CVS

CVS HEALTH Corp

NYSE · CONSUMER STAPLES · RETAIL-DRUG STORES AND PROPRIETARY STORES

94.29

−0.46 −0.49%

USD · close Oct 21

A free account adds a watchlist, alerts when insiders, Congress or short sellers move on your tickers, and a morning brief. Sign up

Work order

FLAG · shorts 32

Insiders, 90 days

no open-market filings in 90 days

Congress, 90 days

0 / 0

no disclosures naming it

Big money

4 / 15

tracked funds hold it

Calls on record

nobody we score has called it yet

MKT CAP $120.6BP/E 24.8DIV YIELD 2.82%FCF YIELD 9.75%REV TTM $415.1B +7.4%NET INCOME $4.9B +7.9%NET DEBT $57.7B52W 70.08 – 110.60SEC XBRL · TTM TO Invalid Date

How CVS rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

61%

of sentences unchanged

Added

new sentences

Dropped

155

sentences removed

Length

−2,863

words, now 19,944

New in FY2025

Summary The following is a summary of the principal risks we face that could negatively impact our businesses, operating results, cash flows and/or financial condition: Risks Relating to Our Businesses • We may not be able to accurately forecast health care and other benefit costs. • Adverse economic conditions in the U.S. and abroad can materially and adversely impact our businesses, operating results, cash flows and financial condition. • Each of our segments operates in a highly competitive and evolving business environment. • A change in our Health Care Benefits product mix may adversely affect our profit margins. • Our health care delivery businesses face unique risks. • Negative public perception of the industries in which we operate can adversely affect our businesses, operating results, cash flows and prospects. • We must maintain and improve our relationships with our retail and specialty pharmacy customers and increase the demand for our products and services. • We face risks relating to the availability, pricing and safety profiles of prescription drugs that we purchase and sell. • 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, and any reserve, including a premium deficiency reserve, may be insufficient. • 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.
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. • We may face increased regulatory risks related to our vertical integration strategy, such as legislation prohibiting state licensure of pharmacies affiliated with a PBM. • We face unique regulatory and other challenges in our PBM, 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, and any disruption to funding from the U.S. federal government could adversely impact our revenues and operating results. • We may not be able to obtain adequate premium rate increases in our Insured Health Care Benefits products, which would have an adverse effect on our revenues, MBRs and operating results, and could magnify the adverse impact of increases in health care and other benefit costs and of ACA assessments, fees and taxes. • Minimum MLR rebate requirements limit the level of margin we can earn in our Insured Health Care Benefits products while leaving us exposed to higher than expected medical costs.
Risks Related to Our Operations • Data governance failures, the failure or disruption of our information technology or infrastructure, a cyberattack or other information security incident 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.
The use of AI and related technology may also increase exposure to reputational, cybersecurity, data privacy, legal, regulatory and operational risks. • Product liability, product recall, professional liability or personal injury issues could damage our reputation. • We face significant competition in attracting and retaining talented employees.
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. • Continuing consolidation and integration among providers and other suppliers may increase our costs and increase competition.
There can be no assurance that future health care and other benefit costs will not exceed our projections.
Premiums for our Insured Health Care Benefits products 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.
During periods when health care and other benefit costs, utilization and/or medical costs trends experience significant volatility and medical claim submission patterns are changing rapidly, accurately detecting, forecasting, managing, reserving and pricing for our (and our self-insured customers’) medical cost trends and incurred and future health care and other benefit costs is more challenging.
In addition, government-imposed limitations on Medicare and Medicaid reimbursements to health plans and providers have caused the private sector to bear a greater share of increasing health care and other benefit costs over time, and future amendments to the ACA that increase the uninsured population may amplify this issue.
These risks are particularly acute during periods when health care and other benefit costs, utilization and/or medical cost trends experience significant volatility and medical claim submission patterns are changing rapidly.
Adverse economic conditions in the U.S. and abroad, including those caused by inflation, high interest rates, declines in consumer confidence, increases in unemployment and supply chain disruptions, all of which we have experienced over the last number of years, can materially and adversely impact our businesses, operating results, cash flows and financial condition, including: • In our Health Care Benefits segment, by causing unanticipated increases and volatility in utilization of covered services, increases in fraudulent claims and 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 response to economic conditions, 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 benefit costs; causing customers and potential customers of our Health Care Benefits segment, particularly smaller employers and individuals, to forgo obtaining or renewing their health and other coverage with us; and also affect our ability to profitably grow and diversify our Health Care Benefits membership. • In our Health Services segment, by causing drug utilization to decline, reducing demand for PBM services and adversely affecting the financial health of our PBM clients. • In our Pharmacy & Consumer Wellness segment, by causing drug utilization to decline, changing consumer purchasing power, preferences and/or spending patterns leading to reduced consumer demand for products sold in our stores, potentially increasing levels of theft at our retail locations. • By causing our existing customers to reduce workforces (including due to business failures), which would reduce our revenues, the number of covered lives in our PBM clients and/or the number of members our Health Care Benefits segment serves.
Reductions in workforce by our customers can also cause unanticipated increases in the health care and other benefit costs of our Health Care Benefits segment.
For 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 increase 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. • By affecting our ability to obtain necessary financing on acceptable terms, our ability to secure suitable store locations 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.
Winning bids for Medicaid and dual eligible programs often are challenged successfully by unsuccessful bidders, and may also be withdrawn or canceled by the issuing agency.
These actions may adversely affect our membership, revenues and operating results. • Our Health Care Benefits segment’s operating results and competitiveness is heavily impacted, in the case of Medicaid programs, by the sufficiency of the rates the states determine are actuarially sound based on experience from previous years.
Such rate levels may not be representative of actual experience, and insufficient rates will negatively impact our revenues and operating results. • From time to time we request increases in our premium rates in our Commercial Health Care Benefits business 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.
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; pricing guarantees; 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.
Marketplace dynamics and regulatory changes also have adversely affected our ability to offer plan sponsors pricing that includes the use of retail “differential” or “spread,” which could adversely affect our future profitability, and we expect these trends to continue. • Our retail pharmacy and specialty pharmacy operations have been affected by reimbursement pressure caused by competition, including client demands for lower prices, generic drug pricing, earlier than expected generic drug introductions and network reimbursement pressure.
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. • Direct-to-consumer (“DTC”) sales of prescription drugs by pharmaceutical companies is a growing trend in the United States.
By implementing DTC sales platforms, pharmaceutical companies can advertise, or sell, their own branded drugs directly to patients, bypassing traditional distribution channels and intermediaries, including pharmacies and PBMs.
DTC platforms may also increase demand for expensive, brand-name drugs that may not provide significant clinical benefit over more cost-effective alternatives.
As a result, the DTC trend may increase overall health care costs for consumers and adversely impact the performance of the Company’s Pharmacy & Consumer Wellness and Health Services segments.
We also serve, and expect to grow our business with, government-sponsored programs, including Medicare and Medicaid, that are subject to competitive bids, have lower profit margins than our Commercial Insured Health Care Benefits products and may introduce volatility in our cash flows from time to time.
Our health care delivery businesses, which include health risk assessments and primary care services, including senior-focused value-based primary care services for Medicare eligible patients, face unique risks which include, but are not limited to, the following: • ability to recruit, retain and grow a network of credentialed, high-quality physicians, physician assistants and nurse practitioners to provide clinical services in highly competitive markets for talent, especially in light of possible changes to the U.S. immigration policies, rules, laws or orders; • successful challenges to the treatment of certain health care providers as independent contractors in many states, which could result in increased costs and subject the business to regulatory sanction; • dependence on a concentrated number of key health plan customers; • the quality of the information received about plan members of such health plans for whom Signify Health will seek to provide in-home evaluations and other services, and the regulatory restrictions and requirements associated with directly contacting plan members; • ability to perform and ensure the quality of health risk assessments; • ability to achieve and receive shared health care cost savings; • the regulatory and business risks associated with participation in certain government health care programs and identification of diagnosis codes related to risk adjustment payments under Part C of the Medicare program; • health reform initiatives and changes in the rules governing government health care programs, including rules related to the use of in-home health risk assessments for the purpose of capturing individual risk used to calculate an individual’s risk adjustment factor or a change to how patient-level risk is determined for CMS programs; • use of “open source” software in its technology, which may make it easier for others to gain access or compromise its proprietary technology; • ability to attract new patients, including Medicare-eligible patients, in a highly competitive market; • satisfying the enrollment requirements under government health care programs for physicians and other providers in a timely manner; • dependence on a significant portion of revenue from Medicare or Medicare Advantage plans, which subjects Oak Street Health to reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program; • dependence for a significant portion of revenue from agreements with a limited number of key payors with whom Oak Street Health contracts to provide services under terms that may permit a payor to amend the compensation arrangements or terminate the agreements without cause; • dependence on reimbursements from third-party payors, which can result in substantial delay, and on patients, through copayments and deductibles, which subjects the Company to additional reimbursement risk; • under the fixed fee (or capitated) agreements Oak Street Health enters into with health plans, the assumption of the risk that the actual cost of a service it provides to a patient exceeds the reimbursement provided by the health plan; • reductions in the quality ratings of Medicare health plans the Company serves could result in a shift of patients from, or the termination of, a health plan the Company serves; • submission of inaccurate, incomplete or erroneous data, including risk adjustment data, to health plans and government payors could result in inaccuracies in the revenue recorded or receipt of overpayments, which may subject the Company to repayment obligations and penalties; • geographic concentration of primary care centers; • laws regulating the corporate practice of medicine and the associated agreements entered into with physician practice groups restrict the manner in which the Oak Street Health business is able to direct the operations and otherwise exercise control of its physician practice groups; • changes in the legal treatment of contractual arrangements with physician practice groups could impact the ability to consolidate the revenue of these groups; and • ability to maintain and enhance reputation and brand recognition.
Failure to timely identify or effectively respond to changing consumer preferences, spending patterns and evolving demographic mixes in the communities we serve, including shifts toward online shopping, or failure to maintain desirable selections of merchandise, store environments or guest experiences could adversely affect our relationship with our customers and clients and the demand for our products and services and could result in excess inventories of products.
We dispense significant volumes of brand name and generic drugs from our retail, specialty and mail order pharmacies, and the retail pharmacies in our PBM’s network also dispense significant volumes of brand name and generic drugs.
In addition, increased utilization of generic drugs (which normally yield a higher gross profit rate than equivalent brand name drugs) has resulted in pressure to decrease reimbursement payments to retail, mail order and specialty pharmacies for generic drugs, causing a reduction in our margins on sales of generic drugs.
For example, during the first quarter of 2025, we recorded a premium deficiency reserve of $448 million related to our individual exchange product line and during the second quarter of 2025, we recorded a premium deficiency reserve of $471 million related to our Group Medicare Advantage product line within the Health Care Benefits segment, primarily related to anticipated losses for the remainder of the 2025 coverage year.
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, 2025 would cause these estimates to change in the near term, and such a change could be material.
The occurrence of natural disasters or extreme weather events, such as hurricanes, tropical storms, floods, wildfires, earthquakes, tsunamis, cyclones, typhoons, extended winter storms, droughts, 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, our vendors and us specifically.
Extreme events or the threat of extreme events could result in significant health care costs, including those associated with behavioral health offerings, waiving certain medical requirements or assisting with replacement medications or transfer prescriptions, which could also be affected by the government’s actions and the responsiveness of public health agencies and other insurers.
Such events could materially and adversely affect our businesses, operations, operating results and cash flows.
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; • 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 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; • 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.
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 regulations; changes in the 340B program, including the resumption of the Pilot and any expansion thereof; 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 prohibiting pharmacy licensure for pharmacies affiliated with a PBM, network restrictions, 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.
For example, laws in Arkansas, Louisiana, North Dakota and Oklahoma have attempted to limit PBM practices and have been subject to recent lawsuits.
Executive orders covering health care and other subjects including immigration, AI, energy and the federal workforce as well as the workforce of public and private companies, if implemented through agency action, may also impact the Company.
The laws and regulations governing our operations and interpretations of those laws and regulations are increasing in number and complexity, change frequently and can be inconsistent or conflict with one another.
Our Health Care Benefits products are highly regulated, particularly those that serve Medicare, Medicaid, dual eligible, dual eligible special needs and small group Commercial customers and members.
The laws and regulations governing participation in Medicare Advantage (including dual eligible special needs plans), Medicare Part D, Medicaid, and Managed Medicaid plans are complex, are subject to interpretation and can expose us to penalties for non-compliance.

and 49 more.

Gone since FY2024

Summary The following is a summary of the principal risks we face that could negatively impact our businesses, operating results, cash flows and/or financial condition: Risks Relating to Our Businesses • We may not be able to accurately forecast health care and other benefit costs. • Adverse economic conditions in the U.S. and abroad can materially and adversely impact our businesses, operating results, cash flows and financial condition. • Each of our segments operates in a highly competitive and evolving business environment. • A change in our Health Care Benefits product mix may adversely affect our profit margins. • Our health care delivery businesses face unique risks • We can provide no assurance that we will be able to compete successfully and profitably on Public Exchanges. • Negative public perception of the industries in which we operate can adversely affect our businesses, operating results, cash flows and prospects. • We must maintain and improve our relationships with our retail and specialty pharmacy customers and increase the demand for our products and services. • We face risks relating to the availability, pricing and safety profiles of prescription drugs that we purchase and sell. • 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, and any reserve, including a premium deficiency reserve, may be insufficient. • We are exposed to risks relating to the solvency of other insurers.
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.
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.
Risks Related to Our Operations • Failure to meet customer and investor expectations, including with respect to corporate responsibility and sustainability goals, may harm our brand and reputation, our ability to retain and grow our customer base and membership. • A cyberattack or other information security incident could significantly disrupt our operations. • Data governance failures or the failure or disruption of our information technology or infrastructure 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. • 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.
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.
There can be no assurance that future health care and other benefits costs will not exceed our projections.
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.
During periods when health care and other benefit costs, utilization and/or medical costs trends experience significant volatility and medical claim submission patterns are changing rapidly, as they did during the COVID-19 pandemic, accurately detecting, forecasting, managing, reserving and pricing for our (and our self-insured customers’) medical cost trends and incurred and future health care and other benefits costs is more challenging.
While the public health emergency related to COVID-19 expired in May 2023, COVID-19 still exists and it may, like many other respiratory viruses, wax and wane depending on geography and seasonality.
The future impact COVID-19 will have on the Company and its ability to accurately forecast health care and other benefit costs is uncertain, and will depend on geographies impacted, whether new variants emerge and their severity, the availability and costs of testing, vaccination and treatment, and legal and regulatory actions.
COVID-19 may also impact provider behavior, utilization trends, membership, and overall economic conditions.
These impacts could be adverse and material.
In 2022-2023 influenza season had an earlier than average start, including as compared to the 2023-2024 influenza season; the 2020-2021 influenza season was impacted by efforts taken to reduce the spread of COVID-19; and the 2019-2020 influenza season maintained a high level of severity for a longer period of time than average.
In addition, government-imposed limitations on Medicare and Medicaid reimbursements to health plans and providers have caused the private sector to bear a greater share of increasing health care and other benefits costs over time, and future amendments to the ACA that increase the uninsured population may amplify this issue.
These risks are particularly acute during periods when health care and other benefit costs, utilization and/or medical cost trends experience significant volatility and medical claim submission patterns are changing rapidly, as they did during the COVID-19 pandemic.
Adverse economic conditions in the U.S. and abroad, including those caused by inflation, high interest rates, declines in consumer confidence, increases in unemployment and supply chain disruptions, all of which we have experienced over the last number of years, can materially and adversely impact our businesses, operating results, cash flows and financial condition, including: • In our Health Care Benefits segment, by causing unanticipated increases and volatility in utilization of covered services, increases in fraudulent claims and 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 response to economic conditions, 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; 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; and also affect our ability to profitably grow and diversify our Health Care Benefits membership. • In our Health Services segment, by causing drug utilization to decline, reducing demand for PBM services and adversely affecting the financial health of our PBM clients. • In our Pharmacy & Consumer Wellness segment, by causing drug utilization to decline, changing consumer purchasing power, preferences and/or spending patterns leading to reduced consumer demand for products sold in our stores, potentially increasing levels of theft at our retail locations and adversely affecting the financial health of our LTC pharmacy customers. • By causing our existing customers to reduce workforces (including due to business failures), which would reduce our revenues, the number of covered lives in our PBM clients and/or the number of members our Health Care Benefits segment serves.
Reductions in workforce by our customers can also cause unanticipated increases in the health care and other benefits costs of our Health Care Benefits segment.
For 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. • 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.
Winning bids for Medicaid and dual eligible programs often are challenged successfully by unsuccessful bidders, and may also be withdrawn or cancelled by the issuing agency.
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.
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.
Marketplace dynamics and regulatory changes also have adversely affected our ability to offer plan sponsors pricing that includes the use of retail “differential” or “spread,” which could adversely affect our future profitability, and we expect these trends to continue. • Our retail pharmacy, specialty pharmacy and LTC pharmacy operations have been affected by reimbursement pressure caused by competition, including client demands for lower prices, generic drug pricing, earlier than expected generic drug introductions and network reimbursement pressure.
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. • The operating results and margins of our LTC business are further affected by the increased efforts of health care payors to negotiate reduced or capitated pricing arrangements and by the financial health of, and purchases and sales of, our LTC customers.
Consumers also are increasingly seeking to access consumer goods and health care products and services locally and through other direct channels such as mobile devices and websites.
Our health care delivery businesses, which we expanded with acquisitions to include health risk assessments, value-based care and provider enablement services through our Signify Health business, and additional senior-focused value-based primary care services for Medicare eligible patients through our Oak Street Health business, face unique risks.
Our Signify Health business faces risks which include, but are not limited to, the following: • ability to recruit, retain and grow its network of credentialed, high-quality physicians, physician assistants and nurse practitioners to provide clinical services in highly competitive markets for talent; • successful challenges to Signify Health’s treatment of health care providers as independent contractors, which could result in increased costs and subject the business to regulatory sanction; • dependence on a concentrated number of key health plan customers; • the quality of the information received about plan members of such health plans for whom Signify Health will seek to provide in-home evaluations and other services, and the regulatory restrictions and requirements associated with directly contacting plan members; • ability to perform and ensure the quality of health risk assessments; • ability to achieve and receive shared health care cost savings; • the regulatory and business risks associated with participation in certain government health care programs, including, among others, the MSSP and ACO REACH models, and identification of diagnosis codes related to risk adjustment payments under Part C of the Medicare program; • health reform initiatives and changes in the rules governing government health care programs, including rules related to the use of in-home health risk assessments for the purpose of capturing individual risk use to calculate an individual’s risk adjustment factor or a change to how patient-level risk is determined for CMS programs; • participation in CMS Innovation Center models, such as ACO REACH, which are subject to changes annually, generally in ways meant to reduce available payments to participants, including benchmarks that can be changed after the end of the performance year, and which has an end date without a plan for ongoing participation in a model by those participating; • impacts of fraud or anomalous billing on shared savings in CMS Innovation Center models; • use of “open source” software in its technology, which may make it easier for others to gain access or compromise its proprietary technology; • success in large, national ACOs is dependent on the collective efforts and compliance of a wide range of participating clients, and for those clients to be able to meet new and changing requirements such as changes to interoperability and reporting requirements; and • challenges in rural and post-acute reimbursement due to their significant dependence on fee-for-service revenue.
Our Oak Street Health business is subject to additional risks including, but not limited to, the following: • ability to attract new Medicare-eligible patients and credentialed, high-quality physicians and other providers for senior-focused primary care in a highly competitive market for such patients and providers; • satisfying the enrollment requirements under government health care programs for physicians and other providers in a timely manner; • dependence on a significant portion of revenue from Medicare or Medicare Advantage plans, which subjects Oak Street Health to reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program; • dependence for a significant portion of revenue from agreements with a limited number of key payors with whom Oak Street Health contracts to provide services under terms that may permit a payor to amend the compensation arrangements or terminate the agreements without cause; • dependence on reimbursements from third-party payors, which can result in substantial delay, and on patients, through copayments and deductibles, which subjects Oak Street Health to additional reimbursement risk; • under the fixed fee (or capitated) agreements Oak Street Health enters into with health plans, the assumption of the risk that the actual cost of a service it provides to a patient exceeds the reimbursement provided by the health plan; • reductions in the quality ratings of Medicare health plans Oak Street Health serves could result in a shift of patients from, or the termination of, a health plan Oak Street Health serves; • submission of inaccurate, incomplete or erroneous data, including risk adjustment data, to health plans and government payors could result in inaccuracies in the revenue Oak Street Health records or receipt of overpayments, which may subject it to repayment obligations and penalties; • geographic concentration of its primary care centers; • risks associated with its existing legal proceedings and litigations; • laws regulating the corporate practice of medicine and the associated agreements entered into with physician practice groups restrict the manner in which the Oak Street Health business is able to direct the operations and otherwise exercise control of its physician practice groups • participation in CMS Innovation Center models, such as ACO REACH, which are subject to changes annually, generally in ways meant to reduce available payments to participants, including benchmarks that can be changed after the end of the performance year, and which has an end date without a plan for ongoing participation in a model by those participating; • changes in the legal treatment of its contractual arrangements with its physician practice groups could impact the ability to consolidate the revenue of these groups; and • ability to maintain and enhance its reputation and brand recognition.
We can provide no assurance that we will be able to compete successfully on Public Exchanges or that our pricing or other actions will result in the profitability of our Public Exchange products.
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.
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.
Due to the price transparency provided by Public Exchanges, when we market products we face competitive pressures from existing and new competitors who may have lower cost structures.
Our competitors may bring their Public Exchange and other consumer products to market more quickly, have greater experience marketing to consumers and/or may be targeting the higher margin portions of our business.
We can provide no assurance that we will be able to compete successfully or profitably on Public Exchanges or that we will be able to benefit from any opportunities presented by Public Exchanges.
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.
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.
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 also serve, and expect to grow our business with, government-sponsored programs, including Medicare and Medicaid, that are subject to competitive bids and have lower profit margins than our Commercial Insured Health Care Benefits products.
Failure to timely identify or effectively respond to changing consumer preferences, spending patterns and evolving demographic mixes in the communities we serve, including shifts toward online shopping, or failure to maintain desirable selections of merchandise, store environments or guests experiences could adversely affect our relationship with our customers and clients and the demand for our products and services and could result in excess inventories of products.

and 115 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

Watch CVS. Know when insiders buy.

One email the day a filing lands. Free.