Financial Services Superintendent Maria T. Vullo today announced that the Department of Financial Services (DFS) has approved CVS Health Corp. and CVS Pharmacy Inc.’s application to acquire Aetna Health Insurance Company of New York, a New York domestic stock accident and health insurance company, following a public hearing and extensive public comment period. DFS approved the acquisition subject to a number of conditions to which CVS and Aetna have agreed including enhanced consumer and health insurance rate protections, privacy controls, cybersecurity compliance, and a $40 million commitment to support health insurance education and enrollment and other consumer health protections. 

“DFS listened to the concerns of the public and has obtained significant commitments from CVS and Aetna to address those concerns, ensuring that the companies hold to their promises of reduced costs and improved health care for New Yorkers, not pass on the costs of this acquisition to New Yorkers, enhance data privacy, and not act in an anti-competitive manner going forward,” said Superintendent Vullo. “With this conditional approval, DFS continues its strong commitment to ensuring that New Yorkers have quality, affordable health care and an insurance market that protects consumers. DFS will use its full regulatory authority to ensure that the companies adhere to these robust commitments and that both CVS and Aetna are held accountable for promises made to New Yorkers.” 

DFS received an application by CVS Health Corporation on January 18, 2018 for approval to acquire control of Aetna Health Insurance Company of New York. On March 9, 2018, DFS received an amended and restated application, which, among other things, added CVS Pharmacy, Inc., a Rhode Island corporation, as an applicant.

DFS held a public hearing on the proposed acquisition on October 18, 2018, at which individuals and groups testified regarding vertical and horizontal competitive issues, pharmacy benefit management practices, the lack of articulated business plans by CVS Health or Aetna Inc. sufficient to demonstrate that any promised benefits would materialize, and concerns for data privacy and security. Several witnesses raised concerns that the CVS/Aetna Merger would give the combined entity greater power in the health insurance, pharmacy benefit manager (PBM), and retail pharmacy markets.

In making its final decision, and mandating conditions for final approval, DFS considered the testimony presented at the hearing as well as the dozens of written comments from interested parties, the overwhelming majority of whom expressed concerns with the transaction.

As part of DFS’s approval, CVS has agreed to specific conditions that the Department demanded to protect New York consumers, including:

No funds from any Aetna company or affiliate covering New Yorkers can be used to pay for CVS’s acquisition

Costs derived from the acquisition, including executive compensation, cannot be passed on to any domestic or foreign Aetna New York insurer

Increased health insurance rates cannot be sought in New York to pay for the cost of the acquisition and premiums and cost-sharing owed by policyholders cannot increase

Dividends cannot be paid by Aetna without the express prior approval of the Superintendent for a period of three years

Annual reports for three years documenting details of the progress toward achieving promised synergies must be provided to DFS

Current products throughout the Aetna New York service area must be maintained for three years following the approval 

One or more new products must be made available by Aetna to the small and large group markets within two years from the approval through an existing or new New York-domiciled insurer 

Roll-out of health care measures must be done fairly and equitably in New York, including in underserved communities

$40 million to New York State, over a three-year period, to support health insurance education and enrollment activities and strengthen New York health care transformation activities, which may include payments to the New York State Health Care Transformation Fund

An independent third-party audit assessing whether Aetna employees have accessed Confidential Information in violation of firewall policies submitted to DFS within one year of the approval

Adherence to DFS’s nation-leading Cybersecurity Regulation, including filing the required annual certificates of compliance to DFS

No preferential pricing to any Aetna-affiliated health insurer licensed in New York, including any managed care organization certified in New York, that considers the fact that the health insurer is Aetna-affiliated 

Ensuring that participating provider networks for insured products maintain access to non-chain New York pharmacies for three years from the approval

DFS will continue to exercise its broad authority to conduct examinations of Aetna and any entity within its holding company structure, including CVS and CVS Caremark, its pharmacy benefit manager where DFS has cause to believe such entity can affect the operations, management or financial condition of any insurer licensed in New York. DFS will use all regulatory tools, including special reports, to review the past and future conduct of CVS Health, CVS Pharmacy, and CVS Caremark, as well as Aetna Inc. and its affiliates, and take every action necessary to ensure that the representations made in the course of this approval were fully accurate and that the parties keep all commitments made. 

Additionally, DFS has previously advocated for state legislation to require that all PBMs operating in New York obtain a license from DFS and be examined and regulated by DFS. While DFS will have full powers to examine CVS Health entities under New York’s holding company statutes, DFS’s proposed legislation to license PBMs is a necessary additional step. CVS committed at the DFS public hearing in October and as part of the approval process that CVS Health and its subsidiaries will take no action to oppose such future legislation.

A copy of the decision and order approving the acquisition, as well as the conditions required, is available here.