Securities, Gross Unrealized Loss | 66,000,000 | 26,000,000 |
Available-for-sale Securities, Gross Unrealized Gain | 0 | 0 |
Fair Value | 1,741,000,000 | 1,688,000,000 |
States, municipalities and political subdivisions | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 2,363,000,000 | 2,370,000,000 |
Available-for-sale Securities, Gross Unrealized Loss | 103,000,000 | 30,000,000 |
Available-for-sale Securities, Gross Unrealized Gain | 0 | 1,000,000 |
Fair Value | 2,466,000,000 | 2,399,000,000 |
U.S. corporate securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 6,929,000,000 | 6,444,000,000 |
Available-for-sale Securities, Gross Unrealized Loss | 465,000,000 | 61,000,000 |
Available-for-sale Securities, Gross Unrealized Gain | 2,000,000 | 16,000,000 |
Fair Value | 7,392,000,000 | 6,489,000,000 |
Foreign securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 2,188,000,000 | 2,355,000,000 |
Available-for-sale Securities, Gross Unrealized Loss | 165,000,000 | 31,000,000 |
Available-for-sale Securities, Gross Unrealized Gain | 1,000,000 | 3,000,000 |
Fair Value | 2,352,000,000 | 2,383,000,000 |
Residential mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 542,000,000 | 567,000,000 |
Available-for-sale Securities, Gross Unrealized Loss | 22,000,000 | 10,000,000 |
Available-for-sale Securities, Gross Unrealized Gain | 0 | 0 |
Fair Value | 564,000,000 | 577,000,000 |
Commercial mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 612,000,000 | 594,000,000 |
Available-for-sale Securities, Gross Unrealized Loss | 46,000,000 | 11,000,000 |
Available-for-sale Securities, Gross Unrealized Gain | 0 | 0 |
Fair Value | 658,000,000 | 605,000,000 |
Other asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 1,247,000,000 | 1,097,000,000 |
Available-for-sale Securities, Gross Unrealized Loss | 14,000,000 | 3,000,000 |
Available-for-sale Securities, Gross Unrealized Gain | 4,000,000 | 15,000,000 |
Fair Value | 1,257,000,000 | 1,085,000,000 |
Redeemable preferred securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 32,000,000 | 30,000,000 |
Available-for-sale Securities, Gross Unrealized Loss | 7,000,000 | 0 |
Available-for-sale Securities, Gross Unrealized Gain | 0 | 1,000,000 |
Fair Value | 39,000,000 | 29,000,000 |
Supporting experience-rated products | ||
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale Securities, Gross Unrealized Loss | 0 | 2,000,000 |
Available-for-sale Securities, Gross Unrealized Gain | 70,000,000 | 12,000,000 |
Fair Value | $ 944,000,000 | $ 916,000,000 |
Investments - Debt Securities by Maturity (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Amortized Cost | ||
Less than one year | $ 1,056 | |
One year through five years | 5,264 | |
After five years through ten years | 3,154 | |
Greater than ten years | 3,713 | |
Total | 15,588 | $ 15,119 |
Fair Value | ||
Less than one year | 1,060 | |
One year through five years | 5,441 | |
After five years through ten years | 3,353 | |
Greater than ten years | 4,136 | |
Total | 16,469 | 15,255 |
Residential mortgage-backed securities | ||
Amortized Cost | ||
Debt securities, maturity, without single maturity date | 542 | |
Total | 542 | 567 |
Fair Value | ||
Debt securities, maturity, without single maturity date | 564 | |
Total | 564 | 577 |
Commercial mortgage-backed securities | ||
Amortized Cost | ||
Debt securities, maturity, without single maturity date | 612 | |
Total | 612 | 594 |
Fair Value | ||
Debt securities, maturity, without single maturity date | 658 | |
Total | 658 | 605 |
Other asset-backed securities | ||
Amortized Cost | ||
Debt securities, maturity, without single maturity date | 1,247 | |
Total | 1,247 | 1,097 |
Fair Value | ||
Debt securities, maturity, without single maturity date | 1,257 | |
Total | $ 1,257 | $ 1,085 |
Investments - Unrealized Loss Position (Details) $ in Millions |
Jun. 30, 2019
USD ($)
security
|
Dec. 31, 2018
USD ($)
security
|
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Fair Value | $ 600 | |
Unrealized Losses | $ 7 | |
U.S. government securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of Securities | security | 9 | 8 |
Fair Value | $ 28 | $ 26 |
Unrealized Losses | $ 0 | $ 0 |
States, municipalities and political subdivisions | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of Securities | security | 40 | 54 |
Fair Value | $ 60 | $ 86 |
Unrealized Losses | $ 0 | $ 1 |
U.S. corporate securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of Securities | security | 156 | 1,399 |
Fair Value | $ 128 | $ 1,431 |
Unrealized Losses | $ 2 | $ 16 |
Foreign securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of Securities | security | 34 | 243 |
Fair Value | $ 38 | $ 314 |
Unrealized Losses | $ 1 | $ 3 |
Residential mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of Securities | security | 20 | 45 |
Fair Value | $ 2 | $ 1 |
Unrealized Losses | $ 0 | $ 0 |
Other asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of Securities | security | 333 | 516 |
Fair Value | $ 344 | $ 528 |
Unrealized Losses | $ 4 | $ 15 |
Debt securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of Securities | security | 592 | 2,279 |
Fair Value | $ 600 | $ 2,409 |
Unrealized Losses | $ 7 | $ 36 |
Redeemable preferred securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of Securities | security | 14 | |
Fair Value | $ 23 | |
Unrealized Losses | $ 1 |
Investments - Unrealized Loss Position Maturities (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Less than one year | $ 16 | |
One year through five years | 61 | |
After five years through ten years | 128 | |
Greater than ten years | 49 | |
Fair Value | 600 | |
Unrealized Losses | ||
Less than one year | 0 | |
One year through five years | 1 | |
After five years through ten years | 2 | |
Greater than ten years | 0 | |
Unrealized Losses | 7 | |
Residential mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt securities, maturity, without single maturity date, fair value | 2 | |
Fair Value | 2 | $ 1 |
Unrealized Losses | ||
Debt securities, maturity, without single maturity date, unrealized losses | 0 | |
Unrealized Losses | 0 | 0 |
Other asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt securities, maturity, without single maturity date, fair value | 344 | |
Fair Value | 344 | 528 |
Unrealized Losses | ||
Debt securities, maturity, without single maturity date, unrealized losses | 4 | |
Unrealized Losses | 4 | $ 15 |
Supporting experience-rated products | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than one year | 0 | |
One year through five years | 0 | |
After five years through ten years | 3 | |
Greater than ten years | 3 | |
Fair Value | 6 | |
Unrealized Losses | ||
Less than one year | 0 | |
One year through five years | 0 | |
After five years through ten years | 0 | |
Greater than ten years | 0 | |
Unrealized Losses | 0 | |
Supporting experience-rated products | Residential mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt securities, maturity, without single maturity date, fair value | 0 | |
Unrealized Losses | ||
Debt securities, maturity, without single maturity date, unrealized losses | 0 | |
Supporting experience-rated products | Other asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt securities, maturity, without single maturity date, fair value | 0 | |
Unrealized Losses | ||
Debt securities, maturity, without single maturity date, unrealized losses | 0 | |
Supporting remaining products | ||
Debt Securities, Available-for-sale [Line Items] | ||
Less than one year | 16 | |
One year through five years | 61 | |
After five years through ten years | 125 | |
Greater than ten years | 46 | |
Fair Value | 594 | |
Unrealized Losses | ||
Less than one year | 0 | |
One year through five years | 1 | |
After five years through ten years | 2 | |
Greater than ten years | 0 | |
Unrealized Losses | 7 | |
Supporting remaining products | Residential mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt securities, maturity, without single maturity date, fair value | 2 | |
Unrealized Losses | ||
Debt securities, maturity, without single maturity date, unrealized losses | 0 | |
Supporting remaining products | Other asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt securities, maturity, without single maturity date, fair value | 344 | |
Unrealized Losses | ||
Debt securities, maturity, without single maturity date, unrealized losses | $ 4 |
Investments - Mortgage Loans (Details) - Commercial Real Estate - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Mortgage Loans on Real Estate [Line Items] | ||
New mortgage loans | $ 37 | $ 78 |
Mortgage loans fully repaid | 19 | 71 |
Mortgage loans foreclosed | $ 0 | $ 0 |
Investments - Mortgage Loans Credit Ratings Indicator (Details) - Commercial Real Estate - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items] | ||
Mortgage loans | $ 1,345 | $ 1,361 |
Category 1 | ||
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items] | ||
Mortgage loans | 45 | 42 |
Category 2 to 4 | ||
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items] | ||
Mortgage loans | 1,288 | 1,301 |
Categories 5 and 6 | ||
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items] | ||
Mortgage loans | 12 | 18 |
Category 7 | ||
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items] | ||
Mortgage loans | $ 0 | $ 0 |
Investments - Investment Income (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Gross investment income | $ 231,000,000 | $ 214,000,000 | $ 430,000,000 | $ 264,000,000 |
Investment expenses | (9,000,000) | 0 | (18,000,000) | 0 |
Net investment income (excluding net realized capital gains or losses) | 222,000,000 | 214,000,000 | 412,000,000 | 264,000,000 |
Net realized capital gains | 71,000,000 | 0 | 130,000,000 | 0 |
Net investment income | 293,000,000 | 214,000,000 | 542,000,000 | 264,000,000 |
OTTI losses, investments, portion recognized in earnings, net | 6,000,000 | 0 | 13,000,000 | 0 |
Supporting experience-rated products | ||||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Net investment income | 12,000,000 | 0 | 23,000,000 | 0 |
Debt securities | ||||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Gross investment income | 146,000,000 | 1,000,000 | 292,000,000 | 3,000,000 |
Mortgage loans | ||||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Gross investment income | 18,000,000 | 0 | 35,000,000 | 0 |
Other investments | ||||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Gross investment income | $ 67,000,000 | $ 213,000,000 | $ 103,000,000 | $ 261,000,000 |
Investments - Realized Gains (Details) - Debt securities - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Debt Securities, Available-for-sale [Line Items] | ||
Proceeds from sales | $ 1,273 | $ 2,762 |
Gross realized capital gains | 37 | 72 |
Gross realized capital gains | $ 2 | $ 4 |
Fair Value Fair Value - Measurement on a recurring basis (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | $ 16,469 | $ 15,255 |
Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value Disclosure | 16,551 | 15,328 |
Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value Disclosure | 1,670 | 1,616 |
Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value Disclosure | 14,742 | 13,581 |
Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value Disclosure | 139 | 131 |
U.S. government securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 1,741 | 1,688 |
U.S. government securities | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 1,741 | 1,688 |
U.S. government securities | Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 1,661 | 1,597 |
U.S. government securities | Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 80 | 91 |
U.S. government securities | Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
States, municipalities and political subdivisions | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 2,466 | 2,399 |
States, municipalities and political subdivisions | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 2,466 | 2,399 |
States, municipalities and political subdivisions | Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
States, municipalities and political subdivisions | Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 2,466 | 2,399 |
States, municipalities and political subdivisions | Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
U.S. corporate securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 7,392 | 6,489 |
U.S. corporate securities | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 7,392 | 6,489 |
U.S. corporate securities | Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
U.S. corporate securities | Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 7,343 | 6,422 |
U.S. corporate securities | Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 49 | 67 |
Foreign securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 2,352 | 2,383 |
Foreign securities | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 2,352 | 2,383 |
Foreign securities | Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
Foreign securities | Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 2,347 | 2,380 |
Foreign securities | Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 5 | 3 |
Residential mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 564 | 577 |
Residential mortgage-backed securities | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 564 | 577 |
Residential mortgage-backed securities | Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
Residential mortgage-backed securities | Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 564 | 577 |
Residential mortgage-backed securities | Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
Commercial mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 658 | 605 |
Commercial mortgage-backed securities | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 658 | 605 |
Commercial mortgage-backed securities | Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
Commercial mortgage-backed securities | Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 658 | 605 |
Commercial mortgage-backed securities | Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
Other asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 1,257 | 1,085 |
Other asset-backed securities | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 1,257 | 1,085 |
Other asset-backed securities | Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
Other asset-backed securities | Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 1,257 | 1,085 |
Other asset-backed securities | Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
Redeemable preferred securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 39 | 29 |
Redeemable preferred securities | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 39 | 29 |
Redeemable preferred securities | Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
Redeemable preferred securities | Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 27 | 22 |
Redeemable preferred securities | Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 12 | 7 |
Debt securities | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 16,469 | 15,255 |
Debt securities | Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 1,661 | 1,597 |
Debt securities | Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 14,742 | 13,581 |
Debt securities | Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 66 | 77 |
Equity securities | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 82 | 73 |
Equity securities | Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 9 | 19 |
Equity securities | Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | 0 | 0 |
Equity securities | Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total | $ 73 | $ 54 |
Fair Value Fair Value - Carrying Value and Fair Value Classified by Level (Details) - Nonrecurring - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Carrying Value | ||
Assets: | ||
Mortgage loans | $ 1,345 | $ 1,361 |
Equity securities | 138 | 140 |
Liabilities: | ||
Investment contracts liabilities with a fixed maturity | 5 | 5 |
Investment contracts liabilities without a fixed maturity | 367 | 382 |
Long-term debt | 70,835 | 72,709 |
Level 1 | Estimated Fair Value | ||
Assets: | ||
Mortgage loans | 0 | 0 |
Liabilities: | ||
Investment contracts liabilities with a fixed maturity | 0 | 0 |
Investment contracts liabilities without a fixed maturity | 0 | 0 |
Long-term debt | 73,590 | 71,252 |
Level 2 | Estimated Fair Value | ||
Assets: | ||
Mortgage loans | 0 | 0 |
Liabilities: | ||
Investment contracts liabilities with a fixed maturity | 0 | 0 |
Investment contracts liabilities without a fixed maturity | 0 | 0 |
Long-term debt | 0 | 0 |
Level 3 | Estimated Fair Value | ||
Assets: | ||
Mortgage loans | 1,380 | 1,366 |
Liabilities: | ||
Investment contracts liabilities with a fixed maturity | 5 | 5 |
Investment contracts liabilities without a fixed maturity | 371 | 357 |
Long-term debt | 0 | 0 |
Total | Estimated Fair Value | ||
Assets: | ||
Mortgage loans | 1,380 | 1,366 |
Liabilities: | ||
Investment contracts liabilities with a fixed maturity | 5 | 5 |
Investment contracts liabilities without a fixed maturity | 371 | 357 |
Long-term debt | $ 73,590 | $ 71,252 |
Fair Value - Separate Accounts Fair Value (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | $ 4,271 | $ 3,884 |
Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 4,054 | 3,693 |
Debt securities | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 3,626 | 3,286 |
Equity securities | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 2 | 3 |
Common/collective trusts | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 426 | 404 |
Cash and Cash Equivalents | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 217 | 191 |
Level 1 | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 1,137 | 782 |
Level 1 | Debt securities | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 1,137 | 782 |
Level 1 | Equity securities | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 0 | 0 |
Level 1 | Common/collective trusts | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 0 | 0 |
Level 2 | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 2,917 | 2,907 |
Level 2 | Debt securities | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 2,489 | 2,500 |
Level 2 | Equity securities | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 2 | 3 |
Level 2 | Common/collective trusts | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 426 | 404 |
Level 3 | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 0 | 4 |
Level 3 | Debt securities | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 0 | 4 |
Level 3 | Equity securities | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | 0 | 0 |
Level 3 | Common/collective trusts | Recurring | ||
Fair Value, Separate Account Investment [Line Items] | ||
Separate accounts assets | $ 0 | $ 0 |
Leases Leases - Narrative (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Lessee, Lease, Description [Line Items] | ||||
Sale leaseback transaction, net proceeds, investing activities | $ 0 | $ 5,000,000 | ||
Sale leaseback transaction, net proceeds, investing activities | $ 0 | $ 0 | ||
Store rationalization charges | $ 0 | $ 0 | $ 135,000,000 | $ 0 |
Building | Minimum | ||||
Lessee, Lease, Description [Line Items] | ||||
Lease term | 15 years | 15 years | ||
Building | Maximum | ||||
Lessee, Lease, Description [Line Items] | ||||
Lease term | 25 years | 25 years | ||
Equipment and other assets | Minimum | ||||
Lessee, Lease, Description [Line Items] | ||||
Lease term | 3 years | 3 years | ||
Equipment and other assets | Maximum | ||||
Lessee, Lease, Description [Line Items] | ||||
Lease term | 10 years | 10 years | ||
Retail Long-Term Care Segment | ||||
Lessee, Lease, Description [Line Items] | ||||
Store rationalization charges | $ 135,000,000 |
Leases - Summary of the components of net lease cost (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Leases [Abstract] | ||
Operating Lease, Cost | $ 681 | $ 1,363 |
Finance Lease, Right-of-Use Asset, Amortization | 9 | 18 |
Finance Lease, Interest Expense | 11 | 21 |
Finance Lease Cost | 20 | 39 |
Short-term Lease, Cost | 6 | 12 |
Variable Lease, Cost | 144 | 286 |
Sublease Income | 10 | 22 |
Lease, Cost | $ 841 | $ 1,678 |
Leases - Supplemental Cash Flow Information (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows paid for operating leases | $ 1,348 |
Operating cash flows paid for interest portion of finance leases | 21 |
Financing cash flows paid for principal portion of finance leases | 13 |
Right-of-use assets obtained in exchange for lease obligations: | |
Operating leases | 868 |
Finance leases | $ 43 |
Leases - Supplemental Balance Sheet Information (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Operating leases: | |||
Operating lease right-of-use assets | $ 20,865 | $ 20,987 | $ 0 |
Current portion of operating lease liabilities | 1,793 | 1,803 | 0 |
Long-term operating lease liabilities | 18,849 | $ 18,832 | $ 0 |
Total operating lease liabilities | 20,642 | ||
Finance leases: | |||
Property and equipment, net | 531 | ||
Current portion of long-term debt | 26 | ||
Long-term debt | 559 | ||
Total finance lease liabilities | $ 585 | ||
Weighted average remaining lease term | |||
Operating leases | 14 years | ||
Finance leases | 20 years 3 months 18 days | ||
Weighted average discount rate | |||
Operating leases | 4.70% | ||
Finance leases | 7.40% |
Leases - Maturities of Operating and Finance Lease Liabilities (Details) $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
Financing Leases | |
2019 (remaining six months) | $ 34 |
2020 | 68 |
2021 | 65 |
2022 | 61 |
2023 | 59 |
Thereafter | 825 |
Total financing lease payments | 1,112 |
Less: imputed interest | (527) |
Total lease liabilities | 585 |
Operating Leases | |
2019 (remaining six months) | 1,356 |
2020 | 2,645 |
2021 | 2,516 |
2022 | 2,356 |
2023 | 2,244 |
Thereafter | 16,857 |
Total operating lease payments | 27,974 |
Less: imputed interest | (7,332) |
Total lease liabilities | 20,642 |
Total | |
2019 (remaining six months) | 1,390 |
2020 | 2,713 |
2021 | 2,581 |
2022 | 2,417 |
2023 | 2,303 |
Thereafter | 17,682 |
Total lease payments | 29,086 |
Less: imputed interest | (7,859) |
Less: imputed interest | 21,227 |
Future noncancelable subleases, future minimum payments | 327 |
Leases, amount due in excess of remaining estimated economic life | $ 2,200 |
Health Care Costs Payable (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | |
Health care costs payable, beginning of the period, net | $ 6,147 |
Less: Claims paid | |
Health care costs payable, end of period, net | 6,889 |
Decrease in prior year health care costs payable | (489) |
Incurred but not reported (IBNR) claims liability, net | 5,100 |
Health Insurance Product Line | |
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | |
Health care costs payable, beginning of the period | 6,147 |
Less: Reinsurance recoverables | 4 |
Health care costs payable, beginning of the period, net | 6,143 |
Add: Components of incurred health care costs | |
Current year | 26,864 |
Prior years | (489) |
Total incurred health care costs | 26,375 |
Less: Claims paid | |
Current year | 20,552 |
Prior years | 5,095 |
Total claims paid | 25,647 |
Add: Premium deficiency reserve | 14 |
Health care costs payable, end of period, net | 6,885 |
Add: Reinsurance recoverables | 4 |
Health care costs payable, end of period | 6,889 |
Premium deficiency reserve | 14 |
Health Care Benefits Segment | |
Less: Claims paid | |
Benefit costs recorded in other insurance liabilities | 21 |
Corporate / Other | |
Less: Claims paid | |
Benefit costs recorded in other insurance liabilities | $ 136 |
Shareholders' Equity (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Nov. 02, 2016 |
|
Equity, Class of Treasury Stock [Line Items] | |||||
Stock repurchased during period (in shares) | 0 | 0 | |||
Dividends declared per share (in dollars per share) | $ 0.50 | $ 0.5 | $ 1.00 | $ 1.00 | |
2016 Repurchase Program | |||||
Equity, Class of Treasury Stock [Line Items] | |||||
Stock repurchase program, authorized amount | $ 15,000,000,000.0 | ||||
Stock repurchase program, remaining authorized repurchase amount | $ 13,900,000,000 | $ 13,900,000,000 |
Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jan. 01, 2018 |
||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Roll Forward] | ||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | $ 102 | $ 102 | ||||||||
Net unrealized investment gains (losses): | ||||||||||
Net unrealized investment gains | $ 251 | $ 0 | 585 | $ 0 | ||||||
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax [Abstract] | ||||||||||
Other comprehensive income (loss) | 251 | 331 | (31) | $ 344 | 582 | 313 | ||||
Foreign currency translation adjustments | 3 | (27) | 4 | (26) | ||||||
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification and Tax [Abstract] | ||||||||||
Adoption of new accounting standard | [1] | $ (13) | ||||||||
Net cash flow hedges | (3) | (4) | (7) | 339 | ||||||
Pension and OPEB plans: | ||||||||||
Adoption of new accounting standard | [1] | (13) | ||||||||
Other comprehensive income (loss) | 251 | 331 | (31) | 344 | 582 | 313 | ||||
Adoption of new accounting standard | [1] | (13) | ||||||||
Other comprehensive income (loss) | 251 | 331 | (31) | 344 | 582 | 313 | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 684 | 684 | ||||||||
Cash flow hedge gain reclassified during next 12 months | 18 | 18 | ||||||||
Net Unrealized Gains (Losses) Investments | ||||||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Roll Forward] | ||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 431 | 97 | 0 | 0 | 97 | 0 | ||||
Net unrealized investment gains (losses): | ||||||||||
Other Comprehensive Income (Loss), Securities, Available-for-Sale, Unrealized Holding Gain (Loss) Arising During Period, after Tax | 259 | 0 | 607 | 0 | ||||||
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Net of Tax | (8) | 0 | (22) | 0 | ||||||
Pension and OPEB plans: | ||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 682 | 431 | 0 | 0 | 682 | 0 | ||||
Other Comprehensive Income (Loss), Securities, Available-for-Sale, Unrealized Holding Gain (Loss) Arising During Period, before Tax | 309 | 0 | 719 | 0 | ||||||
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, before Tax | (11) | 0 | (30) | 0 | ||||||
Accumulated Foreign Currency Adjustment Attributable to Parent | ||||||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Roll Forward] | ||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | (157) | (158) | (128) | (129) | (158) | (129) | ||||
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax [Abstract] | ||||||||||
Other comprehensive income (loss) | 3 | (27) | 4 | (26) | ||||||
Pension and OPEB plans: | ||||||||||
Other comprehensive income (loss) | 3 | (27) | 4 | (26) | ||||||
Other comprehensive income (loss) | 3 | (27) | 4 | (26) | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | (154) | (157) | (155) | (128) | (154) | (155) | ||||
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent | ||||||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Roll Forward] | ||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 308 | 312 | 325 | (15) | 312 | (15) | ||||
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification and Tax [Abstract] | ||||||||||
Adoption of new accounting standard | (3) | |||||||||
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax | (3) | 0 | 0 | 344 | ||||||
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax | 0 | (4) | (7) | (5) | ||||||
Pension and OPEB plans: | ||||||||||
Adoption of new accounting standard | (3) | |||||||||
Adoption of new accounting standard | (3) | |||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 305 | 308 | 321 | 325 | 305 | 321 | ||||
Other Comprehensive Income (Loss), Securities, Available-for-Sale, Unrealized Holding Gain (Loss) Arising During Period, before Tax | (4) | 0 | 0 | 464 | ||||||
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, before Tax | 0 | (6) | (9) | (7) | ||||||
Pension and OPEB Plan | ||||||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Roll Forward] | ||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | (149) | (149) | (25) | (21) | (149) | (21) | ||||
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification and Tax [Abstract] | ||||||||||
Adoption of new accounting standard | (4) | |||||||||
Pension and OPEB plans: | ||||||||||
Adoption of new accounting standard | (4) | |||||||||
Adoption of new accounting standard | (4) | |||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | (149) | (149) | (25) | (25) | (149) | (25) | ||||
Accumulated Other Comprehensive Income (Loss) | ||||||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Roll Forward] | ||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 433 | 102 | 172 | (165) | 102 | (165) | ||||
Pension and OPEB plans: | ||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 684 | 433 | 141 | 172 | 684 | 141 | ||||
Accumulated Other Comprehensive Income (Loss) | ||||||||||
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax [Abstract] | ||||||||||
Other comprehensive income (loss) | 251 | 331 | (31) | 344 | 582 | 313 | ||||
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification and Tax [Abstract] | ||||||||||
Adoption of new accounting standard | [1] | (7) | ||||||||
Pension and OPEB plans: | ||||||||||
Adoption of new accounting standard | [1] | (7) | ||||||||
Other comprehensive income (loss) | 251 | 331 | (31) | 344 | 582 | 313 | ||||
Adoption of new accounting standard | [1] | $ (7) | ||||||||
Other comprehensive income (loss) | $ 251 | $ 331 | $ (31) | $ 344 | $ 582 | $ 313 | ||||
|
Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Earnings Per Share, Basic and Diluted [Line Items] | ||||
Antidilutive securities excluded from computation of EPS (in shares) | 23.3 | 15.3 | 19.3 | 14.3 |
Numerator for earnings (loss) per share calculation: | ||||
Income (loss) from continuing operations | $ 1,931 | $ (2,562) | $ 3,358 | $ (1,564) |
Income from continuing operations allocated to participating securities | (1) | (1) | (3) | (3) |
Net (income) loss attributable to noncontrolling interests | 5 | 0 | (1) | 0 |
Income (loss) from continuing operations attributable to CVS Health | $ 1,935 | $ (2,563) | $ 3,354 | $ (1,567) |
Denominator for earnings (loss) per share calculation: | ||||
Weighted average shares outstanding, basic (in shares) | 1,301.0 | 1,018.0 | 1,299.0 | 1,017.0 |
Dilutive effect of outstanding stock-based compensation awards (in shares) | 1.0 | 0.0 | 3.0 | 0.0 |
Weighted average shares outstanding, diluted (in shares) | 1,302.0 | 1,018.0 | 1,302.0 | 1,017.0 |
Earnings (loss) per share from continuing operations: | ||||
Income (loss) from continuing operations attributable to CVS Health, basic (in dollars per share) | $ 1.49 | $ (2.52) | $ 2.58 | $ (1.54) |
Income (loss) from continuing operations attributable to CVS Health, diluted (in dollars per share) | $ 1.49 | $ (2.52) | $ 2.58 | $ (1.54) |
Continuing Operations | ||||
Earnings Per Share, Basic and Diluted [Line Items] | ||||
Antidilutive securities excluded from computation of EPS (in shares) | 1.9 | 2.3 |
Reinsurance (Details) |
1 Months Ended |
---|---|
Jan. 31, 2019
agreement
| |
Reinsurance Disclosures [Abstract] | |
Number of reinsurance agreements | 2 |
Term of reinsurance agreement | 4 years |
Commitments and Contingencies (Details) $ in Millions |
1 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Mar. 28, 2019
USD ($)
|
Oct. 15, 2018
USD ($)
|
Sep. 30, 2015
store
|
Dec. 31, 2012
memeber
|
Jun. 30, 2019
store
|
|
Loss Contingencies [Line Items] | |||||
Guarantor obligations, number of leases | 79 | ||||
Loss contingency, number of locations with subpoena for documents | 8 | ||||
Loss Contingency, Audit Methodology Sample Size | memeber | 200 | ||||
Provider Proceedings | |||||
Loss Contingencies [Line Items] | |||||
Loss contingency, damages awarded, value | $ | $ 86 | $ 150 |
Segment Reporting - Retrospective Adjustment (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Segment Reporting Information [Line Items] | ||||
Total revenues | $ 63,431 | $ 46,922 | $ 125,077 | $ 92,665 |
Cost of products sold | 38,970 | 38,876 | 76,217 | 76,381 |
Benefit costs | 13,087 | 631 | 26,546 | 1,960 |
Operating expenses | 8,042 | 4,867 | 16,292 | 9,780 |
Operating income (loss) (GAAP measure) | 3,332 | (1,373) | 6,022 | 623 |
Adjusted operating income (loss) | 4,031 | 2,599 | 7,626 | 4,892 |
Operating Segments | Pharmacy Services Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 34,842 | 33,427 | 68,400 | 65,973 |
Cost of products sold | 31,973 | 63,280 | ||
Benefit costs | 0 | 0 | ||
Operating expenses | 362 | 700 | ||
Operating income (loss) (GAAP measure) | 1,092 | 1,993 | ||
Adjusted operating income (loss) | 1,296 | 1,181 | 2,243 | 2,168 |
Operating Segments | Retail Long-Term Care Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 21,447 | 20,672 | 42,562 | 41,104 |
Cost of products sold | 14,760 | 29,276 | ||
Benefit costs | 0 | 0 | ||
Operating expenses | 4,216 | 8,508 | ||
Operating income (loss) (GAAP measure) | (2,225) | (601) | ||
Adjusted operating income (loss) | 1,669 | 1,821 | 3,158 | 3,657 |
Operating Segments | Health Care Benefits Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 17,403 | 764 | 35,273 | 2,082 |
Cost of products sold | 0 | 0 | ||
Benefit costs | 631 | 1,960 | ||
Operating expenses | 133 | 260 | ||
Operating income (loss) (GAAP measure) | 0 | (138) | ||
Adjusted operating income (loss) | 1,438 | 0 | 3,000 | (137) |
Operating Segments | Corporate / Other | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 161 | 210 | 271 | 258 |
Cost of products sold | 0 | 0 | ||
Benefit costs | 0 | 0 | ||
Operating expenses | 263 | 527 | ||
Operating income (loss) (GAAP measure) | (53) | (269) | ||
Adjusted operating income (loss) | (202) | (216) | (433) | (434) |
Intersegment Eliminations | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | (10,422) | (8,151) | (21,429) | (16,752) |
Cost of products sold | (7,857) | (16,175) | ||
Benefit costs | 0 | 0 | ||
Operating expenses | (107) | (215) | ||
Operating income (loss) (GAAP measure) | (187) | (362) | ||
Adjusted operating income (loss) | $ (170) | (187) | $ (342) | (362) |
Previously Reported | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 46,922 | 92,665 | ||
Cost of products sold | 38,876 | 76,381 | ||
Benefit costs | 631 | 1,960 | ||
Operating expenses | 4,867 | 9,780 | ||
Operating income (loss) (GAAP measure) | (1,373) | 623 | ||
Previously Reported | Operating Segments | Pharmacy Services Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 33,251 | 65,471 | ||
Cost of products sold | 31,121 | 60,872 | ||
Benefit costs | 631 | 1,960 | ||
Operating expenses | 407 | 784 | ||
Operating income (loss) (GAAP measure) | 1,092 | 1,855 | ||
Previously Reported | Operating Segments | Retail Long-Term Care Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 20,672 | 41,104 | ||
Cost of products sold | 14,760 | 29,276 | ||
Benefit costs | 0 | 0 | ||
Operating expenses | 4,216 | 8,508 | ||
Operating income (loss) (GAAP measure) | (2,225) | (601) | ||
Previously Reported | Operating Segments | Health Care Benefits Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 0 | 0 | ||
Cost of products sold | 0 | 0 | ||
Benefit costs | 0 | 0 | ||
Operating expenses | 0 | 0 | ||
Operating income (loss) (GAAP measure) | 0 | 0 | ||
Previously Reported | Operating Segments | Corporate / Other | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 210 | 258 | ||
Cost of products sold | 0 | 0 | ||
Benefit costs | 0 | 0 | ||
Operating expenses | 263 | 527 | ||
Operating income (loss) (GAAP measure) | (53) | (269) | ||
Previously Reported | Intersegment Eliminations | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | (7,211) | (14,168) | ||
Cost of products sold | (7,005) | (13,767) | ||
Benefit costs | 0 | 0 | ||
Operating expenses | (19) | (39) | ||
Operating income (loss) (GAAP measure) | (187) | (362) | ||
Restatement Adjustment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 0 | 0 | ||
Cost of products sold | 0 | 0 | ||
Benefit costs | 0 | 0 | ||
Operating expenses | 0 | 0 | ||
Operating income (loss) (GAAP measure) | 0 | 0 | ||
Adjusted operating income (loss) | 3,972 | 4,269 | ||
Restatement Adjustment | Operating Segments | Pharmacy Services Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 176 | 502 | ||
Cost of products sold | 852 | 2,408 | ||
Benefit costs | (631) | (1,960) | ||
Operating expenses | (45) | (84) | ||
Operating income (loss) (GAAP measure) | 0 | 138 | ||
Adjusted operating income (loss) | 89 | 175 | ||
Restatement Adjustment | Operating Segments | Retail Long-Term Care Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 0 | 0 | ||
Cost of products sold | 0 | 0 | ||
Benefit costs | 0 | 0 | ||
Operating expenses | 0 | 0 | ||
Operating income (loss) (GAAP measure) | 0 | 0 | ||
Adjusted operating income (loss) | 4,046 | 4,258 | ||
Restatement Adjustment | Operating Segments | Health Care Benefits Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 764 | 2,082 | ||
Cost of products sold | 0 | 0 | ||
Benefit costs | 631 | 1,960 | ||
Operating expenses | 133 | 260 | ||
Operating income (loss) (GAAP measure) | 0 | (138) | ||
Adjusted operating income (loss) | 0 | 1 | ||
Restatement Adjustment | Operating Segments | Corporate / Other | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 0 | 0 | ||
Cost of products sold | 0 | 0 | ||
Benefit costs | 0 | 0 | ||
Operating expenses | 0 | 0 | ||
Operating income (loss) (GAAP measure) | 0 | 0 | ||
Adjusted operating income (loss) | (163) | (165) | ||
Restatement Adjustment | Intersegment Eliminations | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | (940) | (2,584) | ||
Cost of products sold | (852) | (2,408) | ||
Benefit costs | 0 | 0 | ||
Operating expenses | (88) | (176) | ||
Operating income (loss) (GAAP measure) | 0 | 0 | ||
Adjusted operating income (loss) | $ 0 | $ 0 |
Segment Reporting - Reconciliation of Financial Measures of Segments to Consolidated Totals (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Revenue, Major Customer [Line Items] | ||||
Revenues from customers | $ 63,138 | $ 46,708 | $ 124,535 | $ 92,401 |
Net investment income | 293 | 214 | 542 | 264 |
Total revenues | 63,431 | 46,922 | 125,077 | 92,665 |
Adjusted operating income (loss) | 4,031 | 2,599 | 7,626 | 4,892 |
Operating Segments | Pharmacy Services Segment | ||||
Revenue, Major Customer [Line Items] | ||||
Revenues from customers | 34,842 | 33,427 | 68,400 | 65,973 |
Net investment income | 0 | 0 | 0 | 0 |
Total revenues | 34,842 | 33,427 | 68,400 | 65,973 |
Adjusted operating income (loss) | 1,296 | 1,181 | 2,243 | 2,168 |
Net revenues, retail copayments | 2,900 | 2,800 | 6,200 | 6,100 |
Operating Segments | Retail Long-Term Care Segment | ||||
Revenue, Major Customer [Line Items] | ||||
Revenues from customers | 21,447 | 20,672 | 42,562 | 41,104 |
Net investment income | 0 | 0 | 0 | 0 |
Total revenues | 21,447 | 20,672 | 42,562 | 41,104 |
Adjusted operating income (loss) | 1,669 | 1,821 | 3,158 | 3,657 |
Operating Segments | Health Care Benefits Segment | ||||
Revenue, Major Customer [Line Items] | ||||
Revenues from customers | 17,255 | 760 | 34,961 | 2,076 |
Net investment income | 148 | 4 | 312 | 6 |
Total revenues | 17,403 | 764 | 35,273 | 2,082 |
Adjusted operating income (loss) | 1,438 | 0 | 3,000 | (137) |
Operating Segments | Corporate / Other | ||||
Revenue, Major Customer [Line Items] | ||||
Revenues from customers | 16 | 0 | 41 | 0 |
Net investment income | 145 | 210 | 230 | 258 |
Total revenues | 161 | 210 | 271 | 258 |
Adjusted operating income (loss) | (202) | (216) | (433) | (434) |
Intersegment Eliminations | ||||
Revenue, Major Customer [Line Items] | ||||
Revenues from customers | (10,422) | (8,151) | (21,429) | (16,752) |
Net investment income | 0 | 0 | 0 | 0 |
Total revenues | (10,422) | (8,151) | (21,429) | (16,752) |
Adjusted operating income (loss) | $ (170) | $ (187) | $ (342) | $ (362) |
Segment Reporting - Reconciliation from Operating Income to Adjusted Operating Income (Details) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
store
|
Jun. 30, 2018
USD ($)
|
|
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Operating income (loss) (GAAP measure) | $ 3,332 | $ (1,373) | $ 6,022 | $ 623 |
Amortization of intangible assets | 593 | 214 | 1,215 | 424 |
Acquisition-related transaction and integration costs | 106 | 39 | 254 | 82 |
Store rationalization charges | 0 | 0 | 135 | 0 |
Goodwill impairment | 0 | 3,921 | 0 | 3,921 |
Loss on divestiture of subsidiary | 0 | 0 | 0 | 86 |
Interest income on financing for the Aetna Acquisition | 0 | (202) | 0 | (244) |
Adjusted operating income (loss) | $ 4,031 | $ 2,599 | 7,626 | 4,892 |
Retail Long-Term Care Segment | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Store rationalization charges | $ 135 | |||
Loss on divestiture of subsidiary | $ (725) | |||
Number of under performing stores | store | 46 |
Subsequent Event (Details) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Sep. 30, 2019
USD ($)
|
Jul. 01, 2019
store
|
Jun. 30, 2019
building
|
|
Subsequent Event [Line Items] | |||
Number of stores | 9,900 | ||
Retail Long-Term Care Segment | |||
Subsequent Event [Line Items] | |||
Number of stores | 9,900 | ||
Retail Long-Term Care Segment | Discontinued Operations, Disposed of by Sale | Brazil Subsidiary | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Number of stores | store | 50 | ||
Loss on divestiture | $ | $ 200 |
Label | Element | Value | ||
---|---|---|---|---|
Parent [Member] | ||||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (13,000,000) | [1] | |
Retained Earnings [Member] | ||||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (6,000,000) | [1] | |
Accounting Standards Update 2016-02 [Member] | ||||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 178,000,000 | ||
Accounting Standards Update 2016-02 [Member] | Parent [Member] | ||||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 178,000,000 | ||
Accounting Standards Update 2016-02 [Member] | Retained Earnings [Member] | ||||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 178,000,000 | ||
|
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