July 9, 2020 Read Advisory Board's take on Walmart's new insurance subsidiary and new PBM deal

Walmart has created a new subsidiary, called Walmart Insurance Services, which will sell health insurance policies to consumers, a spokesperson for the organization has confirmed. 

Walmart rumored to start selling Medicare Advantage plans to customers

Walmart Apollo—the "intellectual property holding company" of Walmart, which is based in Arkansas—first filed the new subsidiary's name with the Arkansas Secretary of State on June 26, but the news was not widely reported at the time. According to MedCity News, the subsidiary will likely focus on selling Medicare Advantage plans, but the company did not provide further details on the plans. 

Company spokesperson Marilee McInnis said the organization has offered "access to insurance information in Walmart Health locations" since at least 2005, the Arkansas Democrat Gazette reports.

In an email to MedCity News, the spokesperson wrote that the company also offers "a long-standing education program called Healthcare Begins Here to help people find the right insurance plan for them." But now, the company is "expanding [its] current insurance services to … include the sale of insurance policies" for the first time, McInnis wrote.

Currently, job postings on Walmart's Careers website indicate the company is looking to hire Medicare insurance agents. The new hires—who can work at either a Dallas-area call center or remotely—will start enrolling customers in Medicare insurance plans beginning in August, according to the job postings.

The job postings also seek a Medicare sales supervisor, a sales manager and sales trainer, and a quality assurance officer who will oversee sales calls, the Gazette reports. The job descriptions read, "Walmart strives to be a center of well-being in the communities we serve, and we have a unique, brand new opportunity to help millions of people find the best Medicare insurance available. … We need passionate health insurance professionals to help us build this new business from the ground up and achieve our mission."

Walmart announces deal with PBM

Walmart on Tuesday separately announced a partnership with Capital Rx, a pharmacy benefit manager (PBM) startup that provides health plans with information on prescription drug prices.

The deal would make Capital Rx the first PBM to offer price transparency for retail, specialty, and mail-order prescriptions, FierceHealthcare reports. The move would also bolster Walmart's role in the pharmacy industry, according to MedCity News.

According to FierceHealthcare, Capital Rx currently offers its PBM services to employers and insurers via its "clearinghouse" model, in which it shares drugs' unit costs to clients. The model aims to prevent "spread pricing," FierceHealthcare reports, in which a PBM garners profits by charging payers substantially more than the pharmacy's price for a given drug.

According to A.J. Loiacono, founder and CEO of Capital Rx, the partnership with Walmart will enable the startup to go beyond providing price information for retail drugs to providing that information for mail-order and specialty drugs, as well. The partnership will effectively "complete the model," Loiacono said, with Walmart providing fulfillment on mail and specialty drugs.

"We take pride in providing affordable prices to more than 160 million customers who shop Walmart each week," said Walmart Health and Wellness VP Luke Kleyn. "Working with Capital Rx will allow us to do the same for prescription drugs" (Reuter, MedCityNews, 7/7; Business Insurance, 7/7; McKay, Arkansas Democrat Gazette, 7/7; Minemyer, FierceHealthcare, 7/7).

Advisory Board's take

Walmart's new insurance subsidiary

Sally Kim, Consultant and Natalie Trebes, Director

Walmart's new insurance license is sure to turn heads among insurers, whether from skepticism or apprehension. We rarely see successful new insurance launches from out-of-industry organizations, and even the much-touted Haven Health has been silent for a while after its initial promise to manage health care quality and spending for its massive group of employees.

But other plans are right to be nervous—this is a logical next step for Walmart, and fits with other strategic moves the retailor has been making in health care that may position it for success in the insurance market. Walmart has long maintained a senior-friendly customer service focus, and often enables Medicare Advantage (MA) brokers to use its stores to help seniors understand their products and shop for coverage onsite. For years, Walmart has pioneered increasingly assertive techniques as a health care purchaser, such as steering its employees to choose preferred sites of care through centers of excellence. And the company recently launched standalone primary care clinics focused on transparent, lower out-of-pocket cost and expanded access.

Consumer experience insights, benefit management know-how, and a growing primary care infrastructure are a powerful combination for a new insurer. Especially in an industry that has a poor reputation for consumer friendliness and aligned incentives. Walmart could combine these assets to focus on steering their members to preferred providers and closely managing chronic conditions, using their new insurance product to incentivize members to begin all care at their health centers first.

These features also make MA an attractive segment for Walmart to launch in. It's a fast-growing segment, with enrollment projected to rise to 40% by 2025, and CMS' performance-based bonuses to MA plans have increased year over year. While many other players have also decided to enter the market, with 14 firms offering an MA product for the first-time last year, Walmart's household name and established insurance shopping presence could set it apart from the competition.

Walmart may also be able to combine the essential care management activities that are key to success in MA with cross-selling of more Walmart health products and services. They've already done this for members of other health plans: UnitedHealthcare ran campaigns to direct members with diabetes to Walmart for convenient eye exams, and Walmart allowed Anthem members to use their over-the-counter benefits for drugs when shopping on the easy-to-use Walmart website. Now that CMS has increased flexibility in supplemental benefits, Walmart could design its MA product to services to cover products that Walmart already sells, such as over-the-counter drugs and home safety devices.

The potential is enormous, but success won't be automatic or easy, as many hospital system leaders who have launched their own provider-sponsored health plans would tell you. We'll be watching to see whether Walmart will be able to take on the new challenges of actuarial analysis, complex condition management, and adequate network design. These tedious imperatives of the traditional insurance model can easily thwart efforts to disrupt the industry, especially without a large membership to confer negotiating power.

We'll be tracking Walmart's progress with their new insurance business. In the meantime, read our Medicare Advantage Growth Outlook for more research on new entrants in the Medicare Advantage market and where we see opportunities for health plan growth.

Advisory Board's take

Walmart's new PBM partnership

Regina Lohr, Senior Consultant

Walmart's new partnership spurs a few thoughts:

  1. It makes sense that applying CaptialRx's price transparency for specialty and mail-order drugs would create a compelling package for payers concerned about reining in costs. After all, even though specialty drugs make up only a small percentage of prescriptions, they comprise roughly half of all prescription drug costs. They are also where the majority of growth—and pharmacy profits—are expected to come from in the next few years.

  2. This partnership is another push toward transparency for the PBM industry. There has been talk of change and calls for transparency across the past few years, culminating with the Senate hearing in 2019. However, although PBMs have taken some initial steps toward transparency, we really haven't seen any real change over the past year.

  3. This partnership also serves as evidence that payers need to have vertically integrated PBM and specialty pharmacy services to compete in today's marketplace. Managing the pharmacy benefit and dispensing specialty pharmaceuticals has been a profitable business. When insurers own these businesses, it gives them flexibility to make other adjustments to craft a more competitive product.