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What changed in CVS Health's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CVS Health's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+677 added−753 removedSource: 10-K (2025-02-12) vs 10-K (2024-02-07)

Top changes in CVS Health's 2024 10-K

677 paragraphs added · 753 removed · 544 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

188 edited+50 added−89 removed304 unchanged
Biggest changeUncharacteristic or extreme weather conditions also can adversely affect consumer shopping patterns and Pharmacy & Consumer Wellness revenues, expenses and operating results. During the year ended December 31, 2023, the impact of COVID-19 on the Pharmacy & Consumer Wellness segment continued to decline compared to the prior year.
Biggest changeIn addition, both pharmacy and front store revenues are affected by the timing and severity of the cough, cold and flu season, most notably during first and fourth quarters, resulting in higher administration of vaccines during those periods. Uncharacteristic or extreme weather conditions also can adversely affect consumer shopping patterns and Pharmacy & Consumer Wellness revenues, expenses and operating results.
Health Care Benefits Products and Services 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 of medical and dental care costs) as “ASC.” Health Care Benefits products and services consist of the following: • Commercial Medical : The Health Care Benefits segment offers point-of-service (“POS”), preferred provider organization (“PPO”), health maintenance organization (“HMO”) and indemnity benefit (“Indemnity”) plans.
Health Care Benefits Products and Services 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 of medical and dental care costs) as “ASC.” Health Care Benefits segment products and services consist of the following: • Commercial Medical : The Health Care Benefits segment offers point-of-service (“POS”), preferred provider organization (“PPO”), health maintenance organization (“HMO”) and indemnity benefit (“Indemnity”) plans.
The Office of the Inspector General of the HHS (the “OIG”) has recognized that there are legitimate interests in enlisting physicians in effort to reduce unnecessary costs from the health care system and, if appropriately structured, such gainsharing arrangements should not violate the AKS.
The Office of the Inspector General of HHS (the “OIG”) has recognized that there are legitimate interests in enlisting physicians in effort to reduce unnecessary costs from the health care system and, if appropriately structured, such gainsharing arrangements should not violate the AKS.
The Company also may be subject to significant fines, penalties, premium refunds and litigation if it fails to comply with minimum MLR laws and regulations.
The Company also may be subject to significant fines, penalties, premium refunds and litigation if it fails to comply with minimum MLR laws and regulations.
In addition to competitive wages, the comprehensive list of programs and benefits that we offer include annual bonuses, stock awards, 401(k) plans including matching company contributions, no cost comprehensive wellness screenings, tobacco cessation and weight management programs, no cost confidential counseling and no cost financial navigation support, an employee stock purchase plan, health care and insurance benefits, paid time off, flexible work schedules, family leave, dependent care resources, colleague assistance programs and tuition assistance, retiree medical access, and discount programs, among many others, depending on eligibility.
In addition to competitive wages, the comprehensive list of programs and benefits we offer include annual bonuses, stock awards, 401(k) plans including matching company contributions, no cost comprehensive wellness screenings, tobacco cessation and weight management programs, no cost confidential counseling and no cost financial navigation support, an employee stock purchase plan, health care and insurance benefits, paid time off, flexible work schedules, family leave, dependent care resources, colleague assistance programs and tuition assistance, retiree medical access, and discount programs, among many others, depending on eligibility.
The Company currently believes that the payments it has received and will receive in the near term are adequate to justify the Company’s continued participation in the Medicare Advantage and PDP programs, although there are economic and political pressures to continue to reduce spending on the program, and this outlook could change. 340B Drug Pricing Program – The 340B Drug Pricing Program allows eligible Covered Entities to purchase prescription drugs from manufacturers at a steep discount, and is overseen by the HHS and the Health Resources and Services Administration (“HRSA”).
The Company currently believes that the payments it has received and will receive in the near term are adequate to justify the Company’s continued participation in the Medicare Advantage and PDP programs, although there are economic and political pressures to continue to reduce spending on the program, and this outlook could change. 340B Drug Pricing Program – The 340B Drug Pricing Program, which is overseen by the HHS and the Health Resources and Services Administration (“HRSA”), allows eligible Covered Entities to purchase prescription drugs from manufacturers at a steep discount.
Among other requirements, it specifies minimum medical loss ratios (“MLRs”) for Commercial and Medicare Insured products, specifies features required to be 22 included in commercial benefit designs, limits commercial individual and small group rating and pricing practices, encourages additional competition (including potential incentives for new participants to enter the marketplace), and includes regulations and processes that could delay or limit the Company’s ability to appropriately increase its health plan premium rates.
Among other requirements, it specifies minimum medical loss ratios (“MLRs”) for Commercial and Medicare Insured products, specifies features required to be included in commercial benefit designs, limits commercial individual and small group rating and pricing practices, encourages additional competition (including potential incentives for new participants to enter the marketplace), and includes regulations and processes that could delay or limit the Company’s ability to appropriately increase its health plan premium rates.
Drug Enforcement Administration (the “DEA”) and analogous state agencies that regulate controlled substances; packaging, storing, shipping and tracking of pharmaceuticals; repackaging of drug products; labeling, medication guides and other consumer disclosures; interactions with prescribers and health care professionals; compounding of prescription medications; dispensing of controlled and non-controlled substances; counseling of patients; transfers of prescriptions; advertisement of prescription products and pharmacy services; security; inventory control; recordkeeping; reporting to Boards of Pharmacy, the U.S.
Drug Enforcement Administration (the “DEA”) and analogous state agencies that regulate controlled substances; packaging, storing, shipping and tracking of pharmaceuticals; repackaging of drug products; labeling, medication guides and other consumer disclosures; interactions with prescribers and health care professionals; compounding of prescription medications; dispensing of controlled and non-controlled substances; counseling of 25 patients; transfers of prescriptions; advertisement of prescription products and pharmacy services; security; inventory control; recordkeeping; reporting to Boards of Pharmacy, the U.S.
Additional Health Care Benefits segment competitors include other types of medical and dental provider organizations, various specialty service providers (including PBM services providers), health care consultants, financial services companies, integrated health care delivery organizations (networks of providers who also coordinate administrative services for and assume insurance risk of their members), third party administrators (“TPAs”) and, for certain plans, programs sponsored by the federal or state governments.
Additional Health Care Benefits segment competitors include other types of medical and dental provider organizations, various specialty service providers 6 (including PBM services providers), health care consultants, financial services companies, integrated health care delivery organizations (networks of providers who also coordinate administrative services for and assume insurance risk of their members), third party administrators (“TPAs”) and, for certain plans, programs sponsored by the federal or state governments.
The Company cannot predict whether pending or future federal or state legislation or court proceedings will change aspects of how it operates in the specific markets in which it competes or the health care industry generally, but if changes occur, the impact of any such changes could have a material adverse impact on the Company’s businesses, operating results, cash flows and/or stock price.
The Company cannot predict whether pending or future federal, state or international legislation or court proceedings will change aspects of how it operates in the specific markets in which it competes or the health care industry generally, but if changes occur, the impact of any such changes could have a material adverse impact on the Company’s businesses, operating results, cash flows and/or stock price.
Anti-Remuneration Laws - Federal law prohibits, among other things, an entity from knowingly and willfully offering, paying, soliciting or receiving, subject to certain exceptions and “safe harbors,” any remuneration to induce the referral of 26 individuals or the purchase, lease or order of items or services for which payment may be made under Medicare, Medicaid or certain other federal and state health care programs.
Anti-Remuneration Laws - Federal law prohibits, among other things, an entity from knowingly and willfully offering, paying, soliciting or receiving, subject to certain exceptions and “safe harbors,” any remuneration to induce the referral of individuals or the purchase, lease or order of items or services for which payment may be made under Medicare, Medicaid or certain other federal and state health care programs.
The rating system considers a variety of measures adopted by CMS, including quality of preventative services, chronic illness management and overall customer satisfaction. See “Health Care Benefits Pricing” below in this Item 1 for further discussion of star ratings. The Company seeks Health Plan accreditation for Aetna Inc.
The rating system considers a variety of measures adopted by CMS, including quality of preventative services, chronic illness management and overall customer satisfaction. See “Health Care Benefits Pricing” below in this Item 1 for further discussion of star ratings. The 3 Company seeks Health Plan accreditation for Aetna Inc.
A number of states have similar laws, some of which are not limited to services paid for with government funds. Sanctions for violating these federal and state anti-remuneration laws may include imprisonment, criminal and civil fines, and exclusion from participation in Medicare, Medicaid and other federal and state government-sponsored health care programs.
A number of states have similar laws, some of which are not limited to services paid for with government funds. Sanctions for violating these federal and state anti-remuneration laws may include 23 imprisonment, criminal and civil fines, and exclusion from participation in Medicare, Medicaid and other federal and state government-sponsored health care programs.
CMS also considers inflation, changes in utilization patterns and average per capita fee- 6 for-service Medicare costs in the calculation of the fixed capitation payment or premium. PDP contracts also provide a risk-sharing arrangement with CMS to limit the Company’s exposure to unfavorable expenses or benefit from favorable expenses.
CMS also considers inflation, changes in utilization patterns and average per capita fee-for-service Medicare costs in the calculation of the fixed capitation payment or premium. PDP contracts also provide a risk-sharing arrangement with CMS to limit the Company’s exposure to unfavorable expenses or benefit from favorable expenses.
The Company provides pharmacy consulting, including monthly patient drug therapy evaluations, to assist in compliance with state and federal regulations and provide proprietary clinical and health management programs. It also provides pharmaceutical case management services for retirees, employees and dependents who have drug benefits under corporate-sponsored health care programs.
The Company provides pharmacy consulting, including monthly patient drug therapy evaluations, to assist in compliance with state and federal regulations and provide proprietary clinical and health 13 management programs. It also provides pharmaceutical case management services for retirees, employees and dependents who have drug benefits under corporate-sponsored health care programs.
The Company can give no assurance 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) 21 future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations, including the laws and regulations described in this Government Regulation section, 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; or (v) adverse developments in pending or future legal proceedings against or affecting the Company, including qui tam lawsuits, or affecting one or more of the industries in which the Company competes and/or the health care industry generally.
The Company can give no assurance 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 or strategy, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations, including the laws and regulations described in this Government Regulation section, 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; or (v) adverse developments in pending or future legal proceedings against or affecting the Company, including qui tam lawsuits, or affecting one or more of the industries in which the Company competes and/or the health care industry generally.
Specialty services also connects with our claim adjudication platform and various health plan adjudication platforms with 12 a centralized architecture servicing many clients and members. Operating services, such as Specialty Expedite ® , provide an interconnected onboarding solution for specialty medications and branding solutions ranging from fulfillment to total patient management.
Specialty services also connects with our claim adjudication platform and various health plan adjudication platforms with a centralized architecture servicing many clients and members. Operating services, such as Specialty Expedite ® , provide an interconnected onboarding solution for specialty medications and branding solutions ranging from fulfillment to total patient management.
Health Care Benefits Information Systems The Health Care Benefits segment currently operates and supports an end-to-end suite of information technology platforms to support member engagement, enrollment, health benefit administration, care management, service operations, financial reporting and analytics. The multiple platforms are supported by an integration layer to facilitate the transfer of real-time data.
Health Care Benefits Information Systems The Health Care Benefits segment currently operates and supports an end-to-end suite of information technology platforms to support member engagement, enrollment, health benefit administration, care management, service operations, financial reporting and analytics. Platforms are supported by an integration layer to facilitate the transfer of real-time data.
The Company’s formularies provide recommended products in numerous drug classes to help ensure member access to clinically appropriate drugs with alternatives within a class under the client’s pharmacy benefit plan, while helping to drive the lowest net cost for clients that 9 select one of the Company’s formularies.
The Company’s formularies provide recommended products in numerous drug classes to help ensure member access to clinically appropriate drugs with alternatives within a class under the client’s pharmacy benefit plan, while helping to drive the lowest net cost for clients that select one of the Company’s formularies.
These services are managed through our new innovative specialty workflow and web platform. The Health Services segment’s custom-built proprietary Canopy technology is a key driver of the success of its value-based care model and foundation for patients receiving a consistent, high-quality level of care.
These services are managed through our new innovative specialty workflow and web platform. 10 The Health Services segment’s custom-built proprietary Canopy technology is a key driver of the success of its value-based care model and foundation for patients receiving a consistent, high-quality level of care.
For example: • Under the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 significant, automatic across-the-board budget cuts (known as sequestration) began in March 2013, including Medicare spending cuts of not more than 2% of total program costs per year through 2024.
For example: 27 • Under the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 significant, automatic across-the-board budget cuts (known as sequestration) began in March 2013, including Medicare spending cuts of not more than 2% of total program costs per year through 2024.
Health Care Benefits Customers Medical membership is dispersed throughout the U.S., and the Company also serves medical members in certain countries outside the U.S. The Company offers a broad range of traditional, voluntary and consumer-directed health insurance products 5 and related services, many of which are available nationwide.
Health Care Benefits Customers Medical membership is dispersed throughout the U.S., and the Company also serves medical members in certain countries outside the U.S. The Company offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, many of which are available nationwide.
Telemarketing and Other Outbound Contacts - Certain federal and state laws, such as the Telephone Consumer Protection Act and the Telemarketing Sales Rule, give the FTC, the Federal Communications Commission and state Attorneys General the ability to regulate, and bring enforcement actions relating to, telemarketing practices and certain automated outbound contacts 28 such as phone calls, texts or emails.
Telemarketing and Other Outbound Contacts - Certain federal and state laws, such as the Telephone Consumer Protection Act and the Telemarketing Sales Rule, give the FTC, the Federal Communications Commission and state Attorneys General the ability to regulate, and bring enforcement actions relating to, telemarketing practices and certain automated outbound contacts such as phone calls, texts or emails.
As a result, the Company also is increasing its exposure to changes in government policy with respect to and/or regulation of the various Medicaid, dual eligible and dual eligible special needs plan programs in which the Company participates, including changes in the amounts payable to the Company under those programs.
As a result, the Company is increasing its exposure to changes in government policy with respect to and/or regulation of the various Medicaid, dual eligible and dual eligible special needs plan programs in which the Company participates, including changes in the amounts payable to the Company under those programs.
These programs are primarily designed to promote better health outcomes and to help target inappropriate medication utilization and non-adherence to medication, each of which may result in adverse medical events that negatively affect member health and client pharmacy and medical spend.
These programs are primarily designed to promote better health outcomes and to help target inappropriate medication utilization and non-adherence to medication, each of which may result in adverse medical events that 8 negatively affect member health and client pharmacy and medical spend.
The federal government and certain states also are considering proposals and legislation for Medicaid and dual eligible program reforms or redesigns, including restrictions on the collection of manufacturer’s rebates on pharmaceuticals by Medicaid MCOs and their contracted PBMs, further program, population and/or geographic expansions of risk-based managed care, increasing beneficiary cost- 24 sharing or payment levels, and changes to benefits, reimbursement, eligibility criteria, provider network adequacy requirements (including requiring the inclusion of specified high cost providers in the Company’s networks) and program structure.
The federal government and certain states also are considering proposals and legislation for Medicaid and dual eligible program reforms or redesigns, including restrictions on the collection of manufacturer’s rebates on pharmaceuticals by Medicaid MCOs and their contracted PBMs, further program, population and/or geographic expansions of risk-based managed care, increasing beneficiary cost-sharing or payment levels, and changes to benefits, reimbursement, eligibility criteria (and redeterminations of eligibility), provider network adequacy requirements (including requiring the inclusion of specified high cost providers in the Company’s networks) and program structure.
The Company regards its intellectual property as having significant value in the Health Care Benefits, Health Services and Pharmacy & Consumer Wellness segments. The Company is not aware of any facts that could materially impact the continuing use of any of its intellectual property.
The Company regards its intellectual property as having significant value in the Health Care Benefits, Health Services and Pharmacy & Consumer 17 Wellness segments. The Company is not aware of any facts that could materially impact the continuing use of any of its intellectual property.
The Health Care Benefits segment’s ASC plans compete primarily with other large commercial health care benefit companies, numerous for-profit and not-for-profit organizations operating under licenses from the Blue Cross and Blue Shield Association and TPAs.
The Health Care Benefits segment’s ASC plans compete primarily with other large commercial health care benefit insurance companies, numerous for-profit and not-for-profit organizations operating under licenses from the Blue Cross and Blue Shield Association and TPAs.
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 limit future offsets. 35 Laws and Regulations Related to the Health Services Segment In addition to the laws and regulations discussed above that may affect multiple segments of the Company’s business, the Company is subject to federal, state and local statutes and regulations governing the operation of its Health Services segment specifically.
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 limit future offsets. 32 Laws and Regulations Related to the Health Services Segment In addition to the laws and regulations discussed above that may affect multiple segments of the Company’s business, the Company is subject to federal, state and local statutes and regulations governing the operation of its Health Services segment specifically.
Plan Design Offerings and Administration The Company assists its PBM clients in designing pharmacy benefit plans that help improve health outcomes while minimizing the costs to the client.
Plan Design Offerings and Administration 7 The Company assists its PBM clients in designing pharmacy benefit plans that help improve health outcomes while minimizing the costs to the client.
The Company’s care management program covers diseases such as rheumatoid arthritis, 10 Parkinson’s disease, epilepsy and multiple sclerosis and is accredited by the NCQA. The Company’s UM program covers similar diseases and is accredited by the NCQA and URAC.
The Company’s care management program covers diseases such as rheumatoid arthritis, Parkinson’s disease, epilepsy and multiple sclerosis and is accredited by the NCQA. The Company’s UM program covers similar diseases and is accredited by the NCQA and URAC.
Such laws include the federal False Claims Act (the “False Claims Act”), the federal anti-kickback statute (the “AKS”), state false claims acts and anti-kickback statutes in most states, the federal “Stark Law” and related state laws.
Such laws include the federal False Claims Act (the “False Claims Act”), the federal anti-kickback statute (the “AKS”), state 18 false claims acts and anti-kickback statutes in most states, the federal “Stark Law” and related state laws.
In addition, the Company requested increases in its premium rates in its Commercial Health Care Benefits business for 2024 and expects to request future increases in those rates in order to adequately price for projected medical cost trends, required expansions of coverage and rating limits, and significant assessments, fees and taxes imposed by the federal and state governments, including as a result of the ACA.
In addition, the Company requested increases in its premium rates in its Commercial Health Care Benefits business for 2025 and expects to request future increases in those rates in order to adequately price for projected medical cost trends, required expansions of coverage and rating limits, and significant assessments, fees and taxes imposed by the federal and state governments, including as a result of the ACA.
Members typically receive enhanced benefits over traditional fee-for-service Medicare coverage (“Original Medicare”), including reduced cost-sharing for preventive care, vision and other services. The Company offered network-based HMO and/or PPO plans in 46 states and Washington, D.C. in 2023. For certain qualifying employer groups, the Company offers Medicare PPO products nationally.
Members typically receive enhanced benefits over traditional fee-for-service Medicare coverage (“Original Medicare”), including reduced cost-sharing for preventive care, vision and other services. The Company offered network-based HMO and/or PPO plans in 46 states and Washington, D.C. in 2024. For certain qualifying employer groups, the Company offers Medicare PPO products nationally.
In addition, the FDA regulates the Company’s activities as a distributor of store brand products. 33 Laws and Regulations Related to the Health Care Benefits Segment In addition to the laws and regulations discussed above that may affect multiple segments of the Company’s business, the Company is subject to federal, state, local and international statutes and regulations, as well as government program contracts, governing its Health Care Benefits segment specifically.
In addition, the FDA regulates the Company’s activities as a distributor of store brand products. 30 Laws and Regulations Related to the Health Care Benefits Segment In addition to the laws and regulations discussed above that may affect multiple segments of the Company’s business, the Company is subject to federal, state, local and international statutes and regulations, as well as government program contracts, governing its Health Care Benefits segment specifically.
In some 34 states, these laws and regulations restrict the Company’s ability to price for the risk it assumes and/or reflect reasonable costs in the Company’s pricing. The ACA expanded the premium rate review process by, among other things, requiring the Company’s Commercial Insured rates to be reviewed for “reasonableness” at either the state or the federal level.
In some 31 states, these laws and regulations restrict the Company’s ability to price for the risk it assumes and/or reflect reasonable costs in the Company’s pricing. The ACA expanded the premium rate review process by, among other things, requiring the Company’s Commercial Insured rates to be reviewed for “reasonableness” at either the state or the federal level.
MAC methodology is a common cost management practice used by 36 private and public payors (including CMS) to pay pharmacies for dispensing generic prescription drugs. MAC prices specify the allowable reimbursement by a PBM for a particular strength and dosage of a generic drug that is available from multiple manufacturers but sold at different prices.
MAC methodology is a common cost management practice used by 33 private and public payors (including CMS) to pay pharmacies for dispensing generic prescription drugs. MAC prices specify the allowable reimbursement by a PBM for a particular strength and dosage of a generic drug that is available from multiple manufacturers but sold at different prices.
Substantially all of the Pharmacy & Consumer Wellness segment’s pharmacy revenues are derived from pharmacy benefit managers, managed care organizations (“MCOs”), government funded health care programs, commercial employers and other third-party payors. No single Pharmacy & Consumer Wellness payor accounted for 10% or more of the Company’s consolidated total revenues in 2023, 2022 or 2021.
Substantially all of the Pharmacy & Consumer Wellness segment’s pharmacy revenues are derived from pharmacy benefit managers, managed care organizations (“MCOs”), government funded health care programs, commercial employers and other third-party payors. No single Pharmacy & Consumer Wellness payor accounted for 10% or more of the Company’s consolidated total revenues in 2024, 2023 or 2022.
Congress to continue to scrutinize closely each component of the Medicare program (including Medicare Advantage, PDPs, dual eligible plans, broker compensation and marketing, and provider network access and adequacy), modify the terms and requirements of the program and possibly seek to recast or limit private insurers’ roles. Any of the federal agencies noted above or U.S.
Congress to continue to scrutinize closely each component of the Medicare program (including Medicare Advantage, PDPs, dual eligible plans, broker compensation and marketing, prior authorization, and provider network access and adequacy), modify the terms and requirements of the program and possibly seek to recast or limit private insurers’ roles. Any of the federal agencies noted above or U.S.
Members typically receive coverage for certain prescription drugs, usually subject to a deductible, co-insurance and/or co-payment. The Company offered PDP plans in all 50 states and Washington, D.C. in 2023. • Medicare Supplement: For certain Medicare eligible members, the Company offers supplemental coverage for certain health care costs not covered by Original Medicare.
Members typically receive coverage for certain prescription drugs, usually subject to a deductible, co-insurance and/or co-payment. The Company offered PDP plans in all 50 states and Washington, D.C. in 2024. • Medicare Supplement: For certain Medicare eligible members, the Company offers supplemental coverage for certain health care costs not covered by Original Medicare.
Transparency in Coverage Rule - In October 2020, the HHS, the U.S. Department of Labor (“DOL”) and the U.S. Internal Revenue Service (“IRS,” and together with the HHS and DOL, the “Tri-Departments”) released a final rule requiring health insurers to disclose negotiated prices of drugs, medical services, supplies and other covered items.
Transparency in Coverage Rule - In October 2020, the HHS, the U.S. Department of Labor (“DOL”) and the U.S. Internal Revenue Service (“IRS,” and together with the HHS and DOL, the “Tri-Departments”) released a final rule, referred to as the Transparency in Coverage Rule, requiring health insurers to disclose negotiated prices of drugs, medical services, supplies and other covered items.
The Company offered a wide selection of Medicare Supplement products in 49 states and Washington, D.C. in 2023. • Medicaid and CHIP: The Company offers health care management services to individuals eligible for Medicaid and CHIP under multi-year contracts with government agencies in various states that are subject to annual appropriations.
The Company offered a wide selection of Medicare Supplement products in 49 states and Washington, D.C. in 2024. • Medicaid and CHIP: The Company offers health care management services to individuals eligible for Medicaid and CHIP under multi-year contracts with government agencies in various states that are subject to annual appropriations.
CHIP are state-subsidized insurance programs that provide benefits for families with uninsured children. The Company offered these services on an Insured or ASC basis in 16 states in 2023. • Duals: The Company provides health coverage to beneficiaries who are dually eligible for both Medicare and Medicaid coverage.
CHIP are state-subsidized insurance programs that provide benefits for families with uninsured children. The Company offered these services on an Insured or ASC basis in 16 states in 2024. • Duals: The Company provides health coverage to beneficiaries who are dually eligible for both Medicare and Medicaid coverage.
Aetna Life Insurance Company (“ALIC”), a wholly-owned subsidiary of the Company, has received nationwide NCQA PPO Health Plan accreditation. As of December 31, 2023, all of the Company’s Commercial HMO and all of ALIC’s PPO members who were eligible participated in HMOs or PPOs that are accredited by the NCQA.
Aetna Life Insurance Company (“ALIC”), a wholly-owned subsidiary of the Company, has received nationwide NCQA PPO Health Plan accreditation. As of December 31, 2024, all of the Company’s Commercial HMO and all of ALIC’s PPO members who were eligible participated in HMOs or PPOs that are accredited by the NCQA.
Medicaid Regulation - The Company is seeking to substantially grow its Medicaid, dual eligible and dual eligible special needs plan businesses over the next several years.
Medicaid Regulation - The Company is seeking to grow its Medicaid, dual eligible and dual eligible special needs plan businesses over the next several years.
In addition to HIPAA, state health privacy laws apply to the extent they are more protective of individual privacy than is HIPAA, including laws that place stricter controls on the release of information relating to specific diseases or conditions and requirements to notify members of unauthorized release or use of or access to PHI.
In addition to HIPAA, state laws apply to the extent they are more protective of individual privacy than is HIPAA, including laws that place stricter controls on the release of information relating to specific diseases or conditions, reproductive health records and requirements to notify members of unauthorized release or use of or access to PHI.
Medicare and Medicaid Audits - 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 Advantage and PDP beneficiaries. For example, CMS conducts risk adjustment data validation (“RADV”) audits of a subset of Medicare Advantage contracts for each contract year.
Medicare and Medicaid Audits - CMS regularly audits the Company’s performance to determine its compliance with CMS’ regulations and its contracts with CMS and to assess the quality of services it provides to Medicare Advantage and PDP beneficiaries. For example, CMS conducts risk adjustment data validation (“RADV”) audits of a subset of Medicare Advantage contracts for each contract year.
We serve an estimated more than 35 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”).
We serve an estimated more than 36 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”).
State laws regulate the practice of medicine, the practice of pharmacy, the practice of nursing and certain other 32 clinical activities. Clinicians engaged in a professional practice in connection with the provision of clinical services must satisfy applicable state licensing requirements and must act within their scope of practice.
State laws regulate the practice of medicine, the practice of pharmacy, the practice of nursing and certain other 29 clinical activities. Clinicians engaged in a professional practice in connection with the provision of clinical services must satisfy applicable state licensing requirements and must act within their scope of practice.
Subsequently, in November 2021, the U.S. Court of Appeals for the Eighth Circuit upheld a North Dakota law that regulates employer-sponsored ERISA health plans and certain PBM practices within Medicare and in April 2022 the U.S.
Subsequently, in November 2021, the U.S. Court of Appeals for the Eighth Circuit upheld a North Dakota law that regulates employer-sponsored ERISA health plans and certain PBM practices within Medicare. The U.S.
The Consolidated Appropriations Act of 2021 was signed into law in December 2020 and contains further transparency provisions requiring group health plans and health insurance issuers to report certain prescription drug costs, overall spending on health services and prescription drugs, and information about premiums and the impact of rebates and other remuneration on premiums and out-of-pocket costs to the Tri-Departments.
The Consolidated Appropriations Act of 2021 was signed into law in December 2020 and contains further transparency provisions requiring group health plans and health insurance issuers to report, on an annual basis, certain prescription drug costs, overall spending on health services and prescription drugs, and information about premiums and the impact of rebates and other remuneration on premiums and out-of-pocket costs to the Tri-Departments.
The physician entity is kept “friendly” through a stock transfer restriction agreement and/or other 37 Table of Contents relationship between the MSO and the physician owners of the professional corporation. The fees under the management services arrangement must be carefully structured to comply with state fee splitting laws, which in some states may prohibit percentage-based fees.
The physician entity is kept “friendly” through a stock transfer restriction agreement and/or other relationship between the MSO and the physician owners of the professional corporation. The fees under the management services arrangement must be carefully structured to comply with state fee splitting laws, which in some states may prohibit percentage-based fees.
CMS released the Company’s 2024 star ratings in October 2023. The Company’s 2024 star ratings will be used to determine which of the Company’s Medicare Advantage plans have ratings of four stars or higher and qualify for bonus payments in 2025.
CMS released the Company’s 2025 star ratings in October 2024. The Company’s 2025 star ratings will be used to determine which of the Company’s Medicare Advantage plans have ratings of four stars or higher and qualify for bonus payments in 2026.
(2) “Other” represents less than 11% of the “Front store and other” revenue category in all periods presented. Pharmacy Pharmacy revenues represented over three-fourths of Pharmacy & Consumer Wellness segment revenues in each of 2023, 2022 and 2021.
(2) “Other” represents less than 11% of the “Front store and other” revenue category in all periods presented. Pharmacy Pharmacy revenues represented over three-fourths of Pharmacy & Consumer Wellness segment revenues in each of 2024, 2023 and 2022.
The Company’s international operations are subject to different, and sometimes more stringent, legal and regulatory requirements, which vary widely by jurisdiction, including anti-corruption laws; economic sanctions laws; various privacy, insurance, tax, tariff and trade laws and regulations; corporate governance, privacy, data protection (including the EU’s General Data Protection Regulation which began to apply across the EU during 2018), data mining, data transfer, labor and employment, intellectual property, consumer protection and investment laws and regulations; discriminatory licensing procedures; compulsory cessions of reinsurance; required localization of records and funds; higher premium and income taxes; limitations on dividends and repatriation of capital; and requirements for local participation in an insurer’s ownership.
The Company’s international operations, including its remaining international insurance operations until they are closed down, are subject to different, and sometimes more stringent, legal and regulatory requirements, which vary widely by jurisdiction, including anti-corruption laws; economic sanctions laws; various privacy, insurance, tax, tariff and trade laws and regulations; corporate governance, privacy, data protection (including the EU’s General Data Protection Regulation which began to apply across the EU during 2018), data mining, data transfer, labor and employment, intellectual property, consumer protection and investment laws and regulations; discriminatory licensing procedures; compulsory cessions of reinsurance; required localization of records and funds; higher premium and income taxes; limitations on dividends and repatriation of capital; and requirements for local participation in an insurer’s ownership.
Each year, IHE customers provide a member list, which may be supplemented or amended during the year. Customers generally limit the number of times the Company may attempt to contact their members.
Annually, IHE customers provide a member list, which may be supplemented or amended during the year. Customers generally limit the number of times the Company may attempt to contact their members.
The Company believes that retail pharmacy operations will continue to represent a critical part of the Company’s business due to industry demographics, e.g., an aging American population consuming a greater number of prescription drugs, prescription drugs being used more often as the first line of defense for managing illness, the introduction of new pharmaceutical products, the need for vaccinations, including the COVID-19 vaccination, and Medicare Part D growth.
The Company believes that retail pharmacy operations will continue to represent a critical part of the Company’s business due to industry demographics, e.g., an aging American population consuming a greater number of prescription drugs, prescription drugs being used more often as the first line of defense for managing illness, the introduction of new pharmaceutical products, the need for vaccinations and Medicare Part D growth.
Each year we conduct engagement surveys that provide colleagues with an opportunity to share their opinions and experiences with respect to their role, their team and the enterprise to help CVS Health Corporation’s Board of Directors (the “Board”) and our management identify areas where we can improve colleague experience.
Each year we conduct engagement surveys that provide colleagues the opportunity to share opinions and experiences with respect to 15 their role, their team, and the enterprise to help CVS Health Corporation’s Board of Directors (the “Board”) and our management identify where we can improve colleague experience.
Throughout the year, as IHEs are completed and the Company attempts to contact members, the number of members who have not received an IHE and whom the Company is still able to contact declines, typically resulting in fewer IHEs scheduled during the fourth quarter.
Throughout the year, as IHEs are completed and the Company attempts to contact members, the number of members who have not received an IHE and whom 11 the Company is still able to contact declines, typically resulting in fewer IHEs scheduled during the fourth quarter of each calendar year.
As of December 31, 2023, the Pharmacy 14 & Consumer Wellness segment operated more than 9,000 retail locations, as well as online retail pharmacy websites, LTC pharmacies and on-site pharmacies, retail specialty pharmacy stores, compounding pharmacies and branches for infusion and enteral nutrition services.
As of December 31, 2024, the Pharmacy & Consumer Wellness segment operated more than 9,000 retail locations, as well as online retail pharmacy websites, LTC pharmacies and on-site pharmacies, retail specialty pharmacy stores, compounding pharmacies and branches for infusion and enteral nutrition services.
We believe our consumer-centric strategy will drive sustainable long-term growth and deliver value for all stakeholders. Health Care Benefits Segment The Health Care Benefits segment operates as one of the nation’s leading diversified health care benefits providers, serving an estimated more than 35 million people as of December 31, 2023.
We believe our consumer-centric strategy will drive sustainable long-term growth and deliver value for all stakeholders. Health Care Benefits Segment The Health Care Benefits segment operates as one of the nation’s leading diversified health care benefits providers, serving an estimated more than 36 million people as of December 31, 2024.
Contracts with CMS for coverage of Medicare-eligible individuals in the Health Care Benefits segment accounted for approximately 73%, 74% and 79%, respectively, of the Company’s consolidated revenues from the federal government in 2023, 2022 and 2021.
Contracts with CMS for coverage of Medicare-eligible individuals in the Health Care Benefits segment accounted for approximately 74%, 73% and 74%, respectively, of the Company’s consolidated revenues from the federal government in 2024, 2023 and 2022.
The Company cannot predict future federal Medicare or federal or state Medicaid funding levels or the impact that future federal or state budget actions or entitlement program reform, if it occurs, will have on the Company’s businesses, operations or operating results, but the effects could be materially adverse, particularly on the Company’s Medicare and/or Medicaid revenues, MBRs and operating results. • The European Union’s (“EU’s”) General Data Protection Regulation (“GDPR”) began to apply across the EU during 2018. • Other significant legislative and/or regulatory measures which are or recently have been under consideration include the following: • Increasing the corporate tax rate. • Eliminating payment of manufacturer’s rebates on prescription drugs to PBMs, PDPs and Managed Medicaid organizations in connection with federally funded health care programs. • Imposing requirements and restrictions on the design and/or administration of pharmacy benefit plans offered by the Company’s and its clients’ health plans and/or its PBM clients and/or the services the Company provides to those clients, including prohibiting “differential” or “spread” pricing in PBM contracts; restricting or eliminating the use of formularies for prescription drugs; restricting the Company’s ability to require members to obtain drugs through a home delivery or specialty pharmacy; restricting the Company’s ability to place certain specialty or other drugs in the higher cost tiers of its pharmacy formularies; restricting the Company’s ability to make changes to drug formularies and/or clinical programs; limiting or eliminating rebates on pharmaceuticals; requiring the use of up front purchase price discounts on pharmaceuticals in lieu of rebates; restricting the Company’s ability to configure and reimburse its health plan and retail pharmacy provider networks, including use of CVS pharmacy locations; and restricting or eliminating the use of certain drug pricing methodologies. • Broader application of state insurance- and PBM-related laws to national and multi-state plans that cover residents of that state. • Increasing federal or state government regulation of, or involvement in, the pricing and/or purchasing of drugs. • Restricting the Company’s ability to limit providers’ participation in its networks and/or remove providers from its networks by imposing network adequacy requirements or otherwise (including in its Medicare and Commercial Health Care Benefits products). • Imposing assessments on (or to be collected by) health plans or health carriers that may or may not be passed through to their customers.
The Company cannot predict future federal Medicare or federal or state Medicaid funding levels or the impact that future federal or state budget actions or entitlement program reform, if it occurs, will have on the Company’s businesses, operations or operating results, but the effects could be materially adverse, particularly on the Company’s Medicare and/or Medicaid revenues, MBRs and operating results. • The European Union’s (“EU’s”) General Data Protection Regulation (“GDPR”) began to apply across the EU during 2018. • Other significant legislative and/or regulatory measures which are or recently have been under consideration include the following: • Increasing the corporate tax rate. • Eliminating payment of manufacturer’s rebates on prescription drugs to PBMs, PDPs and Managed Medicaid organizations in connection with federally funded health care programs. • Imposing requirements and restrictions on the design and/or administration of pharmacy benefit plans offered by the Company’s and its clients’ health plans and/or its PBM clients and/or the services the Company provides to those clients, including prohibiting “differential” or “spread” pricing in PBM contracts; restricting or eliminating the use of formularies for prescription drugs; restricting the Company’s ability to require members to obtain drugs through a home delivery or specialty pharmacy; restricting the Company’s ability to place certain specialty or other drugs in the higher cost tiers of its pharmacy formularies; restricting the Company’s ability to make changes to drug formularies and/or clinical programs; limiting or eliminating rebates on pharmaceuticals; requiring the use of up front purchase price discounts on pharmaceuticals in lieu of rebates; restricting the Company’s ability to configure and reimburse its health plan and retail pharmacy provider networks, including use of CVS pharmacy locations; and mandating client use of PBM compensation structures based on flat, fee-for-service or "bona fide service fee" arrangements instead of value-based designs or eliminating the use of certain drug pricing methodologies. • Broader application of state insurance- and PBM-related laws to national and multi-state plans that cover residents of that state. • Increasing federal or state government regulation of, or involvement in, the pricing and/or purchasing of drugs, including Glucagon-like peptide 1 (“GLP-1”) drugs. • Restricting the Company’s ability to limit providers’ participation in its networks and/or remove providers from its networks by imposing network adequacy requirements or otherwise (including in its Medicare and Commercial Health Care Benefits products). • Imposing assessments on (or to be collected by) health plans or health carriers that may or may not be passed through to their customers.
The loss of business from any one or a few independent brokers or agents would not have a material adverse effect on the earnings of the Health Care Benefits segment. Health Care Benefits segment revenues from the federal government accounted for 14% of the Company’s consolidated total revenues in 2023, 2022 and 2021.
The loss of business from any one or a few independent brokers or agents would not have a material adverse effect on the earnings of the Health Care Benefits segment. Health Care Benefits segment revenues from the federal government accounted for 18% of the Company’s consolidated total revenues in 2024, 2023 and 2022.
The data gathered during an IHE is also a resource that can be used by health plans to improve their Healthcare Effectiveness Data and Information Set (“HEDIS”) scores and Medicare Advantage star ratings. MinuteClinic As of December 31, 2023, the Company operated more than 1,000 MinuteClinic locations in the U.S.
The data gathered during an IHE is also a resource that can be used by health plans to improve their Healthcare Effectiveness Data and Information Set (“HEDIS”) scores and Medicare Advantage star ratings. MinuteClinic As of December 31, 2024, the Company operated more than 900 MinuteClinic locations in the U.S.
Retail Pharmacy Network Management Services The Company maintains a national network of approximately 66,000 retail pharmacies, consisting of approximately 38,000 chain pharmacies (which include CVS pharmacy locations) and approximately 28,000 independent pharmacies, in the U.S., including Puerto Rico, the District of Columbia, Guam and the U.S. Virgin Islands.
Retail Pharmacy Network Management Services The Company maintains a national network of approximately 65,000 retail pharmacies, consisting of approximately 37,000 chain pharmacies (which include CVS pharmacy locations) and approximately 28,000 independent pharmacies, in the U.S., including Puerto Rico, the District of Columbia, Guam and the U.S. Virgin Islands.
The Health Services segment has a significant number of competitors offering PBM services, including large, national PBM companies (e.g., Prime Therapeutics and MedImpact), PBMs owned by large national health plans (e.g., the Express Scripts business of Cigna Corporation and the OptumRx business of UnitedHealth) and smaller standalone PBMs.
The Health Services segment has a significant number of competitors offering PBM services, including large, national PBM companies (e.g., Prime Therapeutics and MedImpact), PBMs owned by large national health plans (e.g., the Express Scripts business of Cigna Corporation and the Optum Rx business of UnitedHealth Group) and smaller standalone PBMs.
Competitors include pure-play companies whose principal business is providing health risk assessments and similar services (e.g., Matrix Medical Network), as well as large payors, which may use a variety of different providers to perform health risk assessments across care settings or may perform some or all of their health risk assessments utilizing their own in-house capabilities.
Competitors include pure-play companies whose principal business is providing health risk assessments and similar services, as well as large payors, which may use a variety of different providers to perform health risk assessments across care settings or may perform some or all of their health risk assessments utilizing their own in-house capabilities.
The Company continues to launch and enhance new and exclusive brands to create unmatched offerings in beauty products and deliver other unique product offerings, including a full range of high-quality proprietary brand products that are only available through CVS stores. The Company currently carries approximately 5,500 proprietary brand products, which accounted for approximately 21% of front store revenues during 2023.
The Company continues to launch and enhance new and exclusive brands to create unmatched offerings and deliver other unique product offerings, including a full range of high-quality proprietary brand products that are only available through CVS stores. The Company currently carries approximately 4,500 proprietary brand products, which accounted for approximately 21% of front store revenues during 2024.
Key competitors are companies that work directly with providers to enable them to successfully take risk in value-based care arrangements. Some of these competitors focus on a specific function – like analytics – while others offer more comprehensive services.
Key competitors are companies that work directly with providers to enable them to successfully take risk in value-based care arrangements. Some of these competitors focus on a specific function – like analytics – while others offer more comprehensive services. Some key competitors operate nationally, while other competitors are more geographically focused.
At December 31, 2023, the Company’s underlying nationwide provider network had approximately 1.7 million participating providers. Other providers in the Company’s provider networks also include laboratory, imaging, urgent care and other freestanding health facilities.
At December 31, 2024, the Company’s underlying nationwide provider network had approximately 1.9 million participating providers. Other providers in the Company’s provider networks also include laboratory, imaging, urgent care and other freestanding health facilities.
The Company’s primary care operations rely on its value-based capitated partnerships with payors and CMS which manage and market Medicare Advantage plans across the U.S. The Company has strategic value-based relationships with over 30 different payors as of December 31, 2023, including each of the top 5 national payors by number of Medicare Advantage patients.
The Company’s primary care operations rely on its value-based capitated partnerships with payors and CMS which manage and market Medicare Advantage plans across the U.S. The Company had strategic value-based relationships with over 25 different payors as of December 31, 2024, including each of the top 5 national payors by number of Medicare Advantage patients.
Medicare Advantage and PDP plans that are rated less than 3 stars for three consecutive years are subject to contract termination by CMS. CMS continues to revise its star ratings system to make it harder to achieve 4 or more stars.
The Company’s PDP plans were rated 3.5 stars for 2025. Medicare Advantage and PDP plans that are rated less than 3 stars for three consecutive years are subject to contract termination by CMS. CMS continues to revise its star ratings system to make it harder to achieve 4 or more stars.
In addition, rulemaking in a number of states expands the underlying statutory law particularly with respect to the scope of application to pharmacy appeals and reimbursement, network design, member cost sharing and pharmacy audits.
In addition, rulemaking in a number of states expands the underlying statutory law particularly with respect to the scope of application to pharmacy appeals and reimbursement, transparency reporting, PBM compensation, network design, member cost sharing and pharmacy audits.
Some of the prohibitions, have a broad reach and also prohibit otherwise legitimate business relationships with entities that are not healthcare providers, such as billing agencies or management companies. Legal structures have been developed to comply with various state corporate practice of medicine and fee splitting laws.
Some of the prohibitions, have a broad reach and also prohibit otherwise legitimate business relationships with entities that are not health care providers, such as billing agencies or management companies. 34 Table of Contents Legal structures have been developed to comply with various state corporate practice of medicine and fee splitting laws.
Finally, medical costs will vary seasonally depending on a number of factors including the weather, which can be a driver of certain illnesses such as the influenza virus. 13 Revenues generated from the Company’s IHEs and related services are generally lower in the fourth quarter of each calendar year than the other quarters.
Finally, medical costs will vary seasonally depending on a number of factors including the weather, which can be a driver of certain illnesses such as the influenza virus. Revenues generated from the Company’s IHEs and related services are generally lowest in the fourth quarter of each calendar year.
These assessments may include assessments for insolvency, the uninsured, uncompensated care, Medicaid funding or defraying health care provider medical malpractice insurance costs. • Mandating coverage by the Company’s and its clients’ health plans for additional conditions and/or specified procedures, drugs or devices (e.g., high cost pharmaceuticals, experimental pharmaceuticals and oral chemotherapy regimens). • Regulating electronic connectivity. • Mandating or regulating the disclosure of provider fee schedules, manufacturer’s rebates and other data about the Company’s payments to providers and/or payments the Company receives from pharmaceutical manufacturers. • Mandating or regulating disclosure of provider outcome and/or efficiency information. • Prescribing or limiting members’ financial responsibility for health care or other covered services they utilize, including restricting “surprise” bills by providers and by specifying procedures for resolving “surprise” bills. • Prescribing payment levels for health care and other covered services rendered to the Company’s members by providers who do not have contracts with the Company. 31 • Assessing the medical device status of home infusion therapy products and/or solutions, mobile consumer wellness tools and clinical decision support tools, which may require compliance with FDA requirements in relation to some of these products, solutions and/or tools. • Restricting the ability of employers and/or health plans to establish or impose member financial responsibility. • Proposals to expand benefits under Original Medicare. • Amending or supplementing ERISA to impose greater requirements on PBMs or the administration of employer-funded benefit plans or limit the scope of current ERISA pre-emption, which would among other things expose the Company and other health plans to expanded liability for punitive and other extra-contractual damages and additional state regulation.
These assessments may include assessments for insolvency, the uninsured, uncompensated care, Medicaid funding or defraying health care provider medical malpractice insurance costs. • Mandating coverage by the Company’s and its clients’ health plans for additional conditions and/or specified procedures, drugs or devices (e.g., high cost pharmaceuticals, experimental pharmaceuticals and oral chemotherapy regimens). • Regulating electronic connectivity. • Mandating or regulating the disclosure of provider fee schedules, manufacturer’s rebates and other data about the Company’s payments to providers and/or payments the Company receives from pharmaceutical manufacturers. • Mandating or regulating disclosure of provider outcome and/or efficiency information. • Prescribing or limiting members’ financial responsibility for health care or other covered services they utilize, including restricting “surprise” bills by providers and by specifying procedures for resolving “surprise” bills. • Prescribing payment levels for health care and other covered services rendered to the Company’s members by providers who do not have contracts with the Company. • Assessing the medical device status of home infusion therapy products and/or solutions, mobile consumer wellness tools and clinical decision support tools, which may require compliance with FDA requirements in relation to some of these products, solutions and/or tools. • Restricting the ability of employers and/or health plans to establish or impose member financial responsibility. • Proposals to expand benefits under Original Medicare. 28 • Amending or supplementing ERISA to impose greater requirements on PBMs or the administration of employer-funded benefit plans or limit the scope of current ERISA pre-emption, which would among other things expose the Company and other health plans to expanded liability for punitive and other extra-contractual damages and additional state regulation. • Amending the Mental Health Parity and Addiction Equity Act to add additional provisions that could significantly increase compliance requirements. • Eliminating enhanced premium tax credits, which could impact consumers ability to choose individual coverage on the Exchange .
During the year ended December 31, 2023, the Company’s PBM filled or managed 2.3 billion prescriptions on a 30-day equivalent basis. Health Services Products and Services PBM Solutions The Health Services segment manages prescription drug distribution directly through the Company’s specialty and mail order pharmacies and through pharmacies in its retail network.
During the year ended December 31, 2024, the Company’s PBM filled or managed 1.9 billion prescriptions on a 30-day equivalent basis. Health Services Products and Services PBM Solutions The Health Services segment manages prescription drug distribution directly through the Company’s specialty and mail order pharmacies and through pharmacies in its retail network.
Pharmacy & Consumer Wellness revenues by major product group are as follows: Percentage of Revenues 2023 2022 2021 Pharmacy (1) 78.9 % 76.9 % 76.6 % Front store and other (2) 21.1 % 23.1 % 23.4 % 100.0 % 100.0 % 100.0 % _____________________________________________ (1) Pharmacy includes LTC sales and sales in pharmacies within Target Corporation (“Target”) and other retail stores.
Pharmacy & Consumer Wellness revenues by major product group are as follows: Percentage of Revenues 2024 2023 2022 Pharmacy (1) 80.9 % 78.9 % 76.9 % Front store and other (2) 19.1 % 21.1 % 23.1 % 100.0 % 100.0 % 100.0 % _____________________________________________ (1) Pharmacy includes LTC sales and sales in pharmacies within Target Corporation (“Target”) and other retail stores.
As of December 31, 2023, we had more than 9,000 retail locations, more than 1,000 walk-in medical clinics, 204 primary care medical clinics, a leading pharmacy benefits manager with approximately 108 million plan members and expanding specialty pharmacy solutions, and a dedicated senior pharmacy care business serving more than one million patients per year.
As of December 31, 2024, we had more than 9,000 retail locations, more than 1,000 walk-in and primary care medical clinics, a leading pharmacy benefits manager with approximately 90 million plan members and expanding specialty pharmacy solutions, and a dedicated senior pharmacy care business serving more than 800,000 patients per year.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor example, our business associated with members who have elected to receive benefits under Consolidated Omnibus Budget Reconciliation Act (known as “COBRA”) typically has an MBR that is significantly higher than our overall Commercial MBR. • By causing our clients and customers and potential clients and customers, particularly those with the most employees or members, and state and local governments, to force us to compete more vigorously on factors such as price and service, including service, discount and other performance guarantees, to retain or obtain their business. • By causing customers and potential customers of our Health Care Benefits and Pharmacy & Consumer Wellness segments to purchase fewer products and/or products that generate less profit for us than the ones they currently purchase or otherwise would have purchased. • By causing customers and potential customers of our Health Care Benefits segment, particularly smaller employers and individuals, to forego obtaining or renewing their health and other coverage with us. • In our Health Care Benefits segment, by causing unanticipated increases and volatility in utilization of medical and other covered services by our medical members, increases in fraudulent claims and claim disputes, changes in medical claim submission patterns and/or increases in medical unit costs and/or provider behavior as hospitals and other providers attempt to maintain revenue levels in their efforts to adjust to their own economic challenges, each of which would increase our costs and limit our ability to accurately detect, forecast, manage, reserve and price for our (and our self-insured customers’) medical cost trends and incurred and future health care and other benefits costs. • By weakening the ability or perceived ability of the issuers and/or guarantors of the debt or other securities we hold in our investment portfolio to perform on their obligations to us, which could result in defaults in those securities and has reduced, and may further reduce, the value of those securities and has created, and may continue to create, net realized capital losses for us that reduce our operating results. • By weakening the ability of our customers, including self-insured customers in our Health Care Benefits segment, medical providers and the other companies with which we do business as well as our medical members to perform their obligations to us or causing them not to perform those obligations, either of which could reduce our operating results. • By weakening the ability of our former subsidiaries and/or their purchasers to satisfy their lease obligations that we have guaranteed and causing the Company to be required to satisfy those obligations. • By weakening the financial condition of other insurers, including long-term care insurers and life insurers, which increases the risk that we will receive significant assessments for obligations of insolvent insurers to policyholders and claimants. • By continuing to cause inflation that could cause interest rates to further increase and thereby further increase our interest expense and reduce our operating results, as well as further decrease the value of the debt securities we hold in our investment portfolio, which would further reduce our operating results and/or adversely affect our financial condition. 42 Each of our segments operates in a highly competitive and evolving business environment; and operating income in the industries in which we compete may decline.
Biggest changeFor example, our business associated with members who have elected to receive benefits under Consolidated Omnibus Budget Reconciliation Act (known as “COBRA”) typically has an MBR that is significantly higher than our overall Commercial MBR. • By affecting the ability of our customers to obtain adequate financing, which could result in an inability of our customers to pay timely, or at all, the amounts owed to us. • By causing both state and federal government payers, as a result of budget deficits or spending reductions, to suspend or seek to reduce their health care expenditures resulting in our customers delaying payments to us or renegotiating their contracts with us. • By causing our clients and customers and potential clients and customers, particularly those with the most employees or members, and state and local governments, to force us to compete more vigorously on factors such as price and service, including service, discount and other performance guarantees, to retain or obtain their business. • By causing members and other consumers to decide to postpone, or not to seek, medical treatment which may lead them to incur more expensive medical treatment in the future and/or decrease our prescription volumes. • By causing an increasing in the prevalence of high deductible health plans and health plan designs favoring co-insurance over co-payments. • By weakening the ability or perceived ability of the issuers and/or guarantors of the debt or other securities we hold in our investment portfolio to perform on their obligations to us, which could result in defaults in those securities and has reduced, and may further reduce, the value of those securities and has created, and may continue to create, net realized capital losses for us that reduce our operating results. • By causing customers, including self-insured customers in our Health Care Benefits segment, medical members, medical providers and the other companies to be unable to perform their obligations to us which could reduce our operating results. 39 • By affecting our ability to obtain necessary financing on acceptable terms, our ability to secure suitable store locations under acceptable terms and our ability to execute sale-leaseback transactions under acceptable terms. • By weakening the ability of our former subsidiaries and/or their purchasers to satisfy their lease obligations that we have guaranteed and causing the Company to be required to satisfy those obligations. • By weakening the financial condition of other insurers, including long-term care insurers and life insurers, which increases the risk that we will receive significant assessments for obligations of insolvent insurers to policyholders and claimants. • By continuing to cause inflation that could cause interest rates to further increase and thereby further increase our interest expense and reduce our operating results, as well as further decrease the value of the debt securities we hold in our investment portfolio, which would further reduce our operating results and/or adversely affect our financial condition.
If we are unable to increase our prices to reflect, or otherwise mitigate the impact of, increasing costs, our profitability will be adversely affected.
If we are unable to increase our prices to reflect, or otherwise mitigate the impact of, increasing costs, our profitability will be adversely affected.
The independent brokers, consultants and agents generally are not dedicated to us exclusively and may frequently recommend and/or market health care benefits products of our competitors.
The independent brokers, consultants and agents generally are not exclusively dedicated to us and may frequently recommend and/or market health care benefits products of our competitors.
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, and our operating results and/or our financial condition. The global capital markets, including credit markets, continue to experience volatility and uncertainty.
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, and our operating results and/or our financial condition. The U.S. and global capital markets, including credit markets, continue to experience volatility and uncertainty.
Volatility, uncertainty and/or disruptions in the global capital markets, particularly the U.S. credit markets, and governments’ monetary policy, particularly U.S. monetary policy, can significantly and adversely affect the value of our investment portfolio, our operating results and/or our financial condition by: • significantly reducing the value and/or liquidity of the debt securities we hold in our investment portfolio and creating realized capital losses that reduce our operating results and/or unrealized capital losses that reduce our shareholders’ equity; • lowering interest rates on high-quality short-term or medium-term debt securities and thereby materially reducing our net investment income and operating results as the proceeds from securities in our investment portfolio that mature or are otherwise disposed of continue to be reinvested in lower yielding securities; • reducing the fair values of our investments if interest rates rise; • causing non-performance of or defaults on their obligations to us by third parties, including customers, issuers of securities in our investment portfolio, mortgage borrowers and/or reinsurance and/or derivatives counterparties; • making it more difficult to value certain of our investment securities, for example if trading becomes less frequent, which could lead to significant period-to-period changes in our estimates of the fair values of those securities and cause period-to-period volatility in our net income and shareholders’ equity; • reducing our ability to issue short-term debt securities at attractive interest rates, thereby increasing our interest expense and decreasing our operating results; and • reducing our ability to issue other securities.
Volatility, uncertainty and/or disruptions in the global capital markets, particularly the U.S. credit markets, and governments’ monetary policy, particularly U.S. monetary policy, can significantly and adversely affect the value of our investment portfolio, our operating results and/or our financial condition by: • significantly reducing the value and/or liquidity of the debt securities we hold in our investment portfolio and creating realized capital losses that reduce our operating results and/or unrealized capital losses that reduce our shareholders’ equity; • lowering interest rates on high-quality short-term or medium-term debt securities and thereby materially reducing our net investment income and operating results as the proceeds from securities in our investment portfolio that mature or are otherwise disposed of continue to be reinvested in lower yielding securities; • reducing the fair values of our investments if interest rates rise; • causing non-performance of or defaults on their obligations to us by third parties, including customers, issuers of securities in our investment portfolio, mortgage borrowers and/or reinsurance and/or derivatives counterparties; • making it more difficult to value certain of our investment securities, for example if trading becomes less frequent, which could lead to significant period-to-period changes in our estimates of the fair values of those securities and cause period-to-period volatility in our net income and shareholders’ equity; • reducing our ability to issue debt securities at attractive interest rates, thereby increasing our interest expense and decreasing our operating results; and • reducing our ability to issue other securities.
Any failure of our or these third parties’ prevention, detection or control systems related to regulatory compliance, compliance with our internal policies, data security and/or cybersecurity or any incident involving the theft, misappropriation, loss or other unauthorized disclosure of, or access to, members’, customers’ or other constituents’ sensitive information could require us to expend significant resources to remediate any damage, interrupt our operations and adversely affect our brand and reputation and also expose us to whistleblower, class action and other litigation, other proceedings, prohibitions on marketing or active or passive enrollment of members, corrective actions, fines, sanctions and/or penalties, any of which could adversely affect our businesses, operating results, cash flows and/or financial condition.
Any failure of these third parties’ prevention, detection or control systems related to regulatory compliance, compliance with our internal policies, data security and/or cybersecurity or any incident involving the theft, misappropriation, loss or other unauthorized disclosure of, or access to, members’, customers’ or other constituents’ sensitive information could require us to expend significant resources to remediate any damage, interrupt our operations and adversely affect our brand and reputation and also expose us to whistleblower, class action and other litigation, other proceedings, prohibitions on marketing or active or passive enrollment of members, corrective actions, fines, sanctions and/or penalties, any of which could adversely affect our businesses, operating results, cash flows and/or financial condition.
A number of factors contribute to rising health care and other benefit costs, including previously uninsured members entering the health care system; Medicare members’ utilization of supplemental benefits; other changes in members’ behavior, health care utilization patterns and utilization management; turnover in our membership, health care provider and member fraud; additional government mandated benefits or other regulatory changes, including changes to or as a result of the ACA; changes in the health status of our members; the aging of the population and other changing demographic characteristics; advances in medical technology; increases in the number and cost of prescription drugs (including specialty pharmacy drugs and ultra-high cost drugs and therapies); direct-to-consumer marketing by drug manufacturers; the increasing influence of social media on our members’ health care utilization and other behaviors; the shift to a consumer-driven business model; changes in health care practices and general economic conditions (such as inflation and employment levels); increases in labor costs; pandemics, epidemics or disease outbreaks; influenza-related health care costs (which may be substantial and higher than we expected); clusters of high-cost cases; natural disasters and extreme weather events (which may increase in frequency or intensity as a result of climate change); and numerous other factors that are or may be beyond our control.
A number of factors contribute to rising health care and other benefit costs, including previously uninsured members entering the health care system; Medicare members’ utilization of supplemental benefits; other changes in members’ behavior, health care utilization patterns and utilization management; turnover in our membership, health care provider and member fraud; additional government mandated benefits or other regulatory changes, including changes to or as a result of the ACA and IRA; changes in the health status of our members; the aging of the population and other changing demographic characteristics; advances in medical technology; increases in the number and cost of prescription drugs (including specialty pharmacy drugs and ultra-high cost drugs and therapies); direct-to-consumer marketing by drug manufacturers; the increasing influence of social media on our members’ health care utilization and other behaviors; the shift to a consumer-driven business model; changes in health care practices and general economic conditions (such as inflation and employment levels); increases in labor costs; pandemics, epidemics or disease outbreaks; influenza-related health care costs (which may be substantial and higher than we expected); clusters of high-cost cases; natural disasters and extreme weather events (which may increase in frequency or intensity as a result of climate change); and numerous other factors that are or may be beyond our control.
Events that adversely affect that trust, including inadequate disclosure to our members or customers of our uses of their information, failing to keep our information technology systems and our customers’, members’ and other constituents’ sensitive information secure from significant attack, theft, damage, loss or unauthorized disclosure or access, whether as a result of our action or inaction (including human error) or that of our business associates, vendors or other third parties, could adversely affect our brand and reputation, membership and operating results and also could expose and/or has exposed us to mandatory disclosure to the media, litigation (including class action litigation), governmental investigations and enforcement proceedings, material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders, adverse actions against our licenses to do business and/or injunctive relief, any of which could adversely affect our businesses, operating results, cash flows or financial condition.
Events that adversely affect that trust, including inadequate disclosure to our members or customers of our uses of their information, failing to keep our information technology systems and our customers’, members’ and other constituents’ information secure from significant attack, theft, damage, loss or unauthorized disclosure or access, whether as a result of our action or inaction (including human error) or that of our business associates, vendors or other third parties, could adversely affect our brand and reputation, membership and operating results and also could expose and/or has exposed us to mandatory disclosure to the media, litigation (including class action litigation), governmental investigations and enforcement proceedings, material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders, adverse actions against our licenses to do business and/or injunctive relief, any of which could adversely affect our businesses, operating results, cash flows or financial condition.
If we lose our relationship with one or more drug manufacturers, or if the discounts or rebates provided by drug manufacturers decline, our operating results, cash flows and/or prospects could be adversely affected. • If laws or regulations are promulgated that limit the number of PBMs available in a particular business or geography, competition in those businesses and geographies could be amplified and could adversely affect our revenues and operating results. • The PBM industry has been experiencing price compression as a result of competitive pressures and increased client demands for lower prices; increased revenue sharing, including sharing in a larger portion of payments, including rebates and fees, to PBMs and group purchasing organizations received from drug manufacturers; enhanced service offerings and/or higher service levels.
If we lose our relationship with one or more drug manufacturers, or if the discounts or rebates provided by drug manufacturers decline, our operating results, cash flows and/or prospects could be adversely affected. • If laws or regulations are promulgated that limit the number of PBMs available in a particular business or geography, competition in those businesses and geographies could be amplified and could adversely affect our revenues and operating results. 40 • The PBM industry has been experiencing price compression as a result of competitive pressures and increased client demands for lower prices; increased revenue sharing, including sharing in a larger portion of payments, including rebates and fees, to PBMs and group purchasing organizations received from drug manufacturers; enhanced service offerings and/or higher service levels.
Certain of our Health Services and Pharmacy & Consumer Wellness operations, products and services are subject to: • the clinical quality, patient safety and other risks inherent in the dispensing, packaging and distribution of drugs and other health care products and services, including claims related to purported dispensing and other operational errors (any failure by our Health Services and/or Pharmacy & Consumer Wellness operations to adhere to the laws and regulations applicable to the dispensing of drugs could subject us to civil and criminal penalties); • federal and state anti-kickback and other laws that govern our relationship with drug manufacturers, customers and consumers; • compliance requirements under ERISA, including fiduciary obligations in connection with the development and implementation of items such as drug formularies and preferred drug listings; and • federal and state legislative proposals and/or regulatory activity that could adversely affect pharmacy benefit industry practices.
Certain of our Health Services and Pharmacy & Consumer Wellness operations, products and services are subject to: • the clinical quality, patient safety and other risks inherent in the dispensing, packaging and distribution of drugs and other health care products and services, including claims related to purported dispensing and other operational errors (any failure by our Health Services and/or Pharmacy & Consumer Wellness operations to adhere to the laws and regulations applicable to the dispensing of drugs could subject us to civil and criminal penalties); 47 • federal and state anti-kickback and other laws that govern our relationship with drug manufacturers, customers and consumers; • compliance requirements under ERISA, including fiduciary obligations in connection with the development and implementation of items such as drug formularies and preferred drug listings; and • federal and state legislative proposals and/or regulatory activity that could adversely affect pharmacy benefit industry practices.
These risks and uncertainties include, but are not limited to: our ability to set and execute on our operational strategies and achieve our goals within the currently projected costs and the expected timeframes; the availability and cost of technological advancements, renewable 49 energy and other materials necessary to meet our goals and expectations; compliance with, and changes or additions to, global and regional regulations, taxes, charges, mandates or requirements relating to climate-related goals; labor-related regulations and requirements that restrict or prohibit our ability to impose requirements on third party contractors; the actions of competitors and competitive pressures; and an acquisition of or merger with another company that has not adopted similar goals or whose progress towards reaching its goals is not as advanced as ours.
These risks and uncertainties include, but are not limited to: our ability to set and execute on our operational strategies and achieve our goals within the currently projected costs and the expected timeframes; the availability and cost of technological advancements, renewable energy and other materials necessary to meet our goals and expectations; compliance with, and changes or additions to, global and regional regulations, taxes, charges, mandates or requirements relating to climate-related goals; labor-related regulations and requirements that restrict or prohibit our ability to impose requirements on third party contractors; the actions of competitors and competitive pressures; and an acquisition of or merger with another company that has not adopted similar goals or whose progress towards reaching its goals is not as advanced as ours.
If we are unable to limit our price increases, we may lose customers to competitors with more favorable pricing, adversely affecting our revenues and operating results. 43 • A shift in the mix of our pharmacy prescription volume towards programs offering lower reimbursement rates as a result of competition or otherwise could adversely affect our margins, including the ongoing shift in pharmacy mix towards 90-day prescriptions at retail and the ongoing shift in pharmacy mix towards Medicare Part D prescriptions. • PBM client contracts often are for a period of approximately three years.
If we are unable to limit our price increases, we may lose customers to competitors with more favorable pricing, adversely affecting our revenues and operating results. • A shift in the mix of our pharmacy prescription volume towards programs offering lower reimbursement rates as a result of competition or otherwise could adversely affect our margins, including the ongoing shift in pharmacy mix towards 90-day prescriptions at retail and the ongoing shift in pharmacy mix towards Medicare Part D prescriptions. • PBM client contracts often are for a period of approximately three years.
Negative public perception and/or publicity of our industries in general, or of us or our key vendors, brokers or product distribution networks in particular, can further increase our costs of doing business and adversely affect our operating results and our stock price by: • adversely affecting our brand and reputation; • adversely affecting our ability to market and sell our products and/or services and/or retain our existing customers and members; • requiring us to change our products and/or services; • reducing or restricting the revenue we can receive for our products and/or services; and/or • increasing or significantly changing the regulatory and legislative requirements with which we must comply.
Negative public perception and/or publicity of our industries in general, or of us or our key vendors, brokers or product distribution networks in particular, can further increase our costs of doing business and adversely affect our operating results and our stock price by: • adversely affecting our brand and reputation; 43 • adversely affecting our ability to market and sell our products and/or services and/or retain our existing customers and members; • requiring us to change our products and/or services; • reducing or restricting the revenue we can receive for our products and/or services; and/or • increasing or significantly changing the regulatory and legislative requirements with which we must comply.
The occurrence of natural disasters or extreme weather events, such as hurricanes, tropical storms, floods, wildfires, earthquakes, tsunamis, cyclones, typhoons, extended winter storms, droughts and tornadoes; epidemics, pandemics or disease outbreaks and other extreme events and man-made disasters, such as nuclear or biological attacks or other acts of violence, such as active shooter situations, whether as a result of war or terrorism or otherwise, can have a material adverse effect on the U.S. economy in general, our industries and us specifically.
The occurrence of natural disasters or extreme weather events, such as hurricanes, tropical storms, floods, wildfires, earthquakes, tsunamis, cyclones, typhoons, extended winter storms, droughts and tornadoes; epidemics, pandemics or disease 45 outbreaks and other extreme events and man-made disasters, such as nuclear or biological attacks or other acts of violence, such as active shooter situations, whether as a result of war or terrorism or otherwise, can have a material adverse effect on the U.S. economy in general, our industries and us specifically.
If we are convicted of fraud or other criminal conduct in the performance of a government program or if there is an adverse decision against us under the False Claims Act, we may be temporarily or permanently suspended from participating in government health care programs, including Public Exchange, Medicare Advantage, Medicare Part D, Medicaid, dual eligible and dual 51 eligible special needs plan programs, and we also may be required to pay significant fines and/or other monetary penalties.
If we are convicted of fraud or other criminal conduct in the performance of a government program or if there is an adverse decision against us under the False Claims Act, we may be temporarily or permanently suspended from participating in government health care programs, including Public Exchange, Medicare Advantage, Medicare Part D, Medicaid, dual eligible and dual eligible special needs plan programs, and we also may be required to pay significant fines and/or other monetary penalties.
It is reasonably possible that our business operations and operating results could be materially adversely affected by legislative, enforcement, regulatory and public policy changes at the federal or state level, including, but not limited to: changes to the regulatory environment for health care and related benefits, including Medicare, Medicare Advantage, the ACA, and related Public Exchange regulations; efforts to amend the ACA and related regulations, including through litigation aimed at challenging the ability to enforce portions of the ACA, such as the preventative services mandate; changes to laws or regulations governing drug reimbursement, pricing, purchasing and/or importation; changes to or adoption of laws or regulations governing PBMs, including those related to network restrictions, formulary management, affiliate reimbursement, contractual guarantees and reconciliations, reimbursement mandates, required reporting, purchase discount and/or rebate arrangements with drug manufacturers and/or other PBM services; changes to the laws and regulations governing PBMs’, PDPs’ and/or Managed Medicaid organizations’ interactions with government funded health care programs; changes to or adoption of laws and/or regulations relating to claims processing and billing; changes to immigration policies; changes to patent laws; changes with respect to tax and trade policies, tariffs and other government regulations affecting trade between the U.S. and other countries; and other public policy initiatives.
It is reasonably possible that our business operations and operating results could be materially adversely affected by legislative, enforcement, regulatory and public policy changes at the federal or state level, including, but not limited to: changes to the regulatory environment for health care and related benefits, including Medicare, Medicare Advantage, the ACA, and related Public Exchange regulations; efforts to amend the ACA and related regulations, including through litigation aimed at challenging the ability to enforce portions of the ACA, such as the preventative services mandate; changes to laws or regulations governing drug reimbursement, pricing, purchasing and/or importation; changes to or adoption of laws or regulations governing PBMs, including those related to network restrictions, 46 formulary management, affiliate reimbursement, contractual guarantees and reconciliations, reimbursement mandates, required reporting, compensation, purchase discount and/or rebate arrangements with drug manufacturers and/or other PBM services; changes to the laws and regulations governing PBMs’, PDPs’ and/or Managed Medicaid organizations’ interactions with government funded health care programs; changes to or adoption of laws and/or regulations relating to claims processing and billing; changes to immigration policies; changes to patent laws; changes with respect to tax and trade policies, tariffs and other government regulations affecting trade between the U.S. and other countries; and other public policy initiatives.
Risks Related to Our Relationships with Manufacturers, Providers, Suppliers and Vendors • We face risks relating to the market availability, pricing, suppliers and safety profiles of prescription drugs and other products that we purchase and sell. • We need to be able to maintain our ability to contract with providers on competitive terms and develop and maintain attractive networks with high quality providers. • If our suppliers or 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 and/or regulatory action. • 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. • Continuing consolidation and integration among providers and other suppliers may increase our costs and increase competition. 40 Risks Relating to Our Businesses We may not be able to accurately forecast health care and other benefit costs, including as a result of pandemics or disease outbreaks, which could adversely affect our Health Care Benefits segment’s operating results.
Risks Related to Our Relationships with Manufacturers, Providers, Suppliers and Vendors • We face risks relating to the market availability, pricing, suppliers and safety profiles of prescription drugs and other products that we purchase and sell. • We need to be able to maintain our ability to contract with providers on competitive terms and develop and maintain attractive networks with high quality providers. • If our suppliers or 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 and/or regulatory action. • 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. • Continuing consolidation and integration among providers and other suppliers may increase our costs and increase competition. 37 Risks Relating to Our Businesses We may not be able to accurately forecast health care and other benefit costs, including as a result of pandemics or disease outbreaks, which could adversely affect our Health Care Benefits segment’s operating results.
We 61 also need to develop or acquire new technology systems, contract with new vendors or modify certain of our existing systems to support the consumer-oriented and transformational products and services we are developing, operating and expanding and/or to meet current and developing industry and regulatory standards, including to keep pace with continuing changes in information processing technology, emerging cybersecurity risks and threats, and changes to applicable privacy and security laws, rules and regulations.
We also need to develop or acquire new technology systems, contract with new vendors or modify certain of our existing systems to support the consumer-oriented and transformational products and services we are developing, operating and expanding and/or to meet current and developing industry and regulatory standards, including to keep pace with continuing changes in information processing technology, emerging cybersecurity risks and threats, and changes to applicable privacy and security laws, rules and regulations.
Our use and disclosure of members’, customers’ and other constituents’ sensitive information is subject to complex regulations. • Pursuing multiple information technology improvement initiatives simultaneously could make continued development and implementation significantly more challenging. • Product liability, product recall, professional liability or personal injury issues could damage our reputation. • We face significant competition in attracting and retaining talented employees.
Our use and disclosure of members’, customers’ and other constituents’ personal information is subject to complex regulations. • Pursuing multiple information technology improvement initiatives simultaneously could make continued development and implementation significantly more challenging. • Product liability, product recall, professional liability or personal injury issues could damage our reputation. • We face significant competition in attracting and retaining talented employees.
A termination or modification to any of these relationships could adversely affect our prescription drug supply and have a material adverse effect on our businesses, operating results and financial condition. Moreover, many products distributed by our pharmacies are manufactured with ingredients that are susceptible to supply shortages. In some cases, we depend upon a single source of supply.
A termination or modification to any of these relationships could adversely affect our 61 prescription drug supply and have a material adverse effect on our businesses, operating results and financial condition. Moreover, many products distributed by our pharmacies are manufactured with ingredients that are susceptible to supply shortages. In some cases, we depend upon a single source of supply.
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. Our products are sold primarily through our sales personnel, who frequently work with independent brokers, consultants and agents who assist in the marketing, production and servicing of business.
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. 58 Our products are sold primarily through our sales personnel, who frequently work with independent brokers, consultants and agents who assist in the marketing, production and servicing of business.
Although we have 63 developed procedures for crisis management and disaster recovery and business continuity plans, and we maintain insurance policies that we believe are customary and adequate for our size and industry, our crisis management and disaster recovery procedures and business continuity plans may not be effective and our insurance policies include limits and exclusions and, as a result, our coverage may be insufficient to protect against all potential hazards and risks incident to our businesses.
Although we have developed procedures for crisis management and disaster recovery and business continuity plans, and we maintain insurance policies that we believe are customary and adequate for our size and industry, our crisis management and disaster recovery procedures and business continuity plans may not be effective and our insurance policies include limits and exclusions and, as a result, our coverage may be insufficient to protect against all potential hazards and risks incident to our businesses.
A shift of enrollees from more profitable products to less profitable products could have a material adverse effect on the Health Care Benefits segment’s operating results. Negative public perception of the industries in which we operate, or of our industries’ or our practices, can adversely affect our businesses, operating results, cash flows and prospects.
A continuing shift of enrollees from more profitable products to less profitable products could have a material adverse effect on the Health Care Benefits segment’s operating results. Negative public perception of the industries in which we operate, or of our industries’ or our practices, can adversely affect our businesses, operating results, cash flows and prospects.
As we seek to reduce general and administrative expenses, we must balance the potential impact of cost-saving measures on our customers and other services and performances. If we misjudge the effects of such measures, customers and other services may be adversely affected. We depend on third parties for certain of our customer service, PBM and prescription delivery operations.
As we seek to reduce general and administrative expenses, we must balance the potential impact of cost-saving measures on our customers and other services and performances. If we misjudge the effects of such measures, customers and other services may be adversely affected. We depend 55 on third parties for certain of our customer service, PBM and prescription delivery operations.
If any of the following risks or uncertainties develops into actual events or if the circumstances described in the risks or uncertainties occur or continue to occur, those events or circumstances could have a material adverse effect on our businesses, operating results, cash flows, financial condition and/or stock price, among other effects on us.
If any of the following risks or uncertainties develops into actual events or if the circumstances described in the risks or uncertainties occur or continue to occur, those events or circumstances could have a material adverse effect on our businesses, 35 operating results, cash flows, financial condition and/or stock price, among other effects on us.
Further, our ability to reflect ACA assessments, fees and taxes in our Medicare, Medicaid and CHIP premium rates is limited. Since 2013, HHS has issued determinations to health plans that their premium rate increases were “unreasonable,” and we may experience challenges to appropriate premium rate increases in certain states.
Further, our ability to reflect ACA assessments, fees and taxes in our Medicare, Medicaid and CHIP premium rates is limited. 52 Since 2013, HHS has issued determinations to health plans that their premium rate increases were “unreasonable,” and we may experience challenges to appropriate premium rate increases in certain states.
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. 59 We and our vendors have experienced diverse cyberattacks and expect to continue to experience cyberattacks going forward.
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. We and our vendors have experienced diverse cyberattacks and expect to continue to experience cyberattacks going forward.
If we fail to abide by applicable rules or requirements, or if data relating to our payment systems is compromised due to a breach or misuse, we may be responsible for any costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees.
If we fail to abide by applicable rules or requirements, or if data relating to our payment systems is compromised due to a breach or misuse, we may be responsible for any costs incurred by payment card issuing banks and other third parties or subject to fines and 59 higher transaction fees.
We anticipate continued regulatory and legislative action to increase regulation of premium rates in our Insured Health Care Benefits products. We may not be able to obtain rates that are actuarially justified or that are sufficient to make our policies 56 profitable in one or more product lines or geographies.
We anticipate continued regulatory and legislative action to increase regulation of premium rates in our Insured Health Care Benefits products. We may not be able to obtain rates that are actuarially justified or that are sufficient to make our policies profitable in one or more product lines or geographies.
If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized, and the asset is written down to its estimated fair value. Definite-lived intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of such an asset may not be recoverable.
If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized, and the asset is written down to its estimated fair value. Definite-lived 60 intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of such an asset may not be recoverable.
Litigation, and particularly securities, derivative, collective or class action and qui tam litigation, is often expensive and disruptive. Many of the legal proceedings against us seek substantial damages (including non-economic or punitive damages and treble damages), and certain of these proceedings also seek changes in our business practices.
Litigation, and particularly securities, derivative, collective or class action and qui tam litigation, is often expensive and disruptive. Many of the legal proceedings against us seek substantial damages (including non-economic or punitive damages 48 and treble damages), and certain of these proceedings also seek changes in our business practices.
As states increase their reliance on encounter data, and some states mandate that certain amounts be included or excluded from encounter data, these difficulties could affect the Medicaid premium rates we receive and how Medicaid membership is assigned to us, which could have a material adverse effect on our Medicaid operating results and cash flows and/or our ability to bid for, and continue to participate in, certain Medicaid programs. • If we fail to report and correct errors discovered through our own auditing procedures or during a CMS audit or otherwise fail to comply with the applicable laws and regulations, we could be subject to fines, civil monetary penalties or other sanctions, including fines and penalties under the False Claims Act, which could have a material adverse effect on our ability to participate in Medicare Advantage, Medicare Part D or other government programs, and on our operating results, cash flows and financial condition. • The resumption of Medicaid eligibility redeterminations after being suspended during the COVID-19 pandemic could negatively impact the number of members eligible for the Company’s Medicaid plans. • Certain of our Medicaid contracts require the submission of complete and correct encounter data.
As states increase their reliance on encounter data, and some states mandate that certain amounts be included or excluded from encounter data, these difficulties could affect the Medicaid premium rates we receive and how Medicaid membership is assigned to us, which could have a material adverse effect on our Medicaid operating results and cash flows and/or our ability to bid for, and continue to participate in, certain Medicaid programs. • If we fail to report and correct errors discovered through our own auditing procedures or during a CMS audit or otherwise fail to comply with the applicable laws and regulations, we could be subject to fines, civil monetary penalties or other sanctions, including fines and penalties under the False Claims Act, which could have a material adverse effect on our ability to participate in Medicare Advantage, Medicare Part D or other government programs, and on our operating results, cash flows and financial condition. • The resumption of Medicaid eligibility redeterminations after being suspended during the COVID-19 pandemic has negatively impacted the number of members eligible for the Company’s Medicaid plans, which could impact our operating results and cash flows from the Medicaid business. • Certain of our Medicaid contracts require the submission of complete and correct encounter data.
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 47 insufficient.
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.
Our businesses depend in large part on these systems to adequately price our products and services; accurately establish reserves, process claims and report operating results; and interact with providers, employer plan sponsors, customers, members, consumers and vendors in an efficient and uninterrupted fashion.
Our businesses depend in large part on these systems to adequately price our 57 products and services; accurately establish reserves, process claims and report operating results; and interact with providers, employer plan sponsors, customers, members, consumers and vendors in an efficient and uninterrupted fashion.
This risk is heightened as we develop, operate and expand our consumer-oriented products and services and we expand in the health 62 care space and our business model evolves to include a greater focus on consumers and direct-to-consumer sales, such as competing for sales on Insurance Exchanges.
This risk is heightened as we develop, operate and expand our consumer-oriented products and services and we expand in the health care space and our business model evolves to include a greater focus on consumers and direct-to-consumer sales, such as competing for sales on Insurance Exchanges.
In addition to the integration risks noted above, some other risks we may face with respect to acquisitions, including the recent acquisitions of Oak Street Health and Signify Health, and other inorganic growth strategies include: • we may not be able to obtain the required regulatory approval for an acquisition in a timely manner, if at all; • we frequently compete with other firms, some of which may have greater financial and other resources and a greater tolerance for risk, to acquire attractive companies; • the acquired, alliance and/or joint venture businesses may not perform as projected; 58 • the goodwill or other intangible assets established as a result of our acquisitions may be incorrectly valued or may become impaired; • we may assume unanticipated liabilities, including those that were not disclosed to us or which we underestimated; • the acquired businesses, or the pursuit of other inorganic growth strategies, could disrupt or compete with our existing businesses, distract management, result in the loss of key employees, business partners, suppliers and customers, divert resources, result in tax costs or inefficiencies and make it difficult to maintain our current business standards, controls, information technology systems, policies, procedures and performance; • we may finance future acquisitions and other inorganic growth strategies by issuing common stock for some or all of the purchase price, which would dilute the ownership interests of our stockholders; • we may incur significant debt in connection with acquisitions (whether to finance acquisitions or by assuming debt from the businesses we acquire); • a proposed or pending transaction may have a negative effect on the Company’s credit ratings; • we may not have the expertise to manage and profitably grow the businesses we acquire, and we may need to rely on the retention of key personnel and other suppliers of businesses we acquire, which may be difficult or impossible to accomplish; • we may enter into merger or purchase agreements but, due to reasons within or outside our control, fail to complete the related transactions, which could result in termination fees or other penalties that could be material, cause material disruptions to our businesses and operations and adversely affect our brand, reputation, or stock price; • in order to complete an acquisition, we may be required to divest certain portions of our business, for which we may not be able to obtain favorable pricing; • we may be involved in litigation related to mergers or acquisitions, including for matters that occurred prior to the applicable closing, which may be costly to defend and may result in adverse rulings against us that could be material; • announcements related to an acquisition could have an adverse effect on the market price of the Company’s common stock and other securities; and • the integration into our businesses of the businesses and entities we acquire may affect the way in which existing laws and regulations apply to us, including subjecting us to laws and regulations that did not previously apply to us.
In addition to the integration risks noted above, some other risks we may face with respect to acquisitions and other inorganic growth strategies include: • we may not be able to obtain the required regulatory approval for an acquisition in a timely manner, if at all; • we frequently compete with other firms, some of which may have greater financial and other resources and a greater tolerance for risk, to acquire attractive companies; • the acquired, alliance and/or joint venture businesses may not perform as projected; • the goodwill or other intangible assets established as a result of our acquisitions may be incorrectly valued or may become impaired; • we may assume unanticipated liabilities, including those that were not disclosed to us or which we underestimated; • the acquired businesses, or the pursuit of other inorganic growth strategies, could disrupt or compete with our existing businesses, distract management, result in the loss of key employees, business partners, suppliers and customers, divert resources, result in tax costs or inefficiencies and make it difficult to maintain our current business standards, controls, information technology systems, policies, procedures and performance; • we may finance future acquisitions and other inorganic growth strategies by issuing common stock for some or all of the purchase price, which would dilute the ownership interests of our stockholders; • we may incur significant debt in connection with acquisitions (whether to finance acquisitions or by assuming debt from the businesses we acquire); • a proposed or pending transaction may have a negative effect on the Company’s credit ratings; • we may not have the expertise to manage and profitably grow the businesses we acquire, and we may need to rely on the retention of key personnel and other suppliers of businesses we acquire, which may be difficult or impossible to accomplish; • we may enter into merger or purchase agreements but, due to reasons within or outside our control, fail to complete the related transactions, which could result in termination fees or other penalties that could be material, cause material disruptions to our businesses and operations and adversely affect our brand, reputation, or stock price; • in order to complete an acquisition, we may be required to divest certain portions of our business, for which we may not be able to obtain favorable pricing; • we may be involved in litigation related to mergers or acquisitions, including for matters that occurred prior to the applicable closing, which may be costly to defend and may result in adverse rulings against us that could be material; • announcements related to an acquisition could have an adverse effect on the market price of the Company’s common stock and other securities; and • the integration into our businesses of the businesses and entities we acquire may affect the way in which existing laws and regulations apply to us, including subjecting us to laws and regulations that did not previously apply to us.
Many of these proceedings seek substantial damages which may not be covered by insurance. • 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. • Our litigation and regulatory risk profiles are changing as we offer new products and services and expand in business areas beyond our historical businesses, and we may face increased regulatory risks related to our vertical integration strategy. • We face unique regulatory and other challenges in our PBM, Public Exchange, Medicare and Medicaid businesses. • Programs funded in whole or in part by the U.S. federal government account for a significant portion of our revenues. • We may not be able to obtain adequate premium rate increases in our Insured Health Care Benefits products, MBRs and operating results, which 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.
Many of these proceedings seek substantial damages which may not be covered by insurance. • 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. • Our risk profile is changing as we offer new products and services and expand in business areas beyond our historical businesses, and we may face increased regulatory risks related to our vertical integration strategy. • We face unique regulatory and other challenges in our PBM, Public Exchange, Medicare and Medicaid businesses. • Programs funded in whole or in part by the U.S. federal government account for a significant portion of our revenues. • We may not be able to obtain adequate premium rate increases in our Insured Health Care Benefits products, MBRs and operating results, which 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.
For example, our revenue on Medicare policies is based on bids submitted in June of the year before the contract year. Cost increases in excess of our projections cannot be recovered in the fixed premium period through higher premiums.
For example, our revenue on Individual Medicare policies is based on bids submitted in June of the year before the contract year. Cost increases in excess of our projections cannot be recovered in the fixed premium period through higher premiums.
In addition, breaches of our and/or our vendors’ security measures and the unauthorized access to or dissemination of sensitive personal information, proprietary information or confidential information about us, our customers, our members or other third-parties, could expose our customers’, members’ and other constituents’ private information and our customers, members and other constituents to the risk of financial or medical identity theft, or expose us or other third parties to a risk of loss or misuse of this information, and result in investigations, regulatory enforcement actions, material fines and penalties, loss of customers, litigation or other actions, which could have a material adverse effect on our brand, reputation, businesses, operating results and cash flows.
In addition, breaches of our and/or our vendors’ security measures and the unauthorized access to or dissemination of personal information, proprietary information or confidential information about us, our customers, our members or other third-parties, could expose our customers’, members’ and other constituents’ information and our customers, members and other constituents to the risk of financial or medical identity theft, or expose us or other third parties to a risk of loss or misuse of this information, and result in investigations, regulatory enforcement actions, material fines and penalties, loss of customers, litigation or other actions, which could have a material adverse effect on our brand, reputation, businesses, operating results and cash flows.
These actions may adversely affect our membership, revenues and operating results. • We requested increases in our premium rates in our Commercial Health Care Benefits business for 2024 and expect to request future increases in those rates in order to adequately price for projected medical cost trends, required expansions of coverage and rating limits, and significant assessments, fees and taxes imposed by federal and state governments, including as a result of the ACA.
These actions may adversely affect our membership, revenues and operating results. • We requested increases in our premium rates in our Commercial Health Care Benefits business for 2025 and expect to request future increases in those rates in order to adequately price for projected medical cost trends, required expansions of coverage and rating limits, and significant assessments, fees and taxes imposed by federal and state governments, including as a result of the ACA.
Further, as a result of the ACA and changes to the retiree drug subsidy rules, clients of our PBM business could decide to discontinue providing prescription drug benefits to their 54 Medicare-eligible members.
Further, as a result of the ACA and changes to the retiree drug subsidy rules, clients of our PBM business could decide to discontinue providing prescription drug benefits to their Medicare-eligible members.
The ACA’s minimum MLR rebate requirements limit the level of margin we can earn in Health Care Benefits’ Commercial Insured business. CMS minimum MLR rebate regulations limit the level of margin we can earn in our Medicare Advantage and Medicaid Insured businesses.
The ACA’s minimum MLR rebate requirements limit the level of margin we can earn in Health Care Benefits’ Commercial Insured business. CMS and state minimum MLR rebate regulations limit the level of margin we can earn in our Medicare Advantage and Medicaid Insured businesses.
As an insurer, we have a substantial investment portfolio that supports our policy liabilities and surplus and is comprised largely of debt securities of 64 issuers located in the U.S.
As an insurer, we have a substantial investment portfolio that supports our policy liabilities and surplus and is comprised largely of debt securities of issuers located in the U.S.
These health systems also are increasingly forming and considering forming health plans to directly offer health insurance in competition with us, a process that has been accelerated by the ACA.
Health systems also are increasingly forming and considering forming health plans to directly offer health insurance in competition with us, a process that has been accelerated by the ACA.
These laws, rules and regulations are subject to change (and many are rapidly evolving) and in recent years have given rise to increased enforcement activity, litigation, and other disputes.
These laws, rules and regulations are subject to change (and many are rapidly evolving) and in recent 56 years have given rise to increased enforcement activity, litigation, and other disputes.
Noncompliance with applicable privacy or security laws or regulations, or any security breach, information security incident, and any other incident involving the theft, misappropriation, loss or other 60 unauthorized disclosure of, or access to, sensitive or confidential customer, member or other constituent information, whether by us, by one of our business associates or vendors or by another third party, could require us to expend significant resources to remediate any damage, could interrupt our operations and could adversely affect our brand and reputation, membership and operating results and also could expose and/or has exposed us to mandatory disclosure requirements, adverse media attention, litigation (including class action litigation), governmental investigations and enforcement proceedings, material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders, adverse actions against our licenses to do business and/or injunctive relief, any of which could adversely affect our businesses, operating results, cash flows or financial condition.
Noncompliance with applicable privacy or security laws or regulations, or any security breach, information security incident, and any other incident involving the theft, misappropriation, compromise, loss or other unauthorized disclosure of, or access to, customer, member or other constituent information, whether by us, by one of our business associates or vendors or by another third party, could require us to expend significant resources to remediate any damage, could interrupt our operations and could adversely affect our brand and reputation, membership and operating results and also could expose and/or has exposed us to mandatory disclosure requirements, adverse media attention, litigation (including class action litigation), governmental investigations and enforcement proceedings, material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders, adverse actions against our licenses to do business and/or injunctive relief, any of which could adversely affect our businesses, operating results, cash flows or financial condition.
We estimate health care costs payable periodically, and any resulting adjustments, including premium deficiency reserves, are reflected in current-period operating results within benefit costs.
We estimate health care costs payable periodically, and any resulting adjustments, including premium deficiency reserves, are reflected in current-period operating results within health care costs.
A worsening (or improvement) of health care cost trend rates or changes in claim payment patterns from those that we assumed in estimating health care costs payable as of December 31, 2023 would cause these estimates to change in the near term, and such a change could be material.
A worsening (or improvement) of health care cost trend rates or changes in claim payment patterns from those that we assumed in estimating health care costs payable as of December 31, 2024 would cause these estimates to change in the near term, and such a change could be material.
Negative publicity may come as a result of adverse media coverage, litigation against us and other industry participants, the ongoing public debates over drug pricing, PBMs, government involvement in drug pricing and purchasing, changes to the ACA, “surprise” medical bills, governmental hearings and/or investigations, actual or perceived shortfalls regarding our industries’ or our own products, including Medicare Advantage plans in general, and/or business practices (including PBM operations, drug pricing and insurance coverage determinations) and social media and other media relations activities.
Negative publicity may come as a result of adverse media coverage, litigation against us and other industry participants, the ongoing public debates over drug pricing, PBMs, government involvement in drug pricing and purchasing, changes to the ACA, governmental hearings and/or investigations, actual or perceived shortfalls regarding our industries’ or our own products, including Medicare Advantage plans in general, and/or business practices (including PBM operations, drug pricing and insurance coverage determinations) and social media and other media relations activities.
Our businesses depend on our customers’, members’ and other constituents’ willingness to entrust us with their health related and other sensitive personal information.
Our businesses depend on our customers’, members’ and other constituents’ willingness to entrust us with their health related and other personal information.
We collect, process, maintain, retain, evaluate, utilize and distribute large amounts of personally identifiable, personal health, and financial information (including payment card information) and other confidential and sensitive data about our customers, employees, members and other constituents in the ordinary course of our businesses.
We collect, process, maintain, retain, evaluate, utilize and distribute large amounts of personally identifiable, protected health, and financial information (including payment card information) and other confidential and sensitive data about our customers, employees, members and other constituents in the ordinary course of our businesses.
The accuracy of the projections reflected in our pricing may be impacted by (i) adverse selection among individuals who require or utilize more expensive medical and/or other covered services, (ii) other plans’ withdrawals from participation in the Public Exchanges we serve, (iii) a rapid increase or decline in membership, and (iv) legislation, regulations, enforcement activity and/or judicial decisions that cause Public Exchanges to operate in a manner different than what we projected in setting our premium rates, including the potential expiration of premium subsidies in 2025.
The accuracy of the projections reflected in our pricing may be impacted by (i) adverse selection among individuals who require or utilize more expensive medical and/or other covered services, (ii) other plans’ withdrawals from participation in the Public Exchanges we serve, (iii) a rapid increase or decline in membership, and (iv) legislation, regulations, enforcement activity and/or judicial decisions that cause Public Exchanges to operate in a manner different than what we projected in setting our premium rates, including the potential expiration of premium subsidies and enhanced premium tax credits.
We have set 2024 premium rates for our Public Exchange products based on our projections, including as to the health status and quantity of membership and utilization of medical and/or other covered services by members.
We have set 2025 premium rates for our Public Exchange products based on our projections, including as to the health status and quantity of membership and utilization of medical and/or other covered services by members.
Among other things, joint ventures require us to maintain collaborative relationships with our counterparties, continue to gain access to provider rates that make the joint ventures economically sustainable and devote significant management time to the operation and management of the joint ventures.
For example, joint ventures require us to, among other things, maintain collaborative relationships with our counterparties, continue to gain access to provider rates that make the joint ventures economically sustainable and devote significant management time to the operation and management of the joint ventures.
As a result, our profits are particularly sensitive to the accuracy of our forecasts of the increases in health care and other benefit costs that we expect to occur and our ability to anticipate and detect medical cost trends.
As a result, our profits are particularly sensitive to the accuracy of our forecasts of the increases in health care and other benefit costs that we expect to incur and our ability to anticipate and detect medical cost trends.
The impact of known cyberattacks has not been material to the Company’s operations or operating results through December 31, 2023. The Board is regularly informed regarding the Company’s information security policies, practices and status.
The impact of known cyberattacks has not been material to the Company’s operations or operating results through December 31, 2024. The Board is regularly informed regarding the Company’s information security policies, practices and status.
A compromise of our information security controls or of those businesses with whom we interact, which results in confidential information being accessed, obtained, damaged, or used by unauthorized or improper persons, could harm our reputation and expose us to regulatory actions and claims from customers and clients, financial institutions, payment card associations and other persons, any of which could adversely affect our businesses, operating results and financial condition.
A compromise of our information security controls or of those third parties with whom we interact, which results in business disruption or confidential information being accessed, obtained, damaged, or used by unauthorized or improper persons, could harm our reputation and expose us to regulatory actions and claims from customers and clients, financial institutions, payment card associations and other persons, any of which could adversely affect our businesses, operating results and financial condition.
In addition, there can be no assurance that our pricing or other actions will result in the profitability of our Public Exchange products in 2024 or any future year.
In addition, there can be no assurance that our pricing or other actions will result in the profitability of our Public Exchange products in 2025 or any future year.
As a result of our vertical integration strategy and other innovation initiatives, we are expanding our presence in the health care space and plan to offer new products and services, including services provided by Oak Street Health and Signify Health, which present a different litigation and regulatory risk profile than the products and services that we historically have offered and increase our exposure to additional risks.
As a result of our vertical integration strategy and other innovation initiatives, we are expanding our presence in the health care space and plan to offer new products and services, including services provided by Oak Street Health and Signify Health businesses, which present a 49 different risk profile than the products and services that we historically have offered and increase our exposure to additional risks.
Examples of such changes include, but are not limited to: the federal or one or more state governments fundamentally restructuring or reducing the funding available for government programs, increasing its involvement in drug reimbursement, pricing, purchasing and/or importation, changing the laws and regulations governing PBMs’, PDPs’ and/or Managed Medicaid organizations’ interactions with government funded health care programs, changing the tax treatment of health or related benefits, or significantly altering the ACA.
Examples of such changes include, but are not limited to: the federal or one or more state governments fundamentally restructuring or reducing the funding available for government programs, increasing its involvement in drug reimbursement, pricing, purchasing and/or importation, changing the laws and regulations governing PBMs’, PDPs’ and/or Managed Medicaid organizations’ interactions with government funded health care programs, changing the tax treatment of health or related benefits, including the expiration of enhanced premium tax credits, or significantly altering the ACA.
Premiums for our Insured Health Care Benefits products, which comprised 94% of our Health Care Benefits revenues for 2023, are priced in advance based on our forecasts of health care and other benefit costs during a fixed premium period, which is generally twelve months.
Premiums for our Insured Health Care Benefits products, which comprised 94% of our Health Care Benefits segment revenues for 2024, are priced in advance based on our forecasts of health care and other benefit costs during a fixed premium period, which is generally twelve months.
Moreover, a data security breach could require that we expend significant resources related to our information systems and infrastructure, and could distract management and other key personnel from performing their primary operational duties. We also could be adversely affected by any significant disruption in the systems of third parties we interact with, including key payors and vendors.
Moreover, a cyberattack could require that we expend significant resources related to our information systems and infrastructure, and could distract management and other key personnel from performing their primary operational duties. We also could be adversely affected by any significant disruption in the systems of third parties we interact with, including key payors and vendors.
Challenges to our minimum MLR rebate methodology and/or reports could adversely affect our operating results. • Our operating results may be adversely affected by changes in laws and policies governing employers and by union organizing activity. 39 Risks Associated with Mergers, Acquisitions, and Divestitures • We may be unable to successfully integrate companies we acquire. • 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.
Challenges to our minimum MLR rebate methodology and/or reports could adversely affect our operating results. • Our operating results may be adversely affected by changes in laws and policies governing employers and by union organizing activity. 36 Risks Associated with Mergers, Acquisitions, and Divestitures • We may be unable to successfully integrate companies we acquire. • We may pursue acquisitions, joint ventures, strategic alliances and other inorganic growth opportunities, as well as strategic divestitures, 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.
Potential difficulties that may be encountered in the integration process, including with respect to Oak Street Health and Signify Health, include the following: • Integrating personnel, operations and systems (including internal control environments and compliance policies), while maintaining focus on producing and delivering consistent, high quality products and services; • Coordinating geographically dispersed organizations; • Distracting management’s attention from our ongoing business operations; • Retaining existing customers and attracting new customers; • Managing inefficiencies associated with integrating our operations; and • Reconciling post-acquisition costs and liabilities between buyer and seller.
Potential difficulties that may be encountered in the integration process include the following: • Integrating personnel, operations and systems (including internal control environments and compliance policies), while maintaining focus on producing and delivering consistent, high quality products and services; • Coordinating geographically dispersed organizations; • Distracting management’s attention from our ongoing business operations; • Retaining existing customers and attracting new customers; • Managing inefficiencies associated with integrating our operations; and • Reconciling post-acquisition costs and liabilities between buyer and seller.
For example, certain of our vendors have been responsible for releases of sensitive information of our members and employees, which has caused us to incur additional expenses and given rise to regulatory actions and litigation against us.
For example, certain of our vendors have been responsible for releases of sensitive information of our members and employees, which has caused us to incur additional expenses and given rise to regulatory actions and litigation against us and has adversely impacted our brand.
To compete effectively on Public Exchanges, we have developed or acquired the technology, systems, tools and talent necessary to interact with Public Exchanges and engage Public Exchange consumers 45 through enhanced consumer-focused sales, marketing channels and customer interfaces. We have also created new customer service programs and product offerings.
To compete effectively on Public Exchanges, we have developed or acquired the technology, systems, tools and talent necessary to interact with Public Exchanges and engage Public Exchange consumers through enhanced consumer-focused sales, marketing channels and customer interfaces. We are also creating new customer service programs and product offerings.
Acceptance of these payment methods subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may change in the future, which could make compliance more difficult or costly.
Acceptance of these payment methods subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules and regulatory requirements governing these payment methods. These requirements may change in the future, which could make compliance more difficult or costly.
These risks are particularly high in our in Medicare Advantage (including dual eligible special needs plans), Medicare Part D, Medicaid, and Managed Medicaid plans, where third parties may perform medical management and other member related services for us.
These risks are particularly high in our in Medicare Advantage (including dual eligible special needs plans), Medicare Part D, Medicaid, and Managed Medicaid plans, where third parties may perform medical management and other member related 62 Table of Contents services for us.
Certain of our agreements with such suppliers are short-term and cancelable by either party without cause. In addition, these agreements may allow the supplier to distribute through channels other than us. Certain of these agreements also allow pricing and other terms to be adjusted periodically for changing market conditions or required service levels.
Certain of our agreements with such suppliers are short-term and cancellable without cause. In addition, these agreements may allow the supplier to distribute through channels other than us. Certain of these agreements also allow pricing and other terms to be adjusted periodically for changing market conditions or required service levels.
It is also possible that Congress may enact some limited form of price negotiation for Medicare. In addition, CMS also publishes the National Average Drug Acquisition Cost (“NADAC”) for certain drugs; NADAC pricing is being adopted in an increasing number of states.
It is also possible that Congress may enact some limited form of price negotiation for Medicare. In addition, CMS also publishes the National Average Drug Acquisition Cost (“NADAC”) for certain drugs; NADAC pricing, which has exhibited recent volatility, is being adopted in an increasing number of states.
While participating on the Public Exchanges, we will have to respond to pricing and other actions taken by existing competitors and regulators as well as potentially disruptive new entrants, which could reduce our profit margins.
To participate on the Public Exchanges, we have to respond to pricing and other actions taken by existing competitors and regulators as well as potentially disruptive new entrants, which could reduce our profit margins.
A change in our Health Care Benefits product mix may adversely affect our profit margins. Our Insured Health Care Benefits products that involve greater potential risk generally tend to be more profitable than our ASC products.
A change in our Health Care Benefits product mix may adversely affect our profit margins. Our Insured Health Care Benefits products that involve greater potential risk generally tend to be more profitable than our ASC products, but ASC products continue to rise in popularity.
See Item 1C of this 10-K, “Cybersecurity,” for more information on the Company’s cybersecurity risk management and governance. 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.
See Item 1C of this 10-K, “Cybersecurity,” for more information on the Company’s cybersecurity risk management and governance. Data governance failures can adversely affect our reputation, businesses and prospects. Our use and disclosure of members’, customers’ and other constituents’ personal information is subject to complex regulations at multiple levels. Our information systems are critical to the operation of our businesses.
We are subject to assessments under guaranty fund laws existing in all states for obligations of insolvent insurance companies (including long-term care insurers), HMOs, ACA co-ops and other payors to policyholders and claimants.
We are exposed to risks relating to the solvency of other insurers. We are subject to assessments under guaranty fund laws existing in all states for obligations of insolvent insurance companies (including long-term care insurers), HMOs, ACA co-ops and other payors to policyholders and claimants.
Changes in marketplace dynamics or the actions of competitors or manufacturers, including industry consolidation, the emergence of new competitors and strategic alliances, and decisions to exclude us from new narrow or restricted retail pharmacy networks could materially and adversely affect our businesses, operating results, cash flows and/or prospects.
Changes in marketplace dynamics or the actions of competitors or manufacturers, including industry consolidation, the emergence of new competitors and strategic alliances, and decisions to exclude us from new narrow or restricted retail pharmacy networks could materially and adversely affect our businesses, operating results, cash flows and/or prospects. Our Health Care Delivery Businesses Face Unique Risks.
Such events could adversely affect our businesses, operations, operating results and cash flows, and, in the event of extreme circumstances, our financial condition or viability, particularly if our responses to such events are less adequate than those of our competitors. We may be unable to achieve our environmental, social and governance goals.
Such events could adversely affect our businesses, operations, operating results and cash flows, and, in the event of extreme circumstances, our financial condition or viability, particularly if our responses to such events are less adequate than those of our competitors. We may be unable to achieve our corporate responsibility and sustainability goals.
Congressional committees and state departments of insurance have each increased scrutiny of the marketing practices of brokers and agents who market Medicare products and of the Medicare Advantage organizations that use these organizations to market their products. Any of the federal agencies noted above or U.S.
Congressional committees and state departments of insurance have each increased scrutiny of the marketing practices of brokers and agents who market Medicare products and of the Medicare Advantage organizations that use these organizations to market their products. CMS, other federal agencies or U.S.
Furthermore, acquisitions, including the recent acquisitions of Oak Street Health and Signify Health, even if successfully integrated, may fail to further our business strategy as anticipated, expose us to increased competition or challenges with respect to our products, services or service areas, and expose us to additional liabilities associated with an acquired business including risks and liabilities associated with litigation involving the acquired business.
Furthermore, acquisitions, even if successfully integrated, may fail to further our business strategy as anticipated, expose us to increased competition or challenges with respect to our products, services or service areas, and expose us to additional liabilities associated with an acquired business including risks and liabilities associated with litigation involving the acquired business.
For these operations, we depend in part on the secure transmission of confidential information over public networks. We have many different information and other technology systems supporting our different businesses (including as a result of our acquisitions).
For these operations, we depend in part on the secure transmission of confidential information over public networks. We have many different information and other technology systems supporting our different businesses, including technology acquired as part of acquisitions, such as Canopy.
For certain payment options, including credit and debit cards, we pay interchange and other fees, which could increase periodically thereby raising our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and various other forms of electronic payment.
For certain payment options, including credit and debit cards, we pay interchange and other fees, which could increase periodically thereby raising our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and various other forms of electronic payment we currently use or adopt in the future.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRisk Factors” for more information on the Company’s cybersecurity-related risks. 67 Table of Contents Governance Management has responsibility to manage risk and bring to the Board’s attention the most material near-term and long-term risks to the Company. The Company’s CISO leads management’s assessment and management of cybersecurity risk.
Biggest changeGovernance Management has responsibility to manage risk and bring to the Board’s attention the most material near-term and long-term risks to the Company. The Company’s CISO leads management’s assessment and management of cybersecurity risk. The CISO reports to the Company’s Chief Digital, Data, Analytics & Technology Officer (the “CDDATO”), who reports directly to the Company’s Chief Executive Officer.
The Board has delegated the responsibility for the oversight of the Company’s cybersecurity risks program to the Nominating and Corporate Governance Committee. As part of this oversight, the Nominating and Corporate Governance Committee reviews the Company’s cybersecurity program periodically, and at least annually.
The Board has delegated the responsibility for the oversight of the Company’s cybersecurity risks to the Audit Committee. As part of this oversight, the Audit Committee reviews the Company’s cybersecurity program periodically, and at least annually.
The Company’s information technology systems and processes are assessed by independent third parties, as appropriate to their business requirements, for compliance with the following standards: HIPAA; NIST 800-53; System and Organization Controls (“SOC”) 1; SOC 2 Type 2; HI-TRUST; Payment Card Industry Data Security Standards; and the National Association of Insurance Commissioners.
The Company’s information technology systems and processes are regularly assessed internally as well as by independent third parties for compliance with the following standards: HIPAA; NIST 800-53; System and Organization Controls (“SOC”) 1; SOC 2 Type 2; HI-TRUST; Payment Card Industry Data Security Standards; and the National Association of Insurance Commissioners.
The steps the Company takes to reduce its vulnerability to cyberattacks and to mitigate impacts from cybersecurity incidents include, but are not limited to: establishing information security policies and standards, implementing information protection processes and technologies, monitoring its information technology systems for cybersecurity threats, assessing cybersecurity risk profiles of key third-parties, implementing cybersecurity training and collaborating with public and private organizations on cyber threat information and best practices.
The steps the Company takes to reduce its vulnerability and to mitigate the impacts from cybersecurity incidents include, but are not limited to: comprehensive information security policies and standards, implementing logical and technical controls through processes and technologies, monitoring its information technology systems for cybersecurity threats, assessing cybersecurity risk profiles of key third-parties, implementing cybersecurity training and collaborating with public and private organizations on cyber threat information 63 Table of Contents and best practices.
Item 1C. Cybersecurity. Cybersecurity Risk Management Securing the Company’s business information, intellectual property, customer, patient and employee data and technology systems is essential for the continuity of its businesses, meeting applicable regulatory requirements and maintaining the trust of its stakeholders.
Item 1C. Cybersecurity. Cybersecurity Risk Management Cybersecurity is an important and integrated part of the Company’s enterprise risk management strategy. Safeguarding the Company’s business information, intellectual property, customer, patient and employee data and technology systems is essential for the continuity of its businesses, meeting applicable regulatory requirements and maintaining the trust of its stakeholders.
The Company’s CDDATO and CISO update the Nominating and Corporate Governance Committee periodically, and at least annually, and the full Board as needed, on the Company’s cybersecurity program, including with respect to particular cybersecurity threats, incidents or new developments in the Company’s risk profile.
The Company’s CDDATO and CISO update the Audit Committee periodically, and at least annually, and the full Board as needed, on the Company’s cybersecurity program, including particular cybersecurity threats, incidents and new developments in the Company’s risk profile.
To help protect the Company from a major cybersecurity incident that could have a material impact on operations or the Company’s financial results, the Company has implemented policies, programs and controls, including technology investments that focus on cybersecurity incident prevention, identification and mitigation.
To help protect the Company from a major cybersecurity incident that could have a material impact on operations or the Company’s financial results, the Company has implemented a robust information security program and has made technology investments that focus on cybersecurity incident prevention, detection and mitigation.
The CISO reports to the Company’s Chief Digital, Data, Analytics & Technology Officer (the “CDDATO”), who reports directly to the Company’s Chief Executive Officer. The CDDATO, CISO and the CPO, regularly review cybersecurity matters with management. The current CDDATO, CISO and CPO each has more than 10 years of experience managing risks or advising on cybersecurity issues.
The CDDATO, CISO and the CPO, regularly review cybersecurity matters with management. The current CDDATO, CISO and CPO each has more than 10 years of experience managing risks or advising on cybersecurity issues.
The CISO is a member of the Company’s disclosure committee, and the CPO advises the disclosure committee on cybersecurity matters on an as-needed basis. During 2023, the Board conducted a review of its overall committee structure, membership and responsibilities in an effort to enhance its oversight.
The CISO is a member of the Company’s Disclosure Committee, and the CPO advises the Disclosure Committee on cybersecurity matters on an as-needed basis.
The Company annually purchases a cybersecurity risk insurance policy that would help defray the costs associated with a covered cybersecurity incident if it occurred. Although the Company did not experience a material cybersecurity incident during the year ended December 31, 2023, the scope and impact of any future incident cannot be predicted. See “Item 1A.
The Company annually purchases a cybersecurity risk insurance policy that is expected to help defray the costs associated with a covered cybersecurity incident if it occurred. Although the Company did not experience a material cybersecurity incident during the year ended December 31, 2024, it did experience previously-disclosed impacts from the Change Healthcare cybersecurity incident in February 2024.
Removed
Cybersecurity is an important and integrated part of the Company’s enterprise risk management function that identifies, monitors and mitigates business, operational and legal risks.
Added
See the Company’s Form 10-Q for the three months ended March 31, 2024 for more information. The scope and impact of any future direct or third-party cybersecurity incident cannot be predicted. See “Item 1A. Risk Factors” for more information on the Company’s cybersecurity-related risks.
Removed
As part of this review, the Board has determined that it will shift the delegation of the oversight of the Company’s cybersecurity risks program to the Audit Committee effective March 2024.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company is indemnified for these guarantee obligations by the respective initial purchasers. These guarantees generally remain in effect for the initial lease term and any extension thereof pursuant to a renewal option provided for in the lease prior to the time of the disposition.
Biggest changeThese guarantees generally remain in effect for the initial lease term and any extension thereof pursuant to a renewal option provided for in the lease prior to the time of the disposition. For additional information on these guarantees, see “Lease Guarantees” in Note 18 ‘‘Commitments and Contingencies’’ included in Item 8 of this 10-K.
The Health Services segment also owns or leases office space used for administration, sales and marketing, technology and development and professional services throughout the U.S. and in Ireland. Pharmacy & Consumer Wellness Segment As of December 31, 2023, the Pharmacy & Consumer Wellness segment operated the following properties: • Approximately 7,500 retail stores, of which approximately 5% were owned.
The Health Services segment also owns or leases office space used for administration, sales and marketing, technology and development and professional services throughout the U.S. and in Ireland. Pharmacy & Consumer Wellness Segment As of December 31, 2024, the Pharmacy & Consumer Wellness segment operated the following properties: • More than 7,000 retail stores, of which approximately 4% were owned.
Health Services Segment The Health Services segment includes owned or leased mail service dispensing pharmacies, call centers, on-site pharmacy stores, retail specialty pharmacy stores, specialty mail service pharmacies and primary care centers. The Health Services segment leases 204 primary care centers across 25 states, totaling approximately 1.9 million square feet.
Health Services Segment The Health Services segment includes owned or leased mail service dispensing pharmacies, call centers, on-site pharmacy stores, retail specialty pharmacy stores, specialty mail service pharmacies and primary care centers. 64 Table of Contents The Health Services segment leases 239 primary care centers across 27 states, totaling approximately 2.2 million square feet.
At the end of the existing lease terms, management believes the leases can be renewed or replaced by alternative space. For additional information on the right-of-use assets and lease liabilities associated with the Company’s leases, see Note 7 ‘‘Leases’’ included in Item 8 of this 10-K.
For additional information on the right-of-use assets and lease liabilities associated with the Company’s leases, see Note 7 ‘‘Leases’’ included in Item 8 of this 10-K.
Net selling space for retail stores was approximately 74.6 million square feet as of December 31, 2023. • Approximately 1,895 retail pharmacies within retail chains, as well as approximately 30 clinics in Target Corporation (“Target”) stores; • Owned distribution centers and leased distribution facilities throughout the U.S. totaling approximately 10.1 million square feet; and • Branches for compounding, specialty infusion and enteral nutrition services throughout the U.S. • Owned and leased LTC pharmacies throughout the U.S. and an owned LTC repackaging facility. 68 Table of Contents In connection with certain business dispositions completed between 1995 and 1997, the Company continues to guarantee lease obligations for 63 former stores.
Net selling space for retail stores was approximately 72.6 million square feet as of December 31, 2024. • Approximately 1,860 retail pharmacies within retail chains, as well as approximately 30 clinics in Target Corporation (“Target”) stores; • Owned distribution centers and leased distribution facilities throughout the U.S. totaling approximately 10.1 million square feet; • Branches for compounding, specialty infusion and enteral nutrition services throughout the U.S.; and • Owned and leased LTC pharmacies throughout the U.S. and an owned LTC repackaging facility.
Removed
For additional information on these guarantees, see “Lease Guarantees” in Note 18 ‘‘Commitments and Contingencies’’ included in Item 8 of this 10-K. Management believes that the Company’s owned and leased facilities are suitable and adequate to meet the Company’s anticipated needs.
Added
In connection with certain business dispositions completed between 1995 and 1997, the Company continues to guarantee lease obligations for 61 former stores. The Company is indemnified for these guarantee obligations by the respective initial purchasers.
Added
Management believes that the Company’s owned and leased facilities are suitable and adequate to meet the Company’s anticipated needs. At the end of the existing lease terms, management believes the leases can be renewed or replaced by alternative space.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

10 edited+3 added−5 removed0 unchanged
Biggest changeLynch , age 61, President and Chief Executive Officer of CVS Health Corporation since February 2021; Executive Vice President of CVS Health Corporation from November 2018 through January 2021; President of Aetna Inc. from January 2015 through January 2021; and a director of CVS Health Corporation since February 2021.
Biggest changeRoger N. Farah , age 72, Executive Chair of the Board CVS Health Corporation since October 2024; Chair of the Board of CVS Health Corporation since May 2022; Director of CVS Health Corporation since November 2018; and Director of Aetna, Inc. from June 2007 through November 2018.
Cowhey , age 51, Executive Vice President and Chief Financial Officer of CVS Health Corporation since January 2024; Interim Chief Financial Officer of CVS Health Corporation from October 2023 through January 2024; Senior Vice President, Corporate Finance of CVS Health Corporation from September 2023 through October 2023; Senior Vice President, Capital Markets of CVS Health Corporation from February 2022 through September 2023; and Executive Vice President and Chief Financial Officer of Surgical Partners, a large independent operator of short-stay surgical facilities, from April 2018 through February 2022.
Cowhey , age 52, Executive Vice President and Chief Financial Officer of CVS Health Corporation since January 2024; Senior Vice President and Interim Chief Financial Officer of CVS Health Corporation from October 2023 through January 2024; Senior Vice President, Corporate Finance of CVS Health Corporation from September 2023 through October 2023; Senior Vice President, Capital Markets of CVS Health Corporation from February 2022 through September 2023; and Executive Vice President and Chief Financial Officer of Surgical Partners, a large independent operator of short-stay surgical facilities, from April 2018 through February 2022.
Clark , age 59, Senior Vice President - Controller and Chief Accounting Officer of CVS Health Corporation since November 2018; Vice President - Finance and Accounting of CVS Pharmacy, Inc. from September 2009 through October 2018. Thomas F.
Clark , age 60, Senior Vice President - Controller and Chief Accounting Officer of CVS Health Corporation since November 2018; Vice President - Finance and Accounting of CVS Pharmacy, Inc. from September 2009 through October 2018. Thomas F.
Khichi , age 56, Executive Vice President, Chief Policy Officer and General Counsel of CVS Health Corporation since February 2023; Executive Vice President, Corporate Development, Public Policy, Regulatory Affairs and General Counsel of Becton Dickinson Company (“BD”), a global medical technology company, from December 2017 through February 2023; and Senior Vice President, General Counsel and Secretary of C.R.
Samrat S. Khichi , age 57, Executive Vice President, Chief Policy Officer and General Counsel of CVS Health Corporation since February 2023; Executive Vice President, Corporate Development, Public Policy, Regulatory Affairs and General Counsel of Becton Dickinson Company (“BD”), a global medical technology company, from December 2017 through February 2023; Senior Vice President, General Counsel and Secretary of C.R.
David Joyner , age 59, Executive Vice President of CVS Health Corporation and President of Pharmacy Services since January 2023; Strategic Business Advisor to gWell, Inc., a wellness technology company, since July 2021; Advisor to Podimetrics Inc., a health care company focused on the identification and treatment of diabetic foot ulcers since September 2020; Advisory Council to the Rawls College of Business of Texas Tech University since July 2020; Executive Vice President – Sales and Account Services, CVS Caremark for CVS Health Corporation from March 2011 through December 2019.
David Joyner , age 60, President and Chief Executive Officer of CVS Health Corporation since October 2024; Executive Vice President of CVS Health Corporation and President of Pharmacy Services from January 2023 through October 2024; Strategic Business Advisor to gWell, Inc., a wellness technology company, from July 2021 through September 2023; Advisor to Podimetrics Inc., a health care company focused on the identification and treatment of diabetic foot ulcers from September 2020 through January 2023; Advisory Council to the Rawls College of Business of Texas Tech University since July 2020; Executive Vice President – Sales and Account Services, CVS Caremark for CVS Health Corporation from March 2011 through December 2019.
In each case the officer’s term of office extends to the date of the meeting of the Board following the next annual meeting of stockholders of CVS Health Corporation. Previous positions and responsibilities held by each of the executive officers over the past five years or more are indicated below: Sreekanth K.
In each case the officer’s term of office extends to the date of the meeting of the Board following the next annual meeting of stockholders of CVS Health Corporation. Previous positions and responsibilities held by each of the executive officers over the past five years or more are indicated below: Heidi B.
Bard, a medical technology company that was acquired from BD, from July 2014 through December 2017. Karen S.
Bard, a medical technology company that was acquired from BD, from July 2014 through December 2017.
Item 4. Mine Safety Disclosures. Not applicable. 69 Table of Contents Information about our Executive Officers The following sets forth the name, age and biographical information for each of the Registrant’s executive officers as of February 7, 2024.
Item 4. Mine Safety Disclosures. Not applicable. 65 Table of Contents Information about our Executive Officers The following sets forth the name, age and biographical information for each of the Registrant’s executive officers as of February 12, 2025.
Shah , age 44, Executive Vice President and Chief Pharmacy Officer of CVS Health Corporation since November 2021 and Co-President of Retail since January 2022; Executive Vice President, Specialty and Product Innovation, CVS Caremark 70 from August 2018 through November 2021; Vice President - Specialty Pharmacy, CVS Caremark from February 2013 through July 2018. 71 Table of Contents PART II
Shah , age 45, Executive Vice President and Group President of CVS Health Corporation since November 2024; Executive Vice President and Chief Pharmacy Officer of CVS Health Corporation from November 2021 through November 2024 and President or Co-President of Retail from January 2022 through November 2024; Executive Vice President, Specialty and Product Innovation, CVS Caremark from August 2018 through November 2021; Vice President - Specialty Pharmacy, CVS Caremark from February 2013 through July 2018. 66 Table of Contents PART II
Tilak Mandadi , age 60, Executive Vice President and Chief Data, Digital and Technology Officer of CVS Health Corporation since July 2022; Chief Strategy Officer, MGM Resorts International from July 2021 through July 2022; Executive Vice President, Digital & Global Chief Technology Officer, Disney Parks, Experiences and Products from March 2013 through July 2021. Prem S.
Tilak Mandadi , age 61, Executive Vice President, Ventures and Chief Digital, Data, Analytics and Technology Officer of CVS Health Corporation since July 2022; Chief Strategy Officer, MGM Resorts International from July 2021 through July 2022; Executive Vice President, Digital & Global Chief Technology Officer, Disney Parks, Experiences and Products from March 2013 through July 2021. Steven H.
Removed
Chaguturu, M.D ., age 45, Executive Vice President and Chief Medical Officer of CVS Health Corporation since May 2022; Chief Medical Officer of CVS Caremark from September 2019 through May 2022; Chief Population Health Officer at Mass General Brigham, a non-profit hospital formerly known as Partners HealthCare, from August 2017 through August 2019; Vice President, Population Health Management at Mass General Brigham from June 2014 through August 2017.
Added
Capozzi , age 55, Executive Vice President and Chief People Officer of CVS Health Corporation since September 2024; Executive Vice President and Global Chief People Officer of McDonald’s Corporation from April 2020 through August 2024; Senior Vice President and Chief Human Resources Officer of The Boeing Company from April 2016 through April 2020. James D.
Removed
Dr. Chaguturu is also an Attending Physician at Massachusetts General Hospital and an Instructor in Internal Medicine at Harvard Medical School from July 2007 to the present. James D.
Added
He also currently serves as a director of The Progressive Corporation, an auto insurance company, and formerly served as Chairman of the Board and a director of Tiffany & Co. until January 2021, and as a director of Metro Bank PLC until March 2020. J.
Removed
Havanec , age 63, Executive Vice President and Chief People Officer of CVS Health Corporation since February 2021; Executive Vice President and Chief People Officer, Otis Worldwide Corporation, an elevator, escalator and moving walkway manufacturer, from October 2019 through January 2021; Corporate Vice President, Talent of United Technologies Corporation, a multinational manufacturing conglomerate, from April 2017 through October 2019; Vice President - Human Resources, Institution Businesses of Aetna Inc. from 2013 through March 2017.
Added
Nelson , age 66, Executive Vice President and President, Aetna of CVS Health Corporation since November 2024; Chief Executive Officer, ChenMed LLC (“ChenMed”), a health care provider focused on senior citizens, from February 2024 through August 2024; President, ChenMed, from August 2023 through January 2024; President, JenCare Senior Medical Center, a ChenMed company, from September 2022 through August 2023; Co-Chairman and Chief Executive Officer of Duly Health and Care, a large multispecialty independent provider group, from July 2020 through September 2022.
Removed
Ms. Havanec is also a member of the board of directors of American Water Works Company, Inc., a publicly traded water and wastewater utility company. J.
Removed
Brian A. Kane , age 51, Executive Vice President of CVS Health Corporation and President of Aetna since September 2023; Independent Strategic Advisor to private equity firms focused on health care services from June 2022 to September 2023; and Chief Financial Officer of Humana, Inc., a publicly traded health and well-being company, from June 2014 through May 2021. Samrat S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

15 edited+2 added−2 removed7 unchanged
Biggest changeIn December 2023, the Board authorized an increase of approximately 10% in the quarterly cash dividend to $0.665 per share effective in 2024. CVS Health Corporation has paid cash dividends every quarter since becoming a public company. Future dividends will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Board.
Biggest changeCVS Health Corporation has paid cash dividends every quarter since becoming a public company and expects to maintain its quarterly dividend of $0.665 per share throughout 2025. Future dividends will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Board.
In February 2023, the Company received approximately 5.4 million shares of CVS Health Corporation’s common stock, representing the remaining 20% of the $2.0 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury and the forward contract was reclassified from capital surplus to treasury stock in February 2023.
In February 2023, the Company received approximately 5.4 million shares of CVS Health Corporation’s common stock, representing the remaining 20% of the $2.0 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury stock and the forward contract was reclassified from capital surplus to treasury stock in February 2023.
The ASR was accounted for as an initial treasury stock transaction for $1.6 billion and a forward contract for $0.4 billion. The forward contract was classified as an equity instrument and was recorded within capital surplus.
The ASR was accounted for as an 67 initial treasury stock transaction for $1.6 billion and a forward contract for $0.4 billion. The forward contract was classified as an equity instrument and was recorded within capital surplus.
Issuer Purchases of Equity Securities The following share repurchase programs have been authorized by the Board: In billions Authorization Date Authorized Remaining as of December 31, 2023 November 17, 2022 (“2022 Repurchase Program”) $ 10.0 $ 10.0 December 9, 2021 (“2021 Repurchase Program”) 10.0 4.5 Each of the share Repurchase Programs was effective immediately and permit the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase (“ASR”) transactions, and/or other derivative transactions.
Issuer Purchases of Equity Securities The following share repurchase programs have been authorized by the Board: In billions Authorization Date Authorized Remaining as of December 31, 2024 November 17, 2022 (“2022 Repurchase Program”) $ 10.0 $ 10.0 December 9, 2021 (“2021 Repurchase Program”) 10.0 1.5 Each of the share Repurchase Programs was effective immediately and permit the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase (“ASR”) transactions, and/or other derivative transactions.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information CVS Health Corporation’s common stock is listed on the New York Stock Exchange under the symbol “CVS.” Dividends During 2023, 2022 and 2021, the quarterly cash dividend was $0.605, $0.55 and $0.50 per share, respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information CVS Health Corporation’s common stock is listed on the New York Stock Exchange under the symbol “CVS.” Dividends During 2024, 2023 and 2022, the quarterly cash dividend was $0.665, $0.605 and $0.55 per share, respectively.
(2) Includes eight companies (COST, DG, DLTR, KR, SYY, TGT, WBA, WMT). (3) Includes 64 companies. The year-ended values of each investment shown in the preceding graph are based on share price appreciation plus dividends, with the dividends reinvested as of the last business day of the month during which such dividends were ex-dividend.
(2) Includes 8 companies (COST, DG, DLTR, KR, SYY, TGT, WBA, WMT). (3) Includes 61 companies. The year-ended values of each investment shown in the preceding graph are based on share price appreciation plus dividends, with the dividends reinvested as of the last business day of the month during which such dividends were ex-dividend.
See Note 14 ‘‘Shareholders’ Equity’’ included in Item 8 of this 10-K for additional information regarding the Company’s share repurchases. 73 Table of Contents Stock Performance Graph The following graph compares the cumulative total shareholder return on CVS Health Corporation’s common stock (assuming reinvestment of dividends) with the cumulative total return on the S&P 500 Index, the S&P 500 Food and Staples Retailing Industry Group Index and the S&P 500 Healthcare Sector Group Index from December 31, 2018 through December 31, 2023.
See Note 14 ‘‘Shareholders’ Equity’’ included in Item 8 of this 10-K for additional information regarding the Company’s share repurchases. 68 Table of Contents Stock Performance Graph The following graph compares the cumulative total shareholder return on CVS Health Corporation’s common stock (assuming reinvestment of dividends) with the cumulative total return on the S&P 500 Index, the S&P 500 Food and Staples Retailing Industry Group Index and the S&P 500 Healthcare Sector Group Index from December 31, 2019 through December 31, 2024.
The graph assumes a $100 investment in shares of CVS Health Corporation’s common stock on December 31, 2018.
The graph assumes a $100 investment in shares of CVS Health Corporation’s common stock on December 31, 2019.
Upon payment of the $1.5 billion purchase price on January 4, 2022, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $1.5 billion notional amount of the ASR or approximately 11.6 million shares at a price of $103.34 per share, which were placed into treasury stock in January 2022.
Upon payment of the $1.5 billion purchase price on January 4, 2022, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $1.5 billion notional amount of the ASR or approximately 11.6 million shares, which were placed into treasury stock in January 2022.
Upon payment of the $3.0 billion purchase price on January 4, 2024, the Company received a number of shares of CVS Health Corporation’s common stock equal to 85% of the $3.0 billion notional amount of the ASR or approximately 31.4 million shares at a price of $81.19 per share, which were placed into treasury stock in January 2024.
Upon payment of the $3.0 billion purchase price on January 4, 2024, the Company received a number of shares of CVS Health Corporation’s common stock equal to 85% of the $3.0 billion notional amount of the ASR or approximately 31.4 million shares, which were placed into treasury stock in January 2024.
Upon payment of the $2.0 billion purchase price on January 4, 2023, the Company received a number of 72 shares of CVS Health Corporation’s common stock equal to 80% of the $2.0 billion notional amount of the ASR or approximately 17.4 million shares at a price of $92.19 per share, which were placed into treasury stock in January 2023.
Upon payment of the $2.0 billion purchase price on January 4, 2023, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $2.0 billion notional amount of the ASR or approximately 17.4 million shares, which were placed into treasury stock in January 2023.
See Note 14 ‘‘Shareholders’ Equity’’ included in Item 8 of this 10-K for information regarding CVS Health Corporation’s dividends. Holders of Common Stock As of January 31, 2024, there were 23,098 registered holders of the registrant’s common stock according to the records maintained by the registrant’s transfer agent.
See Note 14 ‘‘Shareholders’ Equity’’ included in Item 8 of this 10-K for information regarding CVS Health Corporation’s dividends. Holders of Common Stock As of February 5, 2025, there were 21,818 registered holders of the registrant’s common stock according to the records maintained by the registrant’s transfer agent.
During the years ended December 31, 2023 and 2022, the Company repurchased an aggregate of 22.8 million shares of common stock for approximately $2.0 billion and an aggregate of 34.1 million shares of common stock for approximately $3.5 billion, respectively, both pursuant to the 2021 Repurchase Program. This activity includes the share repurchases under the ASR transactions described below.
During the years ended December 31, 2024, 2023 and 2022, the Company repurchased an aggregate of 39.7 million shares of common stock for approximately $3.0 billion, an aggregate of 22.8 million shares of common stock for approximately $2.0 billion and an aggregate of 34.1 million shares of common stock for approximately $3.5 billion, respectively, each pursuant to the 2021 Repurchase Program.
During the year ended December 31, 2021, the Company did not repurchase any shares of common stock. Pursuant to the authorization under the 2021 Repurchase Program, the Company entered into a $3.0 billion fixed dollar ASR with Morgan Stanley & Co. LLC (“Morgan Stanley”).
This activity includes the share repurchases under the ASR transactions described below. Pursuant to the authorization under the 2021 Repurchase Program, the Company entered into a $3.0 billion fixed dollar ASR with Morgan Stanley & Co. LLC (“Morgan Stanley”).
December 31, 2018 2019 2020 2021 2022 2023 CVS Health Corporation $ 100 $ 117 $ 111 $ 172 $ 159 $ 139 S&P 500 (1) 100 131 156 200 164 207 S&P 500 Food & Staples Retailing Group Index (2) 100 127 148 185 166 192 S&P 500 Health Care Group Index (1) (3) 100 121 137 173 170 173 _____________________________________________ (1) Includes CVS Health Corporation.
December 31, 2019 2020 2021 2022 2023 2024 CVS Health Corporation $ 100 $ 95 $ 147 $ 136 $ 119 $ 70 S&P 500 (1) 100 118 152 125 157 197 S&P 500 Food & Staples Retailing Group Index (2) 100 116 146 131 151 204 S&P 500 Health Care Group Index (1) (3) 100 113 143 140 143 147 _____________________________________________ (1) Includes CVS Health Corporation.
Removed
At the conclusion of the ASR, the Company may receive additional shares representing the remaining 15% of the $3.0 billion notional amount. The ultimate number of shares the Company may receive will depend on the daily volume-weighted average price of the Company’s stock over an averaging period, less a discount.
Added
The ASR was accounted for as an initial treasury stock transaction for $2.6 billion and a forward contract for $0.4 billion. The forward contract was classified as an equity instrument and was recorded within capital surplus.
Removed
It is also possible, depending on such weighted average price, that the Company will have an obligation to Morgan Stanley which, at the Company’s option, could be settled in additional cash or by issuing shares. Under the terms of the ASR, the maximum number of shares that could be delivered to the Company is 73.9 million.
Added
In March 2024, the Company received approximately 8.3 million shares of CVS Health Corporation’s common stock, representing the remaining 15% of the $3.0 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury and the forward contract was reclassified from capital surplus to treasury stock in March 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

159 edited+48 added−66 removed91 unchanged
Biggest changeThe Company expects to prudently reinvest a portion of this net improvement into its business. 86 Health Services Segment The following table summarizes the Health Services segment’s performance for the respective periods: Change Year Ended December 31, 2023 vs. 2022 2022 vs. 2021 In millions, except percentages 2023 2022 2021 $ % $ % Revenues: Products $ 180,608 $ 167,019 $ 150,799 $ 13,589 8.1 % $ 16,220 10.8 % Services 6,236 2,557 3,093 3,679 143.9 % (536) (17.3) % Net investment income (loss) (1) — — (1) (100.0) % — — % Total revenues 186,843 169,576 153,892 17,267 10.2 % 15,684 10.2 % Cost of products sold 175,424 160,738 145,355 14,686 9.1 % 15,383 10.6 % Health care costs 1,607 — — 1,607 100.0 % — — % Operating expenses 2,970 2,226 2,244 744 33.4 % (18) (0.8) % Operating expenses as a % of total revenues 1.6 % 1.3 % 1.5 % Operating income $ 6,842 $ 6,612 $ 6,293 $ 230 3.5 % 319 5.1 % Operating income as a % of total revenues 3.7 % 3.9 % 4.1 % Adjusted operating income (1) $ 7,312 $ 6,781 $ 6,492 $ 531 7.8 % 289 4.5 % Adjusted operating income as a % of total revenues 3.9 % 4.0 % 4.2 % Revenues (by distribution channel): Pharmacy network (2) $ 112,718 $ 102,968 $ 96,834 $ 9,750 9.5 % 6,134 6.3 % Mail & specialty (3) 67,992 63,825 53,812 4,167 6.5 % 10,013 18.6 % Other 6,134 2,783 3,246 3,351 120.4 % (463) (14.3) % Net investment income (loss) (1) — — (1) (100.0) % — — % Pharmacy claims processed (4) 2,344.3 2,335.1 2,242.6 9.2 0.4 % 92.5 4.1 % Generic dispensing rate (4) 87.6 % 87.4 % 86.8 % _____________________________________________ (1) See “Segment Analysis” above in this MD&A for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Health Services segment, which represents the Company’s principal measure of segment performance.
Biggest changeBased on the Company’s membership as of December 2024, 88% of the Company’s Medicare Advantage members were in plans with 2025 star ratings of at least 4.0 stars, compared to 91% of the Company’s Medicare Advantage members being in plans with 2024 star ratings of at least 4.0 stars based on the Company’s membership as of December 2023. 80 Health Services Segment The following table summarizes the Health Services segment’s performance for the respective periods: Change Year Ended December 31, 2024 vs. 2023 2023 vs. 2022 In millions, except percentages 2024 2023 2022 $ % $ % Revenues: Products $ 162,436 $ 180,608 $ 167,019 $ (18,172) (10.1) % $ 13,589 8.1 % Services 10,884 6,236 2,557 4,648 74.5 % 3,679 143.9 % Net investment income (loss) (1) 285 (1) — 286 NM (1) (100.0) % Total revenues 173,605 186,843 169,576 (13,238) (7.1) % 17,267 10.2 % Cost of products sold 160,036 175,424 160,738 (15,388) (8.8) % 14,686 9.1 % Health care costs 3,407 1,607 — 1,800 112.0 % 1,607 100.0 % Operating expenses 3,225 2,970 2,226 255 8.6 % 744 33.4 % Operating expenses as a % of total revenues 1.9 % 1.6 % 1.3 % Operating income $ 6,937 $ 6,842 $ 6,612 $ 95 1.4 % $ 230 3.5 % Operating income as a % of total revenues 4.0 % 3.7 % 3.9 % Adjusted operating income (2) $ 7,243 $ 7,312 $ 6,781 $ (69) (0.9) % $ 531 7.8 % Adjusted operating income as a % of total revenues 4.2 % 3.9 % 4.0 % Revenues (by distribution channel): Pharmacy network (3) $ 91,650 $ 112,718 $ 102,968 $ (21,068) (18.7) % $ 9,750 9.5 % Mail & specialty (4) 70,877 67,992 63,825 2,885 4.2 % 4,167 6.5 % Other 10,793 6,134 2,783 4,659 76.0 % 3,351 120.4 % Net investment income (loss) (1) 285 (1) — 286 NM (1) (100.0) % Pharmacy claims processed (5) 1,917.6 2,344.3 2,335.1 (426.7) (18.2) % 9.2 0.4 % Generic dispensing rate (5) 87.4 % 87.6 % 87.4 % _____________________________________________ (1) NM represents a percent change that is not meaningful.
In February 2023, the Company received approximately 5.4 million shares of CVS Health Corporation’s common stock, representing the remaining 20% of the $2.0 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury and the forward contract was reclassified from capital surplus to treasury stock in February 2023.
In February 2023, the Company received approximately 5.4 million shares of CVS Health Corporation’s common stock, representing the remaining 20% of the $2.0 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury stock and the forward contract was reclassified from capital surplus to treasury stock in February 2023.
For additional information regarding these and other trends and uncertainties, see Item 1A, “Risk Factors” and Part I, Item 1 “Business - Government Regulation.” 79 Segment Analysis The following discussion of segment operating results is presented based on the Company’s reportable segments in accordance with the accounting guidance for segment reporting and is consistent with the segment disclosure in Note 19 ‘‘Segment Reporting’’ included in Item 8 of this 10-K.
For additional information regarding these and other trends and uncertainties, see Item 1A, “Risk Factors” and Part I, Item 1 “Business - Government Regulation.” 75 Segment Analysis The following discussion of segment operating results is presented based on the Company’s reportable segments in accordance with the accounting guidance for segment reporting and is consistent with the segment disclosure in Note 19 ‘‘Segment Reporting’’ included in Item 8 of this 10-K.
This legislative and regulatory activity could adversely affect the Company’s ability to conduct business on commercially reasonable terms and the Company’s ability to standardize its PBM products and services across state lines.
This legislative and regulatory activity could adversely affect 74 the Company’s ability to conduct business on commercially reasonable terms and the Company’s ability to standardize its PBM products and services across state lines.
The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.03%, regardless of usage. As of December 31, 2023 and 2022, there were no borrowings outstanding under any of the Company’s back-up credit facilities.
The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.03%, regardless of usage. As of December 31, 2024 and 2023, there were no borrowings outstanding under any of the Company’s back-up credit facilities.
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 ties a portion of each Medicare Advantage plan’s reimbursement to the plan’s “star ratings.” Plans must have a star rating of four or higher (out of five) to qualify for bonus payments. CMS released the Company’s 2024 star ratings in October 2023.
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 ties a portion of each Medicare Advantage plan’s reimbursement to the plan’s “star ratings.” Plans must have a star rating of four or higher (out of five) to qualify for bonus payments. CMS released the Company’s 2025 star ratings in October 2024.
(7) Customer funds associated with group life and health contracts of approximately $58 million have been excluded from the table above because such funds may be used primarily at the customer’s discretion to offset future premiums and/or for refunds, and the timing of the related cash flows cannot be determined.
(7) Customer funds associated with group life and health contracts of approximately $52 million have been excluded from the table above because such funds may be used primarily at the customer’s discretion to offset future premiums and/or for refunds, and the timing of the related cash flows cannot be determined.
(3) Refer to Note 10 ‘‘Borrowings and Credit Agreements’’ included in Item 8 of this 10-K for additional information regarding the maturities of debt principal and commercial paper borrowings. Interest payments on long-term debt are calculated using outstanding balances and interest rates in effect on December 31, 2023.
(3) Refer to Note 10 ‘‘Borrowings and Credit Agreements’’ included in Item 8 of this 10-K for additional information regarding the maturities of debt principal and commercial paper borrowings. Interest payments on long-term debt are calculated using outstanding balances and interest rates in effect on December 31, 2024.
External rating agencies use their own capital models and/or RBC standards when they determine a company’s rating. 98 Critical Accounting Policies The Company prepares the consolidated financial statements in conformity with generally accepted accounting principles, which require management to make certain estimates and apply judgment.
External rating agencies use their own capital models and/or RBC standards when they determine a company’s rating. 93 Critical Accounting Policies The Company prepares the consolidated financial statements in conformity with generally accepted accounting principles, which require management to make certain estimates and apply judgment.
The table below does not include future payments of claims to health care providers or pharmacies because certain terms of these payments are not determinable at December 31, 2023 (for example, the timing and volume of future services provided under fee-for-service arrangements and future membership levels for capitated arrangements).
The table below does not include future payments of claims to health care providers or pharmacies because certain terms of these payments are not determinable at December 31, 2024 (for example, the timing and volume of future services provided under fee-for-service arrangements and future membership levels for capitated arrangements).
See Note 1 ‘‘Significant Accounting Policies’’ included in Item 8 of this 10-K for additional information on the Company’s reserving methodology. During 2023 and 2022, the segment observed an increase in completion factors relative to those assumed at the prior year end.
See Note 1 ‘‘Significant Accounting Policies’’ included in Item 8 of this 10-K for additional information on the Company’s reserving methodology. During 2024 and 2023, the segment observed an increase in completion factors relative to those assumed at the prior year end.
However, based on historical claim experience, it is reasonably possible that the estimated weighted average completion factors may vary by plus or minus 9 basis points from the assumed rates, which could impact health care costs payable by approximately plus or minus $166 million pretax.
However, based on historical claim experience, it is reasonably possible that the estimated weighted average completion factors may vary by plus or minus 9 basis points from the assumed rates, which could impact health care costs payable by approximately plus or minus $202 million pretax.
The Company also serves an estimated more than 35 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”).
The Company also serves an estimated more than 36 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”).
As of December 31, 2023, the Pharmacy & Consumer Wellness segment operated more than 9,000 retail locations, as well as online retail pharmacy websites, LTC pharmacies and on-site pharmacies, retail specialty pharmacy stores, compounding pharmacies and branches for infusion and enteral nutrition services.
As of December 31, 2024, the Pharmacy & Consumer Wellness segment operated more than 9,000 retail locations, as well as online retail pharmacy websites, LTC pharmacies and on-site pharmacies, retail specialty pharmacy stores, compounding pharmacies and branches for infusion and enteral nutrition services.
Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is 82 not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.
Intangible asset amortization is excluded from the related non- 77 GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.
Given the close proximity of the acquisition dates to the 2023 annual impairment test of goodwill, as expected, the fair value of these two businesses and, therefore, of the Health Care Delivery reporting unit, remained relatively in line with the carrying value of the reporting unit.
Given the close proximity of the acquisition dates to the 2024 annual impairment test of goodwill, as expected, the fair value of these two businesses and, therefore, of the Health Care Delivery reporting unit, remained relatively in line with the carrying value of the reporting unit.
Also, during 2023 and 2022, the Health Care Benefits segment observed that health care costs for claims with claim incurred dates of three months or less before the financial statement date were lower than previously estimated.
Also, during 2024 and 2023, the Health Care Benefits segment observed that health care costs for claims with claim incurred dates of three months or less before the financial statement date were lower than previously estimated.
Share Repurchase Programs The following share repurchase programs have been authorized by CVS Health Corporation’s Board of Directors (the “Board”): The following share repurchase programs have been authorized by the Board: In billions Authorization Date Authorized Remaining as of December 31, 2023 November 17, 2022 (“2022 Repurchase Program”) $ 10.0 $ 10.0 December 9, 2021 (“2021 Repurchase Program”) 10.0 4.5 Each of the share Repurchase Programs was effective immediately and permit the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase (“ASR”) transactions, and/or other derivative transactions.
Share Repurchase Programs The following share repurchase programs have been authorized by CVS Health Corporation’s Board of Directors (the “Board”): The following share repurchase programs have been authorized by the Board: In billions Authorization Date Authorized Remaining as of December 31, 2024 November 17, 2022 (“2022 Repurchase Program”) $ 10.0 $ 10.0 December 9, 2021 (“2021 Repurchase Program”) 10.0 1.5 Each of the share Repurchase Programs was effective immediately and permit the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase (“ASR”) transactions, and/or other derivative transactions.
The Company maintains capital levels in its operating subsidiaries at or above targeted and/or required capital levels and dividends amounts in excess of these levels to meet liquidity requirements, including the payment of interest on debt and 97 stockholder dividends.
The Company maintains capital levels in its operating subsidiaries at or above targeted and/or required capital levels and dividends amounts in excess of these levels to meet liquidity requirements, including the payment of interest on debt and 92 stockholder dividends.
Accordingly, the Company believes excluding net realized capital gains and losses enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. (3) In 2023, the acquisition-related transaction and integration costs relate to the acquisitions of Signify Health and Oak Street Health.
Accordingly, the Company believes excluding net realized capital gains and losses enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. (3) In 2024, the acquisition-related integration costs relate to the acquisitions of Signify Health and Oak Street Health.
Although the Company currently believes its long-term debt ratings will remain investment grade, it cannot guarantee the future actions of Moody’s and/or S&P. The Company’s debt ratings have a direct impact on its future borrowing costs, access to capital markets and new store operating lease costs.
Although the Company currently believes its long-term debt ratings will remain investment grade, it cannot predict the future actions of Moody’s, S&P and/or Fitch. The Company’s debt ratings have a direct impact on its future borrowing costs, access to capital markets and new store operating lease costs.
At the time of delivery, the Company has performed substantially 99 all of its performance obligations under its client contracts and does not experience a significant level of returns or reshipments.
At the time of delivery, the Company has performed substantially 94 all of its performance obligations under its client contracts and does not experience a significant level of returns or reshipments.
(4) Refer to Note 18 ‘‘Commitments and Contingencies’’ included in Item 8 of this 10-K for additional information regarding the opioid litigation settlement agreements.
(4) Refer to Note 18 ‘‘Commitments and Contingencies’’ included in Item 8 of this 10-K for additional information regarding the opioid litigation settlement obligations.
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.” The Company sold Insured plans directly to individual consumers through the individual public health insurance exchanges (“Public Exchanges”) in 12 states as of December 31, 2023.
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.” The Company sold Insured plans directly to individual consumers through the individual public health insurance exchanges (“Public Exchanges”) in 17 states as of December 31, 2024.
Additionally, net unrealized capital losses on debt securities supporting experience-rated products of $18 million, before tax, have been excluded from the table above.
Additionally, net unrealized capital losses on debt securities supporting experience-rated products of $25 million, before tax, have been excluded from the table above.
In order to help investors assess the aggregate risk, if any, associated with the inventory-related uncertainties discussed above, a ten percent (10%) pre-tax change in estimated inventory losses, which is a reasonably likely change, would increase or decrease the total reserve for estimated inventory losses by approximately $61 million as of December 31, 2023.
In order to help investors assess the aggregate risk, if any, associated with the inventory-related uncertainties discussed above, a ten percent (10%) pre-tax change in estimated inventory losses, which is a reasonably likely change, would increase or decrease the total reserve for estimated inventory losses by approximately $60 million as of December 31, 2024.
The total reserve for estimated inventory losses covered by this critical accounting policy was $607 million and $559 million as of December 31, 2023 and 2022, respectively. Although management believes there is sufficient current and historical information available to record reasonable estimates for estimated inventory losses, it is possible that actual results could differ.
The total reserve for estimated inventory losses covered by this critical accounting policy was $600 million and $607 million as of December 31, 2024 and 2023, respectively. Although management believes there is sufficient current and historical information available to record reasonable estimates for estimated inventory losses, it is possible that actual results could differ.
There were no impairment losses recognized on indefinite-lived intangible assets in any of the years ended December 31, 2023, 2022 or 2021.
There were no impairment losses recognized on indefinite-lived intangible assets in any of the years ended December 31, 2024, 2023 or 2022.
Overview of the Corporate/Other Segment The Company presents the remainder of its financial results in the Corporate/Other segment, which primarily consists of: • Management and administrative expenses to support the Company’s overall operations, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources and finance departments, information technology, digital, data and analytics, as well as 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.
Overview of the Corporate/Other Segment The Company presents the remainder of its financial results in the Corporate/Other segment, which primarily consists of: • Management and administrative expenses to support the Company’s overall operations, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources and finance departments, information technology, digital, data and analytics, as well as 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. 71 Results of Operations The following information summarizes the Company’s results of operations for 2024 compared to 2023.
If either case is true, the Company recognizes a non-credit related impairment, and the cost basis or carrying amount of the debt security is written down to fair value. During the years ended December 31, 2023, 2022 and 2021, the Company recorded yield-related impairment losses on debt securities of $152 million, $143 million and $42 million, respectively.
If either case is true, the Company recognizes a non-credit related impairment, and the cost basis or carrying amount of the debt security is written down to fair value. During the years ended December 31, 2024, 2023 and 2022, the Company recorded yield-related impairment losses on debt securities of $73 million, $152 million and $143 million, respectively.
Future dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Board. 96 Future Cash Requirements The following table summarizes certain estimated future cash requirements under the Company’s various contractual obligations at December 31, 2023, in total and disaggregated into current and long-term obligations.
Future dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Board. 91 Future Cash Requirements The following table summarizes certain estimated future cash requirements under the Company’s various contractual obligations at December 31, 2024, in total and disaggregated into current and long-term obligations.
The segment has considered the pattern of changes in its completion factors when determining the completion factors used in its estimates of IBNR as of December 31, 2023.
The segment has considered the pattern of changes in its completion factors when determining the completion factors used in its estimates of IBNR as of December 31, 2024.
(2) The Company’s net realized capital gains and losses arise from various types of transactions, primarily in the course of managing a portfolio of assets that support the payment of insurance liabilities. Net realized capital gains and losses are reflected in the consolidated statements of operations in net investment income within each segment.
(2) The Company’s net realized capital gains and losses arise from various types of transactions, primarily in the course of managing a portfolio of assets that support the payment of insurance liabilities. Net realized capital gains and losses are reflected in net investment income (loss) within each segment.
Upon payment of the $1.5 billion purchase price on January 4, 2022, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $1.5 billion notional amount of the ASR or approximately 11.6 million shares at a price of $103.34 per share, which were placed into treasury stock in January 2022.
Upon payment of the $1.5 billion purchase price on January 4, 2022, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $1.5 billion notional amount of the ASR or approximately 11.6 million shares, which were placed into treasury stock in January 2022.
Under applicable regulatory requirements and undertakings, at December 31, 2023, the maximum amount of dividends that may be paid by the Company’s insurance and HMO subsidiaries without prior approval by regulatory authorities was $3.1 billion in the aggregate.
Under applicable regulatory requirements and undertakings, at December 31, 2024, the maximum amount of dividends that may be paid by the Company’s insurance and HMO subsidiaries without prior approval by regulatory authorities was $1.6 billion in the aggregate.
At December 31, 2023 and 2022, the Company held investments of $307 million and $331 million, respectively, that are not accounted for as Separate Accounts assets but are legally segregated and are not subject to claims that arise out of the Company’s business.
At December 31, 2024 and 2023, the Company held investments of $269 million and $307 million, respectively, that are not accounted for as Separate Accounts assets but are legally segregated and are not subject to claims that arise out of the Company’s business.
After considering the claims paid in 2023 and 2022 with dates of service prior to the fourth quarter of the previous year, the segment observed assumed incurred claim weighted average completion factors that were 4 and 3 basis points higher, respectively, than previously estimated, resulting in a decrease of $55 million and $32 million in 2023 and 2022, respectively, in health care costs payable that related to the prior year.
After considering the claims paid in 2024 and 2023 with dates of service prior to the fourth quarter of the previous year, the segment observed assumed incurred claim weighted average completion factors that were 23 and 4 basis points higher, respectively, than previously estimated, resulting in a decrease of $339 million and $55 million in 2024 and 2023, respectively, in health care costs payable that related to the prior year.
Upon payment of the $3.0 billion purchase price on January 4, 2024, the Company received a number of shares of CVS Health Corporation’s common stock equal to 85% of the $3.0 billion notional amount of the ASR or approximately 31.4 million shares at a price of $81.19 per share, which were placed into treasury stock in January 2024.
Upon payment of the $3.0 billion purchase price on January 4, 2024, the Company received a number of shares of CVS Health Corporation’s common stock equal to 85% of the $3.0 billion notional amount of the ASR or approximately 31.4 million shares, which were placed into treasury stock in January 2024.
Upon payment of the $2.0 billion purchase price on January 4, 2023, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $2.0 billion notional amount of the ASR or approximately 17.4 million shares at a price of $92.19 per share, which were placed into treasury stock in January 2023.
Upon payment of the $2.0 billion purchase price on January 4, 2023, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $2.0 billion notional amount of the ASR or approximately 17.4 million shares, which were placed into treasury stock in January 2023.
As of September 30, 2023, the Company determined the LTC business no longer met the criteria for held-for-sale accounting and, accordingly, the net assets associated with the LTC business were reclassified to held and used at their respective fair values.
As of the third quarter of 2023, the Company determined the LTC business no longer met the criteria for held-for-sale accounting and, accordingly, the net assets associated with the LTC business were reclassified to held and used at their respective fair values.
This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results. • The Health Services segment’s generic dispensing rate increased to 87.6% in 2023 compared to 87.4% in the prior year.
This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results. • The Health Services segment’s generic dispensing rate decreased to 87.4% in 2024 compared to 87.6% in the prior year.
In connection with its commercial paper program, the Company maintains a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2025, a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 11, 2026, and a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2027.
In connection with its commercial paper program, the Company maintains a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 11, 2027, a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2028, and a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2029.
Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s GAAP consolidated statements of operations in operating expenses within each segment.
Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in operating expenses within each segment.
Adjusted operating income is defined as operating income as measured by accounting principles generally accepted in the United States of America (“GAAP”) 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.
Adjusted operating income is defined as operating income as measured by accounting principles generally accepted in the United States of America (“GAAP”) excluding the impact of amortization of intangible assets, net realized capital gains or losses 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.
The Company believes its operating cash flows, commercial paper program, credit facilities, as well as any potential future borrowings, will be sufficient to fund these future payments and long-term initiatives. As of December 31, 2023, the Company had approximately $8.2 billion in cash and cash equivalents, approximately $735 million of which was held by the parent company or nonrestricted subsidiaries.
The Company believes its operating cash flows, commercial paper program, credit facilities, as well as any potential future borrowings, will be sufficient to fund these future payments and long-term initiatives. As of December 31, 2024, the Company had approximately $8.6 billion in cash and cash equivalents, approximately $3.8 billion of which was held by the parent company or nonrestricted subsidiaries.
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.
The CODM uses adjusted operating income as its principal measure of segment performance as it enhances the CODM’s ability to compare past financial performance with current performance and analyze underlying business performance and trends.
This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results. • The Pharmacy & Consumer Wellness segment’s generic dispensing rate increased to 88.4% in 2023 compared to 87.4% in the prior year.
This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results. 84 • The Pharmacy & Consumer Wellness segment’s generic dispensing rate increased to 88.9% in 2024 compared to 88.4% in the prior year.
Same-store metrics provide management and investors with information useful in understanding the portion of current revenues and prescriptions resulting from organic growth in existing locations versus the portion resulting from opening new stores. Commentary - 2023 compared to 2022 Revenues • Total revenues increased $8.2 billion, or 7.5%, in 2023 compared to 2022.
Same-store metrics provide management and investors with information useful in understanding the portion of current revenues and prescriptions resulting from organic growth in existing locations versus the portion resulting from opening new stores. Commentary - 2024 compared to 2023 Revenues • Total revenues increased $7.7 billion, or 6.6%, in 2024 compared to 2023.
Included in net cash used in investing activities for the years ended December 31, 2023, 2022 and 2021 was the following store development activity: (1) 2023 2022 2021 Total stores (beginning of year) 9,674 9,939 9,962 New and acquired stores (2) 39 41 58 Closed stores (2) (318) (306) (81) Total stores (end of year) 9,395 9,674 9,939 Relocated stores (2) 5 4 17 _____________________________________________ (1) Includes retail drugstores and pharmacies within retail chains, primarily in Target Corporation (“Target”) stores.
Included in net cash used in investing activities for the years ended December 31, 2024, 2023 and 2022 was the following store development activity: (1) 2024 2023 2022 Total stores (beginning of year) 9,395 9,674 9,939 New and acquired stores (2) 39 39 41 Closed stores (2) (299) (318) (306) Total stores (end of year) 9,135 9,395 9,674 Relocated stores (2) 3 5 4 _____________________________________________ (1) Includes retail drugstores and pharmacies within retail chains, primarily in Target Corporation (“Target”) stores.
As of December 31, 2023, the Company had more than 9,000 retail locations, more than 1,000 walk-in medical clinics, 204 primary care medical clinics, a leading pharmacy benefits manager with approximately 108 million plan members and expanding specialty pharmacy solutions, and a dedicated senior pharmacy care business serving more than one million patients per year.
As of December 31, 2024, the Company had more than 9,000 retail locations, more than 1,000 walk-in and primary care medical clinics, a leading pharmacy benefits manager with approximately 90 million plan members and expanding specialty pharmacy solutions, and a dedicated senior pharmacy care business serving more than 800,000 patients per year.
(6) Total payments of future policy benefits, unpaid claims and policyholders’ funds include $614 million, $1.1 billion and $152 million, respectively, of reserves for contracts subject to reinsurance. The Company expects the assuming reinsurance carrier to fund these obligations and has reflected these amounts as reinsurance recoverable assets on the consolidated balance sheets.
(6) Total payments of future policy benefits, unpaid claims and policyholders’ funds include $566 million, $911 million and $137 million, respectively, of reserves for contracts subject to reinsurance. The Company expects the assuming reinsurance carrier to fund these obligations and has reflected these amounts as reinsurance recoverable assets on the consolidated balance sheets.
Specifically, after considering the claims paid in 2023 and 2022 with claim incurred dates for the fourth quarter of the previous year, the segment 103 observed health care costs that were 4.5% and 4.8% lower, respectively, for each fourth quarter than previously estimated, resulting in a reduction of $620 million and $622 million in 2023 and 2022, respectively, in health care costs payable that related to prior year.
Specifically, after considering the claims paid in 2024 and 2023 with claim incurred dates for the fourth quarter of the previous year, the segment observed health care costs that were 3.2% and 4.5% lower, respectively, for each fourth quarter than previously estimated, resulting in a reduction of $546 million and $620 million in 2024 and 2023, respectively, in health care costs payable that related to prior year.
The increase was primarily driven by pharmacy drug mix, increased prescription volume, brand inflation and increased contributions from vaccinations.
The increase was primarily driven by pharmacy drug mix and increased prescription volume, including increased contributions from vaccinations.
The Company does not believe the restrictions contained in these covenants materially affect its financial or operating flexibility. As of December 31, 2023, the Company was in compliance with all of its debt covenants. Debt Ratings As of December 31, 2023, the Company’s long-term debt was rated “Baa2” by Moody’s Investors Service, Inc.
The Company does not believe the restrictions contained in these covenants materially affect its financial or operating flexibility. As of December 31, 2024, the Company was in compliance with all of its debt covenants. Debt Ratings As of December 31, 2024, the Company’s long-term debt was rated “BBB” by Fitch Ratings, Inc. (“Fitch”), “Baa3” by Moody’s Investors Service, Inc.
The Company’s estimates can be affected by a number of factors, including general economic and regulatory conditions; the risk-free interest rate environment; the Company’s market capitalization; efforts of customers and payers to reduce costs, including their prescription drug costs, and/or increase member co-payments; the continued efforts of competitors to gain market share, consumer spending patterns and the Company’s ability to achieve its revenue growth projections and execute on its cost reduction initiatives.
The Company’s estimates can be affected by a number of factors, including general economic and regulatory conditions; the risk-free interest rate environment; the Company’s market capitalization; efforts of customers and payers to reduce costs, including their prescription drug costs, and/or increase member co-payments; the continued efforts of competitors to gain market share; consumer spending patterns; and the Company’s ability to achieve its revenue growth projections and execute on its cost reduction initiatives. 2024 Goodwill Impairment Test During the fourth quarter of 2024, the Company performed its required annual impairment test of goodwill.
This metric provides management and investors with information useful in understanding the impact of prescription volume on segment total revenues and operating results. • Prescriptions filled increased 1.5% on a 30-day equivalent basis in 2023 compared to 2022 primarily driven by increased utilization, partially offset by a decrease in COVID-19 vaccinations and the decrease in store count.
This metric provides management and investors with information useful in understanding the impact of prescription volume on segment total revenues and operating results. • Prescriptions filled increased 4.0% on a 30-day equivalent basis in 2024 compared to 2023 primarily driven by increased utilization, partially offset by the decrease in store count.
These increases were partially offset by continued pharmacy client price improvements. • As you review the Health 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, fees and/or discounts the Company receives from manufacturers, wholesalers and retail pharmacies continue to have an impact on adjusted operating income.
These decreases were largely offset by improved purchasing economics. • As you review the Health 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, fees and/or discounts the Company receives from manufacturers, wholesalers and retail pharmacies continue to have an impact on adjusted operating income.
(5) In 2023 and 2022, the office real estate optimization charges primarily relate to the abandonment of leased real estate and the related right-of-use assets and property and equipment in connection with the planned reduction of corporate office real estate space in response to the Company’s new flexible work arrangement.
(5) In 2024, 2023 and 2022, the office real estate optimization charges primarily relate to the abandonment of leased real estate and the related right-of-use assets and property and equipment in connection with the Company’s evaluation of corporate office real estate space in response to its ongoing flexible work arrangement.
A long-lived asset impairment test was performed during the fourth quarter of 2021 and the results of the impairment test indicated that the fair value of certain retail store asset groups was lower than their respective carrying values.
A long-lived asset impairment test was performed during the third quarter of 2024, the results of which indicated that the fair value of certain retail store asset groups were lower than their respective carrying values.
Although not all states had adopted these rules at December 31, 2023, at that date each of the Company’s active HMOs had a surplus that exceeded either the applicable state net worth requirements or, where adopted, the levels that would require regulatory action under the NAIC’s RBC rules, or were otherwise subject to an agreement to avoid any regulatory action.
Although not all states had adopted these rules at December 31, 2024, at that date each of the Company’s active HMOs had a surplus that exceeded either the applicable state net worth requirements or, where adopted, the levels that would require regulatory action under the NAIC’s RBC rules.
Long-term Borrowings 2023 Notes On June 2, 2023, the Company issued $1.0 billion aggregate principal amount of 5.0% senior notes due January 2029, $750 million aggregate principal amount of 5.25% senior notes due January 2031, $1.25 billion aggregate principal amount of 5.3% senior notes due June 2033, $1.25 billion aggregate principal amount of 5.875% senior notes due June 2053 and $750 million aggregate principal amount of 6.0% senior notes due June 2063 for total proceeds of approximately $4.9 billion, net of discounts and underwriting fees.
The net proceeds of these offerings were used for general corporate purposes. 2023 Notes On June 2, 2023, the Company issued $1.0 billion aggregate principal amount of 5.0% senior notes due January 2029, $750 million aggregate principal amount of 5.25% senior notes due January 2031, $1.25 billion aggregate principal amount of 5.3% senior notes due June 2033, $1.25 billion aggregate principal amount of 5.875% senior notes due June 2053 and 88 $750 million aggregate principal amount of 6.0% senior notes due June 2063 for total proceeds of approximately $4.9 billion, net of discounts and underwriting fees.
At December 31, 2023, all of the Company’s insurance and HMO subsidiaries were either above the RBC level that would require regulatory action or otherwise subject to an agreement to avoid any regulatory action. The RBC framework described above for insurers has been extended by the NAIC to health organizations, including HMOs.
At December 31, 2024, all of the Company’s insurance and HMO subsidiaries were above the RBC level that would require regulatory action. The RBC framework described above for insurers has been extended by the NAIC to health organizations, including HMOs.
We evaluate and adjust our approach in each of the markets we serve, considering all relevant factors. • The Company expects benefits from enterprise-wide cost savings initiatives and investments in efficiencies, which aim to reduce the Company’s operating cost structure in a way that improves the consumer experience and is sustainable.
The Company evaluates and adjusts its approach in each of the markets it serves, considering all relevant factors. • The Company expects benefits from ongoing enterprise-wide cost savings initiatives and investments in efficiencies, which aim to reduce the Company’s operating cost structure in a way that improves the consumer experience and is sustainable.
The Company has three operating segments, Health Care Benefits, Health Services and Pharmacy & Consumer Wellness, 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 Company has four reportable segments: Health Care Benefits, Health Services, Pharmacy & Consumer Wellness and Corporate/Other. The Company’s segments maintain separate financial information, and the Chief Operating Decision Maker (“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.
Commentary - 2023 compared to 2022 Revenues • Revenues primarily 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. • Total revenues decreased $79 million, or 14.9%, in 2023 compared to 2022.
Commentary - 2024 compared to 2023 Revenues • Revenues primarily 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. • Total revenues of $451 million in 2024 remained consistent compared to 2023.
During 2023, approximately 74% of the Company’s total capital expenditures were for technology, digital and other strategic initiatives and 26% were for store, fulfillment and support facilities expansion and improvements. • Net cash provided by financing activities was $2.7 billion in 2023 compared to net cash used in financing activities of $10.5 billion in 2022.
During 2024, approximately 76% of the Company’s total capital expenditures were for technology, digital and other strategic initiatives and 24% were for store, fulfillment and support and improvements. • Net cash used in financing activities was $1.1 billion in 2024 compared to net cash provided by financing activities of $2.7 billion in 2023.
The Health Care Delivery reporting unit is primarily comprised of the Signify Health and Oak Street Health care delivery assets, which were acquired on March 29, 2023 and May 2, 2023, respectively.
In 2023, the Company formed a new Health Care Delivery reporting unit within the Health Services segment. The Health Care Delivery reporting unit is primarily comprised of the Signify Health and Oak Street Health care delivery assets, which were acquired on March 29, 2023 and May 2, 2023, respectively.
In assessing the Company’s credit strength, the Company believes that both Moody’s and S&P considered, among other things, the Company’s capital structure and financial policies as well as its consolidated balance sheet, its historical acquisition activity and other financial information.
In assessing the Company’s credit strength, the Company believes that Moody’s, S&P and Fitch considered, among other things, the Company’s capital structure and financial 89 policies, as well as its consolidated balance sheet, its historical acquisition activity and other financial information, including the Company’s expectations for future earnings and cash flows.
This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription. Commentary - 2023 compared to 2022 Revenues • Total revenues increased $17.3 billion, or 10.2%, in 2023 compared to 2022.
This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription. Commentary - 2024 compared to 2023 Revenues • Total revenues decreased $13.2 billion, or 7.1%, in 2024 compared to 2023.
Final 2024 Medicare Advantage rates resulted in an expected average decrease in revenue for the Medicare Advantage industry of 1.12%, excluding the CMS estimate of Medicare Advantage risk score trend. On January 31, 2024, CMS issued an advance notice detailing proposed 2025 Medicare Advantage payment rates.
Medicare Update On April 1, 2024, CMS issued its final notice detailing final 2025 Medicare Advantage payment rates. Final 2025 Medicare Advantage rates resulted in an expected average decrease in revenue for the Medicare Advantage industry of 0.16%, excluding the CMS estimate of Medicare Advantage risk score trend.
(2) Relocated stores are not included in new and acquired stores or closed stores totals. 93 Short-term Borrowings Commercial Paper and Back-up Credit Facilities The Company had $200 million of commercial paper outstanding at a weighted average interest rate of 4.31% as of December 31, 2023. The Company did not have any commercial paper outstanding as of December 31, 2022.
(2) Relocated stores are not included in new and acquired stores or closed stores totals. 87 Short-term Borrowings Commercial Paper and Back-up Credit Facilities The Company had $2.1 billion of commercial paper outstanding at a weighted average interest rate of 4.98% as of December 31, 2024.
Restructuring charges • During 2023, the Company recorded $507 million in pre-tax restructuring charges, comprised of $344 million of severance and employee-related costs associated with corporate workforce optimization, $152 million of asset impairment charges and an $11 million stock-based compensation charge associated with the impacted employees.
During 2023, the Company recorded $507 million in pre-tax restructuring charges, comprised of $344 million of severance and employee-related costs associated with corporate workforce optimization, $152 million of asset impairment charges and an $11 million stock-based compensation charge associated with the impacted employees. See Note 3 ‘‘Restructuring’’ included in Item 8 of this 10-K for additional information.
This activity includes the share repurchases under the ASR transactions described below. During the year ended December 31, 2021, the Company did not repurchase any shares of common stock. Pursuant to the authorization under the 2021 Repurchase Program, the Company entered into a $3.0 billion fixed dollar ASR with Morgan Stanley & Co. LLC (“Morgan Stanley”).
This activity includes the share repurchases under the ASR transactions described below. Pursuant to the authorization under the 2021 Repurchase Program, the Company entered into a $3.0 billion fixed dollar ASR with Morgan Stanley & Co. LLC (“Morgan Stanley”).
The Company’s use of these derivatives is generally limited to hedging risk and has principally consisted of using interest rate swaps, treasury rate locks, forward contracts, futures contracts, warrants, put options and credit default swaps.
Derivative Financial Instruments The Company uses derivative financial instruments in order to manage interest rate and foreign exchange risk and credit exposure. The Company’s use of these derivatives is generally limited to hedging risk and has principally consisted of using interest rate swaps, treasury rate locks, forward contracts, futures contracts, warrants, put options and credit default swaps.
In February 2022, the Company received approximately 2.7 million shares of CVS Health Corporation’s common stock, representing the remaining 20% of the $1.5 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury stock and the forward contract was reclassified from capital surplus to treasury stock in February 2022.
In March 2024, the Company received approximately 8.3 million shares of CVS Health Corporation’s common stock, representing the remaining 15% of the $3.0 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury and the forward contract was reclassified from capital surplus to treasury stock in March 2024.
The fair values of the reporting units with goodwill exceeded their carrying values by significant margins, with the exception of the Health Care Delivery reporting unit, which exceeded its carrying value by approximately 9%.
The fair values of the reporting units with goodwill exceeded their carrying values by significant margins, with the exception of the Government reporting unit and the Health Care Delivery reporting unit which exceeded their carrying values by approximately 4% and 8%, respectively.
The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants and provides various administrative, management and reporting services to pharmaceutical manufacturers.
The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants and provides various administrative, management and reporting services to pharmaceutical manufacturers. During 2023, the Company completed the acquisition of two key health care delivery assets – Signify Health, Inc.
(3) Same store sales and prescription volume represent the change in revenues and prescriptions filled in the Company’s retail pharmacy stores that have been operating for greater than one year, expressed as a percentage that indicates the increase or decrease relative to the comparable prior period. Same store metrics exclude revenues and prescriptions from LTC and infusion services operations.
(3) Same store sales and prescription volume represent the change in revenues and prescriptions filled in the Company’s retail pharmacy stores that have been operating for greater than one year and digital sales initiated online or through mobile applications and fulfilled through the Company’s distribution centers, expressed as a percentage that indicates the increase or decrease relative to the comparable prior period.
Management uses this metric to evaluate the effectiveness of the business at encouraging the use of generic drugs when they are available and clinically appropriate, which aids in decreasing costs for client members and retail customers.
Generic dispensing rate • Generic dispensing rate is calculated by dividing the Health Services segment’s generic claims processed by its total claims processed. Management uses this metric to evaluate the effectiveness of the business at encouraging the use of generic drugs when they are available and clinically appropriate, which aids in decreasing costs for client members and retail customers.
Overview of the Health Care Benefits Segment The Health Care Benefits segment operates as one of the nation’s leading diversified health care benefits providers. 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 has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInvestments The Company’s investment portfolio supported the following products at December 31, 2023 and 2022: In millions 2023 2022 Experience-rated products $ 723 $ 744 Remaining products 25,555 23,147 Total investments (1) $ 26,278 $ 23,891 _____________________________________________ (1) Includes long-term investments of $17 million which were accounted for as assets held for sale and were included in assets held for sale on the consolidated balance sheet at December 31, 2022.
Biggest changeInvestments The Company’s investment portfolio supported the following products at December 31, 2024 and 2023: In millions 2024 2023 Experience-rated products $ 652 $ 723 Remaining products 30,689 25,555 Total investments $ 31,341 $ 26,278 Investment risks associated with experience-rated products generally do not impact the Company’s operating results.
The Company is dedicating and will continue to dedicate significant resources and incur significant expenses to maintain and update on an ongoing basis the systems and processes that are designed to mitigate the information security risks it faces and protect the security of its computer systems, software, 106 networks and other technology assets against attempts by unauthorized parties to obtain access to confidential information, disrupt or degrade service or cause other damage.
The Company is dedicating and will continue to dedicate significant resources and incur significant expenses to maintain and update on an ongoing basis the systems and processes that are designed to mitigate the information security risks it faces and protect the security of its computer systems, software, networks and other technology assets against attempts by unauthorized parties to obtain access to confidential information, disrupt or degrade service or cause other damage.
If a debt 105 security is in an unrealized loss position and the Company does not have the intent to sell and it is more likely than not that the Company will not have to sell such security before recovery of its amortized cost basis, the Company bifurcates the impairment into credit-related and non-credit related components.
If a debt security is in an unrealized loss position and the Company does not have the intent to sell and it is more likely than not that the Company will not have to sell such security before recovery of its amortized cost basis, the Company bifurcates the impairment into credit-related and non-credit related components.
The amount of the credit-related component is recorded as an allowance for credit losses and recognized in net income, and the amount of the non-credit related component is included in other comprehensive income (loss). The impairment of debt securities is considered a critical accounting policy.
The amount of the credit-related component is recorded as an allowance for credit losses and recognized in net income, and the amount of the non-credit related component is included in other 100 comprehensive income (loss). The impairment of debt securities is considered a critical accounting policy.
The Company generally classifies debt securities as available for sale, and carries them at fair value on the consolidated balance sheets. At both December 31, 2023 and 2022, less than 1% of debt securities were valued using inputs that reflect the Company’s assumptions (categorized as Level 3 inputs in accordance with GAAP).
The Company generally classifies debt securities as available for sale, and carries them at fair value on the consolidated balance sheets. At both December 31, 2024 and 2023, less than 1% of debt securities were valued using inputs that reflect the Company’s assumptions (categorized as Level 3 inputs in accordance with GAAP).
Those risks include risks related to information security, including cybersecurity. The Company and its vendors have experienced diverse cyber attacks and expect to continue to experience cyber attacks going forward. As examples, the Company and its vendors have experienced attempts to gain access to systems, denial of service attacks, attempted malware infections, account takeovers, scanning activity and phishing emails.
Those risks include risks related to information security, including cybersecurity. The Company and its vendors have experienced diverse cyberattacks and expect to continue to experience cyberattacks going forward. As examples, the Company and its vendors have experienced attempts to gain access to systems, denial of service attacks, attempted malware infections, account takeovers, scanning activity and phishing emails.
Based on overall exposure to interest rate risk and equity price risk, the Company believes that these changes in market rates and prices would not materially affect consolidated near-term financial condition, operating results or cash flows as of December 31, 2023.
Based on overall exposure to interest rate risk and equity price risk, the Company believes that these changes in market rates and prices would not materially affect consolidated near-term financial condition, operating results or cash flows as of December 31, 2024.
Evaluation of Foreign Currency and Commodity Risk At December 31, 2023 and 2022, the Company did not have any material foreign currency exchange rate or commodity derivative instruments in place and believes its exposure to foreign currency exchange rate risk is not material. Evaluation of Operational Risks The Company also faces certain operational risks.
Evaluation of Foreign Currency and Commodity Risk At December 31, 2024 and 2023, the Company did not have any material foreign currency exchange rate or commodity derivative instruments in place and believes its exposure to foreign currency exchange rate risk is not material. Evaluation of Operational Risks The Company also faces certain operational risks.
Changes in the fair value of long-term debt do not impact the Company’s operating results or financial condition. • The theoretical reduction in the fair value of interest rate sensitive investments partially offset by the theoretical reduction in the fair value of interest rate sensitive liabilities would result in a net decline in fair value of approximately $570 million ($720 million pretax) related to continuing non-experience-rated products.
Changes in the fair value of long-term debt do not impact the Company’s operating results or financial condition. • The theoretical reduction in the fair value of interest rate sensitive investments partially offset by the theoretical reduction in the fair value of interest rate sensitive liabilities would result in a net decline in fair value of approximately $650 million ($820 million pretax) related to continuing non-experience-rated products.
Assuming an immediate increase of 100 basis points in interest rates, the theoretical decline in the fair values of market sensitive instruments at December 31, 2023 is as follows: • The fair value of long-term debt issued by the Company would decline by approximately $3.5 billion ($4.4 billion pretax).
Assuming an immediate increase of 100 basis points in interest rates, the theoretical decline in the fair values of market sensitive instruments at December 31, 2024 is as follows: • The fair value of long-term debt issued by the Company would decline by approximately $3.3 billion ($4.1 billion pretax).
The fair value of debt securities that were rated below investment grade (that is, having a credit quality rating below BBB-/Baa3) was $2.1 billion and $1.9 billion at December 31, 2023 and 2022, respectively (of which 1.5% and 1.6% at December 31, 2023 and 2022, respectively, supported experience-rated products).
The fair value of debt securities that were rated below investment grade (that is, having a credit quality rating below BBB-/Baa3) was $2.4 billion and $2.1 billion at December 31, 2024 and 2023, respectively (of which 1.6% and 1.5% at December 31, 2024 and 2023, respectively, supported experience-rated products).
These securities had an average credit quality rating of AA- and A at December 31, 2023 and 2022, respectively, without the guarantee. The Company does not have any significant concentration of investments with third party guarantors (either direct or indirect).
These securities had an average credit quality rating of AA+ at both December 31, 2024 and 2023, with the guarantee. These securities had an average credit quality rating of AA and AA- at December 31, 2024 and 2023, respectively, without the guarantee. The Company does not have any significant concentration of investments with third party guarantors (either direct or indirect).
If the value of the Company’s publicly traded domestic equity securities held within its investment portfolio were to decline by 15%, this would result in a net decline in fair value of $32 million ($41 million pretax).
If the value of the Company’s publicly traded domestic equity securities held within its investment portfolio were to decline by 15%, this would result in a net decline in fair value of $43 million ($54 million pretax).
The debt securities in the Company’s investment portfolio had an average credit quality rating of A at both December 31, 2023 and 2022, with a fair value of approximately $4.6 billion and $6.0 billion rated AAA at December 31, 2023 and 2022, respectively.
The debt securities in the Company’s investment portfolio had an average credit quality rating of A at both December 31, 2024 and 2023, with a fair value of approximately $5.9 billion and $4.6 billion rated AAA at December 31, 2024 and 2023, respectively.
At December 31, 2023 and 2022, the Company held $218 million and $202 million, respectively, of municipal debt securities that were guaranteed by third parties, representing 1% of total investments at both December 31, 2023 and 2022. These securities had an average credit quality rating of AA+ at both December 31, 2023 and 2022, with the guarantee.
At December 31, 2024 and 2023, the Company held $82 million and $218 million, respectively, of municipal debt securities that were guaranteed by third parties, representing less than 1% and 1% of total investments at December 31, 2024 and 2023, respectively.
The impact of cyber attacks has not been material to the Company’s operations or operating results through December 31, 2023. The Board and its Audit Committee and Nominating and Corporate Governance Committee are regularly informed regarding the Company’s information security policies, practices and status.
The impact of cyberattacks has not been material to the Company’s operations or operating results through December 31, 2024. The Board and its Audit Committee are regularly informed 101 regarding the Company’s information security policies, practices and status. Please see “Cybersecurity” included in Item 1C of this 10-K for further information. 102 Table of Contents
Removed
See Note 2 ‘‘Acquisitions, Divestitures and Asset Sales’’ included in Item 8 of this 10-K for additional information. Investment risks associated with experience-rated products generally do not impact the Company’s operating results.
Removed
Please see “Cybersecurity” included in Item 1C of this 10-K for further information. 107 Table of Contents

Other CVS 10-K year-over-year comparisons