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CVS/Aetna targets Blue Cross and Walgreens in their Illinois stronghold

CVS from Page 1

presence here, it will put pressure on Deerfield-based Walgreens and Chicago-based Blue Cross, which historically have dominated in their home state.

“Illinois is really Walgreens’ home turf, and it’s a little bit challenging for a competitor to get in,” says Syed Husain, managing director at advisory firm PJ Solomon’s pharmacy and health care practice. “CVS always had a presence, but what happened with the Aetna acquisition—and ultimately (last year’s acquisition of a Medicaid managed care company in Illinois)—is, now there’s a reason to expand and maybe substantiate the presence a little more.”

Nationally, CVS is the largest pharmacy chain and the sixth-largest health insurer by market share. But in Illinois it trails Walgreens, which has 183 more stores in the state, and Blue Cross, which controls the vast majority of the local health insurance market. According to the latest data from the National Association of Insurance Commissioners, CVS ranks third in Illinois with 12 percent of the market, just behind UnitedHealth Group with 12.3 percent.

But under CEO Karen Lynch, previously Aetna’s president, CVS is focusing more on its health insurance segment—and particularly how that business works in tandem with the company’s other assets.

“That combination of consumer-centrism is really something that should be able to set CVS apart from some of its peers, even in similar business lines,” says Morningstar analyst Julie Utterback.

Aetna’s health plan covering Illinoisans who are eligible for both Medicare and Medicaid benefits has grown 27 percent year over year to nearly 9,500 members, or 15 percent of the market, the latest state data shows. But enrollment is expected to balloon starting next month, when Aetna’s plan becomes the first in Illinois to expand into all 102 counties. Corey Taliaferro, Aetna Better Health of Illinois’ executive director, predicts the expansion will double enrollment to 18,000.

GROWING FOOTPRINT

On another front, Aetna entered Illinois’ Medicaid managed care program late last year after acquiring the Medicaid—as well as Medicare Advantage—business of Centene. The move comes three years after the state narrowed the number of payers participating in the program, forcing Aetna to exit.

“From Aetna’s perspective, this was a terrific opportunity to get a little more of a footprint on the payer side and help drive some traffic to their physical footprint on the pharmacy side,” Husain says.

Even though Medicaid has the lowest margins, many insurers are beefing up their offerings as the Biden administration expands access to the health insurance program for the poor and disabled. From January 2020 to May 2021, enrollment in Illinois’ program increased 25 percent to 2.6 million members, according to state data.

The company also aims to enter Affordable Care Act exchanges next year in up to eight states “where we believe we can make a meaningful impact and maximize returns with our first-ever Aetna-CVS branded offerings,” Lynch said during the latest earnings call.

Following significant losses, Aetna stopped selling Obamacare plans in Illinois and other states in 2017.

CVS spokesman Charlie RiceMinoso declines to say whether the company plans to rejoin the Illinois marketplace. But during the earnings call, Daniel Finke, president of the company’s Health Care Benefits segment, said the ability to “connect our strategies around the use of CVS assets”—such as MinuteClinics and HealthHUBs—is a factor in selecting the states.

When deciding which markets to enter, Aetna is likely to consider the 16 states, including Illinois, where it already offers Medicaid plans, says Ari Singh, a senior research analyst at investment management firm Neuberger Berman. Singh says he expects that individuals who enroll in the impending exchange plans will be encouraged to get care at CVS clinics, either through low or no copays.

Aetna’s focus on government-sponsored health insurance in Illinois could eat into Blue Cross of Illinois’ membership. Meanwhile, Aetna can offer incentives to steer health plan members toward its CVS pharmacies and clinics, boosting retail and pharmacy sales while also giving the company’s insurance arm more control over patients’ medical costs. Lacking retail clinics of its own, Blue Cross has less influence over the medical costs its insurance plans are on the hook to cover.

Blue Cross didn’t respond to a request for comment.

ADDING CLINICS

On the retail side, CVS is launching 1,000 clinics nationwide with expanded medical services, including preventive care, diagnostic testing and behavioral health. Of the 871 HealthHUBs that have opened, 35 are in Illinois, including eight in the Chicago area, Rice-Minoso says, declining to say whether additional locations are expected to open in the state.

As CVS launches its HealthHUBs, archrival Walgreens Boots Alliance is opening primary care clinics of its own. Walgreens recently made a big bet on an integrated pharmacy and primary care model, investing $1 billion to put up to 700 VillageMD clinics in its stores in the next four years. The company is in the midst of opening 40 of the clinics, but none are in Illinois.

Walgreens says its “payer agnostic” approach expands the range of choices available to customers. Noting Walgreens has “proudly served Chicago and Illinois communities since 1901,” company spokesman Phil Caruso says the pharmacy chain has a network of payers and providers, as well as partnerships with hospital systems like Advocate Aurora Health and clinical laboratory services firm LabCorp, that enable it to give patients access to the services they need.

HOW CVS STACKS UP IN ILLINOIS

With an array of pharmacies, medical clinics and health insurance plans, CVS is challenging Walgreens and Blue Cross in their home state.

Retail stores CVS Health (Aetna)

392

Walgreens

574

Blue Cross & Blue Shield of Illinois n/a

Retail stores (Chicago only)

Clinics offering primary care services

Total health plan members

Medicaid managed care members**

Medicare-Medicaid members**

73

35 118

0

Nearly 724,000* n/a

406,257 (15% of market) n/a

9,418 (15% of market) n/a n/a

n/a

8 million

634,648 (24% of market)

19,956 (32% of market)

Sources: CVS Health, Walgreens, Illinois Department of Healthcare & Family Services, National Assocation of Insurance Commissioners * as of December 2019 ** as of May 2021

Black homeownership efforts are on the agenda in Chicago’s West Woodlawn

WEST WOODLAWN from Page 3 Altheimer says. Clark added that the effort comes after “decades and decades of disinvestment in this historically Black community.”

They’re not the only ones hoping to lift long-neglected West Woodlawn. In the blocks around the Duncans’ new home right now, there’s a cluster of homebuilding efforts by Black-led development firms.

They include a new two-flat on the same block of Evans that sold for $524,000 in May by West Woodlawn native Lamell McMorris’ Greenlining Realty. The firm sold a rehabbed 19th-century two-flat on the 6400 block of South Langley in August for $469,000 and plans to finish at least five more units this year, according to Jerry Brown, the Compass agent representing Greenlining’s properties.

On the 6500 block of Langley, Eric Stewart’s firm, Fashion Fair Homes, plans to break ground June 29 on a contemporary-styled house that will be priced at about $295,000.

Two blocks north on Langley, five Black developers bought 12 vacant lots where they plan to build new homes.

“For us it was, ‘change is not coming unless we bring the change ourselves,’ ” says Bonita Harrison, principal of KMB Realty, part of the “buy the block” initiative on Langley.

That’s the sort of vision that Haynes Duncan says she and her husband “wanted to be involved in, Black professionals building our communities in an intentional way.”

As homeowners, they’ll bring new life to a formerly derelict building, and as landlords of the second unit, they’ll offer affordable, newly renovated housing to others who want to stay in West Woodlawn. Both they and their tenants will help support existing businesses, such as the Jewel at 63rd and Cottage Grove, and contribute to demand for new businesses.

Ald. Jeanette Taylor, whose 20th Ward includes West Woodlawn, says she welcomes the round of new homes, but guardedly. “In the 20th Ward we have 4,000 vacant lots,” Taylor says. About half are city-owned and half privately owned. “We have to get those lots filled, but I have enough strangers coming in and taking the money they make out of Chicago and even out of the state.”

Taylor declines to comment on the specifics of any developers mentioned in this story but says, “If they’re going to be accountable, if they’re going to build for the people who are in my community and not turn it into gentrification, that’s what we want.”

FIGHTING GENTRIFICATION

A wave of affordable developments in West Woodlawn now could act as a sort of firebreak in later years against the anticipated impact of the Obama Presidential Center: rapid gentrification of the eastern portion of Woodlawn adjacent to the Jackson Park site. Development pressure is also building in Woodlawn just south of the University of Chicago campus, where new single-family homes priced in the mid-$700,000s appeal to buyers who may have been priced out of Hyde Park to the north.

“I don’t think it’s OK to just leave the neighborhood as it is and watch someone else come do it” a few years down the line, Harrison says.

“We’ll do it now, for us,” Harrison says. As well as being part of “buy the bock” on Langley, she rehabbed a 1910s brick two-flat on the 6500 block of Champlain Avenue that her firm sold in March for $450,000.

For McMorris, the effort to build back the neighborhood is deeply personal. Now a strategy and government affairs consultant based in Washington, D.C., he grew up on Marquette Road in West Woodlawn. The greystone has been in his family for at least 60 years, and while visiting several years ago, he says, “I sat on the steps and I looked across the street at the same vacant lots that I had looked at four decades ago.”

McMorris told himself, he says, “We have to start somewhere to reverse this paradigm. We have to drop a pebble somewhere, and it’s going to be here.”

Two-flats, whether built new or rehabbed, are a good place to start because in Chicago they’ve traditionally been practical wealth-builders. The rent that livein owners collect on the second unit defrays their mortgage cost, accelerating their growth in household wealth.

The two-flat model also works for Taylor because of the rental component. “That can be housing for the people who have been here in my community,” she says, “and want to stay in my community.”

Altheimer, who’s built up a portfolio of a few hundred apartments under his primary firm, Miro Development, says he’ll draw on his expertise to train his two-flat buyers on the nuts and bolts and the tribulations of being a landlord. He will also offer to manage their rentals.