CVS Health plans to split into two publicly traded companies, keeping its Aetna health insurance business together with its CVS Caremark pharmacy benefits manager while separating its retail pharmacy chain.
The announcement came alongside third-quarter results showing a continued recovery in Aetna’s margins, with lower medical costs in its government business.
The healthcare solutions company, which will keep the CVS Health name in the interim, will include Aetna, CVS Caremark, CVS Specialty, primary care provider Oak Street Health and in-home health business Signify Health. Chairman and chief executive David Joyner will lead it.
The second company, CVS Pharmacy, will include about 9,000 retail pharmacies, mail pharmacy, MinuteClinic and the Health100 technology business. Prem Shah, currently group president, will be its chief executive.
The separation is intended to be tax-free to shareholders and is expected to be completed in the first half of 2028. CVS said both companies are expected to have solid investment-grade ratings.
“From a position of strength, and a focus on the long term, we plan to create two focused companies to improve consumer engagement, affordability, and care coordination,” Joyner said.
Adjusted operating income in the Health Care Benefits segment, which includes Aetna, rose to $912 million from $314 million a year earlier. The medical benefit ratio, the share of premiums paid out in medical costs, improved to 91.3% from 92.8%, mainly because of better performance in its government business, which includes Medicare Advantage and Medicaid.
CVS said the improvement reflects continued progress on Aetna’s margin recovery plan. Prior-year medical cost estimates developed favorably by $1.3 billion in the first nine months.
Medical membership was 26.1 million, unchanged from June but down from 26.7 million a year earlier, partly because Aetna left the individual ACA exchange market this year. More than 69% of Aetna’s Medicare Advantage members are in plans rated four stars or higher for 2027.
Group-wide, revenue rose 5.4% to $108.4 billion and adjusted earnings per share rose to $2.09 from $1.60. CVS raised its full-year guidance, but said it remains cautious because of continued high medical cost trends.
For employee benefits brokers and consultants, the most important point is what doesn’t change. Aetna and Caremark will stay together, so employers buying Aetna medical cover alongside Caremark pharmacy benefits will still deal with a single integrated company. That integrated model has drawn regulatory scrutiny of pharmacy benefit managers owned by insurers, and the split does nothing to separate them.
What does change is the retail pharmacy relationship. CVS Pharmacy says it will pursue more partnerships with other payers and pharmacy benefit managers. That could give employers and their brokers more choice in pharmacy networks, with CVS stores more likely to compete for other PBMs’ business.
Aetna’s improving margins also matter for renewals. A recovering insurer is likely to compete more strongly for employer business. But CVS’s caution on medical cost trends suggests rate increases in employer health plans won’t ease significantly in 2027.
