10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to_________

Commission File Number: 001-01011

CVS HEALTH CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	05-0494040
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

	One CVS Drive,	Woonsocket,	Rhode Island	02895
(Address of principal executive offices)				(Zip Code)
Registrant’s telephone number, including area code:				(401)	765-1500
Former name, former address and former fiscal year, if changed since last report:				N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CVS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

As of October 28, 2020, the registrant had 1,308,913,498 shares of common stock issued and outstanding.

TABLE OF CONTENTS		Page
Part I	Financial Information
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	68
Item 4.	Controls and Procedures	70
Part II	Other Information
Item 1.	Legal Proceedings	70
Item 1A.	Risk Factors	70
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 3	Defaults Upon Senior Securities	74
Item 4.	Mine Safety Disclosures	74
Item 5.	Other Information	74
Item 6.	Exhibits	75
Signatures		76

Part I.Financial Information

Item 1.Financial Statements

Index to Condensed Consolidated Financial Statements

	Page
Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2020 and 2019	2
Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2020 and 2019	3
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2020 and December 31, 2019	4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2020 and 2019	5
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the three months ended September 30, 2020 and 2019, the three months ended June 30, 2020 and 2019 and the three months ended March 31, 2020 and 2019	7
Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Report of Independent Registered Public Accounting Firm	39

1

CVS Health Corporation

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions, except per share amounts	2020		2019		2020		2019
Revenues:
Products	$	47,738	$	47,149	$	141,096	$	136,023
Premiums	17,182		15,539		51,749		47,612
Services	1,932		1,859		5,757		5,447
Net investment income	204		263		550		805
Total revenues	67,056		64,810		199,152		189,887
Operating costs:
Cost of products sold	40,940		40,437		121,529		116,654
Benefit costs	14,396		12,850		40,534		39,396
Operating expenses	8,471		8,595		25,702		24,887
Total operating costs	63,807		61,882		187,765		180,937
Operating income	3,249		2,928		11,387		8,950
Interest expense	731		747		2,229		2,301
Loss on early extinguishment of debt	766		79		766		79
Other income	(54)		(31)		(153)		(93)
Income before income tax provision	1,806		2,133		8,545		6,663
Income tax provision	587		604		2,328		1,776
Net income	1,219		1,529		6,217		4,887
Net (income) loss attributable to noncontrolling interests	5		1		(11)		—
Net income attributable to CVS Health	$	1,224	$	1,530	$	6,206	$	4,887
Net income per share attributable to CVS Health:
Basic	$	0.93	$	1.17	$	4.74	$	3.76
Diluted	$	0.93	$	1.17	$	4.72	$	3.75
Weighted average shares outstanding:
Basic	1,310		1,302		1,308		1,300
Diluted	1,315		1,305		1,314		1,303
Dividends declared per share	$	0.50	$	0.50	$	1.50	$	1.50

See accompanying notes to condensed consolidated financial statements (unaudited).

2

CVS Health Corporation

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Net income	$	1,219	$	1,529	$	6,217	$	4,887
Other comprehensive income, net of tax:
Net unrealized investment gains	44		136		257		721
Foreign currency translation adjustments	1		153		(5)		157
Net cash flow hedges	(3)		(23)		(15)		(30)
Pension and other postretirement benefits	—		—		(1)		—
Other comprehensive income	42		266		236		848
Comprehensive income	1,261		1,795		6,453		5,735
Comprehensive (income) loss attributable to noncontrolling interests	5		1		(11)		—
Comprehensive income attributable to CVS Health	$	1,266	$	1,796	$	6,442	$	5,735

See accompanying notes to condensed consolidated financial statements (unaudited).

3

CVS Health Corporation

Condensed Consolidated Balance Sheets

(Unaudited)

In millions, except per share amounts	September 30, 2020		December 31, 2019
Assets:
Cash and cash equivalents	$	9,256	$	5,683
Investments	2,831		2,373
Accounts receivable, net	23,816		19,617
Inventories	17,478		17,516
Other current assets	5,830		5,113
Total current assets	59,211		50,302
Long-term investments	20,216		17,314
Property and equipment, net	12,349		12,044
Operating lease right-of-use assets	20,484		20,860
Goodwill	79,579		79,749
Intangible assets, net	31,697		33,121
Separate accounts assets	4,793		4,459
Other assets	4,569		4,600
Total assets	$	232,898	$	222,449
Liabilities:
Accounts payable	$	11,677	$	10,492
Pharmacy claims and discounts payable	15,722		13,601
Health care costs payable	7,593		6,879
Policyholders’ funds	3,964		2,991
Accrued expenses	14,329		12,133
Other insurance liabilities	1,527		1,830
Current portion of operating lease liabilities	1,789		1,596
Current portion of long-term debt	5,443		3,781
Total current liabilities	62,044		53,303
Long-term operating lease liabilities	18,489		18,926
Long-term debt	61,552		64,699
Deferred income taxes	7,253		7,294
Separate accounts liabilities	4,793		4,459
Other long-term insurance liabilities	7,135		7,436
Other long-term liabilities	2,520		2,162
Total liabilities	163,786		158,279
Shareholders’ equity:
Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding	—		—
Common stock, par value $0.01: 3,200 shares authorized; 1,732 shares issued and 1,309 shares outstanding at September 30, 2020 and 1,727 shares issued and 1,302 shares outstanding at December 31, 2019 and capital surplus	46,388		45,972
Treasury stock, at cost: 423 shares at September 30, 2020 and 425 shares at December 31, 2019	(28,164)		(28,235)
Retained earnings	49,328		45,108
Accumulated other comprehensive income	1,255		1,019
Total CVS Health shareholders’ equity	68,807		63,864
Noncontrolling interests	305		306
Total shareholders’ equity	69,112		64,170
Total liabilities and shareholders’ equity	$	232,898	$	222,449

See accompanying notes to condensed consolidated financial statements (unaudited).

4

CVS Health Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
In millions	2020		2019
Cash flows from operating activities:
Cash receipts from customers	$	195,554	$	184,519
Cash paid for inventory and prescriptions dispensed by retail network pharmacies	(116,590)		(109,958)
Insurance benefits paid	(40,221)		(38,812)
Cash paid to other suppliers and employees	(22,185)		(21,411)
Interest and investment income received	622		756
Interest paid	(2,517)		(2,675)
Income taxes paid	(2,365)		(2,205)
Net cash provided by operating activities	12,298		10,214
Cash flows from investing activities:
Proceeds from sales and maturities of investments	3,790		5,616
Purchases of investments	(6,377)		(6,011)
Purchases of property and equipment	(1,724)		(1,890)
Acquisitions (net of cash acquired)	(828)		(361)
Proceeds from sale of subsidiary	834		—
Other	5		16
Net cash used in investing activities	(4,300)		(2,630)
Cash flows from financing activities:
Net borrowings of short-term debt	—		350
Proceeds from issuance of long-term debt	7,919		3,458
Repayments of long-term debt	(10,493)		(8,350)
Derivative settlements	(7)		(25)
Dividends paid	(1,980)		(1,952)
Proceeds from exercise of stock options	249		183
Payments for taxes related to net share settlement of equity awards	(75)		(85)
Other	(33)		11
Net cash used in financing activities	(4,420)		(6,410)
Net increase in cash, cash equivalents and restricted cash	3,578		1,174
Cash, cash equivalents and restricted cash at the beginning of the period	5,954		4,295
Cash, cash equivalents and restricted cash at the end of the period	$	9,532	$	5,469

5

CVS Health Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
In millions	2020		2019
Reconciliation of net income to net cash provided by operating activities:
Net income	$	6,217	$	4,887
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,302		3,275
Stock-based compensation	288		355
(Gain) loss on sale of subsidiary	(271)		205
Loss on early extinguishment of debt	766		79
Deferred income taxes and other noncash items	(25)		(38)
Change in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, net	(3,564)		(2,312)
Inventories	45		413
Other assets	(211)		(374)
Accounts payable and pharmacy claims and discounts payable	3,495		2,330
Health care costs payable and other insurance liabilities	(474)		535
Other liabilities	2,730		859
Net cash provided by operating activities	$	12,298	$	10,214

See accompanying notes to condensed consolidated financial statements (unaudited).

6

CVS Health Corporation

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

			Attributable to CVS Health
	Number of shares outstanding		Common Stock and Capital Surplus (2)		Treasury Stock (1)		Retained Earnings		Accumulated Other Comprehensive Income		Total CVS Health Shareholders’ Equity		Noncontrolling Interests		Total Shareholders’ Equity
	Common Shares	Treasury Shares (1)
In millions
Balance at December 31, 2019	1,727	(425)	$	45,972	$	(28,235)	$	45,108	$	1,019	$	63,864	$	306	$	64,170
Adoption of new accounting standard (Note 1)	—	—	—		—		(3)		—		(3)		—		(3)
Net income	—	—	—		—		2,007		—		2,007		5		2,012
Other comprehensive loss	—	—	—		—		—		(332)		(332)		—		(332)
Stock option activity, stock awards and other	2	—	208		—		—		—		208		—		208
ESPP issuances, net of purchase of treasury shares	—	1	—		53		—		—		53		—		53
Common stock dividends	—	—	—		—		(657)		—		(657)		—		(657)
Other increases in noncontrolling interests	—	—	—		—		—		—		—		23		23
Balance at March 31, 2020	1,729	(424)	46,180		(28,182)		46,455		687		65,140		334		65,474
Net income	—	—	—		—		2,975		—		2,975		11		2,986
Other comprehensive income	—	—	—		—		—		526		526		—		526
Stock option activity, stock awards and other	3	—	96		—		—		—		96		—		96
Purchase of treasury shares, net of ESPP issuances	—	(1)	—		(53)		—		—		(53)		—		(53)
Common stock dividends	—	—	—		—		(662)		—		(662)		—		(662)
Other decreases in noncontrolling interests	—	—	—		—		—		—		—		(12)		(12)
Balance at June 30, 2020	1,732	(425)	$	46,276	$	(28,235)	$	48,768	$	1,213	$	68,022	$	333	$	68,355
Net income (loss)	—	—	—		—		1,224		—		1,224		(5)		1,219
Other comprehensive income (Note 8)	—	—	—		—		—		42		42		—		42
Stock option activity, stock awards and other	—	—	112		—		—		—		112		—		112
ESPP issuances, net of purchase of treasury shares	—	2	—		71		—		—		71		—		71
Common stock dividends	—	—	—		—		(664)		—		(664)		—		(664)
Other decreases in noncontrolling interests	—	—	—		—		—		—		—		(23)		(23)
Balance at September 30, 2020	1,732	(423)	$	46,388	$	(28,164)	$	49,328	$	1,255	$	68,807	$	305	$	69,112

_____________________________________________

(1)Treasury shares include 1 million shares held in trust and treasury stock includes $29 million related to shares held in trust as of September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019.

(2)Common stock and capital surplus includes the par value of common stock of $17 million as of September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019.

7

			Attributable to CVS Health
	Number of shares outstanding		Common Stock and Capital Surplus (2)		Treasury Stock (1)		Retained Earnings		Accumulated Other Comprehensive Income		Total CVS Health Shareholders’ Equity		Noncontrolling Interests		Total Shareholders’ Equity
	Common Shares	Treasury Shares (1)
In millions
Balance at December 31, 2018	1,720	(425)	$	45,440	$	(28,228)	$	40,911	$	102	$	58,225	$	318	$	58,543
Adoption of new accounting standard (3)	—	—	—		—		178		—		178		—		178
Net income	—	—	—		—		1,421		—		1,421		6		1,427
Other comprehensive income	—	—	—		—		—		331		331		—		331
Stock option activity, stock awards and other	2	—	175		—		—		—		175		—		175
ESPP issuances, net of purchase of treasury shares	—	1	—		7		—		—		7		—		7
Common stock dividends	—	—	—		—		(651)		—		(651)		—		(651)
Other decreases in noncontrolling interests	—	—	—		—		—		—		—		(4)		(4)
Balance at March 31, 2019	1,722	(424)	45,615		(28,221)		41,859		433		59,686		320		60,006
Net income (loss)	—	—	—		—		1,936		—		1,936		(5)		1,931
Other comprehensive income	—	—	—		—		—		251		251		—		251
Stock option activity, stock awards and other	2	—	104		—		—		—		104		—		104
Purchase of treasury shares, net of ESPP issuances	—	(1)	—		(36)		—		—		(36)		—		(36)
Common stock dividends	—	—	—		—		(659)		—		(659)		—		(659)
Other increases in noncontrolling interests	—	—	—		—		—		—		—		2		2
Balance at June 30, 2019	1,724	(425)	$	45,719	$	(28,257)	$	43,136	$	684	$	61,282	$	317	$	61,599
Net income (loss)	—	—	—		—		1,530		—		1,530		(1)		1,529
Other comprehensive income (Note 8)	—	—	—		—		—		266		266		—		266
Stock option activity, stock awards and other	1	—	135		—		—		—		135		—		135
ESPP issuances, net of purchase of treasury shares	—	1	—		50		—		—		50		—		50
Common stock dividends	—	—	—		—		(649)		—		(649)		—		(649)
Other increases in noncontrolling interests	—	—	—		—		—		—		—		3		3
Balance at September 30, 2019	1,725	(424)	$	45,854	$	(28,207)	$	44,017	$	950	$	62,614	$	319	$	62,933

_____________________________________________

(1)Treasury shares include 1 million shares held in trust and treasury stock includes $29 million related to shares held in trust as of September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018.

(2)Common stock and capital surplus includes the par value of common stock of $17 million as of September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018.

(3)Reflects the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which resulted in an increase to retained earnings of $178 million during the three months ended March 31, 2019.

See accompanying notes to condensed consolidated financial statements (unaudited).

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Significant Accounting Policies

Description of Business 

CVS Health Corporation (“CVS Health”), together with its subsidiaries (collectively, the “Company”), has more than 9,900 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with approximately 103 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year and expanding specialty pharmacy services. The Company also serves an estimated 33 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs.

The coronavirus disease 2019 (“COVID-19”) pandemic has severely impacted the economies of the U.S. and other countries around the world. The impact of COVID-19 on the Company’s businesses, operating results, cash flows and financial condition in the three and nine months ended September 30, 2020, as well as information regarding certain expected impacts of COVID-19 on the Company, is discussed throughout this Quarterly Report on Form 10-Q.

The Company has four reportable segments: Pharmacy Services, Retail/LTC, Health Care Benefits and Corporate/Other, which are described below.

Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services, mail order pharmacy, specialty pharmacy and infusion services, clinical services, disease management services and medical spend management. The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on public health insurance exchanges (“Public Exchanges”) and private health insurance exchanges, other sponsors of health benefit plans and individuals throughout the United States. The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services.

Retail/LTC Segment

The Retail/LTC segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products, cosmetics and personal care products, provides health care services through its MinuteClinic® walk-in medical clinics, provides medical diagnostic testing and conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to long-term care facilities and other care settings. As of September 30, 2020, the Retail/LTC segment operated more than 9,900 retail locations, approximately 1,100 MinuteClinic locations as well as online retail pharmacy websites, LTC pharmacies and onsite pharmacies.

Health Care Benefits Segment

The Health Care Benefits segment is one of the nation’s leading diversified health care benefits providers. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, Medicaid health care management services and health information technology products and services. The Health Care Benefits segment also provided workers’ compensation administrative services through its Coventry Health Care Workers’ Compensation business (“Workers’ Compensation business”) prior to the sale of this business on July 31, 2020. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.”

9

Corporate/Other Segment

The Company presents the remainder of its financial results in the Corporate/Other segment, which consists of:

•Management and administrative expenses to support the Company’s overall operations, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and enterprise modernization programs and acquisition-related integration costs; and

•Products for which the Company no longer solicits or accepts new customers such as its large case pensions and long-term care insurance products.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of CVS Health and its subsidiaries have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In accordance with such rules and regulations, certain information and accompanying note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Because of the influence of various factors on the Company’s operations, including business combinations, certain holidays and other seasonal influences, net income for any interim period may not be comparable to the same interim period in previous years or necessarily indicative of income for the full year.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated.

The Company continually evaluates its investments to determine if they represent variable interests in a VIE. If the Company determines that it has a variable interest in a VIE, the Company then evaluates if it is the primary beneficiary of the VIE. The evaluation is a qualitative assessment as to whether the Company has the ability to direct the activities of a VIE that most significantly impact the entity’s economic performance. The Company consolidates a VIE if it is considered to be the primary beneficiary.

Assets and liabilities of VIEs for which the Company is the primary beneficiary were not significant to the Company’s unaudited condensed consolidated financial statements. VIE creditors do not have recourse against the general credit of the Company.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Restricted Cash

Restricted cash included in other assets on the unaudited condensed consolidated balance sheets represents amounts held in a trust in one of the Company’s captive insurance companies to satisfy collateral requirements associated with the assignment of certain insurance policies. All restricted cash is invested in time deposits, money market funds or commercial paper.

10

The following is a reconciliation of cash and cash equivalents on the unaudited condensed consolidated balance sheets to total cash, cash equivalents and restricted cash on the unaudited condensed consolidated statements of cash flows:

In millions	September 30, 2020		December 31, 2019
Cash and cash equivalents	$	9,256	$	5,683
Restricted cash (included in other assets)	276		271
Total cash, cash equivalents and restricted cash in the statements of cash flows	$	9,532	$	5,954

Accounts Receivable

Accounts receivable are stated net of allowances for credit losses, customer credit allowances, contractual allowances and estimated terminations. Accounts receivable, net is composed of the following:

In millions	September 30, 2020		December 31, 2019
Trade receivables	$	7,265	$	6,717
Vendor and manufacturer receivables	10,528		7,856
Premium receivables	2,852		2,663
Other receivables	3,171		2,381
Total accounts receivable, net	$	23,816	$	19,617

The Company’s allowance for credit losses was $363 million as of September 30, 2020. When developing an estimate of the Company’s expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable. The Company’s accounts receivable are short duration in nature and typically settle in less than 30 days. The Company’s allowance for doubtful accounts was $319 million as of December 31, 2019.

11

Revenue Recognition

Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by major source in each segment for the three and nine months ended September 30, 2020 and 2019:

In millions	Pharmacy Services		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Three Months Ended September 30, 2020
Major goods/services lines:
Pharmacy	$	35,505	$	17,608	$	—	$	—	$	(10,051)	$	43,062
Front Store	—		4,740		—		—		—		4,740
Premiums	—		—		17,165		17		—		17,182
Net investment income	—		—		121		83		—		204
Other	206		377		1,412		16		(143)		1,868
Total	$	35,711	$	22,725	$	18,698	$	116	$	(10,194)	$	67,056
Pharmacy Services distribution channel:
Pharmacy network (1)	$	21,473
Mail choice (2)	14,032
Other	206
Total	$	35,711
Three Months Ended September 30, 2019
Major goods/services lines:
Pharmacy (3)	$	35,872	$	16,687	$	—	$	—	$	(9,999)	$	42,560
Front Store	—		4,614		—		—		—		4,614
Premiums	—		—		15,507		32		—		15,539
Net investment income	—		—		146		117		—		263
Other (3)	146		165		1,528		3		(8)		1,834
Total	$	36,018	$	21,466	$	17,181	$	152	$	(10,007)	$	64,810
Pharmacy Services distribution channel:
Pharmacy network (1) (3)	$	22,411
Mail choice (2) (3)	13,461
Other	146
Total	$	36,018

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In millions	Pharmacy Services		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Nine Months Ended September 30, 2020
Major goods/services lines:
Pharmacy	$	104,924	$	51,833	$	—	$	—	$	(30,032)	$	126,725
Front Store	—		14,601		—		—		—		14,601
Premiums	—		—		51,699		50		—		51,749
Net investment income	—		—		341		209		—		550
Other	659		702		4,324		33		(191)		5,527
Total	$	105,583	$	67,136	$	56,364	$	292	$	(30,223)	$	199,152
Pharmacy Services distribution channel:
Pharmacy network (1)	$	63,109
Mail choice (2)	41,815
Other	659
Total	$	105,583
Nine Months Ended September 30, 2019
Major goods/services lines:
Pharmacy (3)	$	103,983	$	49,197	$	—	$	—	$	(31,416)	$	121,764
Front Store	—		14,288		—		—		—		14,288
Premiums	—		—		47,543		69		—		47,612
Net investment income	—		—		458		347		—		805
Other (3)	435		543		4,453		7		(20)		5,418
Total	$	104,418	$	64,028	$	52,454	$	423	$	(31,436)	$	189,887
Pharmacy Services distribution channel:
Pharmacy network (1) (3)	$	65,917
Mail choice (2) (3)	38,066
Other	435
Total	$	104,418

_____________________________________________

(1)Pharmacy Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice® activity, which is included within the mail choice category. Maintenance Choice permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS Pharmacy retail store for the same price as mail order.

(2)Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program.

(3)Certain prior year amounts have been reclassified for consistency with the current period presentation.

Contract Balances

Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration, and include ExtraBucks® Rewards and unredeemed Company gift cards. The consideration received remains a contract liability until goods or services have been provided to the customer. In addition, the Company recognizes breakage on Company gift cards based on historical redemption patterns.

The following table provides information about receivables and contract liabilities from contracts with customers:

In millions	September 30, 2020		December 31, 2019
Trade receivables (included in accounts receivable, net)	$	7,265	$	6,717
Contract liabilities (included in accrued expenses)	75		73

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During the nine months ended September 30, 2020 and 2019, the contract liabilities balance includes increases related to customers’ earnings in ExtraBucks Rewards or issuances of Company gift cards and decreases for revenues recognized during the period as a result of the redemption of ExtraBucks Rewards or Company gift cards and breakage of Company gift cards. Below is a summary of such changes:

	Nine Months Ended September 30,
In millions	2020		2019
Contract liabilities, beginning of the period	$	73	$	67
Rewards earnings and gift card issuances	266		269
Redemption and breakage	(264)		(264)
Contract liabilities, end of the period	$	75	$	72

Health Insurer Fee

Since January 1, 2014, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) has imposed an annual premium-based health insurer fee (the “HIF”). The HIF, which is payable each September, is not deductible for federal income tax purposes. There was no expense related to the HIF in the three and nine months ended September 30, 2019, since there was a one-year suspension of the HIF for 2019. In the three and nine months ended September 30, 2020, operating expenses included $255 million and $774 million, respectively, related to the Company’s share of the 2020 HIF. The Company paid approximately $1.0 billion, representing the Company’s portion of the non tax-deductible HIF in 2020. In December 2019, the HIF was repealed for calendar years after 2020.

Related Party Transactions

The Company has an equity method investment in SureScripts, LLC (“SureScripts”), which operates a clinical health information network. The Company utilizes this clinical health information network in providing services to its client plan members and retail customers. The Company expensed fees for the use of this network of $5 million and $14 million in the three months ended September 30, 2020 and 2019, respectively, and expensed fees for the use of this network of approximately $28 million and $26 million in the nine months ended September 30, 2020 and 2019, respectively. The Company’s investment in and equity in the earnings of SureScripts for all periods presented is immaterial.

The Company has an equity method investment in Heartland Healthcare Services, LLC (“Heartland”). Heartland operates several LTC pharmacies in four states. Heartland paid the Company $15 million and $20 million for pharmaceutical inventory purchases during the three months ended September 30, 2020 and 2019, respectively, and $58 million and $72 million for pharmaceutical inventory purchases during the nine months ended September 30, 2020 and 2019, respectively. Additionally, the Company performs certain collection functions for Heartland and then transfers those customer cash collections to Heartland. The Company’s investment in and equity in the earnings of Heartland for all periods presented is immaterial.

New Accounting Pronouncements Recently Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This standard requires the use of a forward-looking expected credit loss impairment model for trade and other receivables, held-to-maturity debt securities, loans and other instruments. This standard also requires impairments and recoveries for available-for-sale debt securities to be recorded through an allowance account and revises certain disclosure requirements. The Company adopted this new accounting standard on January 1, 2020. The Company adopted the credit loss impairment model on a modified retrospective basis and recorded a $3 million cumulative effect adjustment to reduce retained earnings as of the adoption date. The Company adopted the available-for-sale debt security impairment model on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated operating results, cash flows or financial condition.

14

Refer to “Accounts Receivable” above for a discussion of the Company’s expected credit loss impairment policy for its accounts receivable. The following is a discussion of the Company’s available-for-sale debt security impairment policy and expected credit loss impairment policy for mortgage loans under the new credit loss impairment standard:

Debt Securities

Debt securities consist primarily of United States Treasury and agency securities, mortgage-backed securities, corporate and foreign bonds and other debt securities. Debt securities are classified as either current or long-term investments based on their contractual maturities unless the Company intends to sell an investment within the next 12 months, in which case it is classified as current within the unaudited condensed consolidated balance sheets. Debt securities are classified as available for sale and are carried at fair value.

If a debt security is in an unrealized loss position and the Company has the intent to sell the security, or it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis, the amortized cost basis of the security is written down to its fair value and the difference is recognized in net income. If a debt security is in an unrealized loss position and the Company does not have the intent to sell and it is more likely than not that the Company will not have to sell such security before recovery of its amortized cost basis, the Company bifurcates the impairment into credit-related and non-credit related components. In evaluating whether a credit related loss exists, the Company considers a variety of factors including: the extent to which the fair value is less than the amortized cost basis; adverse conditions specifically related to the issuer of a security, an industry or geographic area; the payment structure of the security; the failure of the issuer of the security to make scheduled interest or principle payments; and any changes to the rating of the security by a rating agency. The amount of the credit-related component is recorded as an allowance for credit losses and recognized in net income, and the amount of the non-credit related component is included in other comprehensive income. Interest is not accrued on debt securities when management believes the collection of interest is unlikely.

The credit-related component is determined by comparing the present value of cash flows expected to be collected from the security, considering all reasonably available information relevant to the collectability of the security, with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, the Company records an allowance for credit losses, which is limited by the amount that the fair value is less than amortized cost basis.

For mortgage-backed and other asset-backed securities, the Company recognizes income using an effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The Company’s investment in the security is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the security, with adjustments recognized in net income.

Mortgage Loans

Mortgage loan investments are valued at the unpaid principal balance, net of an allowance for credit losses. Mortgage loans with a maturity date or a committed prepayment date within twelve months are classified as current on the unaudited condensed consolidated balance sheets. The Company assesses whether its loans share similar risk characteristics and, if so, groups such loans in a risk pool when measuring expected credit losses. The Company considers the following characteristics when evaluating whether its loans share similar risk characteristics: loan-to-value ratios, property type (e.g., office, retail, apartment, industrial), geographic location, vacancy rates and property condition.

Credit loss reserves are determined using a loss rate method that multiplies the unpaid principal balance of each loan within a risk pool group by an estimated loss rate percentage. The loss rate percentage considers both the expected loan loss severity and the probability of loan default. For periods where the Company is able to make or obtain reasonable and supportable forecasts of expected economic conditions (e.g., gross domestic product, employment), the Company adjusts its expected loss rates to reflect these forecasted economic conditions. For periods beyond which the Company is able to make or obtain reasonable and supportable forecasts of expected economic conditions, the Company reverts to historical loss rates in determining expected credit losses.

Interest income on a potential problem loan (i.e., high probability of default) or restructured loan is accrued to the extent it is deemed to be collectible and the loan continues to perform under its original or restructured terms. Interest income on problem loans (i.e., more than 60 days delinquent, in bankruptcy or in process of foreclosure) is recognized on a cash basis. Cash payments on loans in the process of foreclosure are treated as a return of principal.

15

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and other - Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Topic 350-40 to determine which implementation costs to capitalize as assets. The Company adopted this new accounting guidance on January 1, 2020 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated operating results, cash flows, financial condition or related disclosures.

New Accounting Pronouncements Not Yet Adopted

Targeted Improvements to the Accounting for Long-Duration Insurance Contracts

In August 2018, the FASB issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (Topic 944). This standard requires the Company to review cash flow assumptions for its long-duration insurance contracts at least annually and recognize the effect of changes in future cash flow assumptions in net income. This standard also requires the Company to update discount rate assumptions quarterly and recognize the effect of changes in these assumptions in other comprehensive income. The rate used to discount the Company’s liability for future policy benefits will be based on an estimate of the yield for an upper-medium grade fixed-income instrument with a duration profile matching that of the Company’s liabilities. In addition, this standard changes the amortization method for deferred acquisition costs and requires additional disclosures regarding the long duration insurance contract liabilities in the Company’s interim and annual financial statements. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Accounting Standards Codification 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.

2.Divestitures

Divestiture of Workers’ Compensation Business

On July 31, 2020, the Company sold its Workers’ Compensation business for $850 million, subject to a working capital adjustment. The results of this business have historically been reported within the Health Care Benefits segment. The Company recorded a pre-tax gain on the divestiture of $271 million in the three and nine months ended September 30, 2020, which is reflected as a reduction in operating expenses in the Company’s unaudited condensed consolidated statement of operations within the Health Care Benefits segment.

Divestiture of Brazilian Subsidiary

On July 1, 2019, the Company sold its Brazilian subsidiary, Drogaria Onofre Ltda. (“Onofre”) for an immaterial amount. Onofre operates 50 retail pharmacy stores, the results of which have historically been reported within the Retail/LTC segment. The Company recorded a loss on the divestiture of $205 million in the three months ended September 30, 2019, which primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income and is reflected in operating expenses in the Company’s unaudited condensed consolidated statements of operations within the Retail/LTC segment.

16

3.Investments

Total investments at September 30, 2020 and December 31, 2019 were as follows:

	September 30, 2020						December 31, 2019
In millions	Current		Long-term		Total		Current		Long-term		Total
Debt securities available for sale	$	2,578	$	17,820	$	20,398	$	2,251	$	14,671	$	16,922
Mortgage loans	253		871		1,124		122		1,091		1,213
Other investments	—		1,525		1,525		—		1,552		1,552
Total investments	$	2,831	$	20,216	$	23,047	$	2,373	$	17,314	$	19,687

Debt Securities

Debt securities available for sale at September 30, 2020 and December 31, 2019 were as follows:

In millions	Gross Amortized Cost		Allowance for Credit Losses (1)		Net Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2020
Debt securities:
U.S. government securities	$	2,455	$	—	$	2,455	$	146	$	—	$	2,601
States, municipalities and political subdivisions	2,393		—		2,393		150		(3)		2,540
U.S. corporate securities	7,665		(4)		7,661		878		(15)		8,524
Foreign securities	2,479		—		2,479		252		(10)		2,721
Residential mortgage-backed securities	680		—		680		33		—		713
Commercial mortgage-backed securities	930		—		930		82		—		1,012
Other asset-backed securities	2,239		—		2,239		33		(10)		2,262
Redeemable preferred securities	22		—		22		3		—		25
Total debt securities (2)	$	18,863	$	(4)	$	18,859	$	1,577	$	(38)	$	20,398
December 31, 2019
Debt securities:
U.S. government securities	$	1,791	$	—	$	1,791	$	62	$	(1)	$	1,852
States, municipalities and political subdivisions	2,202		—		2,202		108		(1)		2,309
U.S. corporate securities	7,167		—		7,167		573		(3)		7,737
Foreign securities	2,149		—		2,149		200		(1)		2,348
Residential mortgage-backed securities	508		—		508		25		—		533
Commercial mortgage-backed securities	654		—		654		46		—		700
Other asset-backed securities	1,397		—		1,397		13		(5)		1,405
Redeemable preferred securities	30		—		30		8		—		38
Total debt securities (2)	$	15,898	$	—	$	15,898	$	1,035	$	(11)	$	16,922

_____________________________________________

(1)Effective January 1, 2020, the Company adopted the available-for-sale debt security impairment model under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The new impairment model requires the write down of amortized cost through an allowance for credit losses, rather than through a reduction of the amortized cost basis of the available-for-sale debt security. As the Company adopted the new available-for-sale debt security impairment model on a prospective basis, there was no allowance for credit losses recorded on available-for-sale debt securities at December 31, 2019.

(2)Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At September 30, 2020, debt securities with a fair value of $928 million, gross unrealized capital gains of $122 million and gross unrealized capital losses of $1 million and at December 31, 2019, debt securities with a fair value of $965 million, gross unrealized capital gains of $83 million and no gross unrealized capital losses were included in total debt securities, but support experience-rated products. Changes in net unrealized capital gains (losses) on these securities are not reflected in accumulated other comprehensive income.

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The net amortized cost and fair value of debt securities at September 30, 2020 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity.

In millions	Net Amortized Cost		Fair Value
Due to mature:
Less than one year	$	1,588	$	1,604
One year through five years	6,009		6,329
After five years through ten years	3,466		3,774
Greater than ten years	3,947		4,704
Residential mortgage-backed securities	680		713
Commercial mortgage-backed securities	930		1,012
Other asset-backed securities	2,239		2,262
Total	$	18,859	$	20,398

18

Summarized below are the debt securities the Company held at September 30, 2020 and December 31, 2019 that were in an unrealized capital loss position, aggregated by the length of time the investments have been in that position:

	Less than 12 months					Greater than 12 months					Total
In millions, except number of securities	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
September 30, 2020
Debt securities:
U.S. government securities	58	$	311	$	—	—	$	—	$	—	58	$	311	$	—
States, municipalities and political subdivisions	95	196		3		—	—		—		95	196		3
U.S. corporate securities	704	639		15		4	2		—		708	641		15
Foreign securities	198	312		10		—	—		—		198	312		10
Residential mortgage-backed securities	19	70		—		3	—		—		22	70		—
Commercial mortgage-backed securities	28	106		—		—	—		—		28	106		—
Other asset-backed securities	288	543		7		90	80		3		378	623		10
Total debt securities	1,390	$	2,177	$	35	97	$	82	$	3	1,487	$	2,259	$	38
December 31, 2019
Debt securities:
U.S. government securities	52	$	168	$	1	—	$	—	$	—	52	$	168	$	1
States, municipalities and political subdivisions	66	115		1		2	5		—		68	120		1
U.S. corporate securities	181	305		2		2	—		1		183	305		3
Foreign securities	39	75		1		—	—		—		39	75		1
Residential mortgage-backed securities	30	16		—		9	—		—		39	16		—
Commercial mortgage-backed securities	16	49		—		—	—		—		16	49		—
Other asset-backed securities	138	254		1		187	182		4		325	436		5
Total debt securities	522	$	982	$	6	200	$	187	$	5	722	$	1,169	$	11

The Company reviewed the securities in the table above and concluded that they are performing assets generating investment income to support the needs of the Company’s business. In performing this review, the Company considered factors such as the quality of the investment security based on research performed by the Company’s internal credit analysts and external rating agencies and the prospects of realizing the carrying value of the security based on the investment’s current prospects for recovery. Unrealized capital losses at September 30, 2020 were generally caused by the widening of credit spreads on these securities relative to the interest rates on U.S. Treasury securities, driven by the adverse economic conditions in the U.S. and abroad caused by the COVID-19 pandemic. As of September 30, 2020, the Company did not intend to sell these securities, and did not believe it was more likely than not that it would be required to sell these securities prior to the anticipated recovery of their amortized cost basis.

19

The maturity dates for debt securities in an unrealized capital loss position at September 30, 2020 were as follows:

	Supporting experience-rated products				Supporting remaining products				Total
In millions	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Due to mature:
Less than one year	$	—	$	—	$	36	$	—	$	36	$	—
One year through five years	1		—		623		7		624		7
After five years through ten years	11		1		493		12		504		13
Greater than ten years	11		—		285		8		296		8
Residential mortgage-backed securities	—		—		70		—		70		—
Commercial mortgage-backed securities	2		—		104		—		106		—
Other asset-backed securities	7		—		616		10		623		10
Total	$	32	$	1	$	2,227	$	37	$	2,259	$	38

Mortgage Loans

The Company’s mortgage loans are collateralized by commercial real estate. During the three and nine months ended September 30, 2020 and 2019, the Company had the following activity in its mortgage loan portfolio:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
New mortgage loans	$	31	$	12	$	55	$	90
Mortgage loans fully repaid	37		56		114		127
Mortgage loans foreclosed	—		—		—		—

The Company assesses mortgage loans on a regular basis for credit impairments, and assigns a credit quality indicator to each loan. The Company’s credit quality indicator is internally developed and categorizes each loan in its portfolio on a scale from 1 to 7. These indicators are based upon several factors, including current loan-to-value ratios, current and future property cash flow, property condition, market trends, creditworthiness of the borrower and deal structure.

•Category 1 - Represents loans of superior quality.

•Categories 2 to 4 - Represent loans where credit risk is minimal to acceptable; however, these loans may display some susceptibility to economic changes.

•Categories 5 and 6 - Represent loans where credit risk is not substantial, but these loans warrant management’s close attention.

•Category 7 - Represents loans where collections are potentially at risk; if necessary, an impairment is recorded.

20

Based on the Company’s assessments at September 30, 2020 and December 31, 2019, the amortized cost basis of the Company's mortgage loans within each credit quality indicator by year of origination was as follows:

	Amortized Cost Basis by Year of Origination
In millions, except credit quality indicator	2020		2019		2018		2017		2016		Prior		Total
September 30, 2020
1	$	—	$	—	$	—	$	23	$	—	$	39	$	62
2 to 4	57		95		90		129		129		516		1,016
5 and 6	—		—		4		4		—		29		37
7	—		—		—		9		—		—		9
Total	$	57	$	95	$	94	$	165	$	129	$	584	$	1,124
December 31, 2019
1			$	—	$	—	$	15	$	—	$	43	$	58
2 to 4			93		93		206		140		611		1,143
5 and 6			—		—		—		—		12		12
7			—		—		—		—		—		—
Total			$	93	$	93	$	221	$	140	$	666	$	1,213

Net Investment Income

Sources of net investment income for the three and nine months ended September 30, 2020 and 2019 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Debt securities	$	151	$	145	$	441	$	437
Mortgage loans	15		19		45		54
Other investments	37		60		64		163
Gross investment income	203		224		550		654
Investment expenses	(8)		(10)		(25)		(28)
Net investment income (excluding net realized capital gains or losses)	195		214		525		626
Net realized capital gains (1)	9		49		25		179
Net investment income (2)	$	204	$	263	$	550	$	805

_____________________________________________

(1)Net realized capital gains include credit-related and yield-related impairment losses on debt securities of $1 million and $2 million, respectively, in the three months ended September 30, 2020. Net realized capital gains include credit-related and yield-related impairment losses on debt securities of $4 million and $44 million, respectively, in the nine months ended September 30, 2020. Net realized capital gains are net of other than temporary impairment losses on debt securities of $9 million and $22 million, respectively, in the three and nine months ended September 30, 2019.

(2)Net investment income includes $10 million and $31 million for the three and nine months ended September 30, 2020, respectively, and $10 million and $33 million for the three and nine months ended September 30, 2019, respectively, related to investments supporting experience-rated products.

Excluding amounts related to experience-rated products, proceeds from the sale of available for sale debt securities and the related gross realized capital gains and losses for the three and nine months ended September 30, 2020 and 2019 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Proceeds from sales	$	905	$	1,325	$	2,324	$	4,087
Gross realized capital gains	17		55		60		127
Gross realized capital losses	3		9		59		13

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4.Fair Value

The preparation of the Company’s unaudited condensed consolidated financial statements in accordance with GAAP requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. The Company’s assets and liabilities carried at fair value have been classified within one of three levels of a hierarchy established by GAAP. The following are the levels of the hierarchy and a brief description of the type of valuation information (“valuation inputs”) that qualifies a financial asset or liability for each level:

•Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.

•Level 2 – Valuation inputs other than Level 1 that are based on observable market data.  These include: quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, valuation inputs that are observable that are not prices (such as interest rates and credit risks) and valuation inputs that are derived from or corroborated by observable markets.

•Level 3 – Developed from unobservable data, reflecting the Company’s assumptions.

For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see Note 4 “Fair Value” in the 2019 Form 10-K.

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There were no financial liabilities measured at fair value on a recurring basis on the condensed consolidated balance sheets at September 30, 2020 or December 31, 2019. Financial assets measured at fair value on a recurring basis on the condensed consolidated balance sheets at September 30, 2020 and December 31, 2019 were as follows:

In millions	Level 1		Level 2		Level 3		Total
September 30, 2020
Cash and cash equivalents	$	5,670	$	3,586	$	—	$	9,256
Debt securities:
U.S. government securities	2,498		103		—		2,601
States, municipalities and political subdivisions	—		2,540		—		2,540
U.S. corporate securities	—		8,476		48		8,524
Foreign securities	—		2,721		—		2,721
Residential mortgage-backed securities	—		713		—		713
Commercial mortgage-backed securities	—		1,012		—		1,012
Other asset-backed securities	—		2,262		—		2,262
Redeemable preferred securities	—		24		1		25
Total debt securities	2,498		17,851		49		20,398
Equity securities	20		—		26		46
Total	$	8,188	$	21,437	$	75	$	29,700
December 31, 2019
Cash and cash equivalents	$	3,397	$	2,286	$	—	$	5,683
Debt securities:
U.S. government securities	1,785		67		—		1,852
States, municipalities and political subdivisions	—		2,309		—		2,309
U.S. corporate securities	—		7,700		37		7,737
Foreign securities	—		2,348		—		2,348
Residential mortgage-backed securities	—		533		—		533
Commercial mortgage-backed securities	—		700		—		700
Other asset-backed securities	—		1,405		—		1,405
Redeemable preferred securities	—		26		12		38
Total debt securities	1,785		15,088		49		16,922
Equity securities	34		—		39		73
Total	$	5,216	$	17,374	$	88	$	22,678

During the three and nine months ended September 30, 2020 and 2019, there were no transfers into or out of Level 3.

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The carrying value and estimated fair value classified by level of fair value hierarchy for financial instruments carried on the condensed consolidated balance sheets at adjusted cost or contract value at September 30, 2020 and December 31, 2019 were as follows:

	Carrying Value		Estimated Fair Value
In millions			Level 1		Level 2		Level 3		Total
September 30, 2020
Assets:
Mortgage loans	$	1,124	$	—	$	—	$	1,148	$	1,148
Equity securities (1)	146		N/A		N/A		N/A		N/A
Liabilities:
Investment contract liabilities:
With a fixed maturity	5		—		—		5		5
Without a fixed maturity	322		—		—		370		370
Long-term debt	66,995		76,642		—		—		76,642
December 31, 2019
Assets:
Mortgage loans	$	1,213	$	—	$	—	$	1,239	$	1,239
Equity securities (1)	149		N/A		N/A		N/A		N/A
Liabilities:
Investment contract liabilities:
With a fixed maturity	5		—		—		5		5
Without a fixed maturity	372		—		—		392		392
Long-term debt	68,480		74,306		—		—		74,306

_____________________________________________

(1)It was not practical to estimate the fair value of these cost-method investments as it represents shares of unlisted companies.

Separate Accounts assets relate to the Company’s large case pensions products which represent funds maintained to meet specific objectives of contract holders. Since contract holders bear the investment risk of these assets, a corresponding Separate Accounts liability has been established equal to the assets. These assets and liabilities are carried at fair value. Separate Accounts financial assets as of September 30, 2020 and December 31, 2019 were as follows:

	September 30, 2020								December 31, 2019
In millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	2	$	72	$	—	$	74	$	2	$	143	$	—	$	145
Debt securities	1,538		2,576		—		4,114		1,224		2,589		—		3,813
Equity securities	—		2		—		2		—		2		—		2
Common/collective trusts	—		603		—		603		—		499		—		499
Total	$	1,540	$	3,253	$	—	$	4,793	$	1,226	$	3,233	$	—	$	4,459

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5.Health Care Costs Payable

The following table shows the components of the change in health care costs payable during the nine months ended September 30, 2020 and 2019:

	Nine Months Ended September 30,
In millions	2020		2019
Health care costs payable, beginning of the period	$	6,879	$	6,147
Less: Reinsurance recoverables	5		4
Health care costs payable, beginning of the period, net	6,874		6,143
Acquisition	444		—
Add: Components of incurred health care costs
Current year	40,777		39,657
Prior years	(448)		(511)
Total incurred health care costs (1)	40,329		39,146
Less: Claims paid
Current year	34,198		33,032
Prior years	5,865		5,253
Total claims paid	40,063		38,285
Add: Premium deficiency reserve	1		6
Health care costs payable, end of the period, net	7,585		7,010
Add: Reinsurance recoverables	8		4
Health care costs payable, end of the period	$	7,593	$	7,014

_____________________________________________

(1)Total incurred health care costs for the nine months ended September 30, 2020 and 2019 in the table above exclude (i) $1 million and $6 million, respectively, related to a premium deficiency reserve related to the Company’s Medicaid products, (ii) $31 million and $31 million, respectively, of benefit costs recorded in the Health Care Benefits segment that are included in other insurance liabilities on the Company’s unaudited condensed consolidated balance sheets and (iii) $173 million and $213 million, respectively, of benefit costs recorded in the Corporate/Other segment that are included in other insurance liabilities on the Company’s unaudited condensed consolidated balance sheets.

The Company’s estimates of prior years’ health care costs payable decreased by $448 million and $511 million, respectively, in the nine months ended September 30, 2020 and 2019, because claims were settled for amounts less than originally estimated (i.e., the amount of claims incurred was lower than originally estimated), primarily due to lower health care cost trends as well as the actual claim submission time being faster than originally assumed (i.e., the Company’s completion factors were higher than originally assumed) in estimating health care costs payable at the end of the prior year.

At September 30, 2020, the Company’s liabilities for the ultimate cost of (i) services rendered to the Company’s Insured members but not yet reported to the Company and (ii) claims which have been reported to the Company but not yet paid (collectively, “IBNR”) plus expected development on reported claims totaled approximately $5.8 billion. Substantially all of the Company’s liabilities for IBNR plus expected development on reported claims at September 30, 2020 related to the current year.

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6.Borrowings

The following table is a summary of the Company’s borrowings at September 30, 2020 and December 31, 2019:

In millions	September 30, 2020		December 31, 2019
Long-term debt
3.125% senior notes due March 2020	$	—	$	723
Floating rate notes due March 2020 (2.515% at December 31, 2019)	—		277
2.8% senior notes due July 2020	—		2,750
3.35% senior notes due March 2021	2,038		2,038
Floating rate notes due March 2021 (0.968% at September 30, 2020 and 2.605% at December 31, 2019)	1,000		1,000
4.125% senior notes due May 2021	222		222
2.125% senior notes due June 2021	1,750		1,750
4.125% senior notes due June 2021	203		203
5.45% senior notes due June 2021	187		187
3.5% senior notes due July 2022	1,500		1,500
2.75% senior notes due November 2022	1,000		1,000
2.75% senior notes due December 2022	1,250		1,250
4.75% senior notes due December 2022	399		399
3.7% senior notes due March 2023	3,723		6,000
2.8% senior notes due June 2023	1,300		1,300
4% senior notes due December 2023	527		1,250
3.375% senior notes due August 2024	650		650
2.625% senior notes due August 2024	1,000		1,000
3.5% senior notes due November 2024	750		750
5% senior notes due December 2024	299		299
4.1% senior notes due March 2025	2,000		5,000
3.875% senior notes due July 2025	2,828		2,828
2.875% senior notes due June 2026	1,750		1,750
3% senior notes due August 2026	750		750
3.625% senior notes due April 2027	750		—
6.25% senior notes due June 2027	372		372
1.3% senior notes due August 2027	1,500		—
4.3% senior notes due March 2028	9,000		9,000
3.25% senior notes due August 2029	1,750		1,750
3.75% senior notes due April 2030	1,500		—
1.75% senior notes due August 2030	1,250		—
4.875% senior notes due July 2035	652		652
6.625% senior notes due June 2036	771		771
6.75% senior notes due December 2037	533		533
4.78% senior notes due March 2038	5,000		5,000
6.125% senior notes due September 2039	447		447
4.125% senior notes due April 2040	1,000		—
2.7% senior notes due August 2040	1,250		—
5.75% senior notes due May 2041	133		133
4.5% senior notes due May 2042	500		500
4.125% senior notes due November 2042	500		500
5.3% senior notes due December 2043	750		750
4.75% senior notes due March 2044	375		375
5.125% senior notes due July 2045	3,500		3,500
3.875% senior notes due August 2047	1,000		1,000
5.05% senior notes due March 2048	8,000		8,000
4.25% senior notes due April 2050	750		—
Finance lease obligations	1,036		808
Other	276		279
Total debt principal	67,721		69,246
Debt premiums	245		262
Debt discounts and deferred financing costs	(971)		(1,028)
	66,995		68,480
Less:
Current portion of long-term debt	(5,443)		(3,781)
Long-term debt	$	61,552	$	64,699

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Long-term Borrowings

2020 Notes

On August 21, 2020, the Company issued $1.5 billion aggregate principal amount of 1.3% unsecured senior notes due August 21, 2027, $1.25 billion aggregate principal amount of 1.75% unsecured senior notes due August 21, 2030 and $1.25 billion aggregate principal amount of 2.7% unsecured senior notes due August 21, 2040 (collectively, the “August 2020 Notes”) for total proceeds of approximately $3.97 billion, net of discounts and underwriting fees.

On March 31, 2020, the Company issued $750 million aggregate principal amount of 3.625% unsecured senior notes due April 1, 2027, $1.5 billion aggregate principal amount of 3.75% unsecured senior notes due April 1, 2030, $1.0 billion aggregate principal amount of 4.125% unsecured senior notes due April 1, 2040 and $750 million aggregate principal amount of 4.25% unsecured senior notes due April 1, 2050 (collectively, the “March 2020 Notes”) for total proceeds of approximately $3.95 billion, net of discounts and underwriting fees..

The net proceeds of these offerings will be used for general corporate purposes, which may include working capital, capital expenditures, as well as the repurchase and/or repayment of indebtedness. Net proceeds from these offerings that had not been used for these purposes were held in cash or temporarily invested in cash equivalents and short-term investment-grade securities from the date of issuance through September 30, 2020.

During March 2020, the Company entered into several interest rate swap transactions to manage interest rate risk. These agreements were designated as cash flow hedges and were used to hedge the exposure to variability in future cash flows resulting from changes in interest rates related to the anticipated issuance of the March 2020 Notes. In connection with the issuance of the March 2020 Notes, the Company terminated all outstanding cash flow hedges. The Company paid a net amount of $7 million to the hedge counterparties upon termination, which was recorded as a loss, net of tax, of $5 million in accumulated other comprehensive income and will be reclassified as interest expense over the life of the March 2020 Notes. See Note 8 ‘‘Other Comprehensive Income’’ for additional information.

Early Extinguishments of Debt

In August 2020, the Company purchased $6.0 billion of its outstanding senior notes through cash tender offers. The senior notes purchased included the following: $723 million of its 4.0% senior notes due 2023, $2.3 billion of its 3.7% senior notes due 2023 and $3.0 billion of its 4.1% senior notes due 2025. In connection with the purchase of such senior notes, the Company paid a premium of $706 million in excess of the aggregate principal amount of the senior notes that were purchased, wrote-off $47 million of unamortized deferred financing costs and incurred $13 million in fees, for a total loss on early extinguishment of debt of $766 million.

In August 2019, the Company purchased $4.0 billion of its outstanding senior notes through cash tender offers. The senior notes purchased included the following: $1.3 billion of its 3.125% senior notes due 2020, $723 million of its floating rate notes due 2020, $328 million of its 4.125% senior notes due 2021, $297 million of 4.125% senior notes due 2021 issued by Aetna, $413 million of 5.45% senior notes due 2021 issued by Coventry Health Care, Inc., a wholly-owned subsidiary of Aetna and $962 million of its 3.35% senior notes due 2021. In connection with the purchase of such senior notes, the Company paid a premium of $76 million in excess of the aggregate principal amount of the senior notes that were purchased, incurred $8 million in fees and recognized a net gain of $5 million on the write-off of net unamortized deferred financing premiums, for a net loss on early extinguishment of debt of $79 million.

7.Shareholders’ Equity

Share Repurchases

On November 2, 2016, CVS Health’s Board of Directors (the “Board”) authorized the 2016 share repurchase program (“2016 Repurchase Program”) for up to $15.0 billion of the Company’s common shares. The 2016 Repurchase Program permits the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase transactions, and/or other derivative transactions. The 2016 Repurchase Program can be modified or terminated by the Board at any time.

During the nine months ended September 30, 2020 and 2019, the Company did not repurchase any shares of its common stock. At September 30, 2020, the Company had remaining authorization to repurchase an aggregate of up to approximately $13.9 billion of its common shares under the 2016 Repurchase Program.

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Dividends

The quarterly cash dividend declared by the Board was $0.50 per share in each of the three-month periods ended September 30, 2020 and 2019. Cash dividends declared by the Board were $1.50 per share in each of the nine-month periods ended September 30, 2020 and 2019. CVS Health has paid cash dividends every quarter since becoming a public company. Future dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Board.

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8.Other Comprehensive Income

Shareholders’ equity included the following activity in accumulated other comprehensive income for the three and nine months ended September 30, 2020 and 2019:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Net unrealized investment gains:
Beginning of period balance	$	987	$	682	$	774	$	97
Other comprehensive income before reclassifications ($83, $214, $278 and $933 pretax)	52		192		218		799
Amounts reclassified from accumulated other comprehensive income ($(10), $(63), $47 and $(93) pretax) (1)	(8)		(56)		39		(78)
Other comprehensive income	44		136		257		721
End of period balance	1,031		818		1,031		818
Foreign currency translation adjustments:
Beginning of period balance	(2)		(154)		4		(158)
Other comprehensive income (loss) before reclassifications	1		(1)		(5)		3
Amounts reclassified from accumulated other comprehensive income (loss) (2)	—		154		—		154
Other comprehensive income (loss)	1		153		(5)		157
End of period balance	(1)		(1)		(1)		(1)
Net cash flow hedges:
Beginning of period balance	267		305		279		312
Other comprehensive loss before reclassifications ($0, $(25), $(7) and $(25) pretax)	—		(18)		(5)		(18)
Amounts reclassified from accumulated other comprehensive income ($(4), $(7), $(14) and $(16) pretax) (3)	(3)		(5)		(10)		(12)
Other comprehensive loss	(3)		(23)		(15)		(30)
End of period balance	264		282		264		282
Pension and other postretirement benefits:
Beginning of period balance	(39)		(149)		(38)		(149)
Other comprehensive loss before reclassifications ($0, $0, $(8) and $0 pretax)	—		—		(6)		—
Amounts reclassified from accumulated other comprehensive loss ($0, $0, $7 and $0 pretax) (4)	—		—		5		—
Other comprehensive loss	—		—		(1)		—
End of period balance	(39)		(149)		(39)		(149)
Total beginning of period accumulated other comprehensive income	1,213		684		1,019		102
Total other comprehensive income	42		266		236		848
Total end of period accumulated other comprehensive income	$	1,255	$	950	$	1,255	$	950

_____________________________________________

(1)Amounts reclassified from accumulated other comprehensive income for specifically identified debt securities are included in net investment income in the unaudited condensed consolidated statements of operations.

(2)Amounts reclassified from accumulated other comprehensive income (loss) represent the elimination of the cumulative translation adjustment associated with the sale of Onofre, which was sold on July 1, 2019. The loss on the divestiture of Onofre is reflected in operating expenses in the unaudited condensed consolidated statements of operations.

(3)Amounts reclassified from accumulated other comprehensive income for specifically identified cash flow hedges are included in interest expense in the unaudited condensed consolidated statements of operations. The Company expects to reclassify approximately $15 million, net of tax, in net gains associated with its cash flow hedges into net income within the next 12 months.

(4)Amounts reclassified from accumulated other comprehensive loss for specifically identified pension and other postretirement benefits are included in other income in the unaudited condensed consolidated statements of operations.

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9.Earnings Per Share

Earnings per share is computed using the two-class method. Stock appreciation rights and options to purchase 17 million and 16 million shares of common stock were outstanding, but were excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2020, respectively, because their exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. For the same reason, stock appreciation rights and options to purchase 18 million and 19 million shares of common stock were outstanding, but were excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2019, respectively.

The following is a reconciliation of basic and diluted earnings per share for the respective periods:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions, except per share amounts	2020		2019		2020		2019
Numerator for earnings per share calculation:
Net income	$	1,219	$	1,529	$	6,217	$	4,887
Income allocated to participating securities	—		—		—		(3)
Net (income) loss attributable to noncontrolling interests	5		1		(11)		—
Net income attributable to CVS Health	$	1,224	$	1,530	$	6,206	$	4,884
Denominator for earnings per share calculation:
Weighted average shares, basic	1,310		1,302		1,308		1,300
Effect of dilutive securities	5		3		6		3
Weighted average shares, diluted	1,315		1,305		1,314		1,303
Earnings per share:
Basic	$	0.93	$	1.17	$	4.74	$	3.76
Diluted	$	0.93	$	1.17	$	4.72	$	3.75

10.Commitments and Contingencies

COVID-19

The COVID-19 pandemic continues to evolve. We believe COVID-19’s impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the geographies impacted and the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to the pandemic. Those primary drivers are beyond our knowledge and control. As a result, the impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be adverse and material. COVID-19 also may result in legal and regulatory proceedings, investigations and claims against us.

Lease Guarantees

Between 1995 and 1997, the Company sold or spun off a number of subsidiaries, including Bob’s Stores and Linens ‘n Things, each of which subsequently filed for bankruptcy, and Marshalls. In many cases, when a former subsidiary leased a store, the Company provided a guarantee of the former subsidiary’s lease obligations for the initial lease term and any extension thereof pursuant to a renewal option provided for in the lease prior to the time of the disposition. When the subsidiaries were disposed of and accounted for as discontinued operations, the Company’s guarantees remained in place, although each initial purchaser agreed to indemnify the Company for any lease obligations the Company was required to satisfy. If any of the purchasers or any of the former subsidiaries fail to make the required payments under a store lease, the Company could be required to satisfy those obligations, and any significant adverse impact of COVID-19 on such purchasers and/or former subsidiaries increases the risk that the Company will be required to satisfy those obligations. As of September 30, 2020, the Company guaranteed 76 such store leases (excluding the lease guarantees related to Linens ‘n Things, which have been recorded as a liability on the unaudited condensed consolidated balance sheets), with the maximum remaining lease term extending through 2030.

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Guaranty Fund Assessments, Market Stabilization and Other Non-Voluntary Risk Sharing Pools

Under guaranty fund laws existing in all states, insurers doing business in those states can be assessed (in most states up to prescribed limits) for certain obligations of insolvent insurance companies to policyholders and claimants. The life and health insurance guaranty associations in which the Company participates that operate under these laws respond to insolvencies of long-term care insurers and life insurers as well as health insurers. The Company’s assessments generally are based on a formula relating to the Company’s health care premiums in the state compared to the premiums of other insurers. Certain states allow assessments to be recovered over time as offsets to premium taxes. Some states have similar laws relating to HMOs and/or other payors such as not-for-profit consumer-governed health plans established under the ACA.

In 2009, the Pennsylvania Insurance Commissioner placed long-term care insurer Penn Treaty Network America Insurance Company and one of its subsidiaries (collectively, “Penn Treaty”) in rehabilitation, an intermediate action before insolvency, and subsequently petitioned a state court to convert the rehabilitation into a liquidation. Penn Treaty was placed in liquidation in March 2017. The Company has recorded a liability for its estimated share of future assessments by applicable life and health insurance guaranty associations. It is reasonably possible that in the future the Company may record a liability and expense relating to other insolvencies which could have a material adverse effect on the Company’s operating results, financial condition and cash flows, and this risk is heightened by any significant adverse impact of the COVID-19 pandemic on the solvency of other insurers, including long-term care insurers and life insurers. While historically the Company has ultimately recovered more than half of guaranty fund assessments through statutorily permitted premium tax offsets, significant increases in assessments could lead to legislative and/or regulatory actions that limit future offsets.

HMOs in certain states in which the Company does business are subject to assessments, including market stabilization and other risk-sharing pools, for which the Company is assessed charges based on incurred claims, demographic membership mix and other factors. The Company establishes liabilities for these assessments based on applicable laws and regulations. In certain states, the ultimate assessments the Company pays are dependent upon the Company’s experience relative to other entities subject to the assessment, and the ultimate liability is not known at the financial statement date. While the ultimate amount of the assessment is dependent upon the experience of all pool participants, the Company believes it has adequate reserves to cover such assessments.

Litigation and Regulatory Proceedings

The Company is a party to numerous legal proceedings, investigations, audits and claims arising, for the most part, in the ordinary course of its businesses, including the matters described below. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and reasonably estimable, the Company does not establish an accrued liability. None of the Company’s accruals for outstanding legal matters are material individually or in the aggregate to the Company’s financial condition.

Except as otherwise noted, the Company cannot predict with certainty the timing or outcome of the legal matters described below, and the Company is unable to reasonably estimate a possible loss or range of possible loss in excess of amounts already accrued for these matters. It is reasonably possible that the outcome of such legal matters could be material to the Company.

Usual and Customary Litigation

The Company is named as a defendant in a number of lawsuits, including the cases below, that allege that the Company’s retail stores overcharged for prescription drugs by not submitting the price available to members of the CVS Health Savings Pass program as the pharmacy’s usual and customary price, and related theories. The Company is defending itself against these claims.

Corcoran et al. v. CVS Health Corporation (U.S. District Court for the Northern District of California) and Podgorny et al. v. CVS Health Corporation (U.S. District Court for the Northern District of Illinois). These putative class actions were filed against the Company in July and September 2015. The cases were consolidated in the U.S. District Court for the Northern District of California. Plaintiffs seek damages and injunctive relief under the consumer protection statutes of certain states on behalf of a class of consumers who purchased certain prescription drugs. Several third-party payors filed similar putative class actions on behalf of payors captioned Sheet Metal Workers Local No. 20 Welfare and Benefit Fund v. CVS Health Corp. and Plumbers Welfare Fund, Local 130 v. CVS Health Corporation (both pending in the U.S. District Court for the District of

31

Rhode Island) in February and August 2016. In all of these cases the plaintiffs allege the Company overcharged for certain prescription drugs by not submitting the price available to members of the CVS Health Savings Pass program as the pharmacy’s usual and customary price. In the Corcoran case, the U.S. District Court granted summary judgment to the Company on plaintiffs’ claims in their entirety and certified certain subclasses in September 2017. In June 2019, the U.S. Court of Appeals for the Ninth Circuit reversed the U.S. District Court’s grant of summary judgment and reversed the U.S. District Court’s narrowing of the requested class. The Corcoran case is proceeding to a trial on a six state class basis, and trial is scheduled to occur in 2021. The Sheet Metal Workers plaintiffs have amended their complaint to assert a claim under the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) premised on an alleged conspiracy between the Company and other PBMs.

State of Mississippi v. CVS Health Corporation, et al. (Circuit Court of DeSoto County, Mississippi, Third Judicial District). In July 2016, the Company was served with a complaint filed on behalf of the State of Mississippi. The complaint alleged that CVS retail pharmacies in Mississippi submitted false claims for reimbursement to the Mississippi Medicaid program by not submitting the price available to members of the CVS Health Savings Pass program as the pharmacy’s usual and customary price. In June 2019, the Company’s motion for judgment on the pleadings was granted in part and denied in part. Also in June 2019, the State of Mississippi’s motion to dismiss the Company’s counterclaim for declaratory relief was granted. In April 2020, the Company’s motion to dismiss the State of Mississippi’s second amended complaint was denied.

Blue Cross and Blue Shield of Alabama, et al. v. CVS Health Corporation, et al. and Horizon Healthcare Services, Inc. (d/b/a Horizon Blue Cross Blue Shield of New Jersey) et al. v. CVS Health Corporation, et al. (U.S. District Court for the District of Rhode Island). In May 2020, eight Blue Cross Blue Shield entities from six states filed a lawsuit against the Company alleging fraud and other state causes of action premised on a theory that the Company’s retail stores overcharged for prescription drugs by not submitting accurate usual and customary prices, including by not submitting the price available to members of the former CVS Health Savings Pass program. In October 2020, two Horizon Blue Cross Blue Shield entities from New Jersey filed an almost identical lawsuit premised on the same theories.

PBM Litigation and Investigations

The Company is named as a defendant in a number of lawsuits and is subject to a number of investigations concerning its PBM practices.

Klein, et al. v. Prime Therapeutics, et al. (U.S. District Court for the District of Minnesota). This putative class action was filed against the Company and other PBMs in June 2017 on behalf of ERISA plan members who purchased and paid for EpiPen or EpiPen Jr. Plaintiffs allege that the PBMs are ERISA fiduciaries to plan members and have violated ERISA by allegedly causing higher inflated prices for EpiPens through the process of negotiating increased rebates from EpiPen manufacturer Mylan. This case was consolidated with a similar matter and was proceeding as In re EpiPen ERISA Litigation. In October 2020, the lawsuit was voluntarily dismissed with prejudice following denial of the plaintiffs’ motion for class certification.

County of Harris, Texas v. Eli Lilly and Company, et al. (U.S. District Court for the Southern District of Texas). This lawsuit was filed against Caremark, Aetna, the manufacturers of insulin and other PBMs in November 2019 by Harris County. Harris County alleges that it was overcharged for insulin as a result of a “price fixing conspiracy” between the manufacturers and PBMs to artificially increase the price of insulin and other diabetes medications. The complaint alleges violations of RICO and claims that the manufacturers and PBMs engaged in an “Insulin Pricing Scheme” whereby the manufacturers artificially increased the reported prices of their insulin products while “secretly” paying rebates to the PBMs in exchange for preferred treatment on the PBMs’ drug formularies. The Company is defending itself against these claims.

In re Direct Purchaser EpiPen Litigation (U.S. District Court for the District of Minnesota). This putative class action (originally captioned as Rochester Drug Cooperative, Inc. v. Mylan Inc., et al.) was filed in March 2020 against Caremark, other PBMs and the manufacturer of EpiPen products and their authorized generics on behalf of purported classes of direct purchasers of these products. The complaint alleges violations of RICO and claims that rebate agreements between the drug manufacturer and PBMs caused the direct purchasers to pay inflated prices for these drug products. A nearly identical case was separately filed in the same court (Dakota Drug, Inc. v. Mylan Inc., et al.). The court granted a motion to consolidate the two complaints. The Company is defending itself against these claims.

In re Direct Purchaser Insulin Pricing Litigation (U.S. District Court for the District of New Jersey). This putative class action (originally captioned as Rochester Drug Cooperative, Inc. v. Eli Lilly and Co., et al.) was filed in March 2020 against Caremark, other PBMs and the manufacturers of analog insulin products on behalf of purported classes of direct purchasers of these products. The complaint alleges violations of RICO and claims that rebate agreements between the drug manufacturers and PBMs caused the direct purchasers to pay inflated prices for these drug products. Two nearly identical cases were

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separately filed in the same court (FWK Holdings, LLC v. Novo Nordisk, et al. and Value Drug Company v. Eli Lilly & Co., et al.). The court granted a motion to consolidate all three complaints. The Company is defending itself against these claims.

United States ex rel. Behnke v. CVS Caremark Corporation, et al. (U.S. District Court for the Eastern District of Pennsylvania). In April 2018, the Court unsealed a complaint filed in February 2014. The government has declined to intervene in this case. The relator alleges that the Company submitted, or caused to be submitted, to Part D of the Medicare program Prescription Drug Event data and/or Direct and Indirect Remuneration reports that misrepresented true prices paid by the Company’s PBM to pharmacies for drugs dispensed to Part D beneficiaries with prescription benefits administered by the Company’s PBM. In April 2020, the Company’s motion to dismiss was granted in part and denied in part. The Company is defending itself against these claims.

The Company has received subpoenas, civil investigative demands (“CIDs”) and other requests for documents and information from, and is being investigated by, Attorneys General of several states regarding its PBM practices, including pricing and rebates. In addition, the Company has received inquiries from congressional committees regarding insulin pricing. The Company has been providing documents and information in response to these subpoenas, CIDs and requests for information.

Controlled Substances Litigation, Audits and Subpoenas

In December 2017, the U.S. Judicial Panel on Multidistrict Litigation consolidated numerous cases filed against various defendants by plaintiffs such as counties, cities, hospitals, Indian tribes and third-party payors, alleging claims generally concerning the impacts of widespread prescription opioid abuse. The consolidated multidistrict litigation captioned In re National Prescription Opiate Litigation (MDL No. 2804) is pending in the U.S. District Court for the Northern District of Ohio. This multidistrict litigation presumptively includes hundreds of relevant federal court cases that name the Company as a defendant. A significant number of similar cases that name the Company as a defendant in some capacity are pending in state courts. In addition, the Company has been named as a defendant in similar cases brought by certain state Attorneys General. The Company is defending itself against all such claims. Additionally, the Company has received subpoenas, CIDs and/or other requests for information regarding opioids from state Attorneys General and insurance and other regulators of several states. The Company has been cooperating with the government with respect to these subpoenas, CIDs and other requests for information.

The Company routinely is audited by the U.S. Drug Enforcement Administration (the “DEA”). In some instances, the Company is in discussions with the DEA and U.S. Attorney’s Offices concerning allegations that the Company violated certain requirements of the federal Controlled Substances Act.

In January 2020, the DOJ served the Company with a DEA administrative subpoena. The subpoena seeks documents relating to practices with respect to prescription opioids and other controlled substances at CVS Pharmacy locations in connection with an investigation concerning potential violations of the federal Controlled Substances Act and the federal False Claims Act. The Company has been cooperating with the government with respect to this subpoena.

Prescription Processing Litigation and Investigations

U.S. ex rel. Bassan et al. v. Omnicare, Inc. and CVS Health Corp. and U.S. ex rel. Mohajer et al. v. Omnicare, Inc. and CVS Health Corp. (U.S. District Court for the Southern District of New York). In December 2019, the U.S. Attorney’s Office for the Southern District of New York (the “SDNY”) filed complaints-in-intervention in these two previously sealed qui tam cases. With respect to the Bassan complaint, all states and Washington, D.C. have declined to intervene at this time. The government’s investigation related to these complaints included the previously disclosed CID that the Company received in October 2015 from the SDNY concerning the Company’s Omnicare pharmacies’ cycle fill process for assisted living facilities. The complaints allege that for certain non-skilled nursing facilities, Omnicare improperly filled prescriptions beyond one year where a valid prescription did not exist and that these dispensing events violated the federal False Claims Act. The Mohajer relators have amended their complaint to include claims based on similar theories related to certain skilled nursing facilities. The Company is defending itself against these claims.

In July 2017, the Company also received a subpoena from the California Department of Insurance requesting documents concerning the Company’s Omnicare pharmacies’ cycle fill process for assisted living facilities. The Company has been cooperating with the California Department of Insurance and providing documents and information in response to this subpoena.

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In December 2016, the Company received a CID from the U.S. Attorney’s Office for the Northern District of New York requesting documents and information in connection with a federal False Claims Act investigation concerning whether the Company’s retail pharmacies improperly submitted certain insulin claims to Part D of the Medicare program rather than Part B of the Medicare program. The Company has been cooperating with the government and providing documents and information in response to this CID.

In May 2017, the Company received a CID from the SDNY requesting documents and information concerning possible false claims submitted to Medicare in connection with reimbursements for prescription drugs under the Medicare Part D program. The Company has been cooperating with the government and providing documents and information in response to this CID.

Provider Proceedings

The Company is named as a defendant in purported class actions and individual lawsuits arising out of its practices related to the payment of claims for services rendered to its members by health care providers with whom the Company has a contract and with whom the Company does not have a contract (“out-of-network providers”). Among other things, these lawsuits allege that the Company paid too little to its health plan members and/or providers for these services and/or otherwise allege that the Company failed to timely or appropriately pay or administer claims and benefits (including the Company’s post payment audit and collection practices and reductions in payments to providers due to sequestration). Other major health insurers are the subject of similar litigation or have settled similar litigation.

The Company also has received subpoenas and/or requests for documents and other information from, and been investigated by, state Attorneys General and other state and/or federal regulators, legislators and agencies relating to, and the Company is involved in other litigation regarding, its out-of-network benefit payment and administration practices. It is reasonably possible that others could initiate additional litigation or additional regulatory action against the Company with respect to its out-of-network benefit payment and/or administration practices.

CMS Actions

The U.S. Centers for Medicare & Medicaid Services (“CMS”) regularly audits the Company’s performance to determine its compliance with CMS’s regulations and its contracts with CMS and to assess the quality of services it provides to Medicare beneficiaries. CMS uses various payment mechanisms to allocate and adjust premium payments to the Company’s and other companies’ Medicare plans by considering the applicable health status of Medicare members as supported by information prepared, maintained and provided by health care providers. The Company collects claim and encounter data from providers and generally relies on providers to appropriately code their submissions to the Company and document their medical records, including the diagnosis data submitted to the Company with claims. CMS pays increased premiums to Medicare Advantage plans and Medicare PDP plans for members who have certain medical conditions identified with specific diagnosis codes. Federal regulators review and audit the providers’ medical records to determine whether those records support the related diagnosis codes that determine the members’ health status and the resulting risk-adjusted premium payments to the Company. In that regard, CMS has instituted risk adjustment data validation (“RADV”) audits of various Medicare Advantage plans, including certain of the Company’s plans, to validate coding practices and supporting medical record documentation maintained by health care providers and the resulting risk adjusted premium payments to the plans. CMS may require the Company to refund premium payments if the Company’s risk adjusted premiums are not properly supported by medical record data. The Office of the Inspector General of Health and Human Services (the “OIG”) also is auditing the Company’s risk adjustment-related data and that of other companies. The Company expects CMS and the OIG to continue these types of audits.

In 2012, CMS revised its audit methodology for RADV audits to determine refunds payable by Medicare Advantage plans for contract year 2011 and forward. Under the revised methodology, among other things, CMS will extrapolate the error rate identified in the audit sample of approximately 200 members to all risk adjusted premium payments made under the contract being audited. For contract years prior to 2011, CMS did not extrapolate sample error rates to the entire contract. As a result, the revised methodology may increase the Company’s exposure to premium refunds to CMS based on incomplete medical records maintained by providers. Since 2013, CMS has selected certain of the Company’s Medicare Advantage contracts for various contract years for RADV audit, and the number of RADV audits continues to increase. The Company is currently unable to predict which of its Medicare Advantage contracts will be selected for future audit, the amounts of any retroactive refunds of, or prospective adjustments to, Medicare Advantage premium payments made to the Company, the effect of any such refunds or adjustments on the actuarial soundness of the Company’s Medicare Advantage bids, or whether any RADV audit findings would require the Company to change its method of estimating future premium revenue in future bid submissions to CMS or compromise premium assumptions made in the Company’s bids for prior contract years, the current contract year or future contract years. Any premium or fee refunds or adjustments resulting from regulatory audits, whether as a result of

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RADV, Public Exchange related or other audits by CMS, the OIG, the U.S. Department of Health and Human Services or otherwise, including audits of the Company’s minimum medical loss ratio (“MLR”) rebates, methodology and/or reports, could be material and could adversely affect the Company’s operating results, cash flows and/or financial condition.

Medicare and Medicaid CIDs

The Company has received CIDs from the Civil Division of the DOJ in connection with a current investigation of the Company’s patient chart review processes in connection with risk adjustment data submissions under Parts C and D of the Medicare program. The Company has been cooperating with the government and providing documents and information in response to these CIDs.

In April 2020, the Company received a CID from the Office of the Washington Attorney General, Medicaid Fraud Control Division, on behalf of the State of Washington and all other states, as well as the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The investigation involves, among other things, possible retention of overpayments and possible submission of false claims for Medicaid reimbursement relating to drugs prescribed by providers who were excluded by the applicable federal and/or state Medicaid programs. The Company is cooperating with the government with respect to this investigation.

Stockholder Matters

The Company and/or its current and/or former directors and/or executive officers are named as defendants in a number of lawsuits and a request for access to information initiated by holders or putative holders of CVS Health common stock.

Between February and August 2019, six class action complaints were filed by putative plaintiffs against the Company and certain current and former officers and directors: Anarkat v. CVS Health Corp., et al. (U.S. District Court for the District of Rhode Island); Labourers’ Pension Fund of Central and Eastern Canada v. CVS Health Corp., et al. (New York Supreme Court); City of Warren Police and Fire Retirement Sys. v. CVS Health Corp., et. al. (Rhode Island Superior Court); Cambria Co. Employees Retirement Sys. v. CVS Health Corp., et al. (New York Supreme Court); Freundlich v. CVS Health Corp., et al. (Rhode Island Superior Court); and In re CVS Health Corp. Securities Act Litigation (formerly captioned Waterford Twp. Police & Fire Retirement Sys. v. CVS Health Corp., et al.) (U.S. District Court for the District of Rhode Island). The plaintiffs in these cases assert a variety of causes of action under federal securities laws that are premised on allegations that the defendants made certain omissions and misrepresentations relating to the performance of the Company’s LTC business unit, which allegedly injured investors who acquired CVS Health securities between February 9, 2016 and February 20, 2019. The Labourers’ Pension Fund and Cambria County cases have been consolidated into a single action based on the Labourers’ Pension Fund complaint. The Freundlich and City of Warren cases have been consolidated into In re CVS Health Corp. Securities Litigation and stayed in favor of the earlier-filed Anarkat and Labourers’ Pension Fund cases. The Company is defending itself against these claims.

In January 2020, a derivative complaint was filed against the Company’s directors and current and former executive officers in the U.S. District Court for the District of Rhode Island by a stockholder. Lovoi v. Aguirre, et al. makes allegations similar to those contained the six stockholder class action complaints described above, including that the Company made false or misleading statements about its LTC business unit’s financial health. The Lovoi complaint alleges claims for breach of fiduciary duty against the Company’s directors and certain of its current and former executive officers and for violation of the federal securities laws. The Lovoi complaint seeks damages, restitution and equitable relief on behalf of the Company. The Lovoi case has been stayed pending the resolution of the two federal class action complaints described above. The Company’s directors and current and former executive officers are defending themselves against these claims.

In August and September 2020, two ERISA class actions were filed in the U.S. District Court in the District of Connecticut against CVS Health Corp., Aetna Inc., and several current and former executives, directors and/or members of Aetna’s Compensation and Talent Management Committee: Radcliffe v. Aetna Inc., et al. and Flaim v. Aetna Inc., et al. The plaintiffs in these cases assert a variety of causes of action premised on allegations that the defendants breached fiduciary duties and engaged in prohibited transactions relating to participants in the Aetna 401(k) plan’s investment in company stock between December 3, 2017 and February 20, 2019, claiming losses related to the performance of the Company’s LTC business unit. The Company also received a related document request pursuant to ERISA § 104(b). The Company is evaluating these matters.

Other Legal and Regulatory Proceedings

The Company is also a party to other legal proceedings and is subject to government investigations, inquiries and audits and has received and is cooperating with the government in response to CIDs, subpoenas or similar process from various governmental agencies requesting information, arising, for the most part, in the ordinary course of its businesses. These other legal

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proceedings and government actions include claims of or relating to bad faith, medical or professional malpractice, claims processing, dispensing of medications, non-compliance with state and federal regulatory regimes, marketing misconduct, failure to timely or appropriately pay or administer claims and benefits, provider network structure (including the use of performance-based networks and termination of provider contracts), rescission of insurance coverage, improper disclosure or use of personal information, anticompetitive practices, general contractual matters, product liability, intellectual property litigation and employment litigation. Some of these other legal proceedings are or are purported to be class actions or derivative claims. The Company is defending itself against the claims brought in these matters.

Awards to the Company and others of certain government contracts, particularly Medicaid contracts and other contracts with government customers in the Company’s Health Care Benefits segment, frequently are subject to protests by unsuccessful bidders. These protests may result in awards to the Company being reversed, delayed or modified. The loss or delay in implementation of any government contract could adversely affect the Company’s operating results. The Company will continue to defend contract awards it receives.

There also continues to be a heightened level of review and/or audit by regulatory authorities and legislators of, and increased litigation regarding, the Company’s and the rest of the health care and related benefits industry’s business and reporting practices, including premium rate increases, utilization management, development and application of medical policies, complaint, grievance and appeal processing, information privacy, provider network structure (including provider network adequacy, the use of performance-based networks and termination of provider contracts), provider directory accuracy, calculation of minimum medical loss ratios and/or payment of related rebates, delegated arrangements, rescission of insurance coverage, limited benefit health products, student health products, pharmacy benefit management practices (including manufacturers’ rebates, pricing, the use of narrow networks and the placement of drugs in formulary tiers), sales practices, customer service practices, vendor oversight and claim payment practices (including payments to out-of-network providers).

As a leading national health care company, the Company regularly is the subject of government actions of the types described above. These government actions may prevent or delay the Company from implementing planned premium rate increases and may result, and have resulted, in restrictions on the Company’s businesses, changes to or clarifications of the Company’s business practices, retroactive adjustments to premiums, refunds or other payments to members, beneficiaries, states or the federal government, withholding of premium payments to the Company by government agencies, assessments of damages, civil or criminal fines or penalties, or other sanctions, including the possible suspension or loss of licensure and/or suspension or exclusion from participation in government programs.

The Company can give no assurance that its businesses, financial condition, operating results and/or cash flows will not be materially adversely affected, or that the Company will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations as they may relate to one or more of the Company’s businesses, one or more of the industries in which the Company competes and/or the health care industry generally; (iii) pending or future federal or state government investigations of one or more of the Company’s businesses, one or more of the industries in which the Company competes and/or the health care industry generally; (iv) pending or future government audits, investigations or enforcement actions against the Company; (v) adverse developments in any pending qui tam lawsuit against the Company, whether sealed or unsealed, or in any future qui tam lawsuit that may be filed against the Company; or (vi) adverse developments in pending or future legal proceedings against the Company or affecting one or more of the industries in which the Company competes and/or the health care industry generally.

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11.Segment Reporting

The Company has three operating segments, Pharmacy Services, Retail/LTC and Health Care Benefits, as well as a Corporate/Other segment. The Company’s segments maintain separate financial information, and the Company’s chief operating decision maker (the “CODM”) evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company’s segments based on adjusted operating income, which is defined as operating income (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. See the reconciliations of operating income (GAAP measure) to adjusted operating income below for further context regarding the items excluded from operating income in determining adjusted operating income. The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying business performance and trends. Non-GAAP financial measures the Company discloses, such as consolidated adjusted operating income, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.

The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:

In millions	Pharmacy  Services (1)		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Three Months Ended
September 30, 2020
Revenues from external customers	$	33,492	$	14,770	$	18,557	$	33	$	—	$	66,852
Intersegment revenues	2,219		7,955		20		—		(10,194)		—
Net investment income	—		—		121		83		—		204
Total revenues	35,711		22,725		18,698		116		(10,194)		67,056
Adjusted operating income (loss)	1,619		1,412		1,080		(303)		(186)		3,622
September 30, 2019
Revenues from external customers	$	33,680	$	13,805	$	17,027	$	35	$	—	$	64,547
Intersegment revenues	2,338		7,661		8		—		(10,007)		—
Net investment income	—		—		146		117		—		263
Total revenues	36,018		21,466		17,181		152		(10,007)		64,810
Adjusted operating income (loss)	1,439		1,516		1,423		(252)		(179)		3,947
Nine Months Ended
September 30, 2020
Revenues from external customers	$	98,233	$	44,314	$	55,972	$	83	$	—	$	198,602
Intersegment revenues	7,350		22,822		51		—		(30,223)		—
Net investment income	—		—		341		209		—		550
Total revenues	105,583		67,136		56,364		292		(30,223)		199,152
Adjusted operating income (loss)	4,127		4,371		6,035		(931)		(539)		13,063
September 30, 2019
Revenues from external customers	$	95,494	$	41,536	$	51,976	$	76	$	—	$	189,082
Intersegment revenues	8,924		22,492		20		—		(31,436)		—
Net investment income	—		—		458		347		—		805
Total revenues	104,418		64,028		52,454		423		(31,436)		189,887
Adjusted operating income (loss)	3,682		4,674		4,423		(685)		(521)		11,573

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(1)Total revenues of the Pharmacy Services segment include approximately $2.5 billion and $2.7 billion of retail co-payments for the three months ended September 30, 2020 and 2019, respectively, and $8.5 billion and $8.9 billion of retail co-payments for the nine months ended September 30, 2020 and 2019, respectively.

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The following are reconciliations of consolidated operating income to adjusted operating income for the three and nine months ended September 30, 2020 and 2019:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Operating income (GAAP measure)	$	3,249	$	2,928	$	11,387	$	8,950
Amortization of intangible assets (1)	587		607		1,751		1,822
Acquisition-related integration costs (2)	57		111		196		365
(Gain) loss on divestiture of subsidiary (3)	(271)		205		(271)		205
Store rationalization charges (4)	—		96		—		231
Adjusted operating income	$	3,622	$	3,947	$	13,063	$	11,573

_____________________________________________

(1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

(2)During the three and nine months ended September 30, 2020 and 2019, acquisition-related integration costs relate to the Aetna Acquisition. The acquisition-related integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

(3)During the three and nine months ended September 30, 2020, the gain on divestiture of subsidiary represents the pre-tax gain on the sale of the Workers’ Compensation business, which the Company sold on July 31, 2020 for approximately $850 million. The gain on divestiture is reflected as a reduction in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Health Care Benefits segment. During the three and nine months ended September 30, 2019, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of Onofre, which occurred on July 1, 2019. The loss on divestiture primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income and is reflected in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment.

(4)During the three and nine months ended September 30, 2019, the store rationalization charges relate to the planned closure of 22 underperforming retail pharmacy stores in the first quarter of 2020. During the nine months ended September 30, 2019, the store rationalization charges also relate to the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Retail/LTC segment.

12.Subsequent Event

The ACA established a temporary risk corridor program, which expired at the end of 2016, for qualified individual and small group health insurance plans. Under this program, health insurance companies were to make payments to, or receive payments from, the U.S. Department of Health and Human Services (“HHS”) based on their ratio of allowable costs to target costs (as defined by the ACA).

The Company filed a lawsuit in August 2019 to recover the $313 million it was owed under the ACA’s risk corridor program, which had been stayed pending the Supreme Court decision. In April 2020, the U.S. Supreme Court ruled that health insurance companies may sue the federal government for amounts owed as calculated under the ACA’s temporary risk corridor program. At September 30, 2020, the Company did not record any ACA risk corridor receivables because payment was uncertain.

On October 22, 2020, the Company received the $313 million it was owed under the ACA’s risk corridor program. The Company recorded the risk corridor payment as an increase to premium revenue in the fourth quarter of 2020. After considering offsetting items such as the ACA’s minimum MLR rebate requirements and premium taxes, the Company expects to record pre-tax income of approximately $305 million and after-tax income of approximately $220 million during the fourth quarter of 2020.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of CVS Health Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of CVS Health Corporation (the Company) as of September 30, 2020, the related condensed consolidated statements of operations and comprehensive income for the three-month and nine-month periods ended September 30, 2020 and 2019, the related condensed consolidated statements of shareholders’ equity for the three-month periods ended March 31, 2020 and 2019, June 30, 2020 and 2019 and September 30, 2020 and 2019, the related condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2020 and 2019, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2019, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated February 18, 2020, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Ernst & Young LLP

Boston, Massachusetts

November 6, 2020

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Overview of Business

CVS Health Corporation (“CVS Health”), together with its subsidiaries (collectively, the “Company,” “we,” “our” or “us”), is the nation’s premier health innovation company helping people on their path to better health. Whether in one of its pharmacies or through its health services and plans, the Company is pioneering a bold new approach to total health by making quality care more affordable, accessible, simple and seamless. The Company is community-based and locally focused, engaging consumers with the care they need when and where they need it. The Company has more than 9,900 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with approximately 103 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year and expanding specialty pharmacy services. The Company also serves an estimated 33 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs.

The Company has four reportable segments: Pharmacy Services, Retail/LTC, Health Care Benefits and Corporate/Other, which are described below.

Overview of the Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services, mail order pharmacy, specialty pharmacy and infusion services, clinical services, disease management services and medical spend management. The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on public health insurance exchanges and private health insurance exchanges, other sponsors of health benefit plans and individuals throughout the United States. The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services.

Overview of the Retail/LTC Segment

The Retail/LTC segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products, cosmetics and personal care products, provides health care services through its MinuteClinic® walk-in medical clinics, provides medical diagnostic testing and conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to long-term care facilities and other care settings. As of September 30, 2020, the Retail/LTC segment operated more than 9,900 retail locations, approximately 1,100 MinuteClinic locations as well as online retail pharmacy websites, LTC pharmacies and onsite pharmacies.

Overview of the Health Care Benefits Segment

The Health Care Benefits segment is one of the nation’s leading diversified health care benefits providers. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, Medicaid health care management services, and health information technology products and services. The Health Care Benefits segment also provided workers’ compensation administrative services through its Coventry Health Care Workers’ Compensation business (“Workers’ Compensation business”) prior to the sale of this business on July 31, 2020. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.”

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Overview of the Corporate/Other Segment

The Company presents the remainder of its financial results in the Corporate/Other segment, which consists of:

•Management and administrative expenses to support the Company’s overall operations, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and enterprise modernization programs and acquisition-related integration costs; and

•Products for which the Company no longer solicits or accepts new customers such as large case pensions and long-term care insurance products.

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COVID-19 and 2020 Outlook

As coronavirus disease 2019 (“COVID-19”) continues to severely impact the economies of the U.S. and other countries around the world, the Company continues to execute its preparedness plans to maintain continuity of our operations, while also taking steps to keep our colleagues healthy and safe. In accordance with governmental directions to shelter-in-place, eliminate large gatherings and practice social distancing, the Company has transitioned many office-based colleagues to a remote work environment. The various initiatives we have implemented to slow and/or reduce the impact of COVID-19, such as colleagues working remotely and installing protective equipment in our retail pharmacies, and the COVID-19-related support programs we have put in place for our customers, medical members and colleagues have increased our operating expenses and reduced the efficiency of our operations.

The legislative and regulatory environment governing our businesses is dynamic and changing frequently as described in more detail below under “Government Regulation,” including mandated increases to the medical services we must pay for without a corresponding increase in the premiums we receive in our Insured Health Care Benefits products. Federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19 may not effectively combat the severity and/or duration of the COVID-19 pandemic and have resulted in, among other things, a significant reduction in utilization of medical services (“utilization”) that is discretionary, the cancellation of elective medical procedures, reduced customer traffic and front store sales in our retail pharmacies, our customers being ordered to close or severely curtail their operations, the adoption of work-from-home policies and a reduction in diagnostic reporting due to reductions in provider visits and restrictions on our access to providers’ medical records, all of which impact our businesses. Among other impacts of these policies and initiatives, we expect an adverse impact on:

•Drug utilization due to the reduction in new therapy prescriptions;

•Front store sales as a result of reduced customer traffic in our retail pharmacies due to shelter-in-place orders and COVID-19 related unemployment;

•Medical membership in our Health Care Benefits segment and covered lives in our PBM clients due to reductions in workforce at our existing customers (including due to business failures) as well as reduced willingness to change benefits providers by prospective customers;

•Benefit costs due to COVID-19 related support programs we have put in place for our medical members and mandated increases to the medical services we must pay for without a corresponding increase in the premiums we receive in our Insured Health Care Benefits products; and

•The amount, timing and collectability of payments to the Company from customers, clients, government payers and members as a result of the impact of COVID-19 on them.

In addition to the items described above, we expect the adverse economic conditions in the U.S. and abroad caused by COVID-19 to continue at least throughout 2020 and possibly longer, resulting in increased unemployment, reduced economic activity, continued capital markets volatility, downward pressure on our net investment income and the value of our investment portfolio and lower interest rates. We also expect to see upward pressure on provider unit costs and changes in provider behavior as providers attempt to maintain revenue levels in their efforts to adjust to their own COVID-19 related impacts and other economic challenges. We may continue to experience similar adverse effects on our businesses, operating results and cash flows from a recessionary economic environment that is expected to persist after the COVID-19 pandemic has moderated. As a result, the quarterly cadence of our earnings is likely to continue to vary from historical patterns.

The COVID-19 pandemic continues to evolve. We believe COVID-19’s impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the geographies impacted and the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to the pandemic. Those primary drivers are beyond our knowledge and control. As a result, the impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be adverse and material. COVID-19 also may result in legal and regulatory proceedings, investigations and claims against us.

In addition to the COVID-19 related matters described above, the Company expects it will experience the following key trends during the fourth quarter of 2020:

•The Pharmacy Services segment is expected to benefit from Specialty pharmacy growth and continued improvements in purchasing economics, partially offset by 2020 selling season net losses and continued price compression.

•The Retail/LTC segment is expected to experience continued reimbursement pressure. In addition, the Company expects the impact of COVID-19 will continue to result in incremental operating expenses associated with the Company’s

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pandemic response efforts, as well as reduced new therapy prescriptions and related front store volume, which will be partially offset by increased diagnostic testing.

•The Health Care Benefits segment expects utilization of medical services to continue at more normal levels, with select geographies affected by COVID-19 waves. The Company expects to incur significant planned COVID-19 related investments in the Health Care Benefits segment, including premium credits, minimum medical loss ratio rebates and contractual requirements that benefit customers and members. The Company also expects to incur higher seasonal operating expenses during the fourth quarter to support readiness for the start of the 2021 plan year.

•The Company expects changes to its business environment to continue for the next several years as elected and other government officials at the national and state levels continue to propose and enact significant modifications to public policy and existing laws and regulations that govern the Company’s businesses.

The Company’s current expectations described above under “COVID-19 and 2020 Outlook” and below under “Government Regulation” are forward-looking statements. Please see “Cautionary Statement Concerning Forward-Looking Statements” and the Risk Factors sections of this report, and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Form 10-K”), for information regarding important factors that may cause the Company’s actual results to differ from those currently projected and/or otherwise materially affect the Company.

Government Regulation

The Families First Coronavirus Response Act (the “Families First Act”) and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) were enacted in March 2020. Each of the Families First Act and the CARES Act requires the Company to provide coverage for COVID-19 related medical services, in many cases without member cost sharing, in its Insured Health Care Benefits products.

The CARES Act also provides relief funding to health care providers to reimburse them for health care related expenses incurred in preventing, preparing for and/or responding to COVID-19 (provided no other source is obligated to reimburse those expenses) or lost health care related revenues that are attributable to COVID-19. The Company did not request any funding under the CARES Act. However, in the second quarter of 2020, the Company received $43 million from the CARES Act provider relief fund, all of which has been returned to the U.S. Department of Health and Human Services.

The CARES Act also allows for the deferral of the payment of the employer share of Social Security taxes effective March 27, 2020. The Company has elected to defer its Social Security tax payments in accordance with this provision, and will remit the associated payments in two equal installments on or about December 31, 2021 and December 31, 2022, as required under the CARES Act. The Company deferred approximately $445 million of its Social Security tax payments during the nine months ended September 30, 2020.

In addition to the Families First Act and the CARES Act, the Company is experiencing an unprecedented level of new laws, regulations, directives and orders from federal, state, county and municipal authorities related to the COVID-19 pandemic, most of which have been issued on an emergency basis with immediate, or in some instances retroactive, effect. These governmental actions include, but are not limited to, requirements to waive member cost sharing associated with COVID-19 testing and treatment, provide coverage for additional COVID-19-related services, expand the use of telemedicine, suspend precertification or other utilization management mechanisms (including review of claims for medical necessity), allow earlier or longer renewal of prescriptions, extend grace periods for payments of premiums or limit coverage termination based on non-payment of premiums or fees, modify health benefits coverage eligibility rules to help maintain employee eligibility, and facilitate, accelerate or advance payments to health care providers. Related governmental actions have required the Company to close or significantly limit operations at traditional office worksites and affected the hours of operation of MinuteClinic locations and the Company’s pharmacies. In some instances, the Company has taken permitted proactive actions consistent with more general regulatory directives, such as expanding home delivery of prescription medications, extending hours of operation for member assistance lines and liberalizing certain other terms of coverage. Similar directives have affected the Company’s international operations around the world. The Company anticipates additional mandates and directives from domestic and foreign federal, state, county and city authorities throughout the continuation of the COVID-19 pandemic and for some time thereafter, some of which may result in permanent changes in the Company’s operations or the health care and other benefits cost and other risks assumed by the Company. Further, although the Company has seen regulators relax certain requirements in light of the COVID-19 pandemic, such as temporary suspension of certain audits and extensions of certain filing deadlines, failure to provide regulatory relief or accommodations in other areas may result in increased costs or reduced revenue for the Company.

The impact of this governmental activity on the U.S. economy, consumer, customer and health care provider behavior and health care utilization patterns is beyond our knowledge and control. As a result, the financial and/or operational impact these

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COVID-19 related governmental actions and inactions will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the collective impact could be material and adverse.

Separately, in April 2020, the U.S. Supreme Court ruled that health insurance companies may sue the federal government for amounts owed as calculated under the ACA’s temporary risk corridor program. The Company filed a lawsuit in August 2019 to recover the $313 million it was owed under the ACA’s risk corridor program, which had been stayed pending the Supreme Court decision. At September 30, 2020, the Company did not record any ACA risk corridor receivables because payment was uncertain. On October 22, 2020, the Company received the $313 million in funds owed to it under the ACA’s risk corridor program.

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Operating Results

The following discussion explains the material changes in the Company’s operating results for the three and nine months ended September 30, 2020 and 2019, and the significant developments affecting the Company’s financial condition since December 31, 2019. We strongly recommend that you read our audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the 2019 Form 10-K.

Summary of Consolidated Financial Results

									Change
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30, 2020 vs 2019				Nine Months Ended September 30, 2020 vs 2019
In millions	2020		2019		2020		2019		$		%		$		%
Revenues:
Products	$	47,738	$	47,149	$	141,096	$	136,023	$	589	1.2	%	$	5,073	3.7	%
Premiums	17,182		15,539		51,749		47,612		1,643		10.6	%	4,137		8.7	%
Services	1,932		1,859		5,757		5,447		73		3.9	%	310		5.7	%
Net investment income	204		263		550		805		(59)		(22.4)	%	(255)		(31.7)	%
Total revenues	67,056		64,810		199,152		189,887		2,246		3.5	%	9,265		4.9	%
Operating costs:
Cost of products sold	40,940		40,437		121,529		116,654		503		1.2	%	4,875		4.2	%
Benefit costs	14,396		12,850		40,534		39,396		1,546		12.0	%	1,138		2.9	%
Operating expenses	8,471		8,595		25,702		24,887		(124)		(1.4)	%	815		3.3	%
Total operating costs	63,807		61,882		187,765		180,937		1,925		3.1	%	6,828		3.8	%
Operating income	3,249		2,928		11,387		8,950		321		11.0	%	2,437		27.2	%
Interest expense	731		747		2,229		2,301		(16)		(2.1)	%	(72)		(3.1)	%
Loss on early extinguishment of debt	766		79		766		79		687		869.6	%	687		869.6	%
Other income	(54)		(31)		(153)		(93)		(23)		(74.2)	%	(60)		(64.5)	%
Income before income tax provision	1,806		2,133		8,545		6,663		(327)		(15.3)	%	1,882		28.2	%
Income tax provision	587		604		2,328		1,776		(17)		(2.8)	%	552		31.1	%
Net income	1,219		1,529		6,217		4,887		(310)		(20.3)	%	1,330		27.2	%
Net (income) loss attributable to noncontrolling interests	5		1		(11)		—		4		400.0	%	(11)		(100.0)	%
Net income attributable to CVS Health	$	1,224	$	1,530	$	6,206	$	4,887	$	(306)	(20.0)	%	$	1,319	27.0	%

Commentary - Three Months Ended September 30, 2020 vs. 2019

Revenues

•Total revenues increased $2.2 billion, or 3.5%, in the three months ended September 30, 2020 compared to the prior year driven by growth in the Health Care Benefits and Retail/LTC segments.

•Please see “Segment Analysis” later in this report for additional information about the revenues of the Company’s segments.

Operating expenses

•Operating expenses decreased $124 million, or 1.4%, in the three months ended September 30, 2020 compared to the prior year. Operating expenses as a percentage of total revenues were 12.6% in the three months ended September 30, 2020, a decrease of 70 basis points compared to the prior year. The decrease in operating expenses was primarily due to (i) a $271 million pre-tax gain on the sale of the Workers’ Compensation business, which occurred on July 31, 2020, (ii) the absence

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of a $205 million pre-tax loss on the sale of the Company’s Brazilian subsidiary, Drogaria Onofre Ltda. (“Onofre”) and a $96 million store rationalization charge, both recorded in the three months ended September 30, 2019, and (iii) the favorable impact of enterprise-wide cost savings initiatives in the three months ended September 30, 2020. These decreases were partially offset by the reinstatement of the HIF for 2020, incremental operating expenses associated with the Company’s COVID-19 pandemic response efforts and increased operating expenses associated with growth in the business.

•Please see “Segment Analysis” later in this report for additional information about the operating expenses of the Company’s segments.

Operating income

•Operating income increased $321 million, or 11.0%, in the three months ended September 30, 2020 compared to the prior year. The increase in operating income was primarily due to (i) the $271 million pre-tax gain on the sale of the Workers’ Compensation business, (ii) the absence of the $205 million pre-tax loss on the sale of Onofre and the $96 million store rationalization charge, both recorded in the three months ended September 30, 2019, (iii) improved purchasing economics in the Pharmacy Services segment, and (iv) the favorable impact of enterprise-wide cost savings initiatives in the three months ended September 30, 2020. These increases were partially offset by declines in the Health Care Benefits segment, largely attributable to the impact of planned COVID-19 related investments benefiting customers and members, and continued reimbursement pressure in the Retail/LTC segment.

•Please see “Segment Analysis” later in this report for additional information about the operating income of the Company’s segments.

Interest expense

•Interest expense decreased $16 million, or 2.1%, in the three months ended September 30, 2020 compared to the prior year primarily due to lower average debt in the three months ended September 30, 2020. See “Liquidity and Capital Resources” later in this report for additional information.

Loss on early extinguishment of debt

•During the three months ended September 30, 2020, the loss on early extinguishment of debt relates to the Company’s repayment of $6.0 billion of its outstanding senior notes pursuant to its tender offers for such notes in August 2020, which resulted in a loss on early extinguishment of debt of $766 million. During the three months ended September 30, 2019, the loss on early extinguishment of debt relates to the Company’s repayment of $4.0 billion of its outstanding senior notes pursuant to its tender offers for such senior notes in August 2019, which resulted in a loss of early extinguishment of debt of $79 million. See Note 6 ‘‘Borrowings’’ to the unaudited condensed consolidated financial statements for additional information.

Income tax provision

•The Company’s effective income tax rate was 32.5% for the three months ended September 30, 2020 compared to 28.3% for the three months ended September 30, 2019. The increase in the effective income tax rate was primarily attributable to basis differences on the sale of the Workers’ Compensation business in the three months ended September 30, 2020 and the reinstatement of the non-deductible HIF for 2020. These increases were partially offset by the absence of the impact of the sale of Onofre in the three months ended September 30, 2019.

Commentary - Nine Months Ended September 30, 2020 vs. 2019

Revenues

•Total revenues increased $9.3 billion, or 4.9%, in the nine months ended September 30, 2020 compared to the prior year driven by growth across all segments.

•Please see “Segment Analysis” later in this report for additional information about the revenues of the Company’s segments.

Operating expenses

•Operating expenses increased $815 million, or 3.3%, in the nine months ended September 30, 2020 compared to the prior year. Operating expenses as a percentage of total revenues were 12.9% in the nine months ended September 30, 2020, a decrease of 20 basis points compared to the prior year. The increase in operating expenses was primarily due to the reinstatement of the HIF for 2020, incremental operating expenses associated with the Company’s COVID-19 pandemic response efforts and increased operating expenses associated with growth in the business. The increase in operating expenses was partially offset by (i) the $271 million pre-tax gain on the sale of the Workers’ Compensation business, (ii) the absence of the $231 million of store rationalization charges and the $205 million pre-tax loss on the sale of Onofre,

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both recorded in the nine months ended September 30, 2019, and (iii) the favorable impact of enterprise-wide cost savings initiatives in the nine months ended September 30, 2020.

•Please see “Segment Analysis” later in this report for additional information about the operating expenses of the Company’s segments.

Operating income

•Operating income increased $2.4 billion, or 27.2%, in the nine months ended September 30, 2020 compared to the prior year. The increase in operating income was primarily due to (i) the impact of the COVID-19 pandemic, which resulted in reduced benefit costs due to the deferral of elective procedures and other discretionary utilization in the Health Care Benefits segment in the nine months ended September 30, 2020, (ii) improved purchasing economics in the Pharmacy Services segment, (iii) the $271 million pre-tax gain on the sale of the Workers’ Compensation business, and (iv) the absence of the $231 million of store rationalization charges and the $205 million pre-tax loss on the sale of Onofre, both recorded in the nine months ended September 30, 2019. These increases in operating income were partially offset by continued reimbursement pressure and incremental operating expenses associated with the Company’s COVID-19 pandemic response efforts in the Retail/LTC segment.

•Please see “Segment Analysis” later in this report for additional information about the operating income of the Company’s segments.

Interest expense

•Interest expense decreased $72 million, or 3.1%, in the nine months ended September 30, 2020 compared to the prior year, primarily due to lower average debt in the nine months ended September 30, 2020. See “Liquidity and Capital Resources” later in this report for additional information.

Loss on early extinguishment of debt

•During the nine months ended September 30, 2020, the loss on early extinguishment of debt relates to the Company’s repayment of $6.0 billion of its outstanding senior notes pursuant to its tender offers for such notes in August 2020, which resulted in a loss on early extinguishment of debt of $766 million. During the nine months ended September 30, 2019, the loss on early extinguishment of debt relates to the Company’s repayment of $4.0 billion of its outstanding senior notes pursuant to its tender offers for such senior notes in August 2019, which resulted in a loss of early extinguishment of debt of $79 million. See Note 6 ‘‘Borrowings’’ to the unaudited condensed consolidated financial statements for additional information.

Income tax provision

•The Company’s effective income tax rate was 27.2% for the nine months ended September 30, 2020 compared to 26.7% for the nine months ended September 30, 2019. The increase in the effective income tax rate was primarily due to the reinstatement of the non-deductible HIF for 2020 and basis differences on the sale of the Workers’ Compensation business in the nine months ended September 30, 2020. These increases were partially offset by the absence of the impact of the sale of Onofre in the nine months ended September 30, 2019 and the favorable resolution of certain income tax matters in the nine months ended September 30, 2020.

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Segment Analysis

The following discussion of segment operating results is presented based on the Company’s reportable segments in accordance with the accounting guidance for segment reporting and is consistent with the segment disclosure in Note 11 ‘‘Segment Reporting’’ to the unaudited condensed consolidated financial statements.

The Company has three operating segments, Pharmacy Services, Retail/LTC and Health Care Benefits, as well as a Corporate/Other segment. The Company’s segments maintain separate financial information, and the Company’s chief operating decision maker (the “CODM”) evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company’s segments based on adjusted operating income, which is defined as operating income (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. See the reconciliations of operating income (GAAP measure) to adjusted operating income below for further context regarding the items excluded from operating income in determining adjusted operating income. The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying business performance and trends. Non-GAAP financial measures the Company discloses, such as consolidated adjusted operating income, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.

The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:

In millions	Pharmacy Services (1)		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations (2)		Consolidated Totals
Three Months Ended
September 30, 2020
Total revenues	$	35,711	$	22,725	$	18,698	$	116	$	(10,194)	$	67,056
Adjusted operating income (loss)	1,619		1,412		1,080		(303)		(186)		3,622
September 30, 2019
Total revenues	36,018		21,466		17,181		152		(10,007)		64,810
Adjusted operating income (loss)	1,439		1,516		1,423		(252)		(179)		3,947
Nine Months Ended
September 30, 2020
Total revenues	$	105,583	$	67,136	$	56,364	$	292	$	(30,223)	$	199,152
Adjusted operating income (loss)	4,127		4,371		6,035		(931)		(539)		13,063
September 30, 2019
Total revenues	104,418		64,028		52,454		423		(31,436)		189,887
Adjusted operating income (loss)	3,682		4,674		4,423		(685)		(521)		11,573

_____________________________________________

(1)Total revenues of the Pharmacy Services segment include approximately $2.5 billion and $2.7 billion of retail co-payments for the three months ended September 30, 2020 and 2019, respectively, and $8.5 billion and $8.9 billion of retail co-payments for the nine months ended September 30, 2020 and 2019, respectively.

(2)Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services segment, the Retail/LTC segment and/or the Health Care Benefits segment.

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The following are reconciliations of operating income to adjusted operating income for the three and nine months ended September 30, 2020 and 2019:

	Three Months Ended September 30, 2020
In millions	Pharmacy  Services		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Operating income (loss) (GAAP measure)	$	1,564	$	1,283	$	949	$	(361)	$	(186)	$	3,249
Non-GAAP adjustments:
Amortization of intangible assets (1)	55		129		402		1		—		587
Acquisition-related integration costs (2)	—		—		—		57		—		57
Gain on divestiture of subsidiary (3)	—		—		(271)		—		—		(271)
Adjusted operating income (loss)	$	1,619	$	1,412	$	1,080	$	(303)	$	(186)	$	3,622

	Three Months Ended September 30, 2019
In millions	Pharmacy  Services		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Operating income (loss) (GAAP measure)	$	1,340	$	1,095	$	1,036	$	(364)	$	(179)	$	2,928
Non-GAAP adjustments:
Amortization of intangible assets (1)	99		120		387		1		—		607
Acquisition-related integration costs (2)	—		—		—		111		—		111
Loss on divestiture of subsidiary (3)	—		205		—		—		—		205
Store rationalization charge (4)	—		96		—		—		—		96
Adjusted operating income (loss)	$	1,439	$	1,516	$	1,423	$	(252)	$	(179)	$	3,947

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	Nine Months Ended September 30, 2020
In millions	Pharmacy  Services		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Operating income (loss) (GAAP measure)	$	3,949	$	3,996	$	5,110	$	(1,129)	$	(539)	$	11,387
Non-GAAP adjustments:
Amortization of intangible assets (1)	178		375		1,196		2		—		1,751
Acquisition-related integration costs (2)	—		—		—		196		—		196
Gain on divestiture of subsidiary (3)	—		—		(271)		—		—		(271)
Adjusted operating income (loss)	$	4,127	$	4,371	$	6,035	$	(931)	$	(539)	$	13,063

	Nine Months Ended September 30, 2019
In millions	Pharmacy  Services		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Operating income (loss) (GAAP measure)	$	3,387	$	3,884	$	3,253	$	(1,053)	$	(521)	$	8,950
Non-GAAP adjustments:
Amortization of intangible assets (1)	295		354		1,170		3		—		1,822
Acquisition-related integration costs (2)	—		—		—		365		—		365
Loss on divestiture of subsidiary (3)	—		205		—		—		—		205
Store rationalization charges (4)	—		231		—		—		—		231
Adjusted operating income (loss)	$	3,682	$	4,674	$	4,423	$	(685)	$	(521)	$	11,573

_____________________________________________

(1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

(2)During the three and nine months ended September 30, 2020 and 2019, acquisition-related integration costs relate to the Company’s acquisition (the “Aetna Acquisition”) of Aetna Inc. (“Aetna”). The acquisition-related integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

(3)During the three and nine months ended September 30, 2020, the gain on divestiture of subsidiary represents the pre-tax gain on the sale of the Workers’ Compensation business, which the Company sold on July 31, 2020 for approximately $850 million. The gain on divestiture is reflected as a reduction in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Health Care Benefits segment. During the three and nine months ended September 30, 2019, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of Onofre, which occurred on July 1, 2019. The loss on divestiture primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income and is reflected in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment.

(4)During the three and nine months ended September 30, 2019, the store rationalization charges relate to the planned closure of 22 underperforming retail pharmacy stores in the first quarter of 2020. During the nine months ended September 30, 2019, the store rationalization charges also relate to the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Retail/LTC segment.

50

Pharmacy Services Segment

The following table summarizes the Pharmacy Services segment’s performance for the respective periods:

													Change
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30, 2020 vs 2019				Nine Months Ended September 30, 2020 vs 2019
In millions, except percentages	2020			2019			2020			2019			$		%		$		%
Revenues:
Products	$	35,461		$	35,883		$	104,802		$	104,056		$	(422)	(1.2)	%	$	746	0.7	%
Services	250			135			781			362			115		85.2	%	419		115.7	%
Total revenues	35,711			36,018			105,583			104,418			(307)		(0.9)	%	1,165		1.1	%
Cost of products sold	33,809			34,300			100,583			99,918			(491)		(1.4)	%	665		0.7	%
Operating expenses	338			378			1,051			$	1,113		(40)		(10.6)	%	(62)		(5.6)	%
Operating expenses as a % of total revenues	0.9		%	1.0		%	1.0		%	1.1		%
Operating income	$	1,564		$	1,340		$	3,949		$	3,387		$	224	16.7	%	$	562	16.6	%
Operating income as a % of total revenues	4.4		%	3.7		%	3.7		%	3.2		%
Adjusted operating income (1)	$	1,619		$	1,439		$	4,127		$	3,682		$	180	12.5	%	$	445	12.1	%
Adjusted operating income as a % of total revenues	4.5		%	4.0		%	3.9		%	3.5		%
Revenues (by distribution channel):
Pharmacy network (2) (3)	$	21,473		$	22,411		$	63,109		$	65,917		$	(938)	(4.2)	%	$	(2,808)	(4.3)	%
Mail choice (3) (4)	14,032			13,461			41,815			38,066			571		4.2	%	3,749		9.8	%
Other	206			146			659			435			60		41.1	%	224		51.5	%
Pharmacy claims processed: (5)
Total	528.2			509.5			1,575.0			1,480.3			18.7		3.7	%	94.7		6.4	%
Pharmacy network (2)	447.7			430.2			1,333.9			1,250.0			17.5		4.1	%	83.9		6.7	%
Mail choice (4)	80.5			79.3			241.1			230.3			1.2		1.5	%	10.8		4.7	%
Generic dispensing rate: (5)
Total	87.9		%	88.1		%	88.5		%	88.3		%
Pharmacy network (2)	88.3		%	88.7		%	89.0		%	88.9		%
Mail choice (4)	85.7		%	85.3		%	85.7		%	85.1		%

_____________________________________________

(1)See “Segment Analysis” above in this report for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Pharmacy Services segment.

(2)Pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice activity, which is included within the mail choice category. Maintenance Choice permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS Pharmacy retail store for the same price as mail order.

(3)Certain prior year amounts have been reclassified for consistency with the current period presentation.

(4)Mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program.

(5)Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.

Commentary - Three Months Ended September 30, 2020 vs. 2019

Revenues

•Total revenues decreased $307 million, or 0.9%, to $35.7 billion in the three months ended September 30, 2020 compared to the prior year primarily driven by previously disclosed client losses and continued price compression, partially offset by growth in specialty pharmacy and brand inflation.

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Operating expenses

•Operating expenses in the Pharmacy Services segment include selling, general and administrative expenses; depreciation and amortization expense; and expenses related to specialty retail pharmacies, which include store and administrative payroll, employee benefits and occupancy costs.

•Operating expenses decreased $40 million, or 10.6%, in the three months ended September 30, 2020 compared to the prior year primarily driven by lower amortization expense in the three months ended September 30, 2020.

•Operating expenses as a percentage of total revenues remained relatively consistent at 0.9% and 1.0% in the three-month periods ended September 30, 2020 and 2019, respectively.

Operating income and adjusted operating income

•Operating income increased $224 million, or 16.7%, and adjusted operating income increased $180 million, or 12.5%, in the three months ended September 30, 2020 compared to the prior year primarily driven by improved purchasing economics and growth in specialty pharmacy. The increase was partially offset by continued price compression and previously disclosed client losses. The increase in operating income also was driven by lower amortization expense in the three months ended September 30, 2020.

•As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about the business:

•The Company’s efforts to (i) retain existing clients, (ii) obtain new business and (iii) maintain or improve the rebates and/or discounts the Company receives from manufacturers, wholesalers and retail pharmacies continue to have an impact on operating income and adjusted operating income. In particular, competitive pressures in the PBM industry have caused the Company and other PBMs to continue to share with clients a larger portion of rebates and/or discounts received from pharmaceutical manufacturers. In addition, marketplace dynamics and regulatory changes have limited the Company’s ability to offer plan sponsors pricing that includes retail network “differential” or “spread,” and the Company expects these trends to continue. The “differential” or “spread” is any difference between the drug price charged to plan sponsors, including Medicare Part D plan sponsors, by a PBM and the price paid for the drug by the PBM to the dispensing provider.

Pharmacy claims processed

•Total pharmacy claims processed represents the number of prescription claims processed through our pharmacy benefits manager and dispensed by either our retail network pharmacies or our own mail and specialty pharmacies. Management uses this metric to understand variances between actual claims processed and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of pharmacy claim volume on segment total revenues and operating results.

•The Company’s pharmacy network claims processed on a 30-day equivalent basis increased 4.1% to 447.7 million claims in the three months ended September 30, 2020 compared to 430.2 million claims in the prior year. The increase in pharmacy network claims processed was primarily driven by net new business, partially offset by reduced new therapy prescriptions in the three months ended September 30, 2020 as a result of COVID-19.

•The Company’s mail choice claims processed on a 30-day equivalent basis increased 1.5% to 80.5 million claims in the three months ended September 30, 2020 compared to 79.3 million claims in the prior year. The increase in mail choice claims was primarily driven by net new business and the continued adoption of Maintenance Choice offerings. The increase was partially offset by reduced new therapy prescriptions in the three months ended September 30, 2020 as a result of COVID-19.

Generic dispensing rate

•Generic dispensing rate is calculated by dividing the Pharmacy Services segment’s generic drug prescriptions processed or filled by its total prescriptions processed or filled. Management uses this metric to evaluate the effectiveness of the business at encouraging the use of generic drugs when they are available and clinically appropriate, which aids in decreasing costs for client members and retail customers. This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results.

•The Pharmacy Services segment’s total generic dispensing rate decreased to 87.9% in the three months ended September 30, 2020 compared to 88.1% in the prior year. The decrease in the segment’s generic dispensing rate was primarily due to an increase in brand prescriptions, reflecting an increase in flu immunizations in the three months ended September 30, 2020 in comparison to the prior year. The Company believes the segment’s generic dispensing rate will likely increase in future periods, affected by, among other things, the number of new brand and generic drug introductions and the Company’s success at encouraging plan members to utilize generic drugs when they are available and clinically appropriate.

52

Commentary - Nine Months Ended September 30, 2020 vs. 2019

Revenues

•Total revenues increased $1.2 billion, or 1.1%, to $105.6 billion in the nine months ended September 30, 2020 compared to the prior year primarily due to growth in specialty pharmacy and brand inflation. The increase was partially offset by previously disclosed client losses and continued price compression.

Operating expenses

•Operating expenses decreased $62 million, or 5.6%, in the nine months ended September 30, 2020 compared to the prior year primarily driven by lower amortization expense in the nine months ended September 30, 2020, partially offset by incremental operating expenses associated with growth in the business.

•Operating expenses as a percentage of total revenues remained relatively consistent at 1.0% and 1.1% in the nine-month periods ended September 30, 2020 and 2019, respectively.

Operating income and adjusted operating income

•Operating income increased $562 million, or 16.6%, and adjusted operating income increased $445 million, or 12.1%, in the nine months ended September 30, 2020 compared to the prior year primarily driven by improved purchasing economics and growth in specialty pharmacy, partially offset by previously disclosed client losses and continued price compression. The increase in operating income also was driven by lower amortization expense in the nine months ended September 30, 2020.

Pharmacy claims processed

•The Company’s pharmacy network claims processed on a 30-day equivalent basis increased 6.7% to 1.33 billion claims in the nine months ended September 30, 2020 compared to 1.25 billion claims in the prior year. The increase in pharmacy network claims processed was primarily driven by net new business, partially offset by reduced new therapy prescriptions in the nine months ended September 30, 2020 as a result of COVID-19.

•The Company’s mail choice claims processed on a 30-day equivalent basis increased 4.7% to 241.1 million claims in the nine months ended September 30, 2020 compared to 230.3 million claims in the prior year. The increase in mail choice claims was primarily driven by net new business and the continued adoption of Maintenance Choice offerings. The increase was partially offset by reduced new therapy prescriptions in the nine months ended September 30, 2020 as a result of COVID-19.

Generic dispensing rate

•The Pharmacy Services segment’s total generic dispensing rate increased to 88.5% in the nine months ended September 30, 2020 compared to 88.3% in the prior year. The continued increase in the segment’s generic dispensing rate was primarily due to the impact of new generic drug introductions and the Company’s ongoing efforts to encourage plan members to use generic drugs when they are available and clinically appropriate.

53

Retail/LTC Segment

The following table summarizes the Retail/LTC segment’s performance for the respective periods:

													Change
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30, 2020 vs 2019				Nine Months Ended September 30, 2020 vs 2019
In millions, except percentages	2020			2019			2020			2019			$		%		$		%
Revenues:
Products	$	22,424		$	21,273		$	66,422		$	63,403		$	1,151	5.4	%	$	3,019	4.8	%
Services	301			193			714			625			108		56.0	%	89		14.2	%
Total revenues	22,725			21,466			67,136			64,028			1,259		5.9	%	3,108		4.9	%
Cost of products sold	16,899			15,656			49,697			46,504			1,243		7.9	%	3,193		6.9	%
Operating expenses	4,543			4,715			13,443			13,640			(172)		(3.6)	%	(197)		(1.4)	%
Operating expenses as a % of total revenues	20.0		%	22.0		%	20.0		%	21.3		%
Operating income	$	1,283		$	1,095		$	3,996		$	3,884		$	188	17.2	%	$	112	2.9	%
Operating income as a % of total revenues	5.6		%	5.1		%	6.0		%	6.1		%
Adjusted operating income (1)	$	1,412		$	1,516		$	4,371		$	4,674		$	(104)	(6.9)	%	$	(303)	(6.5)	%
Adjusted operating income as a % of total revenues	6.2		%	7.1		%	6.5		%	7.3		%
Revenues (by major goods/service lines):
Pharmacy	$	17,608		$	16,687		$	51,833		$	49,197		$	921	5.5	%	$	2,636	5.4	%
Front Store	4,740			4,614			14,601			14,288			126		2.7	%	313		2.2	%
Other	377			165			702			543			212		128.5	%	159		29.3	%
Prescriptions filled (2)	368.4			352.3			1,088.9			1,048.2			16.1		4.6	%	40.7		3.9	%
Same store sales increase: (3)
Total	5.7		%	3.6		%	5.7		%	3.9		%
Pharmacy	6.7		%	4.5		%	6.8		%	4.7		%
Front Store	2.2		%	0.6		%	1.9		%	1.3		%
Prescription volume (2)	5.8		%	7.8		%	5.4		%	7.3		%
Generic dispensing rate (2)	87.7		%	88.2		%	88.7		%	88.7		%

_____________________________________________

(1)See “Segment Analysis” above in this report for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Retail/LTC segment.

(2)Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.

(3)Same store sales and prescription volume represent the change in revenues and prescriptions filled in the Company’s retail pharmacy stores that have been operating for greater than one year, expressed as a percentage that indicates the increase or decrease relative to the comparable prior period. Same store metrics exclude revenues from MinuteClinic, revenues and prescriptions from LTC operations and, in 2019, revenues and prescriptions from stores in Brazil. Management uses these metrics to evaluate the performance of existing stores on a comparable basis and to inform future decisions regarding existing stores and new locations. Same-store metrics provide management and investors with information useful in understanding the portion of current revenues and prescriptions resulting from organic growth in existing locations versus the portion resulting from opening new stores.

Commentary - Three Months Ended September 30, 2020 vs. 2019

Revenues

•Total revenues increased $1.3 billion, or 5.9%, to $22.7 billion in the three months ended September 30, 2020 compared to the prior year primarily driven by increased prescription volume, higher front store revenues, increased diagnostic testing and brand inflation. These increases were partially offset by continued reimbursement pressure and the impact of recent generic introductions.

•Pharmacy same store sales increased 6.7% in the three months ended September 30, 2020 compared to the prior year. The increase was primarily driven by the 5.8% increase in pharmacy same store prescription volume on a 30-day equivalent

54

basis, pharmacy drug mix and brand inflation. These increases were partially offset by continued reimbursement pressure and the impact of recent generic introductions.

•Front store same store sales increased 2.2% in the three months ended September 30, 2020 compared to the prior year. The increase was primarily due to strength in consumer health sales and an increase in basket size, partially offset by decreased customer traffic in the segment’s retail pharmacies as a result of the COVID-19 pandemic.

•Other revenues increased 128.5% in the three months ended September 30, 2020 compared to the prior year. The increase was primarily due to increased diagnostic testing and the fulfillment of consumer health product boxes to support the Health Care Benefits segment’s Medicare members, both in response to the COVID-19 pandemic in the three months ended September 30, 2020.

Operating expenses

•Operating expenses in the Retail/LTC segment include store payroll, store employee benefits, store occupancy costs, selling expenses, advertising expenses, depreciation and amortization expense and certain administrative expenses.

•Operating expenses decreased $172 million, or 3.6%, in the three months ended September 30, 2020 compared to the prior year. The decrease was primarily due to the absence of the $205 million pre-tax loss on the sale of Onofre and the $96 million store rationalization charge primarily related to operating lease right-of-use asset impairment charges in connection with planned closure of underperforming retail pharmacy stores, both recorded in the three months ended September 30, 2019. The decrease was partially offset by incremental operating expenses associated with the Company’s COVID-19 pandemic response efforts and the increased volume described above in the three months ended September 30, 2020.

•Operating expenses as a percentage of total revenues decreased to 20.0% in the three months ended September 30, 2020 compared to 22.0% in the prior year. The decrease in operating expenses as a percentage of total revenues was primarily driven by the increases in total revenues and decreases in operating expenses described above.

Operating income and adjusted operating income

•Operating income increased $188 million, or 17.2%, in the three months ended September 30, 2020 compared to the prior year. The increase in operating income was primarily driven by the absence of the $205 million pre-tax loss on the sale of Onofre and the $96 million store rationalization charge, both recorded in the three months ended September 30, 2019. This increase was partially offset by the decrease in adjusted operating income described below.

•Adjusted operating income decreased $104 million, or 6.9%, in the three months ended September 30, 2020 compared to the prior year. The decrease in adjusted operating income was primarily due to continued reimbursement pressure, incremental operating expenses associated with the Company’s COVID-19 pandemic response efforts in the three months ended September 30, 2020 and declines in long-term care. These decreases were partially offset by the increased pharmacy and front store volume described above, improved generic drug purchasing and increased diagnostic testing as a result of the COVID-19 pandemic in the three months ended September 30, 2020.

•As you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business:

•The segment’s operating income and adjusted operating income have been adversely affected by the efforts of managed care organizations, PBMs and governmental and other third-party payors to reduce their prescription drug costs, including the use of restrictive networks, as well as changes in the mix of business within the pharmacy portion of the Retail/LTC segment. If the reimbursement pressure accelerates, the segment may not be able grow revenues, and its operating income and adjusted operating income could be adversely affected.

•The increased use of generic drugs has positively impacted the segment’s operating income and adjusted operating income but has resulted in third-party payors augmenting their efforts to reduce reimbursement payments to retail pharmacies for prescriptions. This trend, which the Company expects to continue, reduces the benefit the segment realizes from brand to generic drug conversions.

Prescriptions filled

•Prescriptions filled represents the number of prescriptions dispensed through the Retail/LTC segment’s pharmacies. Management uses this metric to understand variances between actual prescriptions dispensed and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of prescription volume on segment total revenues and operating results.

•Prescriptions filled increased 4.6% on a 30-day equivalent basis in the three months ended September 30, 2020 compared to the prior year primarily driven by the continued adoption of patient care programs. Prescriptions filled in the three months ended September 30, 2020 were adversely impacted by the COVID-19 pandemic, which resulted in reduced new therapy prescriptions, partially offset by greater use of 90-day prescriptions and increased immunizations.

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Generic dispensing rate

•Generic dispensing rate is calculated by dividing the Retail/LTC segment’s generic drug prescriptions filled by its total prescriptions filled. Management uses this metric to evaluate the effectiveness of the business at encouraging the use of generic drugs when they are available and clinically appropriate, which aids in decreasing costs for client members and retail customers. This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results.

•The Retail/LTC segment’s generic dispensing rate decreased to 87.7% in the three months ended September 30, 2020 compared to 88.2% in the prior year. The decrease in the segment’s generic dispensing rate was primarily driven by an increase in brand prescriptions, reflecting an increase in flu immunizations in the three months ended September 30, 2020 in comparison to the prior year. The Company believes the segment’s generic dispensing rate will likely increase in future periods, affected by, among other things, the number of new brand and generic drug introductions and the Company’s success at encouraging plan members to utilize generic drugs when they are available and clinically appropriate.

Commentary - Nine Months Ended September 30, 2020 vs. 2019

Revenues

•Total revenues increased $3.1 billion, or 4.9%, to $67.1 billion in the nine months ended September 30, 2020 compared to the prior year primarily driven by increased prescription volume, higher front store revenues and brand inflation. These increases were partially offset by continued reimbursement pressure and the impact of recent generic introductions.

•Pharmacy same store sales increased 6.8% in the nine months ended September 30, 2020 compared to the prior year. The increase was driven by the 5.4% increase in pharmacy same store prescription volume on a 30-day equivalent basis, pharmacy drug mix and brand inflation. These increases were partially offset by continued reimbursement pressure and the impact of recent generic introductions.

•Front store same store sales increased 1.9% in the nine months ended September 30, 2020 compared to the prior year. The increase was primarily due to strength in consumer health and general merchandise sales, which was primarily driven by COVID-19 related sales.

•Other revenues increased 29.3% in the nine months ended September 30, 2020 compared to the prior year. The increase was primarily due to increased diagnostic testing and the fulfillment of consumer health product boxes to support the Health Care Benefits segment’s Medicare members, both in response to the COVID-19 pandemic in the nine months ended September 30, 2020.

Operating expenses

•Operating expenses decreased $197 million, or 1.4%, in the nine months ended September 30, 2020 compared to the prior year. The decrease was primarily driven by the absence of the $231 million of store rationalization charges in connection with the planned closure of underperforming retail pharmacy stores and the $205 million pre-tax loss on the sale of Onofre, both recorded in the nine months ended September 30, 2019, and the impact of cost savings initiatives in the nine months ended September 30, 2020. The decrease was partially offset by incremental operating expenses associated with the Company’s COVID-19 pandemic response efforts and the increased volume described above in the nine months ended September 30, 2020.

•Operating expenses as a percentage of total revenues decreased to 20.0% in the nine months ended September 30, 2020 compared to 21.3% in the prior year. The decrease in operating expenses as a percentage of total revenues was primarily driven by the increases in total revenues and decreases in operating expenses described above.

Operating income and adjusted operating income

•Operating income increased $112 million, or 2.9%, in the nine months ended September 30, 2020 compared to the prior year. The increase in operating income was primarily driven by the absence of the $231 million of store rationalization charges and the $205 million pre-tax loss on the sale of Onofre, both recorded in the nine months ended September 30, 2019. This increase was partially offset by the decrease in adjusted operating income described below.

•Adjusted operating income decreased $303 million, or 6.5%, in the nine months ended September 30, 2020 compared to the prior year. The decrease in adjusted operating income was primarily due to continued reimbursement pressure, incremental operating expenses associated with the Company’s COVID-19 pandemic response efforts in the nine months ended September 30, 2020 and declines in long-term care. These decreases were partially offset by the increased prescription and front store volume described above, improved generic drug purchasing and increased diagnostic testing as a result of the COVID-19 pandemic in the nine months ended September 30, 2020.

56

Prescriptions filled

•Prescriptions filled increased 3.9% on a 30-day equivalent basis in the nine months ended September 30, 2020 compared to the prior year primarily driven by the continued adoption of patient care programs. Prescriptions filled in the nine months ended September 30, 2020 were adversely impacted by the COVID-19 pandemic, which resulted in reduced new therapy prescriptions, partially offset by greater use of 90-day prescriptions and increased immunizations, as well as decreased long-term care prescription volume.

Generic dispensing rate

•The Retail/LTC segment’s generic dispensing rate of 88.7% in the nine months ended September 30, 2020 remained consistent with the prior year.

57

Health Care Benefits Segment

The following table summarizes the Health Care Benefits segment’s performance for the respective periods:

													Change
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30, 2020 vs 2019					Nine Months Ended September 30, 2020 vs 2019
In millions, except percentages and basis points (“bps”)	2020			2019			2020			2019			$			%		$			%
Revenues:
Premiums	$	17,165		$	15,507		$	51,699		$	47,543		$	1,658		10.7	%	$	4,156		8.7	%
Services	1,412			1,528			4,324			4,453			(116)			(7.6)	%	(129)			(2.9)	%
Net investment income	121			146			341			458			(25)			(17.1)	%	(117)			(25.5)	%
Total revenues	18,698			17,181			56,364			52,454			1,517			8.8	%	3,910			7.5	%
Benefit costs	14,416			12,914			40,816			39,815			1,502			11.6	%	1,001			2.5	%
MBR	84.0		%	83.3		%	78.9		%	83.7		%	70		bps			(480)		bps
Operating expenses	$	3,333		$	3,231		$	10,438		$	9,386		$	102		3.2	%	$	1,052		11.2	%
Operating expenses as a % of total revenues	17.8		%	18.8		%	18.5		%	17.9		%
Operating income	$	949		$	1,036		$	5,110		$	3,253		$	(87)		(8.4)	%	$	1,857		57.1	%
Operating income as a % of total revenues	5.1		%	6.0		%	9.1		%	6.2		%
Adjusted operating income (1)	$	1,080		$	1,423		$	6,035		$	4,423		$	(343)		(24.1)	%	$	1,612		36.4	%
Adjusted operating income as a % of total revenues	5.8		%	8.3		%	10.7		%	8.4		%
Premium revenues (by business):
Government	$	12,181		$	10,247		$	36,626		$	31,598		$	1,934		18.9	%	$	5,028		15.9	%
Commercial	$	4,984		$	5,260		$	15,073		$	15,945		(276)			(5.2)	%	(872)			(5.5)	%

_____________________________________________

(1)See “Segment Analysis” above in this report for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Health Care Benefits segment.

Commentary - Three Months Ended September 30, 2020 vs. 2019

Revenues

•Total revenues increased $1.5 billion, or 8.8%, to $18.7 billion in the three months ended September 30, 2020 compared to the prior year primarily driven by membership growth in the Health Care Benefits segment’s Government products and the favorable impact of the reinstatement of the HIF for 2020. These increases were partially offset by the divestitures of Aetna’s standalone PDPs (which the Company retained the financial results of through 2019) and Workers’ Compensation business, membership declines in the segment’s Commercial products and planned COVID-19 related investments benefiting customers and members in the three months ended September 30, 2020.

Medical Benefit Ratio (“MBR”)

•Medical benefit ratio is calculated as benefit costs divided by premium revenues and represents the percentage of premium revenues spent on medical benefits for the Company’s Insured members. Management uses MBR to assess the underlying business performance and underwriting of its insurance products, understand variances between actual results and expected results and identify trends in period-over-period results. MBR provides management and investors with information useful in assessing the operating results of the Company’s Insured Health Care Benefits products.

•The Health Care Benefits segment’s MBR increased 70 basis points from 83.3% to 84.0% in the three months ended September 30, 2020 compared to the prior year primarily driven by the planned COVID-19 related investments described above, shifts in business mix and the divestiture of Aetna’s standalone PDPs, partially offset by the reinstatement of the HIF for 2020.

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Operating expenses

•Operating expenses in the Health Care Benefits segment include selling, general and administrative expenses and depreciation and amortization expenses.

•Operating expenses increased $102 million, or 3.2%, in the three months ended September 30, 2020 compared to the prior year. The increase in operating expenses was primarily due to the reinstatement of the HIF for 2020 and incremental operating expenses to support the increased membership described above, including operating expenses to support additional Medicaid members onboarded during the first quarter of 2020. The increase was partially offset by the $271 million pre-tax gain on the sale of the Workers’ Compensation business in the three months ended September 30, 2020.

•Operating expenses as a percentage of total revenues decreased to 17.8% in the three months ended September 30, 2020 compared to 18.8% in the prior year. The decrease in operating expenses as a percentage of total revenues was primarily due to the $271 million pre-tax gain on the sale of the Workers’ Compensation business in the three months ended September 30, 2020.

Operating income and adjusted operating income

•Operating income decreased $87 million, or 8.4%, and adjusted operating income decreased $343 million, or 24.1% in the three months ended September 30, 2020, compared to the prior year. The decrease in both operating income and adjusted operating income was primarily driven by the planned COVID-19 related investments described above and the divestitures of Aetna’s standalone PDPs and Workers’ Compensation business. The decrease in operating income was partially offset by the $271 million pre-tax gain on the sale of the Workers’ Compensation business.

Commentary - Nine Months Ended September 30, 2020 vs. 2019

Revenues

•Total revenues increased $3.9 billion, or 7.5%, to $56.4 billion in the nine months ended September 30, 2020 compared to the prior year primarily driven by membership growth in the Health Care Benefits segment’s Government products and the favorable impact of the reinstatement of the HIF for 2020. These increases were partially offset by membership declines in the segment’s Commercial products, the divestitures of Aetna’s standalone PDPs and Workers’ Compensation business and planned COVID-19 related investments benefiting customers and members in the nine months ended September 30, 2020.

MBR

•The Health Care Benefits segment’s MBR decreased 480 basis points from 83.7% to 78.9% in the nine months ended September 30, 2020 compared to the prior year primarily due to the deferral of elective procedures and other discretionary utilization in response to the COVID-19 pandemic in the nine months ended September 30, 2020 and the reinstatement of the HIF for 2020.

Operating expenses

•Operating expenses increased $1.1 billion, or 11.2%, in the nine months ended September 30, 2020 compared to the prior year. The increase in operating expenses was primarily due to the reinstatement of the HIF for 2020 and incremental operating expenses to support the increased membership described above, including operating expenses to support additional Medicaid members onboarded during the first quarter of 2020. The increase was partially offset by the $271 million pre-tax gain on the sale of the Workers’ Compensation business.

•Operating expenses as a percentage of total revenues increased to 18.5% in the nine months ended September 30, 2020 compared to 17.9% in the prior year. The increase in operating expenses as a percentage of total revenues was primarily due to the reinstatement of the HIF for 2020.

Operating income and adjusted operating income

•Operating income increased $1.9 billion, or 57.1%, and adjusted operating income increased $1.6 billion, or 36.4% in the nine months ended September 30, 2020, compared to the prior year. The increase was primarily driven by reduced benefit costs due to the deferral of elective procedures and other discretionary utilization in response to the COVID-19 pandemic and membership growth in the segment’s Government products, partially offset by membership declines in the segment’s Commercial products. The increase in operating income was also driven by the $271 million pre-tax gain on the sale of the Workers’ Compensation business.

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The following table summarizes the Health Care Benefits segment’s medical membership for the respective periods:

	September 30, 2020			June 30, 2020			December 31, 2019			September 30, 2019
In thousands	Insured	ASC	Total	Insured	ASC	Total	Insured	ASC	Total	Insured	ASC	Total
Medical membership:
Commercial	3,268	13,671	16,939	3,298	14,179	17,477	3,591	14,159	17,750	3,560	14,159	17,719
Medicare Advantage	2,689	—	2,689	2,651	—	2,651	2,321	—	2,321	2,304	—	2,304
Medicare Supplement	1,009	—	1,009	954	—	954	881	—	881	842	—	842
Medicaid	2,028	605	2,633	1,918	586	2,504	1,398	558	1,956	1,382	562	1,944
Total medical membership	8,994	14,276	23,270	8,821	14,765	23,586	8,191	14,717	22,908	8,088	14,721	22,809
Supplemental membership information:
Medicare Prescription Drug Plan (standalone) (1)			5,540			5,575			5,994			5,998

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(1)Represents the Company’s SilverScript PDP membership only. Excludes 2.5 million members as of both December 31, 2019 and September 30, 2019 related to Aetna’s standalone PDPs that were sold effective December 31, 2018. The Company retained the financial results of the divested plans through 2019 through a reinsurance agreement. Subsequent to 2019, the Company no longer retains the financial results of the divested plans.

Medical Membership

•Medical membership represents the number of members covered by the Company’s Insured and ASC medical products and related services at a specified point in time. Management uses this metric to understand variances between actual medical membership and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of medical membership on segment total revenues and operating results.

•Medical membership as of September 30, 2020 of 23.3 million decreased 316 thousand members compared with June 30, 2020, primarily reflecting a decline in Commercial products, partially offset by increases in Medicare and Medicaid products. Medical membership as of September 30, 2020 of 23.3 million increased 461 thousand members compared with September 30, 2019, reflecting increases in Medicare and Medicaid products, partially offset by declines in Commercial products.

Medicare Update

On April 6, 2020, the U.S. Centers for Medicare & Medicaid Services issued its final notice detailing final 2021 Medicare Advantage benchmark payment rates (the “Final Notice”). Overall the Company projects the benchmark rates in the Final Notice will increase funding for its Medicare Advantage business, excluding the impact of the HIF, by approximately 1.8% in 2021 compared to 2020.

The ACA ties a portion of each Medicare Advantage plan’s reimbursement to the plan’s “star ratings.” Plans must have a star rating of four or higher (out of five) to qualify for bonus payments. CMS released the Company’s 2021 star ratings in October 2020. The Company’s 2021 star ratings will be used to determine which of the Company’s Medicare Advantage plans have ratings of four stars or higher and qualify for bonus payments in 2022. Based on the Company’s membership at September 1, 2020, 83% of the Company’s Medicare Advantage members were in plans with 2021 star ratings of at least 4.0 stars, consistent with 83% of the Company’s Medicare Advantage members being in plans with 2020 star ratings of at least 4.0 stars based on the Company’s membership at September 1, 2019.

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Corporate/Other Segment

The following table summarizes the Corporate/Other segment’s performance for the respective periods:

									Change
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30, 2020 vs 2019				Nine Months Ended September 30, 2020 vs 2019
In millions, except percentages	2020		2019		2020		2019		$		%		$		%
Revenues:
Premiums	$	17	$	32	$	50	$	69	$	(15)	(46.9)	%	$	(19)	(27.5)	%
Services	16		3		33		7		13		433.3	%	26		371.4	%
Net investment income	83		117		209		347		(34)		(29.1)	%	(138)		(39.8)	%
Total revenues	116		152		292		423		(36)		(23.7)	%	(131)		(31.0)	%
Benefit costs	54		77		173		213		(23)		(29.9)	%	(40)		(18.8)	%
Operating expenses	423		439		1,248		1,263		(16)		(3.6)	%	(15)		(1.2)	%
Operating loss	(361)		(364)		(1,129)		(1,053)		3		0.8	%	(76)		(7.2)	%
Adjusted operating loss (1)	(303)		(252)		(931)		(685)		(51)		(20.2)	%	(246)		(35.9)	%

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(1)See “Segment Analysis” above in this report for a reconciliation of operating loss (GAAP measure) to adjusted operating loss for the Corporate/Other segment.

Commentary - Three Months Ended September 30, 2020 vs. 2019

Revenues

•Revenues primarily relate to products for which the Company no longer solicits or accepts new customers, such as large case pensions and long-term care insurance products.

•Total revenues decreased $36 million in the three months ended September 30, 2020 compared to the prior year. The decrease was primarily driven by lower net investment income including a $27 million decrease in net realized capital gains in the three months ended September 30, 2020 compared to the prior year.

Operating expenses

•Operating expenses within the Corporate/Other segment consist of management and administrative expenses to support the Company’s overall operations, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and enterprise modernization programs and acquisition-related integration costs. Segment operating expenses also include operating costs to support the Company’s large case pensions and long-term care insurance products.

•Operating expenses decreased $16 million in the three months ended September 30, 2020 compared to the prior year. The decrease was primarily driven by a $54 million decrease in acquisition-related integration costs and lower investments in modernization in the three months ended September 30, 2020 compared to the prior year. These decreases were partially offset by an increase in the Company’s investments in transformation in the three months ended September 30, 2020 compared to the prior year.

Commentary - Nine Months Ended September 30, 2020 vs. 2019

Revenues

•Total revenues decreased $131 million in the nine months ended September 30, 2020 compared to the prior year. The decrease was primarily driven by lower net investment income due to COVID-19 related capital markets volatility and a $95 million decrease in net realized capital gains in the nine months ended September 30, 2020 compared to the prior year.

Operating expenses

•Operating expenses decreased $15 million in the nine months ended September 30, 2020 compared to the prior year. The decrease was primarily driven by a $169 million decrease in acquisition-related integration costs compared to the prior year. The decrease was partially offset by incremental operating expenses associated with the Company’s investments in transformation and COVID-19 pandemic response efforts in the nine months ended September 30, 2020.

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Liquidity and Capital Resources

Cash Flows

The Company maintains a level of liquidity sufficient to allow it to meet its cash needs in the short-term. Over the long term, the Company manages its cash and capital structure to maximize shareholder return, maintain its financial condition and maintain flexibility for future strategic initiatives. The Company continuously assesses its regulatory capital requirements, working capital needs, debt and leverage levels, debt maturity schedule, capital expenditure requirements, dividend payouts, potential share repurchases and future investments or acquisitions. The Company believes its operating cash flows, commercial paper program, credit facilities, sale-leaseback program, as well as any potential future borrowings, will be sufficient to fund these future payments and long-term initiatives. As of September 30, 2020, the Company had approximately $9.3 billion in cash and cash equivalents, approximately $3.6 billion of which was held by the parent company or nonrestricted subsidiaries.

The COVID-19 pandemic has severely impacted global economic activity and during the first half of the year caused significant volatility and negative pressure in the capital markets. As a result of the uncertainty generated by COVID-19, on March 31, 2020, the Company issued $4.0 billion aggregate principal amount of unsecured senior notes to enhance its liquidity and strengthen its capital. The net proceeds from this offering will be used for general corporate purposes, which may include working capital, capital expenditures and repayment of indebtedness. As markets stabilized, in August 2020, the Company purchased $6.0 billion of its outstanding senior notes through cash tender offers, while issuing $4.0 billion aggregate principal amount of unsecured senior notes. The Company will continue to monitor the severity and duration of the pandemic and its impact on the U.S. and global economies, consumer behavior and health care utilization patterns and our businesses, results of operations, financial condition, and cash flows.

The net change in cash, cash equivalents and restricted cash during the nine months ended September 30, 2020 and 2019 was as follows:

	Nine Months Ended September 30,				Change
In millions, except percentages	2020		2019		$		%
Net cash provided by operating activities	$	12,298	$	10,214	$	2,084	20.4	%
Net cash used in investing activities	(4,300)		(2,630)		(1,670)		63.5	%
Net cash used in financing activities	(4,420)		(6,410)		1,990		(31.0)	%
Net increase in cash, cash equivalents and restricted cash	$	3,578	$	1,174	$	2,404	204.8	%

Commentary

•Net cash provided by operating activities increased by $2.1 billion in the nine months ended September 30, 2020 compared to the prior year due primarily to higher operating income in the Health Care Benefits and Pharmacy Services segments and the deferral of approximately $445 million of certain payroll tax payments to future years, as permitted in response to the COVID-19 pandemic.

•Net cash used in investing activities increased by $1.7 billion in the nine months ended September 30, 2020 compared to the prior year primarily due to increased net purchases of investments and an increase in cash used for acquisitions, partially offset by $834 million in proceeds from the sale of the Workers’ Compensation business.

•Net cash used in financing activities was $4.4 billion in the nine months ended September 30, 2020 compared to net cash used in financing activities of $6.4 billion in the prior year. The decrease in cash used in financing activities primarily related to a decrease in net debt repaid during the nine months ended September 30, 2020 compared to the prior year.

Short-term Borrowings

Commercial Paper and Back-up Credit Facilities

The Company did not have any commercial paper outstanding as of September 30, 2020. In connection with its commercial paper program, the Company maintains a $1.0 billion 364-day unsecured back-up revolving credit facility, which expires on May 12, 2021, a $1.0 billion, five-year unsecured back-up revolving credit facility, which expires on May 18, 2022, a $2.0 billion, five-year unsecured back-up revolving credit facility, which expires on May 17, 2023, and a $2.0 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2024. The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted

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average quarterly facility fee of approximately 0.03%, regardless of usage. As of September 30, 2020, there were no borrowings outstanding under any of the Company’s back-up credit facilities.

Federal Home Loan Bank of Boston

A subsidiary of the Company is a member of the Federal Home Loan Bank of Boston (the “FHLBB”). As a member, the subsidiary has the ability to obtain cash advances, subject to certain minimum collateral requirements. The maximum borrowing capacity available from the FHLBB as of September 30, 2020, was approximately $935 million. As of September 30, 2020, there were no outstanding advances from the FHLBB.

Long-term Borrowings

2020 Notes

On August 21, 2020, the Company issued $1.5 billion aggregate principal amount of 1.3% unsecured senior notes due August 21, 2027, $1.25 billion aggregate principal amount of 1.75% unsecured senior notes due August 21, 2030 and $1.25 billion aggregate principal amount of 2.7% unsecured senior notes due August 21, 2040 (collectively, the “August 2020 Notes”) for total proceeds of approximately $3.97 billion, net of discounts and underwriting fees.

On March 31, 2020, the Company issued $750 million aggregate principal amount of 3.625% unsecured senior notes due April 1, 2027, $1.5 billion aggregate principal amount of 3.75% unsecured senior notes due April 1, 2030, $1.0 billion aggregate principal amount of 4.125% unsecured senior notes due April 1, 2040 and $750 million aggregate principal amount of 4.25% unsecured senior notes due April 1, 2050 (collectively, the “March 2020 Notes”) for total proceeds of approximately $3.95 billion, net of discounts and underwriting fees.

The net proceeds of these offerings will be used for general corporate purposes, which may include working capital, capital expenditures, as well as the repurchase and/or repayment of indebtedness. Net proceeds from these offerings that had not been used for these purposes were held in cash or temporarily invested in cash equivalents and short-term investment-grade securities from the date of issuance through September 30, 2020.

During March 2020, the Company entered into several interest rate swap transactions to manage interest rate risk. These agreements were designated as cash flow hedges and were used to hedge the exposure to variability in future cash flows resulting from changes in interest rates related to the anticipated issuance of the March 2020 Notes. In connection with the issuance of the March 2020 Notes, the Company terminated all outstanding cash flow hedges. The Company paid a net amount of $7 million to the hedge counterparties upon termination, which was recorded as a loss, net of tax, of $5 million in accumulated other comprehensive income and will be reclassified as interest expense over the life of the March 2020 Notes. See Note 8 ‘‘Other Comprehensive Income’’ to the unaudited condensed consolidated financial statements for additional information.

Early Extinguishments of Debt

In August 2020, the Company purchased $6.0 billion of its outstanding senior notes through cash tender offers. The senior notes purchased included the following: $723 million of its 4.0% senior notes due 2023, $2.3 billion of its 3.7% senior notes due 2023 and $3.0 billion of its 4.1% senior notes due 2025. In connection with the purchase of such senior notes, the Company paid a premium of $706 million in excess of the aggregate principal amount of the senior notes that were purchased, wrote-off $47 million of unamortized deferred financing costs and incurred $13 million in fees, for a total loss on early extinguishment of debt of $766 million.

In August 2019, the Company purchased $4.0 billion of its outstanding senior notes through cash tender offers. The senior notes purchased included the following: $1.3 billion of its 3.125% senior notes due 2020, $723 million of its floating rate notes due 2020, $328 million of its 4.125% senior notes due 2021, $297 million of 4.125% senior notes due 2021 issued by Aetna, $413 million of 5.45% senior notes due 2021 issued by Coventry Health Care, Inc., a wholly-owned subsidiary of Aetna and $962 million of its 3.35% senior notes due 2021. In connection with the purchase of such senior notes, the Company paid a premium of $76 million in excess of the aggregate principal amount of the senior notes that were purchased, incurred $8 million in fees and recognized a net gain of $5 million on the write-off of net unamortized deferred financing premiums, for a net loss on early extinguishment of debt of $79 million.

Debt Covenants

The Company’s back-up revolving credit facilities, unsecured senior notes and unsecured floating rate notes contain customary restrictive financial and operating covenants. These covenants do not include an acceleration of the Company’s debt maturities

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in the event of a downgrade in the Company’s credit ratings. The Company does not believe the restrictions contained in these covenants materially affect its financial or operating flexibility. As of September 30, 2020, the Company was in compliance with all of its debt covenants.

Debt Ratings 

As of September 30, 2020, the Company’s long-term debt was rated “Baa2” by Moody’s Investor Service, Inc. (“Moody’s”) and “BBB” by Standard & Poor’s Financial Services LLC (“S&P”), and its commercial paper program was rated “P-2” by Moody’s and “A-2” by S&P. In assessing the Company’s credit strength, the Company believes that both Moody’s and S&P considered, among other things, the Company’s capital structure and financial policies as well as its consolidated balance sheet, its historical acquisition activity and other financial information. Although the Company currently believes its long-term debt ratings will remain investment grade, it cannot guarantee the future actions of Moody’s and/or S&P. The Company’s debt ratings have a direct impact on its future borrowing costs, access to capital markets and new store operating lease costs.

Share Repurchase Program

During the nine months ended September 30, 2020 and 2019, the Company did not repurchase any shares of common stock. See Note 7 ‘‘Shareholders’ Equity’’ to the unaudited condensed consolidated financial statements for additional information on the Company’s share repurchase program.

Off-Balance Sheet Arrangements

See Note 10 ‘‘Commitments and Contingencies’’ to the unaudited condensed consolidated financial statements for information on the Company’s lease guarantees.

Critical Accounting Policies

The Company prepares the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles, which require management to make certain estimates and apply judgment. Estimates and judgments are based on historical experience, current trends and other factors that management believes to be important at the time the unaudited condensed consolidated financial statements are prepared. On a regular basis, the Company reviews its accounting policies and how they are applied and disclosed in the unaudited condensed consolidated financial statements. While the Company believes the historical experience, current trends and other factors considered by management support the preparation of the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles, actual results could differ from estimates, and such differences could be material.

Measurement of Credit Losses on Financial Instruments

Effective January 1, 2020, the Company adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326). This standard requires the use of a forward-looking expected credit loss impairment model for trade and other receivables, held-to-maturity debt securities, loans and other instruments. This standard also requires impairments and recoveries for available-for-sale debt securities to be recorded through an allowance account and revises certain disclosure requirements. The Company adopted the credit loss impairment model on a modified retrospective basis and recorded a $3 million cumulative effect adjustment to reduce retained earnings as of the adoption date. The Company adopted the available-for-sale debt security impairment model on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated operating results, cash flows or financial condition. See Note 1 ‘‘Significant Accounting Policies’’ to the unaudited condensed consolidated financial statements for a discussion of the adoption of this new accounting standard and associated updates to the Company’s accounting policies from those previously disclosed in the 2019 Form 10-K.

Recoverability of Goodwill

During the three months ended September 30, 2020, the Company performed its required annual impairment test of goodwill. The results of this impairment test indicated that there was no impairment of goodwill as of the testing date. The goodwill impairment test resulted in the fair values of all of the Company’s reporting units exceeding their carrying values by significant margins, with the exception of the Commercial Business and LTC reporting units, which exceeded their carrying values by approximately 6% and 12%, respectively.

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The fair value of the reporting units is estimated using a combination of a discounted cash flow method and a market multiple method. The determination of the fair value of the reporting units requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include the selection of appropriate peer group companies; control premiums and valuation multiples appropriate for acquisitions in the industries in which the Company competes; discount rates; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, income taxes, capital expenditures and future working capital requirements. When determining these assumptions and preparing these estimates, the Company considers each reporting unit’s historical results and current operating trends; consolidated revenues, profitability and cash flow results and forecasts; and industry trends. The Company’s estimates can be affected by a number of factors, including general economic and regulatory conditions; the risk-free interest rate environment; the Company’s market capitalization; efforts of customers and payers to reduce costs, including their prescription drug costs, and/or increase member co-payments; the continued efforts of competitors to gain market share and consumer spending patterns.

In connection with the Aetna Acquisition in November 2018, the Company added the Health Care Benefits segment which includes the Commercial Business reporting unit. The transaction was accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values at the date of acquisition. As a result, at the time of the acquisition the fair value of the Commercial Business reporting unit was equal to its carrying value. The Company has experienced declines in its Commercial Insured medical membership subsequent to the closing date of the Aetna Acquisition and may continue to do so for a number of reasons, including as a result of the competitive Commercial business environment. In addition, COVID-19 has had and may continue to have an adverse impact on medical membership on the Commercial business due to reductions in workforce at existing customers (including due to business failures) as well as reduced willingness to change benefit providers by prospective customers. The Company’s fair value estimate is sensitive to significant assumptions including changes in medical membership, revenue growth rate, operating income and the discount rate. Although the Company believes the financial projections used to determine the fair value of the Commercial Business reporting unit in the third quarter of 2020 were reasonable and achievable, the challenges described above may affect the Company’s ability to increase medical membership or operating income in the Commercial Business reporting unit at the rate estimated when such goodwill impairment test was performed and may continue to do so.

The LTC reporting unit continues to experience industry-wide challenges that have impacted management’s ability to grow the business at the rate that was originally estimated when the Company acquired Omnicare Inc. Those challenges included lower client retention rates, lower occupancy rates in skilled nursing facilities, the deteriorating financial health of numerous skilled nursing facility customers which resulted in a number of customer bankruptcies in 2018, and continued facility reimbursement pressures. COVID-19 has also had an adverse impact on the financial health of the Company’s long-term care facility customers due to declines in occupancy rates and increased operating expenses. A number of these customers have relied on supplemental liquidity sources such as grants and advance Medicare payments under programs expanded or created under the CARES Act to maintain adequate liquidity during the COVID-19 pandemic and may require additional sources of liquidity throughout the duration of the COVID-19 pandemic.

Although the Company believes the financial projections used to determine the fair value of the LTC reporting unit in the third quarter of 2020 were reasonable and achievable, the LTC reporting unit has faced challenges that affect the Company’s ability to grow the LTC reporting unit’s business at the rate estimated when such goodwill impairment test was performed and may continue to do so. These challenges and some of the key assumptions included in the Company’s financial projections to determine the estimated fair value of the LTC reporting unit include client retention rates; occupancy rates in skilled nursing facilities; the financial health of skilled nursing facility customers; facility reimbursement pressures; the Company’s ability to execute its senior living initiative; the Company’s ability to extract cost savings from labor productivity and other initiatives; the geographies impacted and the severity and duration of COVID-19; COVID-19’s impact on health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to COVID-19. The fair value of the LTC reporting unit also is dependent on market multiples of peer group companies and the risk-free interest rate environment, which impacts the discount rate used in the discounted cash flow valuation method. If the LTC reporting unit does not achieve its forecasts, it is reasonably possible in the near term that the goodwill of the LTC reporting unit could be deemed to be impaired by a material amount. As of September 30, 2020, the goodwill balance in the LTC reporting unit was $431 million.

The COVID-19 pandemic severely impacted global economic activity in the nine months ended September 30, 2020, including the businesses of some of the Company’s customers, and during the first half of the year caused significant volatility and negative pressure in the capital markets. In addition to adversely affecting the Company’s businesses, which may have a material adverse impact on the Company’s profitability and cash flows, these developments may adversely affect the timing and collectability of payments to the Company from customers, clients, government payers and members as a result of the impact of COVID-19 on them. For further information regarding the potential adverse impact of COVID-19 on the Company, please see

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“Risk Factors” in Part II, Item 1A of this report. The COVID-19 pandemic continues to evolve. We believe COVID-19’s impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the geographies impacted and the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to the pandemic. Those primary drivers are beyond our knowledge and control. As a result, the impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be adverse and material. COVID-19 also may result in legal and regulatory proceedings, investigations and claims against us. If the Company’s businesses, results of operations, financial condition and/or cash flows are materially adversely affected, the goodwill of the LTC and Commercial Business reporting units could be deemed to be impaired by a material amount.

For a full description of the Company’s other critical accounting policies, see “Critical Accounting Policies” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2019 Form 10-K.

Cautionary Statement Concerning Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a “safe harbor” for forward-looking statements, so long as (1) those statements are identified as forward-looking and (2) the statements are accompanied by meaningful cautionary statements that identify important factors that could cause actual results to differ materially from those discussed in the statement. We want to take advantage of these safe harbor provisions.

Certain information contained in this Quarterly Report on Form 10-Q (this “report”) is forward-looking within the meaning of the Reform Act or SEC rules. This information includes, but is not limited to: “COVID-19 and 2020 Outlook” and “Government Regulation” of Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in Part I, Item 2, “Quantitative and Qualitative Disclosures About Market Risk” included in Part I, Item 3, and “Risk Factors” included in Part II, Item 1A of this report. In addition, throughout this report and our other reports and communications, we use the following words or variations or negatives of these words and similar expressions when we intend to identify forward-looking statements:

·	Anticipates	·	Believes	·	Can	·	Continue	·	Could
·	Estimates	·	Evaluate	·	Expects	·	Explore	·	Forecast
·	Guidance	·	Intends	·	Likely	·	May	·	Might
·	Outlook	·	Plans	·	Potential	·	Predict	·	Probable
·	Projects	·	Seeks	·	Should	·	View	·	Will

All statements addressing the future operating performance of CVS Health or any segment or any subsidiary and/or future events or developments, including statements relating to the projected impact of COVID-19 on the Company’s businesses, investment portfolio, operating results, cash flows and/or financial condition; statements relating to corporate strategy; statements relating to future revenue or adjusted revenue, operating income or adjusted operating income, earnings per share or adjusted earnings per share, Pharmacy Services segment business, sales results and/or trends and/or operations, Retail/LTC segment business, sales results and/or trends and/or operations, Health Care Benefits segment business, sales results and/or trends, medical cost trends, medical membership, Medicare Part D membership, medical benefit ratios and/or operations, incremental investment spending, interest expense, effective tax rate, weighted-average share count, cash flow from operations, net capital expenditures, cash available for debt repayment, integration synergies, net synergies, integration costs, enterprise modernization, transformation, leverage ratio, cash available for enhancing shareholder value, inventory reduction, turn rate and/or loss rate, debt ratings, the Company’s ability to attract or retain customers and clients, store development and/or relocations, new product development, and the impact of industry and regulatory developments; and statements expressing optimism or pessimism about future operating results or events, are forward-looking statements within the meaning of the Reform Act.

Forward-looking statements rely on a number of estimates, assumptions and projections concerning future events, and are subject to a number of significant risks and uncertainties and other factors that could cause actual results to differ materially from those statements. Many of these risks and uncertainties and other factors are outside our control. Certain of these risks and uncertainties and other factors are described under “Risk Factors” included in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and/or under “Risk Factors” included in Part II, Item 1A of this report; these are not the only risks and uncertainties we face. There can be no assurance that the Company has identified all the risks that affect it. Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be

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immaterial also may adversely affect the Company’s businesses. If any of those risks or uncertainties develops into actual events, those events or circumstances could have a material adverse effect on the Company’s businesses, operating results, cash flows, financial condition and/or stock price, among other effects.

You should not put undue reliance on forward-looking statements. Any forward-looking statement speaks only as of the date of this report, and we disclaim any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events, uncertainties or otherwise.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

The Company’s earnings and financial condition are exposed to interest rate risk, credit quality risk, market valuation risk, foreign currency risk, commodity risk and operational risk.

Evaluation of Interest Rate and Credit Quality Risk

The Company manages interest rate risk by seeking to maintain a tight match between the durations of assets and liabilities when appropriate. The Company manages credit quality risk by seeking to maintain high average credit quality ratings and diversified sector exposure within its debt securities portfolio. In connection with its investment and risk management objectives, the Company also uses derivative financial instruments whose market value is at least partially determined by, among other things, levels of or changes in interest rates (short-term or long-term), duration, prepayment rates, equity markets or credit ratings/spreads. The Company’s use of these derivatives is generally limited to hedging risk and has principally consisted of using interest rate swaps, treasury rate locks, forward contracts, futures contracts, warrants, put options and credit default swaps. These instruments, viewed separately, subject the Company to varying degrees of interest rate, equity price and credit risk. However, when used for hedging, the Company expects these instruments to reduce overall risk.

Investments

The Company’s investment portfolio supported the following products at September 30, 2020 and December 31, 2019:

In millions	September 30, 2020		December 31, 2019
Experience-rated products	$	1,046	$	1,100
Remaining products	22,001		18,587
Total investments	$	23,047	$	19,687

Investment risks associated with experience-rated products generally do not impact the Company’s operating results. The risks associated with investments supporting experience-rated pension and annuity products in the large case pensions business in the Company’s Corporate/Other segment are assumed by the contract holders and not by the Company (subject to, among other things, certain minimum guarantees). Assets supporting experience-rated products may be subject to contract holder or participant withdrawals.

The debt securities in the Company’s investment portfolio had an average credit quality rating of A at both September 30, 2020 and December 31, 2019 with approximately $6.0 billion and $4.4 billion rated AAA at September 30, 2020 and December 31, 2019, respectively. The debt securities that were rated below investment grade (that is, having a credit quality rating below BBB-/Baa3) were $1.7 billion and $1.2 billion at September 30, 2020 and December 31, 2019, respectively (of which 2% and 4% at September 30, 2020 and December 31, 2019, respectively, supported experience-rated products).

At September 30, 2020 and December 31, 2019, the Company held $322 million and $333 million, respectively, of municipal debt securities that were guaranteed by third parties, representing 2% of total investments at both September 30, 2020 and December 31, 2019. These securities had an average credit quality rating of AA at both September 30, 2020 and December 31, 2019 with the guarantee. These securities had an average credit quality rating of A and A+ at September 30, 2020 and December 31, 2019, respectively, without the guarantee. The Company does not have any significant concentration of investments with third party guarantors (either direct or indirect).

The Company generally classifies debt securities as available for sale, and carries them at fair value on the unaudited condensed consolidated balance sheets. At both September 30, 2020 and December 31, 2019, less than 1% of debt securities were valued using inputs that reflect the Company’s assumptions (categorized as Level 3 inputs in accordance with accounting principles generally accepted in the United States of America). See Note 4 ‘‘Fair Value’’ included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for additional information on the methodologies and key assumptions used to determine the fair value of investments. For additional information related to investments, see Note 3 ‘‘Investments’’ to the unaudited condensed consolidated financial statements.

The Company regularly reviews debt securities in its portfolio to determine whether a decline in fair value below the cost basis or carrying value has occurred. If a debt security is in an unrealized loss position and the Company has the intent to sell the security, or it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis, the amortized cost basis of the security is written down to its fair value and the difference is recognized in net income. If a debt

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security is in an unrealized loss position and the Company does not have the intent to sell and it is more likely than not that the Company will not have to sell such security before recovery of its amortized cost basis, the Company bifurcates the impairment into credit-related and non-credit related components. The amount of the credit-related component is recorded as an allowance for credit losses and recognized in net income, and the amount of the non-credit related component is included in other comprehensive income. The accounting for and measurement of credit losses on financial instruments is considered a critical accounting policy. See Note 1 ‘‘Significant Accounting Policies’’ to the unaudited condensed consolidated financial statements for a discussion of the Company’s accounting policy for debt securities.

Evaluation of Market Valuation Risks

The Company regularly evaluates its risk from market-sensitive instruments by examining, among other things, levels of or changes in interest rates (short-term or long-term), duration, prepayment rates, equity markets and/or credit ratings/spreads. The Company also regularly evaluates the appropriateness of investments relative to management-approved investment guidelines (and operates within those guidelines) and the business objectives of its portfolios.

On a quarterly basis, the Company reviews the impact of hypothetical net losses in its investment portfolio on the Company’s consolidated near-term financial condition, operating results and cash flows assuming the occurrence of certain reasonably possible changes in near-term market rates and prices. Interest rate changes (whether resulting from changes in treasury yields or credit spreads or other factors) represent the most material risk exposure category for the Company. The Company has estimated the impact on the fair value of market sensitive instruments based on the net present value of cash flows using a representative set of likely future interest rate scenarios. The assumptions used were as follows: an immediate increase of 100 basis points in interest rates (which the Company believes represents a moderately adverse scenario) and an immediate decrease of 15% in prices for publicly traded domestic equity securities.

Assuming an immediate increase of 100 basis points in interest rates, the theoretical decline in the fair values of market sensitive instruments at September 30, 2020 is as follows:

•The fair value of long-term debt would decline by approximately $5.2 billion ($6.5 billion pretax). Changes in the fair value of long-term debt do not impact the Company’s operating results or financial condition.

•The theoretical reduction in the fair value of interest rate sensitive investments partially offset by the theoretical reduction in the fair value of interest rate sensitive liabilities would result in a net decline in fair value of approximately $480 million ($605 million pretax) related to continuing non-experience-rated products. Reductions in the fair value of investment securities would be reflected as an unrealized loss in equity, as the Company classifies these debt securities as available for sale. The Company does not record liabilities at fair value.

If the value of the Company’s publicly traded domestic equity securities were to decline by 15%, this would result in a net decline in fair value of $4 million ($5 million pretax).

Based on overall exposure to interest rate risk and equity price risk, the Company believes that these changes in market rates and prices would not materially affect consolidated near-term financial condition, operating results or cash flows as of September 30, 2020.

Evaluation of Foreign Currency and Commodity Risk

At September 30, 2020 and December 31, 2019, the Company did not have any material foreign currency exchange rate or commodity derivative instruments in place and believes its exposure to foreign currency exchange rate risk is not material.

At September 30, 2020 and December 31, 2019, 5.3% and 6.1%, respectively, of the Company’s investment portfolio was comprised of investments that have exposure to the oil and gas industry, with more than half that amount comprised of investment grade rated debt securities. These exposures are experiencing varied degrees of financial strains in the current depressed oil and gas price environment, and the likelihood of the Company’s portfolio incurring additional realized capital losses on these exposures may increase if such depressed prices persist and/or decline further.

Evaluation of Operational Risks

The Company also faces certain operational risks. Those risks include risks related to the COVID-19 pandemic and risks related to information security, including cybersecurity.

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The spread of COVID-19, or actions taken to mitigate its spread, could have material and adverse effects on our ability to operate our businesses effectively, including as a result of the complete or partial closure of facilities or labor shortages. Disruptions in our supply chains, our distribution chains and/or public and private infrastructure, including communications, financial services and supply chains, could materially and adversely impact our business operations. We have transitioned a significant subset of our colleagues to a remote work environment in an effort to mitigate the spread of COVID-19, as have a significant number of our third-party service providers, which may amplify certain risks to our businesses, including an increased demand for information technology resources, increased risk of phishing and other cyber attacks, increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information about us or our medical members or other third-parties and increased risk of business interruptions.

The Company and its vendors have experienced and continue to experience a variety of cyber attacks, and the Company and its vendors expect to continue to experience cyber attacks going forward. Among other things, the Company and its vendors have experienced automated attempts to gain access to public facing networks, brute force, SYN flood and distributed denial of service attacks, attempted malware infections, vulnerability scanning, ransomware attacks, spear-phishing campaigns, mass reconnaissance attempts, injection attempts, phishing, PHP injection and cross-site scripting. The Company also has seen an increase in attacks designed to obtain access to consumers’ accounts using illegally obtained demographic information. The Company is dedicating and will continue to dedicate significant resources and incur significant expenses to maintain and update on an ongoing basis the systems and processes that are designed to mitigate the information security risks it faces and protect the security of its computer systems, software, networks and other technology assets against attempts by unauthorized parties to obtain access to confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage. The impact of cyber attacks has not been material to the Company’s operations or operating results through September 30, 2020. The Board of Directors of CVS Health Corporation and its Audit Committee and Nominating and Corporate Governance Committee are regularly informed regarding the Company’s information security policies, practices and status.

Item 4.Controls and Procedures

Evaluation of disclosure controls and procedures: The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a‑15(f) and 15d‑15(f)) as of September 30, 2020, have concluded that as of such date the Company’s disclosure controls and procedures were adequate and effective and designed to provide reasonable assurance that material information relating to the Company and its subsidiaries would be made known to such officers on a timely basis.

Changes in internal control over financial reporting: There has been no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that occurred in the three months ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II.Other Information

Item 1.Legal Proceedings

The information contained in Note 10 ‘‘Commitments and Contingencies’’ contained in “Notes to Condensed Consolidated Financial Statements (Unaudited)” in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference herein.

Item 1A.Risk Factors

The following information supplements the risk factors described in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 10-K”) and should be read in conjunction with the risk factors described in the 2019 10-K. The COVID-19 pandemic underscores and amplifies certain risks we face in our businesses, including those discussed in the 2019 10-K. Due to the unprecedented nature of the pandemic, we cannot identify all of the risks we face from the pandemic.

The spread of, impact of and response to coronavirus disease 2019, or COVID-19, underscores and amplifies certain risks we face, including those discussed in our Form 10-K for the fiscal year ended December 31, 2019. The impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be material and adverse.

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Coronavirus disease 2019 (“COVID-19”) has spread to every state in the U.S., has been declared a pandemic by the World Health Organization and has severely impacted, and is expected to continue to severely impact, the economies of the U.S. and other countries around the world.

The legislative and regulatory environment governing our businesses is dynamic and changing frequently, including the Families First Coronavirus Response Act (the “Families First Act”), the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and mandated increases to the medical services we must pay for without a corresponding increase in the premiums we receive in our Health Care Benefits insurance products where we assume all or a majority of the risk for medical and dental care costs (our “Insured” products). As a result of COVID-19, including legislative and/or regulatory responses to COVID-19, the premiums we charge in our Insured Health Care Benefits products may prove to be insufficient to cover the cost of medical services delivered to our Insured medical members, which may increase significantly as a result of higher utilization rates of medical facilities and services and other increases in associated hospital and pharmaceutical costs. Federal, state and local governmental policies and initiatives to reduce the transmission of COVID-19, including shelter-in-place orders and social distancing directives, may not effectively combat the severity and/or duration of the COVID-19 pandemic and have resulted in, among other things, a reduction in utilization of medical services (“utilization”) that is discretionary, the cancellation of elective medical procedures, reduced customer traffic and front store sales in our retail pharmacies, our customers being ordered to close or severely curtail their operations, the adoption of work-from-home policies and a reduction in diagnostic reporting due to reductions in health care provider visits and restrictions on our access to providers’ medical records, all of which impact our businesses. Among other impacts of these policies and initiatives on our businesses, we expect changes in medical claims submission patterns and an adverse impact on (i) drug utilization due to the reduction in discretionary visits with health care providers; (ii) front store sales as a result of reduced customer traffic in our retail pharmacies due to shelter-in-place orders and COVID-19 related unemployment; (iii) medical membership in our Health Care Benefits segment and covered lives in our PBM clients due to reductions in workforce at our existing customers (including due to business failures) as well as reduced willingness to change benefits providers by prospective customers; (iv) benefit costs due to COVID-19 related support programs we have put in place for our medical members and mandated increases to the medical services we must pay for without a corresponding increase in the premiums we receive in our Insured Health Care Benefits products; and (v) the amount, timing and collectability of payments to the Company from customers, clients, government payers and members as a result of the impact of COVID-19 on them. Over time, these policies and initiatives also may cause us to experience increased benefit costs and/or decreased revenues in our Health Care Benefits segment if, as a result of our medical members not seeing their health care providers as a result of COVID-19, we are unable to implement clinical initiatives to manage benefit costs and chronic conditions of our medical members and appropriately document their risk profiles.

In addition, in response to COVID-19, during the first half of 2020, we began to offer our medical members expanded benefit coverage and became obligated by governmental action to provide other additional coverage. This expanded benefit coverage is being provided without a corresponding increase in the premiums we receive in our Insured Health Care Benefits products. We also are taking actions designed to help provide financial and administrative relief for the health care provider community. Such measures and any further steps we take or are required to take to expand or otherwise modify the services delivered to our Health Care Benefits members, provide relief for the health care provider community, or in connection with the relaxation of shelter-in-place orders and social distancing directives and other restrictions on movement and economic activity intended to reduce the spread of COVID-19, including the potential for widespread testing, and vaccination once available, as a component of lifting those measures, could adversely impact our benefit costs, medical benefit ratio and operating results.

The various initiatives we have implemented to slow and/or reduce the impact of COVID-19, such as colleagues working remotely and installing protective equipment in our retail pharmacies, and the COVID-19-related support programs we have put in place for our customers, medical members and colleagues have increased our operating expenses and reduced the efficiency of our operations. Our operating results will continue to be adversely affected so long as these initiatives continue or if they are expanded. In addition, the adverse economic conditions in the U.S. and abroad caused by COVID-19 have had, and may continue to have, an adverse impact on our net investment income and the value of our investment portfolio.

The spread of COVID-19, or actions taken to mitigate its spread, could have material and adverse effects on our ability to operate our businesses effectively, including as a result of the complete or partial closure of facilities, labor shortages and/or financial difficulties experienced by third-party service providers. Disruptions in our supply chains, our distribution chains and/or public and private infrastructure, including communications, financial services and supply chains, could materially and adversely impact our business operations. We have transitioned a significant subset of our colleagues to a remote work environment in an effort to mitigate the spread of COVID-19, as have a significant number of our third-party service providers, which may amplify certain risks to our businesses, including an increased demand for information technology resources, increased risk of phishing and other cybersecurity attacks, increased risk of unauthorized dissemination of sensitive personal

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information or proprietary or confidential information about us or our medical members or other third-parties and increased risk of business interruptions.

The COVID-19 pandemic continues to evolve. We believe COVID-19’s impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the geographies impacted and the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to the pandemic. Those primary drivers are beyond our knowledge and control. As a result, the impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be adverse and material. COVID-19 also may result in legal and regulatory proceedings, investigations and claims against us.

A number of factors, many of which are beyond our control, including COVID-19 and related testing and vaccinations, when available, contribute to rising health care and other benefit costs. We may not be able to accurately forecast health care and other benefit costs, which could adversely affect our Health Care Benefits segment’s operating results. There can be no assurance that future health care and other benefits costs will not exceed our projections.

As a result of COVID-19, the current economic environment is adverse and less predictable than recently experienced, which has caused and may continue to cause unanticipated and significant volatility in our health care and other benefits costs, including COVID-19 related testing and vaccination (when available) and post-acute care skilled nursing facility and behavioral health costs. Premiums for our Insured Health Care Benefits products, which comprised 91% of our Health Care Benefits revenues for 2019, 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. These forecasts are typically developed several months before the fixed premium period begins, are influenced by historical data (and recent historical data in particular), are dependent on our ability to anticipate and detect medical cost trends and changes in our members’ behavior and health care utilization patterns and medical claim submission patterns and require a significant degree of judgment. For example, our revenue on Medicare policies is based on bids submitted in June of the year before the contract year. Cost increases in excess of our projections cannot be recovered in the fixed premium period through higher premiums. As a result, our profits are particularly sensitive to the accuracy of our forecasts of the increases in health care and other benefit costs that we expect to occur and our ability to anticipate and detect medical cost trends. For 2020 those forecasts do not include any projections for COVID-19 related costs, including COVID-19 related testing and vaccination costs, post-acute care skilled nursing facility and behavioral health costs and government mandated and voluntary expansions of benefits coverage which may be significant. During periods such as 2020 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 a result of COVID-19, 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. There can be no assurance regarding the accuracy of the health care or other benefit cost projections reflected in our pricing, and our health care and other benefit costs (including COVID-19 related testing and vaccination (when available) and post-acute care skilled nursing facility and behavioral health costs) are affected by COVID-19 and other external events over which we have no control. Even relatively small differences between predicted and actual health care and other benefit costs as a percentage of premium revenues can result in significant adverse changes in our Health Care Benefits segment’s operating results.

A number of factors contribute to rising health care and other benefit costs, including COVID-19, previously uninsured members entering the health care system, changes in members’ behavior and health care utilization patterns, turnover in our membership, additional government mandated benefits or other regulatory changes (including under the Families First Act and the CARES Act), changes in the health status of our members, the aging of the population and other changing demographic characteristics, advances in medical technology, increases in the number and cost of prescription drugs (including specialty pharmacy drugs and ultra-high cost drugs and therapies), direct-to-consumer marketing by drug manufacturers, the increasing influence of social media on our members’ health care utilization and other behaviors, changes in health care practices and general economic conditions (such as inflation and employment levels). 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 or repeal or replacement of the ACA that increase the uninsured population may amplify this problem. Other factors that affect our health care and other benefit costs include epidemics or other pandemics, changes as a result of the ACA, changes to the ACA and other changes in the regulatory environment, the evolution toward a consumer driven business model, new technologies, influenza related health care costs (which may be substantial and were higher than we projected for the 2019-2020 influenza season), clusters of high-cost cases, health care provider and member fraud, and numerous other factors that are or may be beyond our control.

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Furthermore, if we are not able to accurately and promptly anticipate and detect medical cost trends or accurately estimate the cost of incurred but not yet reported claims or reported claims that have not been paid, our ability to take timely corrective actions to limit future health care costs and reflect our current benefit cost experience in our pricing process may be limited, which would further amplify the extent of any adverse impact on our operating results. These risks are particularly acute during periods such as 2020 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 a result of COVID-19. Such risks are further magnified by the ACA and other existing and future legislation and regulations that limit our ability to price for our projected and/or experienced increases in utilization and/or medical cost trends.

There can be no assurance that future health care and other benefits costs will not exceed our projections.

Adverse economic conditions in the U.S. and abroad can materially and adversely impact our businesses, operating results, cash flows and financial condition, and we do not expect these conditions to improve in the near future.

The COVID-19 pandemic, the availability and cost of credit and other capital, higher unemployment rates and other factors have contributed to adverse conditions in the global economy and significantly diminished expectations for the global economy, and particularly the U.S. economy, at least through the end of 2020 and possibly longer. Our customers, medical providers and the other companies with which we do business are generally headquartered in the U.S.; however many of our largest customers are global companies with operations around the world. As a result, adverse economic conditions in the U.S. and abroad, including those caused by COVID-19, can materially and adversely impact our businesses, operating results, cash flows and financial condition, including:

•In our Pharmacy 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 Retail/LTC 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 and adversely affecting the financial health of our LTC pharmacy customers.

•By leading to reductions in workforce by our existing customers (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.

•By leading 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 to retain or obtain their business.

•By leading customers and potential customers of our Retail/LTC and Health Care Benefits segments to purchase fewer products and/or products that generate less profit for us than the ones they currently purchase or otherwise would have purchased.

•By leading 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.

•In our Health Care Benefits segment, by causing unanticipated increases and volatility in utilization of medical and other covered services, including COVID-19 related testing, vaccination (when available) and behavioral health services, by our medical members, changes in medical claim submission patterns and/or increases in medical unit costs and/or provider behavior, 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.

•By increasing medical unit costs and causing changes in provider behavior in our Health Care Benefits segment as hospitals and other providers attempt to maintain revenue levels in their efforts to adjust to their own COVID-19-related and other economic challenges.

•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 weakening the ability of our customers, including self-insured customers in our Health Care Benefits segment, medical providers and the other companies with which we do business as well as our medical members to perform their obligations to us or causing them not to perform those obligations, either of which could reduce our operating results.

•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.

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•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 causing, over time, inflation that could cause interest rates to increase and thereby increase our interest expense and reduce our operating results, as well as decrease the value of the debt securities we hold in our investment portfolio, which would reduce our operating results and/or adversely affect our financial condition.

Furthermore, reductions in workforce by our customers can 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 a medical benefit ratio (“MBR”) that is significantly higher than our overall Commercial MBR.

There can be no assurance that our health care and other benefit costs, businesses, operating results, cash flows and/or financial condition will not be materially and adversely impacted by these economy-related conditions or other factors.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

(c) Stock Repurchases

The following table presents the total number of shares purchased in the three months ended September 30, 2020, the average price paid per share and the approximate dollar value of shares that still could have been purchased at the end of the applicable fiscal period, pursuant to the share repurchase program authorized by CVS Health Corporation’s Board of Directors on November 2, 2016. See Note 7 ‘‘Shareholders’ Equity’’ contained in “Notes to Condensed Consolidated Financial Statements (Unaudited)” in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Fiscal Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2020 through July 31, 2020	—	$	—	—	$	13,869,392,446
August 1, 2020 through August 31, 2020	—	$	—	—	$	13,869,392,446
September 1, 2020 through September 30, 2020	—	$	—	—	$	13,869,392,446
	—			—

Item 3.        Defaults Upon Senior Securities

None.

Item 4.        Mine Safety Disclosures

Not Applicable.

Item 5.        Other Information

None.

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Item 6. Exhibits

The exhibits listed in this Item 6 are filed as part of this Quarterly Report on Form 10-Q. Exhibits marked with an asterisk (*) are management contracts or compensatory plans or arrangements. Exhibits other than those listed are omitted because they are not required to be listed or are not applicable. Pursuant to Item 601(b)(4)(iii) of regulation S-K, the Registrant hereby agrees to furnish to the Securities and Exchange Commission a copy of any omitted instrument that is not required to be listed.

INDEX TO EXHIBITS

4	Instruments defining the rights of security holders, including indentures
4.1	Form of the Registrant’s 2027 Note (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on August 21, 2020).
4.2	Form of the Registrant’s 2030 Note (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on August 21, 2020).
4.3	Form of the Registrant’s 2040 Note (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on August 21, 2020).
10	Material Contracts
10.1	Form of Performance Stock Unit Agreement - Annual Grant between the Registrant and selected employees of the Registrant.
15	Letter re: unaudited interim financial information
15.1	Letter from Ernst & Young LLP acknowledging awareness of the use of a report dated November 6, 2020 related to their reviews of interim financial information.
31	Rule 13a-14(a)/15d-14(a) Certifications
31.1	Certification by the Chief Executive Officer.
31.2	Certification by the Chief Financial Officer.
32	Section 1350 Certifications
32.1	Certification by the Chief Executive Officer.
32.2	Certification by the Chief Financial Officer.
101
101	The following materials from the CVS Health Corporation Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2020 formatted in Inline XBRL: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders’ Equity and (vi) the related Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104
104	Cover Page Interactive Data File - The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL (included as Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CVS HEALTH CORPORATION

Date:	November 6, 2020	By:	/s/ Eva C. Boratto
			Eva C. Boratto
			Executive Vice President and Chief Financial Officer

EX-10.1

Exhibit 10.1

CVS HEALTH CORPORATION

PERFORMANCE STOCK UNIT AGREEMENT– ANNUAL GRANT

GRANT DATE: xx/xx/xxxx

1.Pursuant and subject to the provisions of the 2017 Incentive Compensation Plan (the “Plan”), of CVS Health Corporation (the “Company”), on the date set forth above (the “Grant Date”), the Company has awarded and hereby evidences the Performance Stock Unit (“PSU”) Award to the person named below (the “Participant”), subject to the terms and conditions set forth and incorporated in this Performance Stock Unit agreement (this “Agreement”). The Plan is hereby made a part hereof, and the Participant agrees to be bound by all the provisions of the Plan. Capitalized terms not otherwise defined herein shall have the meaning assigned to such term(s) in the Plan. On the Grant Date specified above, the fair value, as determined utilizing the methodology approved by the Management Planning and Development Committee of the Board of Directors (the “Committee”) or its delegate, of each PSU equals $xx.xx.

Participant:	Name
Employee ID:	#####
Target Number of PSUs (#):	#####

2.Each PSU represents a right to a future payment of one share (“Share”) of Common Stock ($0.01 par value) of the Company, subject to required tax withholding. The actual number of Shares (if any) that the Participant receives shall be subject to the terms and conditions of the Plan and this Agreement, including, without limitation, the Company’s achievement of the performance goals set forth in Appendix A and Section 10 of this Agreement.

3.(a)    Subject to the terms and conditions of the Plan and this Agreement and subject to the Participant’s continued employment, the PSUs shall vest and become non-forfeitable on April 1, 2023 or such other date as may be provided in Section 6 (the “Vesting Date”), based on the level of achievement of the performance goals set forth in Appendix A (and as determined by reference to Appendices B and C), and shall be determined by multiplying the number of PSUs that are subject to this Agreement by the applicable performance adjustment shown in Appendix A for the attained level of the performance goals. The “Performance Period” shall be the three-year period commencing on January 1, 2020 and ending on December 31, 2022.

(b)    The Participant shall be entitled to receive (and the Company shall deliver to the Participant) the Shares, subject to any applicable withholdings, as soon as administratively practicable following the Vesting Date, unless delivery of the Shares has been deferred in accordance with Section 4 below (the date of such delivery of the Shares being hereafter referred to as the “Settlement Date”).

(c)    Notwithstanding anything herein to the contrary, if the Participant is subject to the reporting requirements under Section 16 of the Securities Exchange Act of 1934, as amended, or becomes subject to such reporting obligations at any time during the Performance Period, the Participant agrees and covenants that as a condition to the receipt of the award of PSUs and the payment of the PSUs hereunder, the Participant shall not sell or otherwise transfer any Shares issued and transferred to the Participant pursuant to this Agreement (including with respect to any Shares that are deferred under Section 4(a)) until the second anniversary of

PSU Award Agreement_2020

the Settlement Date (such period hereinafter referred to as the “Holding Period”), except that the Participant shall be permitted, prior to the end of the Holding Period, (a) to sell or transfer shares to pay applicable tax and social security withholdings, if any, with respect to such settlement (or, alternatively, if the Company withholds such Shares pursuant to Section 5 of this Agreement, the requirements in this Section 3(c) not to sell or otherwise transfer any Shares shall only apply to the number of such Shares delivered to the Participant (i.e., after such withholding of Shares)), (b) to sell or transfer shares upon a Change in Control, or (c) to transfer Shares to the Participant’s personal brokerage account. The Participant’s attempt to assign or transfer Shares subject to this Agreement, either voluntarily or involuntarily, contrary to the provisions hereof, shall be null and void and without effect. The Company may, in its sole discretion, impose restrictions on the assignment or transfer of Shares consistent with the provisions hereof, including, without limitation, by or through the transfer agent for such Shares or by means of legending stock certificates or otherwise.

4.(a)    In accordance with rules promulgated by the Committee, the Participant, to the extent eligible under the CVS Health Deferred Stock Compensation Plan, may elect to defer delivery of Shares in settlement of PSUs covered by this Agreement. Any such deferred delivery date elected by the Participant shall become the Settlement Date for purposes of this Agreement.

(b)    To the extent dividends are paid on such deferred Shares following the Vesting Date and prior to the Settlement Date, the Participant shall be entitled to receive a number of additional deferred Shares equal to: (x) the amount of dividend per Share as declared by the Company’s Board of Directors on the Company’s common stock multiplied by (y) the number of deferred Shares held by the Participant on the record date of such dividend, divided by (z) the Fair Market Value of a Share on such dividend payment date.

5.On the Settlement Date, the number of Shares to be delivered by the Company to the Participant shall be reduced by the smallest number of Shares having a Fair Market Value at least equal to the dollar amount of federal, state and local tax withholding required to be withheld by the Company with respect to such PSUs on such date.

6.(a)     Except as provided in Sections 6(b)–(e) below, if, for any reason, the Participant’s employment with the Company and any subsidiary of the Company terminates, all PSUs not then vested in accordance with Section 3 above shall be immediately forfeited.

(b)In the event the Participant’s employment with the Company and any subsidiary of the Company terminates by reason of death, PSUs not then vested in accordance with Section 3 shall become immediately vested based upon target performance as of the date of the Participant’s death, and shall become settled upon thirty (30) days of the Participant’s death.

(c)In the event the Participant’s employment with the Company and any subsidiary of the Company terminates by reason of a deemed “Qualified Retirement” or involuntary termination of employment and the Participant is entitled to severance, PSUs shall vest on a pro-rata basis as of the Participant’s termination of employment date, which is the last day that the Participant is employed by the Company and any subsidiary of the Company, as follows: the total number of PSUs that the Participant shall be entitled to shall be equal to the number of PSUs based upon actual performance as of the end of the Performance Period multiplied by the following fraction: (A) the numerator shall be the number of months elapsed as of the termination of employment date since the beginning of the Performance Period and (B) the denominator shall be the total number of months in the Performance Period. For purposes of this calculation, the number of months in the numerator in sub-section (A) above shall include any partial month in which the Participant has worked (for example, if the time elapsed between the beginning of the Performance Period and the retirement date is eight (8) months and five (5) days, the numerator in sub-section (A) above shall be nine (9)).

PSU Award Agreement_2020

“Qualified Retirement” shall mean termination of employment on or after attainment of age fifty-five (55) with at least ten (10) years of continuous service, or attainment of age sixty (60) with at least five (5) years of continuous service or such other terms as may be determined by the Company and set forth in the applicable award agreement; provided that:  if the Participant elects to terminate his or her employment voluntarily, the Participant has provided the Company with at least twelve (12) months advance notice, in accordance with the provisions of Section 9 below, of his or her retirement date or such other term of advance notice as is determined by the Chief Human Resources Officer of the Company. Any Shares represented by the pro-rated PSUs that vest under this section shall settle on the Settlement Date that would have applied under the original schedule set forth in Section 3 of this Agreement.

(d)        In the event the Participant’s employment with the Company and any subsidiary of the Company terminates by reason of total and permanent disability (as defined in the Company’s Long-Term Disability Plan, or, if not defined in such Plan, as defined by the Social Security Administration), the PSUs shall vest as of the employment termination date on a pro- rata basis as follows:  the number of PSUs based upon actual performance as of the end of the Performance Period multiplied by the following fraction:  (A) the numerator shall be the number of months elapsed as of the Participant’s termination date since the beginning of the Performance Period and (B) the denominator shall be the total number of months in the Performance Period.  For purposes of this calculation, the number of months in the numerator in sub-section (A) above shall include any partial month in which the Participant has worked.  For example, if the time elapsed between the beginning of the Performance Period and the termination date is eight (8) months and five (5) days, the numerator in sub-section (A) above shall be nine (9).  Any Shares represented by PSUs that vest under this section shall settle on the Settlement Date that would have applied under the original schedule set forth in Section 3 of this Agreement.

(e)    Notwithstanding the above, if the Participant experiences a Termination Without Cause or a Constructive Termination Without Cause within two (2) years following a Change in the provisions of the Plan with respect to Change in Control shall apply, and the Participant’s PSUs shall become fully vested with the performance goals and other conditions with respect to the PSUs being deemed to be met at target performance.

(f)    For purposes of this Section 6, transfer of the Participant’s employment from the Company to a subsidiary of the Company, transfer among or between subsidiaries of the Company, or transfer from a subsidiary of the Company to the Company shall not be treated as a termination of employment.

(g)    The Participant shall be responsible for any applicable withholding or other taxes that may become due as a result of PSUs that vest as of the Participant’s termination of employment date or thereafter.

7.A PSU does not represent an equity interest in the Company and carries no voting rights. The Participant shall have no rights of a shareholder with respect to the PSUs prior to the Vesting Date.

8.Neither the execution and delivery hereof nor the granting of the Award evidenced hereby shall constitute or be evidence of any agreement or understanding, express or implied, on the part of the Company or its subsidiaries to employ the Participant for any specific period.

9.Any notice required to be given hereunder to the Company shall be in writing. If by regular mail, any required notice shall be addressed to: CVS Health Corporation, Attention: Senior Director, Executive Compensation, One CVS Drive, Woonsocket, RI 02895. If by electronic mail, any notice required shall be sent to: equityadministration@cvshealth.com.

PSU Award Agreement_2020

Any notice required to be given hereunder to the Participant shall be addressed to such Participant at the address shown on the records of the Company, subject to the right of either party hereafter to designate, in writing, to the other, some other address.

10.All decisions and interpretations made by the Board of Directors or the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive on all persons. In the event of any inconsistency between the terms hereof and the provisions of the Plan, the Plan shall govern. Furthermore, the determination of the achievement of any performance goals under this Agreement, and the amounts used in making such determination, shall be in the Board of Directors’ or the Committee’s sole discretion and such determination shall be final, binding and conclusive for all purposes and upon all parties. The Committee (or, if applicable, the Chief Executive Officer of the Company) may, in its discretion, reduce or increase the amount of a settlement otherwise to be made in connection with the PSUs to the extent permissible under the Plan.

11.The award of PSUs pursuant to this Agreement is expressly subject to and contingent upon the requirement that the Participant shall have fully executed and delivered to the Company the Restrictive Covenant Agreement that may be required and provided by the Company. The applicable agreement containing the restrictive covenants that the Company may require in connection with this award is hereafter referred to as the “Restrictive Covenant Agreement”. 

If the Company intends to require the Participant to execute and deliver a new Restrictive Covenant Agreement in connection with the grant hereunder, the Company shall provide such new Restrictive Covenant Agreement to the Participant and the Participant agrees to execute and deliver such new Restrictive Covenant Agreement by the deadline set forth by the Company.  If the Participant is currently subject to a Restrictive Covenant Agreement and the Company does not require the Participant to execute and deliver a new Restrictive Covenant Agreement, then by accepting the award of PSUs, pursuant to this Agreement, the Participant affirms his or her Restrictive Covenant Agreement and intent to be bound by the restrictions in the Restrictive Covenant Agreement and to comply with all of its provisions. 

The Participant agrees that failure to execute and return the new Restrictive Covenant Agreement, if required, by the deadline set forth by the Company shall result in the immediate and irrevocable forfeiture of the PSU Award hereunder and any right to receive dividend equivalents or Shares with respect thereto.  Further, if the Participant violates any provision of the applicable Restrictive Covenant Agreement, any unvested PSUs will be immediately and irrevocably forfeited, and no payment of any kind, including Dividend Equivalents or Shares, shall be payable with respect thereto.  This Section shall not constitute the Company’s exclusive remedy for the Participant’s violation of the Restrictive Covenant Agreement. The Company reserves all rights to seek all available legal or equitable remedies in the event of the Participant’s violation or threatened violation of the Restrictive Covenant Agreement, including injunctive relief.

12.By accepting this Award, the Participant acknowledges that a copy of the Plan has been made available by the Company for the Participant’s reference and agrees to be bound by the terms and conditions set forth in this Agreement and the Plan as in effect from time to time.

13.By accepting this Award, the Participant further acknowledges that the Federal securities laws and/or the Company’s policies regarding trading in its securities may limit or restrict the Participant’s right to trade Shares, including, without limitation, sales of Shares acquired in connection with PSUs. The Participant agrees to comply with such Federal securities law requirements and the Company’s policies, as such laws and policies may be amended from time to time.

PSU Award Agreement_2020

14.The Company intends that this Agreement not violate any applicable provision of, or result in any additional tax or penalty under, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and that to the extent any provisions of this Agreement do not comply with Code Section 409A the Company shall make such changes in order to comply with Code Section 409A to the extent it considers reasonable. In all events, the provisions of the Company’s 409A Universal Definitions Document are hereby incorporated by reference and to the extent required to avoid a violation of the applicable rules under Section 409A by reason of Section 409A(a)(2)(B)(i) of the Code, payment of any amounts subject to Section 409A of the Code shall be delayed until the first business day of the seventh month immediately following the employment termination date. For purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment, references to the “termination of employment” (and corollary terms) shall be construed to refer to “separation from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)). Notwithstanding the foregoing, the Company makes no representations as to the tax treatment or consequences of any payment made hereunder, and the Participant, by accepting this Award, acknowledges that the Participant shall be solely responsible for same.

15.The Award subject to this PSU Agreement under the Plan shall be subject to the terms of the Company’s Recoupment Policy as it exists from time to time, which may require the Participant to immediately repay to the Company the value of any pre-tax economic benefit that he or she may derive from the Award. By accepting this Award, the Participant acknowledges that the Company’s Recoupment Policy has been made available for the Participant’s reference.

16.(a)     The Participant agrees that the Award covered by this Agreement is subject to the Company’s Recoupment Policy and the other terms and conditions set forth in this Agreement. In addition to and without limiting the other terms and conditions of this Agreement, if prior to final settlement and release from the Holding Period the Committee determines that the Participant has engaged in Detrimental Conduct (as defined below), the Committee, in its sole discretion, will be entitled to recover from the Participant some or all of the Shares (and any related dividends or dividend equivalents) paid to the Participant pursuant to this Agreement. All such determinations by the Committee will be final and binding.

(b)Detrimental Conduct. The Participant agrees that during any period in which PSUs (and any related dividend equivalents) remain outstanding and payable pursuant to this Agreement, including the Holding Period, the Participant shall not engage in Detrimental Conduct. For purposes of this Agreement, “Detrimental Conduct” means any one of the following: (i) any conduct that would constitute Cause; (ii) the commission of a criminal act by the Participant, whether or not performed in the workplace, that subjects, or if generally known, would subject the Company or its subsidiaries to public ridicule or embarrassment; (iii) intentional misconduct or conduct not taken in good faith and causing significant reputational harm to the Company or its subsidiaries; (iv) intentional violation, or negligent disregard, of the Company’s or its subsidiaries’ policies, rules and procedures, specifically including, but not limited to any of the Participant’s obligations under the Company’s Code of Conduct and workplace policies; or (v) any violation of the Participant’s Restrictive Covenant Agreement.

(c)Remedies. Payment of PSUs (and any related dividends or dividend equivalents) on the Settlement Date is specifically conditioned on the requirement that at all times prior to such Settlement Date, the Participant does not engage in Detrimental Conduct. In addition, releasing Shares delivered after the Holding Period is also specifically conditioned on the requirement that at all times prior to such release, the Participant does not engage in Detrimental Conduct. If the Committee determines in its reasonable business judgment that the Participant has failed to satisfy such requirements, then all or a portion of the PSUs (and

PSU Award Agreement_2020

any related dividends or dividend equivalents), or all or a portion of any Shares delivered in settlement thereof that are subject to the Holding Period, as of the date of such determination, shall be canceled and forfeited as of such date of determination. All such determinations by the Committee will be final and binding.

17.This Agreement shall be governed by the laws of Delaware, without giving effect to its choice of law provisions.

18.This Agreement shall be fully effective only upon the Participant’s formal acceptance of the terms and conditions set forth above as required by the Company.

By:
	Name
	Title
	CVS Health Corporation

Accepted by:
	Name
	Title
	CVS Health Corporation
	Date

PSU Award Agreement_2020

EX-15.1

Exhibit 15.1

Letter re: Unaudited Interim Financial Information

November 6, 2020

To the Shareholders and the Board of Directors of CVS Health Corporation

We are aware of the incorporation by reference in the Registration Statements (Form S-3ASR No. 333-238506 and Form S-8 Nos. 333-238507, 333-230035, 333-228622, 333-167746, 333-217853, 333-208805, 333-141481, 333-139470, 333-63664, 333-91253, 333-49407, 333-34927, and 333-28043) of CVS Health Corporation of our report dated November 6, 2020, relating to the unaudited condensed consolidated interim financial statements of CVS Health Corporation that is included in its Form 10-Q for the quarter ended September 30, 2020.

/s/ Ernst & Young LLP

Boston, Massachusetts

EX-31.1

Exhibit 31.1

Certification

I, Larry J. Merlo, President and Chief Executive Officer of CVS Health Corporation, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of CVS Health Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 6, 2020	/S/     LARRY J. MERLO
		Larry J. Merlo
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

I, Eva C. Boratto, Executive Vice President and Chief Financial Officer of CVS Health Corporation, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of CVS Health Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 6, 2020	/S/     EVA C. BORATTO
		Eva C. Boratto
		Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

The certification set forth below is being submitted in connection with the Quarterly Report of CVS Health Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2020 (the “Report”) solely for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

I, Larry J. Merlo, President and Chief Executive Officer of the Company, certify that, to the best of my knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 6, 2020	/S/    LARRY J. MERLO
		Larry J. Merlo
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION

The certification set forth below is being submitted in connection with the Quarterly Report of CVS Health Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2020 (the “Report”) solely for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

I, Eva C. Boratto, Executive Vice President and Chief Financial Officer of the Company, certify that, to the best of my knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 6, 2020	/S/    EVA C. BORATTO
		Eva C. Boratto
		Executive Vice President and Chief Financial Officer

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2020	Oct. 28, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	001-01011
Entity Registrant Name	CVS HEALTH CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	05-0494040
Entity Address, Address Line One	One CVS Drive,
Entity Address, City or Town	Woonsocket,
Entity Address, State or Province	RI
Entity Address, Postal Zip Code	02895
City Area Code	(401)
Local Phone Number	765-1500
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	CVS
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		1,308,913,498
Entity Central Index Key	0000064803
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues:
Premiums	$ 17,182	$ 15,539	$ 51,749	$ 47,612
Net investment income	204	263	550	805
Total revenues	67,056	64,810	199,152	189,887
Operating costs:
Cost of products sold	40,940	40,437	121,529	116,654
Benefit costs	14,396	12,850	40,534	39,396
Operating expenses	8,471	8,595	25,702	24,887
Total operating costs	63,807	61,882	187,765	180,937
Operating income	3,249	2,928	11,387	8,950
Interest expense	731	747	2,229	2,301
Loss on early extinguishment of debt	766	79	766	79
Other income	(54)	(31)	(153)	(93)
Income before income tax provision	1,806	2,133	8,545	6,663
Income tax provision	587	604	2,328	1,776
Net income	1,219	1,529	6,217	4,887
Net (income) loss attributable to noncontrolling interests	5	1	(11)	0
Net income attributable to CVS Health	$ 1,224	$ 1,530	$ 6,206	$ 4,887
Net income per share attributable to CVS Health:
Net income per share attributable to CVS Health, basic (in dollars per share)	$ 0.93	$ 1.17	$ 4.74	$ 3.76
Net income per share attributable to CVS Health, diluted (in dollars per share)	$ 0.93	$ 1.17	$ 4.72	$ 3.75
Weighted average shares outstanding:
Weighted average basic shares outstanding (in shares)	1,310	1,302	1,308	1,300
Weighted average diluted shares outstanding (in shares)	1,315	1,305	1,314	1,303
Dividends declared per share (in dollars per share)	$ 0.50	$ 0.50	$ 1.50	$ 1.50
Cost, Product and Service [Extensible List]	us-gaap:ProductMember	us-gaap:ProductMember	us-gaap:ProductMember	us-gaap:ProductMember
Products
Revenues:
Revenues	$ 47,738	$ 47,149	$ 141,096	$ 136,023
Services
Revenues:
Revenues	$ 1,932	$ 1,859	$ 5,757	$ 5,447

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Statement of Comprehensive Income [Abstract]
Net income	$ 1,219	$ 1,529	$ 6,217	$ 4,887
Other comprehensive income, net of tax:
Net unrealized investment gains	44	136	257	721
Foreign currency translation adjustments	1	153	(5)	157
Net cash flow hedges	(3)	(23)	(15)	(30)
Pension and other postretirement benefits	0	0	(1)	0
Other comprehensive income	42	266	236	848
Comprehensive income	1,261	1,795	6,453	5,735
Comprehensive (income) loss attributable to noncontrolling interests	5	1	(11)	0
Comprehensive income attributable to CVS Health	$ 1,266	$ 1,796	$ 6,442	$ 5,735

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Assets:
Cash and cash equivalents	$ 9,256	$ 5,683
Investments	2,831	2,373
Accounts receivable, net	23,816	19,617
Inventories	17,478	17,516
Other current assets	5,830	5,113
Total current assets	59,211	50,302
Long-term investments	20,216	17,314
Property and equipment, net	12,349	12,044
Operating lease right-of-use assets	20,484	20,860
Goodwill	79,579	79,749
Intangible assets, net	31,697	33,121
Separate accounts assets	4,793	4,459
Other assets	4,569	4,600
Total assets	232,898	222,449
Liabilities:
Accounts payable	11,677	10,492
Pharmacy claims and discounts payable	15,722	13,601
Health care costs payable	7,593	6,879
Policyholders’ funds	3,964	2,991
Accrued expenses	14,329	12,133
Other insurance liabilities	1,527	1,830
Current portion of operating lease liabilities	1,789	1,596
Current portion of long-term debt	5,443	3,781
Total current liabilities	62,044	53,303
Long-term operating lease liabilities	18,489	18,926
Long-term debt	61,552	64,699
Deferred income taxes	7,253	7,294
Separate accounts liabilities	4,793	4,459
Other long-term insurance liabilities	7,135	7,436
Other long-term liabilities	2,520	2,162
Total liabilities	163,786	158,279
Shareholders’ equity:
Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding	0	0
Common stock, par value $0.01: 3,200 shares authorized; 1,732 shares issued and 1,309 shares outstanding at September 30, 2020 and 1,727 shares issued and 1,302 shares outstanding at December 31, 2019 and capital surplus	46,388	45,972
Treasury stock, at cost: 423 shares at September 30, 2020 and 425 shares at December 31, 2019	(28,164)	(28,235)
Retained earnings	49,328	45,108
Accumulated other comprehensive income	1,255	1,019
Total CVS Health shareholders’ equity	68,807	63,864
Noncontrolling interests	305	306
Total shareholders’ equity	69,112	64,170
Total liabilities and shareholders’ equity	$ 232,898	$ 222,449

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	100,000	100,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	3,200,000,000	3,200,000,000
Common Stock, Shares, Issued	1,732,000,000	1,727,000,000
Common Stock, Shares, Outstanding	1,309,000,000	1,302,000,000
Treasury Stock, Shares	423,000,000	425,000,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Cash receipts from customers	$ 195,554	$ 184,519
Cash paid for inventory and prescriptions dispensed by retail network pharmacies	(116,590)	(109,958)
Insurance benefits paid	(40,221)	(38,812)
Cash paid to other suppliers and employees	(22,185)	(21,411)
Interest and investment income received	622	756
Interest paid	(2,517)	(2,675)
Income taxes paid	(2,365)	(2,205)
Net cash provided by operating activities	12,298	10,214
Cash flows from investing activities:
Proceeds from sales and maturities of investments	3,790	5,616
Purchases of investments	(6,377)	(6,011)
Purchases of property and equipment	(1,724)	(1,890)
Acquisitions (net of cash acquired)	(828)	(361)
Proceeds from sale of subsidiary	834	0
Other	5	16
Net cash used in investing activities	(4,300)	(2,630)
Cash flows from financing activities:
Net borrowings of short-term debt	0	350
Proceeds from issuance of long-term debt	7,919	3,458
Repayments of long-term debt	(10,493)	(8,350)
Derivative settlements	7	25
Dividends paid	(1,980)	(1,952)
Proceeds from exercise of stock options	249	183
Payments for taxes related to net share settlement of equity awards	(75)	(85)
Other	(33)	11
Net cash used in financing activities	(4,420)	(6,410)
Net increase in cash, cash equivalents and restricted cash	3,578	1,174
Cash, cash equivalents and restricted cash at the beginning of the period	5,954	4,295
Cash, cash equivalents and restricted cash at the end of the period	9,532	5,469
Reconciliation of net income to net cash provided by operating activities:
Net income	6,217	4,887
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,302	3,275
Stock-based compensation	288	355
(Gain) loss on sale of subsidiary	(271)	205
Loss on early extinguishment of debt	766	79
Deferred income taxes and other noncash items	(25)	(38)
Change in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, net	(3,564)	(2,312)
Inventories	45	413
Other assets	(211)	(374)
Accounts payable and pharmacy claims and discounts payable	3,495	2,330
Health care costs payable and other insurance liabilities	(474)	535
Other liabilities	$ 2,730	$ 859

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Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) shares in Millions, $ in Millions		Total	Common Stock	Treasury Stock		Common Stock Including Capital Surplus		Retained Earnings	Accumulated Other Comprehensive Income	Total CVS Health Shareholders’ Equity	Noncontrolling Interests	Cumulative Effect, Period of Adoption, Adjustment		Cumulative Effect, Period of Adoption, Adjustment Retained Earnings		Cumulative Effect, Period of Adoption, Adjustment Total CVS Health Shareholders’ Equity
Shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2018			1,720	(425)	[1]
Balance at beginning of period at Dec. 31, 2018		$ 58,543		$ (28,228)	[1]	$ 45,440	[2]	$ 40,911	$ 102	$ 58,225	$ 318	$ 178	[3]	$ 178	[3]	$ 178	[3]
Shareholders' Equity [Roll Forward]
Net income (loss)		1,427						1,421		1,421	6
Other comprehensive income (loss)		331							331	331
Stock option activity, stock awards and other (in shares)			2
Stock option activity, stock awards and other		175				175	[2]			175
ESPP issuances, net of purchase of treasury shares (in shares)	[1]			1
ESPP issuances, net of purchase of treasury shares		7		$ 7	[1]					7
Common stock dividends		(651)						(651)		(651)
Other increases (decreases) in noncontrolling interests		(4)									(4)
Shares outstanding, balance at end of period (in shares) at Mar. 31, 2019			1,722	(424)	[1]
Balance at end of period at Mar. 31, 2019		60,006		$ (28,221)	[1]	45,615	[2]	41,859	433	59,686	320
Shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2018			1,720	(425)	[1]
Balance at beginning of period at Dec. 31, 2018		58,543		$ (28,228)	[1]	45,440	[2]	40,911	102	58,225	318	178	[3]	178	[3]	178	[3]
Shareholders' Equity [Roll Forward]
Other comprehensive income (loss)		848
Shares outstanding, balance at end of period (in shares) at Sep. 30, 2019			1,725	(424)	[1]
Balance at end of period at Sep. 30, 2019		62,933		$ (28,207)	[1]	45,854	[2]	44,017	950	62,614	319
Shares outstanding, balance at beginning of period (in shares) at Mar. 31, 2019			1,722	(424)	[1]
Balance at beginning of period at Mar. 31, 2019		60,006		$ (28,221)	[1]	45,615	[2]	41,859	433	59,686	320
Shareholders' Equity [Roll Forward]
Net income (loss)		1,931						1,936		1,936	(5)
Other comprehensive income (loss)		251							251	251
Stock option activity, stock awards and other (in shares)			2
Stock option activity, stock awards and other		104				104	[2]			104
Purchases of treasury shares, net of ESPP issuances (in shares)	[1]			(1)
Purchase of treasury shares, net of ESPP issuances		(36)		$ (36)	[1]					(36)
Common stock dividends		(659)						(659)		(659)
Other increases (decreases) in noncontrolling interests		2									2
Shares outstanding, balance at end of period (in shares) at Jun. 30, 2019			1,724	(425)	[1]
Balance at end of period at Jun. 30, 2019		61,599		$ (28,257)	[1]	45,719	[2]	43,136	684	61,282	317
Shareholders' Equity [Roll Forward]
Net income (loss)		1,529						1,530		1,530	(1)
Other comprehensive income (loss)		266							266	266
Stock option activity, stock awards and other (in shares)			1
Stock option activity, stock awards and other		135				135	[2]			135
ESPP issuances, net of purchase of treasury shares (in shares)	[1]			1
ESPP issuances, net of purchase of treasury shares		50		$ 50	[1]					50
Common stock dividends		(649)						(649)		(649)
Other increases (decreases) in noncontrolling interests		3									3
Shares outstanding, balance at end of period (in shares) at Sep. 30, 2019			1,725	(424)	[1]
Balance at end of period at Sep. 30, 2019		62,933		$ (28,207)	[1]	45,854	[2]	44,017	950	62,614	319
Shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2019			1,727	(425)	[4]
Balance at beginning of period at Dec. 31, 2019		64,170		$ (28,235)	[4]	45,972	[5]	45,108	1,019	63,864	306	(3)		(3)		(3)
Shareholders' Equity [Roll Forward]
Net income (loss)		2,012						2,007		2,007	5
Other comprehensive income (loss)		(332)							(332)	(332)
Stock option activity, stock awards and other (in shares)			2
Stock option activity, stock awards and other		208				208	[5]			208
ESPP issuances, net of purchase of treasury shares (in shares)	[4]			1
ESPP issuances, net of purchase of treasury shares		53		$ 53	[4]					53
Common stock dividends		(657)						(657)		(657)
Other increases (decreases) in noncontrolling interests		23									23
Shares outstanding, balance at end of period (in shares) at Mar. 31, 2020			1,729	(424)	[4]
Balance at end of period at Mar. 31, 2020		65,474		$ (28,182)	[4]	46,180	[5]	46,455	687	65,140	334
Shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2019			1,727	(425)	[4]
Balance at beginning of period at Dec. 31, 2019		64,170		$ (28,235)	[4]	45,972	[5]	45,108	1,019	63,864	306	$ (3)		$ (3)		$ (3)
Shareholders' Equity [Roll Forward]
Other comprehensive income (loss)		236
Shares outstanding, balance at end of period (in shares) at Sep. 30, 2020			1,732	(423)	[4]
Balance at end of period at Sep. 30, 2020		69,112		$ (28,164)	[4]	46,388	[5]	49,328	1,255	68,807	305
Shares outstanding, balance at beginning of period (in shares) at Mar. 31, 2020			1,729	(424)	[4]
Balance at beginning of period at Mar. 31, 2020		65,474		$ (28,182)	[4]	46,180	[5]	46,455	687	65,140	334
Shareholders' Equity [Roll Forward]
Net income (loss)		2,986						2,975		2,975	11
Other comprehensive income (loss)		526							526	526
Stock option activity, stock awards and other (in shares)			3
Stock option activity, stock awards and other		96				96	[5]			96
Purchases of treasury shares, net of ESPP issuances (in shares)	[4]			(1)
Purchase of treasury shares, net of ESPP issuances		(53)		$ (53)	[4]					(53)
Common stock dividends		(662)						(662)		(662)
Other increases (decreases) in noncontrolling interests		(12)									(12)
Shares outstanding, balance at end of period (in shares) at Jun. 30, 2020			1,732	(425)	[4]
Balance at end of period at Jun. 30, 2020		68,355		$ (28,235)	[4]	46,276	[5]	48,768	1,213	68,022	333
Shareholders' Equity [Roll Forward]
Net income (loss)		1,219						1,224		1,224	(5)
Other comprehensive income (loss)		42							42	42
Stock option activity, stock awards and other		112				112	[5]			112
ESPP issuances, net of purchase of treasury shares (in shares)	[4]			2
ESPP issuances, net of purchase of treasury shares		71		$ 71	[4]					71
Common stock dividends		(664)						(664)		(664)
Other increases (decreases) in noncontrolling interests		(23)									(23)
Shares outstanding, balance at end of period (in shares) at Sep. 30, 2020			1,732	(423)	[4]
Balance at end of period at Sep. 30, 2020		$ 69,112		$ (28,164)	[4]	$ 46,388	[5]	$ 49,328	$ 1,255	$ 68,807	$ 305

[1] Treasury shares include 1 million shares held in trust and treasury stock includes $29 million related to shares held in trust as of September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018.

[2] Common stock and capital surplus includes the par value of common stock of $17 million as of September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018.

[3] Reflects the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which resulted in an increase to retained earnings of $178 million during the three months ended March 31, 2019.

[4] Treasury shares include 1 million shares held in trust and treasury stock includes $29 million related to shares held in trust as of September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019.

[5] Common stock and capital surplus includes the par value of common stock of $17 million as of September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019.

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Condensed Consolidated Statements of Shareholders' Equity (Parentheticals) - USD ($) shares in Millions, $ in Millions	9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Treasury shares held in trust (in shares)	1				1
Treasury Stock, Value, Shares Held In Trust	$ 29	$ 29	$ 29		$ 29	$ 29	$ 29	$ 29
Common Stock, Value, Issued	17	17	17	$ 17	17	17	17	17
Cumulative adjustment to retained earnings as a result of new accounting standard adoption	$ 69,112	68,355	65,474	64,170	62,933	61,599	60,006	58,543
Accounting Standards Update [Extensible List]	us-gaap:AccountingStandardsUpdate201613Member
Retained Earnings
Cumulative adjustment to retained earnings as a result of new accounting standard adoption	$ 49,328	$ 48,768	$ 46,455	45,108	$ 44,017	$ 43,136	$ 41,859	40,911
Cumulative Effect, Period of Adoption, Adjustment
Cumulative adjustment to retained earnings as a result of new accounting standard adoption				(3)				178	[1]
Cumulative Effect, Period of Adoption, Adjustment | Retained Earnings
Cumulative adjustment to retained earnings as a result of new accounting standard adoption				$ (3)				$ 178	[1]

[1] Reflects the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which resulted in an increase to retained earnings of $178 million during the three months ended March 31, 2019.

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

Description of Business 

CVS Health Corporation (“CVS Health”), together with its subsidiaries (collectively, the “Company”), has more than 9,900 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with approximately 103 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year and expanding specialty pharmacy services. The Company also serves an estimated 33 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs.

The coronavirus disease 2019 (“COVID-19”) pandemic has severely impacted the economies of the U.S. and other countries around the world. The impact of COVID-19 on the Company’s businesses, operating results, cash flows and financial condition in the three and nine months ended September 30, 2020, as well as information regarding certain expected impacts of COVID-19 on the Company, is discussed throughout this Quarterly Report on Form 10-Q.

The Company has four reportable segments: Pharmacy Services, Retail/LTC, Health Care Benefits and Corporate/Other, which are described below.

Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services, mail order pharmacy, specialty pharmacy and infusion services, clinical services, disease management services and medical spend management. The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on public health insurance exchanges (“Public Exchanges”) and private health insurance exchanges, other sponsors of health benefit plans and individuals throughout the United States. The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services.

Retail/LTC Segment

The Retail/LTC segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products, cosmetics and personal care products, provides health care services through its MinuteClinic® walk-in medical clinics, provides medical diagnostic testing and conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to long-term care facilities and other care settings. As of September 30, 2020, the Retail/LTC segment operated more than 9,900 retail locations, approximately 1,100 MinuteClinic locations as well as online retail pharmacy websites, LTC pharmacies and onsite pharmacies.

Health Care Benefits Segment

The Health Care Benefits segment is one of the nation’s leading diversified health care benefits providers. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, Medicaid health care management services and health information technology products and services. The Health Care Benefits segment also provided workers’ compensation administrative services through its Coventry Health Care Workers’ Compensation business (“Workers’ Compensation business”) prior to the sale of this business on July 31, 2020. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.”

Corporate/Other Segment

The Company presents the remainder of its financial results in the Corporate/Other segment, which consists of:

•Management and administrative expenses to support the Company’s overall operations, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and enterprise modernization programs and acquisition-related integration costs; and

•Products for which the Company no longer solicits or accepts new customers such as its large case pensions and long-term care insurance products.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of CVS Health and its subsidiaries have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In accordance with such rules and regulations, certain information and accompanying note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Because of the influence of various factors on the Company’s operations, including business combinations, certain holidays and other seasonal influences, net income for any interim period may not be comparable to the same interim period in previous years or necessarily indicative of income for the full year.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated.

The Company continually evaluates its investments to determine if they represent variable interests in a VIE. If the Company determines that it has a variable interest in a VIE, the Company then evaluates if it is the primary beneficiary of the VIE. The evaluation is a qualitative assessment as to whether the Company has the ability to direct the activities of a VIE that most significantly impact the entity’s economic performance. The Company consolidates a VIE if it is considered to be the primary beneficiary.

Assets and liabilities of VIEs for which the Company is the primary beneficiary were not significant to the Company’s unaudited condensed consolidated financial statements. VIE creditors do not have recourse against the general credit of the Company.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Restricted Cash

Restricted cash included in other assets on the unaudited condensed consolidated balance sheets represents amounts held in a trust in one of the Company’s captive insurance companies to satisfy collateral requirements associated with the assignment of certain insurance policies. All restricted cash is invested in time deposits, money market funds or commercial paper.

The following is a reconciliation of cash and cash equivalents on the unaudited condensed consolidated balance sheets to total cash, cash equivalents and restricted cash on the unaudited condensed consolidated statements of cash flows:

In millions	September 30, 2020		December 31, 2019
Cash and cash equivalents	$	9,256	$	5,683
Restricted cash (included in other assets)	276		271
Total cash, cash equivalents and restricted cash in the statements of cash flows	$	9,532	$	5,954

Accounts Receivable

Accounts receivable are stated net of allowances for credit losses, customer credit allowances, contractual allowances and estimated terminations. Accounts receivable, net is composed of the following:

In millions	September 30, 2020		December 31, 2019
Trade receivables	$	7,265	$	6,717
Vendor and manufacturer receivables	10,528		7,856
Premium receivables	2,852		2,663
Other receivables	3,171		2,381
Total accounts receivable, net	$	23,816	$	19,617

The Company’s allowance for credit losses was $363 million as of September 30, 2020. When developing an estimate of the Company’s expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable. The Company’s accounts receivable are short duration in nature and typically settle in less than 30 days. The Company’s allowance for doubtful accounts was $319 million as of December 31, 2019.

Revenue Recognition

Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by major source in each segment for the three and nine months ended September 30, 2020 and 2019:

In millions	Pharmacy Services		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Three Months Ended September 30, 2020
Major goods/services lines:
Pharmacy	$	35,505	$	17,608	$	—	$	—	$	(10,051)	$	43,062
Front Store	—		4,740		—		—		—		4,740
Premiums	—		—		17,165		17		—		17,182
Net investment income	—		—		121		83		—		204
Other	206		377		1,412		16		(143)		1,868
Total	$	35,711	$	22,725	$	18,698	$	116	$	(10,194)	$	67,056
Pharmacy Services distribution channel:
Pharmacy network (1)	$	21,473
Mail choice (2)	14,032
Other	206
Total	$	35,711
Three Months Ended September 30, 2019
Major goods/services lines:
Pharmacy (3)	$	35,872	$	16,687	$	—	$	—	$	(9,999)	$	42,560
Front Store	—		4,614		—		—		—		4,614
Premiums	—		—		15,507		32		—		15,539
Net investment income	—		—		146		117		—		263
Other (3)	146		165		1,528		3		(8)		1,834
Total	$	36,018	$	21,466	$	17,181	$	152	$	(10,007)	$	64,810
Pharmacy Services distribution channel:
Pharmacy network (1) (3)	$	22,411
Mail choice (2) (3)	13,461
Other	146
Total	$	36,018

In millions	Pharmacy Services		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Nine Months Ended September 30, 2020
Major goods/services lines:
Pharmacy	$	104,924	$	51,833	$	—	$	—	$	(30,032)	$	126,725
Front Store	—		14,601		—		—		—		14,601
Premiums	—		—		51,699		50		—		51,749
Net investment income	—		—		341		209		—		550
Other	659		702		4,324		33		(191)		5,527
Total	$	105,583	$	67,136	$	56,364	$	292	$	(30,223)	$	199,152
Pharmacy Services distribution channel:
Pharmacy network (1)	$	63,109
Mail choice (2)	41,815
Other	659
Total	$	105,583
Nine Months Ended September 30, 2019
Major goods/services lines:
Pharmacy (3)	$	103,983	$	49,197	$	—	$	—	$	(31,416)	$	121,764
Front Store	—		14,288		—		—		—		14,288
Premiums	—		—		47,543		69		—		47,612
Net investment income	—		—		458		347		—		805
Other (3)	435		543		4,453		7		(20)		5,418
Total	$	104,418	$	64,028	$	52,454	$	423	$	(31,436)	$	189,887
Pharmacy Services distribution channel:
Pharmacy network (1) (3)	$	65,917
Mail choice (2) (3)	38,066
Other	435
Total	$	104,418

_____________________________________________

(1)Pharmacy Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice® activity, which is included within the mail choice category. Maintenance Choice permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS Pharmacy retail store for the same price as mail order.

(2)Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program.

(3)Certain prior year amounts have been reclassified for consistency with the current period presentation.

Contract Balances

Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration, and include ExtraBucks® Rewards and unredeemed Company gift cards. The consideration received remains a contract liability until goods or services have been provided to the customer. In addition, the Company recognizes breakage on Company gift cards based on historical redemption patterns.

The following table provides information about receivables and contract liabilities from contracts with customers:

In millions	September 30, 2020		December 31, 2019
Trade receivables (included in accounts receivable, net)	$	7,265	$	6,717
Contract liabilities (included in accrued expenses)	75		73

During the nine months ended September 30, 2020 and 2019, the contract liabilities balance includes increases related to customers’ earnings in ExtraBucks Rewards or issuances of Company gift cards and decreases for revenues recognized during the period as a result of the redemption of ExtraBucks Rewards or Company gift cards and breakage of Company gift cards. Below is a summary of such changes:

	Nine Months Ended September 30,
In millions	2020		2019
Contract liabilities, beginning of the period	$	73	$	67
Rewards earnings and gift card issuances	266		269
Redemption and breakage	(264)		(264)
Contract liabilities, end of the period	$	75	$	72

Health Insurer Fee

Since January 1, 2014, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) has imposed an annual premium-based health insurer fee (the “HIF”). The HIF, which is payable each September, is not deductible for federal income tax purposes. There was no expense related to the HIF in the three and nine months ended September 30, 2019, since there was a one-year suspension of the HIF for 2019. In the three and nine months ended September 30, 2020, operating expenses included $255 million and $774 million, respectively, related to the Company’s share of the 2020 HIF. The Company paid approximately $1.0 billion, representing the Company’s portion of the non tax-deductible HIF in 2020. In December 2019, the HIF was repealed for calendar years after 2020.

Related Party Transactions

The Company has an equity method investment in SureScripts, LLC (“SureScripts”), which operates a clinical health information network. The Company utilizes this clinical health information network in providing services to its client plan members and retail customers. The Company expensed fees for the use of this network of $5 million and $14 million in the three months ended September 30, 2020 and 2019, respectively, and expensed fees for the use of this network of approximately $28 million and $26 million in the nine months ended September 30, 2020 and 2019, respectively. The Company’s investment in and equity in the earnings of SureScripts for all periods presented is immaterial.

The Company has an equity method investment in Heartland Healthcare Services, LLC (“Heartland”). Heartland operates several LTC pharmacies in four states. Heartland paid the Company $15 million and $20 million for pharmaceutical inventory purchases during the three months ended September 30, 2020 and 2019, respectively, and $58 million and $72 million for pharmaceutical inventory purchases during the nine months ended September 30, 2020 and 2019, respectively. Additionally, the Company performs certain collection functions for Heartland and then transfers those customer cash collections to Heartland. The Company’s investment in and equity in the earnings of Heartland for all periods presented is immaterial.

New Accounting Pronouncements Recently Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This standard requires the use of a forward-looking expected credit loss impairment model for trade and other receivables, held-to-maturity debt securities, loans and other instruments. This standard also requires impairments and recoveries for available-for-sale debt securities to be recorded through an allowance account and revises certain disclosure requirements. The Company adopted this new accounting standard on January 1, 2020. The Company adopted the credit loss impairment model on a modified retrospective basis and recorded a $3 million cumulative effect adjustment to reduce retained earnings as of the adoption date. The Company adopted the available-for-sale debt security impairment model on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated operating results, cash flows or financial condition.

Refer to “Accounts Receivable” above for a discussion of the Company’s expected credit loss impairment policy for its accounts receivable. The following is a discussion of the Company’s available-for-sale debt security impairment policy and expected credit loss impairment policy for mortgage loans under the new credit loss impairment standard:

Debt Securities

Debt securities consist primarily of United States Treasury and agency securities, mortgage-backed securities, corporate and foreign bonds and other debt securities. Debt securities are classified as either current or long-term investments based on their contractual maturities unless the Company intends to sell an investment within the next 12 months, in which case it is classified as current within the unaudited condensed consolidated balance sheets. Debt securities are classified as available for sale and are carried at fair value.

If a debt security is in an unrealized loss position and the Company has the intent to sell the security, or it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis, the amortized cost basis of the security is written down to its fair value and the difference is recognized in net income. If a debt security is in an unrealized loss position and the Company does not have the intent to sell and it is more likely than not that the Company will not have to sell such security before recovery of its amortized cost basis, the Company bifurcates the impairment into credit-related and non-credit related components. In evaluating whether a credit related loss exists, the Company considers a variety of factors including: the extent to which the fair value is less than the amortized cost basis; adverse conditions specifically related to the issuer of a security, an industry or geographic area; the payment structure of the security; the failure of the issuer of the security to make scheduled interest or principle payments; and any changes to the rating of the security by a rating agency. The amount of the credit-related component is recorded as an allowance for credit losses and recognized in net income, and the amount of the non-credit related component is included in other comprehensive income. Interest is not accrued on debt securities when management believes the collection of interest is unlikely.

The credit-related component is determined by comparing the present value of cash flows expected to be collected from the security, considering all reasonably available information relevant to the collectability of the security, with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, the Company records an allowance for credit losses, which is limited by the amount that the fair value is less than amortized cost basis.

For mortgage-backed and other asset-backed securities, the Company recognizes income using an effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The Company’s investment in the security is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the security, with adjustments recognized in net income.

Mortgage Loans

Mortgage loan investments are valued at the unpaid principal balance, net of an allowance for credit losses. Mortgage loans with a maturity date or a committed prepayment date within twelve months are classified as current on the unaudited condensed consolidated balance sheets. The Company assesses whether its loans share similar risk characteristics and, if so, groups such loans in a risk pool when measuring expected credit losses. The Company considers the following characteristics when evaluating whether its loans share similar risk characteristics: loan-to-value ratios, property type (e.g., office, retail, apartment, industrial), geographic location, vacancy rates and property condition.

Credit loss reserves are determined using a loss rate method that multiplies the unpaid principal balance of each loan within a risk pool group by an estimated loss rate percentage. The loss rate percentage considers both the expected loan loss severity and the probability of loan default. For periods where the Company is able to make or obtain reasonable and supportable forecasts of expected economic conditions (e.g., gross domestic product, employment), the Company adjusts its expected loss rates to reflect these forecasted economic conditions. For periods beyond which the Company is able to make or obtain reasonable and supportable forecasts of expected economic conditions, the Company reverts to historical loss rates in determining expected credit losses.

Interest income on a potential problem loan (i.e., high probability of default) or restructured loan is accrued to the extent it is deemed to be collectible and the loan continues to perform under its original or restructured terms. Interest income on problem loans (i.e., more than 60 days delinquent, in bankruptcy or in process of foreclosure) is recognized on a cash basis. Cash payments on loans in the process of foreclosure are treated as a return of principal.

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and other - Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Topic 350-40 to determine which implementation costs to capitalize as assets. The Company adopted this new accounting guidance on January 1, 2020 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated operating results, cash flows, financial condition or related disclosures.

New Accounting Pronouncements Not Yet Adopted

Targeted Improvements to the Accounting for Long-Duration Insurance Contracts

In August 2018, the FASB issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (Topic 944). This standard requires the Company to review cash flow assumptions for its long-duration insurance contracts at least annually and recognize the effect of changes in future cash flow assumptions in net income. This standard also requires the Company to update discount rate assumptions quarterly and recognize the effect of changes in these assumptions in other comprehensive income. The rate used to discount the Company’s liability for future policy benefits will be based on an estimate of the yield for an upper-medium grade fixed-income instrument with a duration profile matching that of the Company’s liabilities. In addition, this standard changes the amortization method for deferred acquisition costs and requires additional disclosures regarding the long duration insurance contract liabilities in the Company’s interim and annual financial statements. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Accounting Standards Codification 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.

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Divestitures

9 Months Ended

Sep. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

Divestitures

Divestitures

Divestiture of Workers’ Compensation Business

On July 31, 2020, the Company sold its Workers’ Compensation business for $850 million, subject to a working capital adjustment. The results of this business have historically been reported within the Health Care Benefits segment. The Company recorded a pre-tax gain on the divestiture of $271 million in the three and nine months ended September 30, 2020, which is reflected as a reduction in operating expenses in the Company’s unaudited condensed consolidated statement of operations within the Health Care Benefits segment.

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Investments

9 Months Ended

Sep. 30, 2020

Investments [Abstract]

Investments

Investments

Total investments at September 30, 2020 and December 31, 2019 were as follows:

	September 30, 2020						December 31, 2019
In millions	Current		Long-term		Total		Current		Long-term		Total
Debt securities available for sale	$	2,578	$	17,820	$	20,398	$	2,251	$	14,671	$	16,922
Mortgage loans	253		871		1,124		122		1,091		1,213
Other investments	—		1,525		1,525		—		1,552		1,552
Total investments	$	2,831	$	20,216	$	23,047	$	2,373	$	17,314	$	19,687

Debt Securities

Debt securities available for sale at September 30, 2020 and December 31, 2019 were as follows:

In millions	Gross Amortized Cost		Allowance for Credit Losses (1)		Net Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2020
Debt securities:
U.S. government securities	$	2,455	$	—	$	2,455	$	146	$	—	$	2,601
States, municipalities and political subdivisions	2,393		—		2,393		150		(3)		2,540
U.S. corporate securities	7,665		(4)		7,661		878		(15)		8,524
Foreign securities	2,479		—		2,479		252		(10)		2,721
Residential mortgage-backed securities	680		—		680		33		—		713
Commercial mortgage-backed securities	930		—		930		82		—		1,012
Other asset-backed securities	2,239		—		2,239		33		(10)		2,262
Redeemable preferred securities	22		—		22		3		—		25
Total debt securities (2)	$	18,863	$	(4)	$	18,859	$	1,577	$	(38)	$	20,398
December 31, 2019
Debt securities:
U.S. government securities	$	1,791	$	—	$	1,791	$	62	$	(1)	$	1,852
States, municipalities and political subdivisions	2,202		—		2,202		108		(1)		2,309
U.S. corporate securities	7,167		—		7,167		573		(3)		7,737
Foreign securities	2,149		—		2,149		200		(1)		2,348
Residential mortgage-backed securities	508		—		508		25		—		533
Commercial mortgage-backed securities	654		—		654		46		—		700
Other asset-backed securities	1,397		—		1,397		13		(5)		1,405
Redeemable preferred securities	30		—		30		8		—		38
Total debt securities (2)	$	15,898	$	—	$	15,898	$	1,035	$	(11)	$	16,922

_____________________________________________

(1)Effective January 1, 2020, the Company adopted the available-for-sale debt security impairment model under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The new impairment model requires the write down of amortized cost through an allowance for credit losses, rather than through a reduction of the amortized cost basis of the available-for-sale debt security. As the Company adopted the new available-for-sale debt security impairment model on a prospective basis, there was no allowance for credit losses recorded on available-for-sale debt securities at December 31, 2019.

(2)Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At September 30, 2020, debt securities with a fair value of $928 million, gross unrealized capital gains of $122 million and gross unrealized capital losses of $1 million and at December 31, 2019, debt securities with a fair value of $965 million, gross unrealized capital gains of $83 million and no gross unrealized capital losses were included in total debt securities, but support experience-rated products. Changes in net unrealized capital gains (losses) on these securities are not reflected in accumulated other comprehensive income.

The net amortized cost and fair value of debt securities at September 30, 2020 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity.

In millions	Net Amortized Cost		Fair Value
Due to mature:
Less than one year	$	1,588	$	1,604
One year through five years	6,009		6,329
After five years through ten years	3,466		3,774
Greater than ten years	3,947		4,704
Residential mortgage-backed securities	680		713
Commercial mortgage-backed securities	930		1,012
Other asset-backed securities	2,239		2,262
Total	$	18,859	$	20,398

Summarized below are the debt securities the Company held at September 30, 2020 and December 31, 2019 that were in an unrealized capital loss position, aggregated by the length of time the investments have been in that position:

	Less than 12 months					Greater than 12 months					Total
In millions, except number of securities	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
September 30, 2020
Debt securities:
U.S. government securities	58	$	311	$	—	—	$	—	$	—	58	$	311	$	—
States, municipalities and political subdivisions	95	196		3		—	—		—		95	196		3
U.S. corporate securities	704	639		15		4	2		—		708	641		15
Foreign securities	198	312		10		—	—		—		198	312		10
Residential mortgage-backed securities	19	70		—		3	—		—		22	70		—
Commercial mortgage-backed securities	28	106		—		—	—		—		28	106		—
Other asset-backed securities	288	543		7		90	80		3		378	623		10
Total debt securities	1,390	$	2,177	$	35	97	$	82	$	3	1,487	$	2,259	$	38
December 31, 2019
Debt securities:
U.S. government securities	52	$	168	$	1	—	$	—	$	—	52	$	168	$	1
States, municipalities and political subdivisions	66	115		1		2	5		—		68	120		1
U.S. corporate securities	181	305		2		2	—		1		183	305		3
Foreign securities	39	75		1		—	—		—		39	75		1
Residential mortgage-backed securities	30	16		—		9	—		—		39	16		—
Commercial mortgage-backed securities	16	49		—		—	—		—		16	49		—
Other asset-backed securities	138	254		1		187	182		4		325	436		5
Total debt securities	522	$	982	$	6	200	$	187	$	5	722	$	1,169	$	11

The Company reviewed the securities in the table above and concluded that they are performing assets generating investment income to support the needs of the Company’s business. In performing this review, the Company considered factors such as the quality of the investment security based on research performed by the Company’s internal credit analysts and external rating agencies and the prospects of realizing the carrying value of the security based on the investment’s current prospects for recovery. Unrealized capital losses at September 30, 2020 were generally caused by the widening of credit spreads on these securities relative to the interest rates on U.S. Treasury securities, driven by the adverse economic conditions in the U.S. and abroad caused by the COVID-19 pandemic. As of September 30, 2020, the Company did not intend to sell these securities, and did not believe it was more likely than not that it would be required to sell these securities prior to the anticipated recovery of their amortized cost basis.

The maturity dates for debt securities in an unrealized capital loss position at September 30, 2020 were as follows:

	Supporting experience-rated products				Supporting remaining products				Total
In millions	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Due to mature:
Less than one year	$	—	$	—	$	36	$	—	$	36	$	—
One year through five years	1		—		623		7		624		7
After five years through ten years	11		1		493		12		504		13
Greater than ten years	11		—		285		8		296		8
Residential mortgage-backed securities	—		—		70		—		70		—
Commercial mortgage-backed securities	2		—		104		—		106		—
Other asset-backed securities	7		—		616		10		623		10
Total	$	32	$	1	$	2,227	$	37	$	2,259	$	38

Mortgage Loans

The Company’s mortgage loans are collateralized by commercial real estate. During the three and nine months ended September 30, 2020 and 2019, the Company had the following activity in its mortgage loan portfolio:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
New mortgage loans	$	31	$	12	$	55	$	90
Mortgage loans fully repaid	37		56		114		127
Mortgage loans foreclosed	—		—		—		—

The Company assesses mortgage loans on a regular basis for credit impairments, and assigns a credit quality indicator to each loan. The Company’s credit quality indicator is internally developed and categorizes each loan in its portfolio on a scale from 1 to 7. These indicators are based upon several factors, including current loan-to-value ratios, current and future property cash flow, property condition, market trends, creditworthiness of the borrower and deal structure.

•Category 1 - Represents loans of superior quality.

•Categories 2 to 4 - Represent loans where credit risk is minimal to acceptable; however, these loans may display some susceptibility to economic changes.

•Categories 5 and 6 - Represent loans where credit risk is not substantial, but these loans warrant management’s close attention.

•Category 7 - Represents loans where collections are potentially at risk; if necessary, an impairment is recorded.

Based on the Company’s assessments at September 30, 2020 and December 31, 2019, the amortized cost basis of the Company's mortgage loans within each credit quality indicator by year of origination was as follows:

	Amortized Cost Basis by Year of Origination
In millions, except credit quality indicator	2020		2019		2018		2017		2016		Prior		Total
September 30, 2020
1	$	—	$	—	$	—	$	23	$	—	$	39	$	62
2 to 4	57		95		90		129		129		516		1,016
5 and 6	—		—		4		4		—		29		37
7	—		—		—		9		—		—		9
Total	$	57	$	95	$	94	$	165	$	129	$	584	$	1,124
December 31, 2019
1			$	—	$	—	$	15	$	—	$	43	$	58
2 to 4			93		93		206		140		611		1,143
5 and 6			—		—		—		—		12		12
7			—		—		—		—		—		—
Total			$	93	$	93	$	221	$	140	$	666	$	1,213

Net Investment Income

Sources of net investment income for the three and nine months ended September 30, 2020 and 2019 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Debt securities	$	151	$	145	$	441	$	437
Mortgage loans	15		19		45		54
Other investments	37		60		64		163
Gross investment income	203		224		550		654
Investment expenses	(8)		(10)		(25)		(28)
Net investment income (excluding net realized capital gains or losses)	195		214		525		626
Net realized capital gains (1)	9		49		25		179
Net investment income (2)	$	204	$	263	$	550	$	805

_____________________________________________

(1)Net realized capital gains include credit-related and yield-related impairment losses on debt securities of $1 million and $2 million, respectively, in the three months ended September 30, 2020. Net realized capital gains include credit-related and yield-related impairment losses on debt securities of $4 million and $44 million, respectively, in the nine months ended September 30, 2020. Net realized capital gains are net of other than temporary impairment losses on debt securities of $9 million and $22 million, respectively, in the three and nine months ended September 30, 2019.

(2)Net investment income includes $10 million and $31 million for the three and nine months ended September 30, 2020, respectively, and $10 million and $33 million for the three and nine months ended September 30, 2019, respectively, related to investments supporting experience-rated products.

Excluding amounts related to experience-rated products, proceeds from the sale of available for sale debt securities and the related gross realized capital gains and losses for the three and nine months ended September 30, 2020 and 2019 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Proceeds from sales	$	905	$	1,325	$	2,324	$	4,087
Gross realized capital gains	17		55		60		127
Gross realized capital losses	3		9		59		13

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Fair Value

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

The preparation of the Company’s unaudited condensed consolidated financial statements in accordance with GAAP requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. The Company’s assets and liabilities carried at fair value have been classified within one of three levels of a hierarchy established by GAAP. The following are the levels of the hierarchy and a brief description of the type of valuation information (“valuation inputs”) that qualifies a financial asset or liability for each level:

•Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.

•Level 2 – Valuation inputs other than Level 1 that are based on observable market data.  These include: quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, valuation inputs that are observable that are not prices (such as interest rates and credit risks) and valuation inputs that are derived from or corroborated by observable markets.

•Level 3 – Developed from unobservable data, reflecting the Company’s assumptions.

For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see Note 4 “Fair Value” in the 2019 Form 10-K.

There were no financial liabilities measured at fair value on a recurring basis on the condensed consolidated balance sheets at September 30, 2020 or December 31, 2019. Financial assets measured at fair value on a recurring basis on the condensed consolidated balance sheets at September 30, 2020 and December 31, 2019 were as follows:

In millions	Level 1		Level 2		Level 3		Total
September 30, 2020
Cash and cash equivalents	$	5,670	$	3,586	$	—	$	9,256
Debt securities:
U.S. government securities	2,498		103		—		2,601
States, municipalities and political subdivisions	—		2,540		—		2,540
U.S. corporate securities	—		8,476		48		8,524
Foreign securities	—		2,721		—		2,721
Residential mortgage-backed securities	—		713		—		713
Commercial mortgage-backed securities	—		1,012		—		1,012
Other asset-backed securities	—		2,262		—		2,262
Redeemable preferred securities	—		24		1		25
Total debt securities	2,498		17,851		49		20,398
Equity securities	20		—		26		46
Total	$	8,188	$	21,437	$	75	$	29,700
December 31, 2019
Cash and cash equivalents	$	3,397	$	2,286	$	—	$	5,683
Debt securities:
U.S. government securities	1,785		67		—		1,852
States, municipalities and political subdivisions	—		2,309		—		2,309
U.S. corporate securities	—		7,700		37		7,737
Foreign securities	—		2,348		—		2,348
Residential mortgage-backed securities	—		533		—		533
Commercial mortgage-backed securities	—		700		—		700
Other asset-backed securities	—		1,405		—		1,405
Redeemable preferred securities	—		26		12		38
Total debt securities	1,785		15,088		49		16,922
Equity securities	34		—		39		73
Total	$	5,216	$	17,374	$	88	$	22,678

During the three and nine months ended September 30, 2020 and 2019, there were no transfers into or out of Level 3.

The carrying value and estimated fair value classified by level of fair value hierarchy for financial instruments carried on the condensed consolidated balance sheets at adjusted cost or contract value at September 30, 2020 and December 31, 2019 were as follows:

	Carrying Value		Estimated Fair Value
In millions			Level 1		Level 2		Level 3		Total
September 30, 2020
Assets:
Mortgage loans	$	1,124	$	—	$	—	$	1,148	$	1,148
Equity securities (1)	146		N/A		N/A		N/A		N/A
Liabilities:
Investment contract liabilities:
With a fixed maturity	5		—		—		5		5
Without a fixed maturity	322		—		—		370		370
Long-term debt	66,995		76,642		—		—		76,642
December 31, 2019
Assets:
Mortgage loans	$	1,213	$	—	$	—	$	1,239	$	1,239
Equity securities (1)	149		N/A		N/A		N/A		N/A
Liabilities:
Investment contract liabilities:
With a fixed maturity	5		—		—		5		5
Without a fixed maturity	372		—		—		392		392
Long-term debt	68,480		74,306		—		—		74,306

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(1)It was not practical to estimate the fair value of these cost-method investments as it represents shares of unlisted companies.

Separate Accounts assets relate to the Company’s large case pensions products which represent funds maintained to meet specific objectives of contract holders. Since contract holders bear the investment risk of these assets, a corresponding Separate Accounts liability has been established equal to the assets. These assets and liabilities are carried at fair value. Separate Accounts financial assets as of September 30, 2020 and December 31, 2019 were as follows:

	September 30, 2020								December 31, 2019
In millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	2	$	72	$	—	$	74	$	2	$	143	$	—	$	145
Debt securities	1,538		2,576		—		4,114		1,224		2,589		—		3,813
Equity securities	—		2		—		2		—		2		—		2
Common/collective trusts	—		603		—		603		—		499		—		499
Total	$	1,540	$	3,253	$	—	$	4,793	$	1,226	$	3,233	$	—	$	4,459

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Health Care Costs Payable

9 Months Ended

Sep. 30, 2020

Health Care and Other Insurance Liabilities [Abstract]

Health Care Costs Payable

Health Care Costs Payable

The following table shows the components of the change in health care costs payable during the nine months ended September 30, 2020 and 2019:

	Nine Months Ended September 30,
In millions	2020		2019
Health care costs payable, beginning of the period	$	6,879	$	6,147
Less: Reinsurance recoverables	5		4
Health care costs payable, beginning of the period, net	6,874		6,143
Acquisition	444		—
Add: Components of incurred health care costs
Current year	40,777		39,657
Prior years	(448)		(511)
Total incurred health care costs (1)	40,329		39,146
Less: Claims paid
Current year	34,198		33,032
Prior years	5,865		5,253
Total claims paid	40,063		38,285
Add: Premium deficiency reserve	1		6
Health care costs payable, end of the period, net	7,585		7,010
Add: Reinsurance recoverables	8		4
Health care costs payable, end of the period	$	7,593	$	7,014

_____________________________________________

(1)Total incurred health care costs for the nine months ended September 30, 2020 and 2019 in the table above exclude (i) $1 million and $6 million, respectively, related to a premium deficiency reserve related to the Company’s Medicaid products, (ii) $31 million and $31 million, respectively, of benefit costs recorded in the Health Care Benefits segment that are included in other insurance liabilities on the Company’s unaudited condensed consolidated balance sheets and (iii) $173 million and $213 million, respectively, of benefit costs recorded in the Corporate/Other segment that are included in other insurance liabilities on the Company’s unaudited condensed consolidated balance sheets.

The Company’s estimates of prior years’ health care costs payable decreased by $448 million and $511 million, respectively, in the nine months ended September 30, 2020 and 2019, because claims were settled for amounts less than originally estimated (i.e., the amount of claims incurred was lower than originally estimated), primarily due to lower health care cost trends as well as the actual claim submission time being faster than originally assumed (i.e., the Company’s completion factors were higher than originally assumed) in estimating health care costs payable at the end of the prior year.

At September 30, 2020, the Company’s liabilities for the ultimate cost of (i) services rendered to the Company’s Insured members but not yet reported to the Company and (ii) claims which have been reported to the Company but not yet paid (collectively, “IBNR”) plus expected development on reported claims totaled approximately $5.8 billion. Substantially all of the Company’s liabilities for IBNR plus expected development on reported claims at September 30, 2020 related to the current year.

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Borrowings

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Borrowings

Borrowings

The following table is a summary of the Company’s borrowings at September 30, 2020 and December 31, 2019:

In millions	September 30, 2020		December 31, 2019
Long-term debt
3.125% senior notes due March 2020	$	—	$	723
Floating rate notes due March 2020 (2.515% at December 31, 2019)	—		277
2.8% senior notes due July 2020	—		2,750
3.35% senior notes due March 2021	2,038		2,038
Floating rate notes due March 2021 (0.968% at September 30, 2020 and 2.605% at December 31, 2019)	1,000		1,000
4.125% senior notes due May 2021	222		222
2.125% senior notes due June 2021	1,750		1,750
4.125% senior notes due June 2021	203		203
5.45% senior notes due June 2021	187		187
3.5% senior notes due July 2022	1,500		1,500
2.75% senior notes due November 2022	1,000		1,000
2.75% senior notes due December 2022	1,250		1,250
4.75% senior notes due December 2022	399		399
3.7% senior notes due March 2023	3,723		6,000
2.8% senior notes due June 2023	1,300		1,300
4% senior notes due December 2023	527		1,250
3.375% senior notes due August 2024	650		650
2.625% senior notes due August 2024	1,000		1,000
3.5% senior notes due November 2024	750		750
5% senior notes due December 2024	299		299
4.1% senior notes due March 2025	2,000		5,000
3.875% senior notes due July 2025	2,828		2,828
2.875% senior notes due June 2026	1,750		1,750
3% senior notes due August 2026	750		750
3.625% senior notes due April 2027	750		—
6.25% senior notes due June 2027	372		372
1.3% senior notes due August 2027	1,500		—
4.3% senior notes due March 2028	9,000		9,000
3.25% senior notes due August 2029	1,750		1,750
3.75% senior notes due April 2030	1,500		—
1.75% senior notes due August 2030	1,250		—
4.875% senior notes due July 2035	652		652
6.625% senior notes due June 2036	771		771
6.75% senior notes due December 2037	533		533
4.78% senior notes due March 2038	5,000		5,000
6.125% senior notes due September 2039	447		447
4.125% senior notes due April 2040	1,000		—
2.7% senior notes due August 2040	1,250		—
5.75% senior notes due May 2041	133		133
4.5% senior notes due May 2042	500		500
4.125% senior notes due November 2042	500		500
5.3% senior notes due December 2043	750		750
4.75% senior notes due March 2044	375		375
5.125% senior notes due July 2045	3,500		3,500
3.875% senior notes due August 2047	1,000		1,000
5.05% senior notes due March 2048	8,000		8,000
4.25% senior notes due April 2050	750		—
Finance lease obligations	1,036		808
Other	276		279
Total debt principal	67,721		69,246
Debt premiums	245		262
Debt discounts and deferred financing costs	(971)		(1,028)
	66,995		68,480
Less:
Current portion of long-term debt	(5,443)		(3,781)
Long-term debt	$	61,552	$	64,699

Long-term Borrowings

2020 Notes

On August 21, 2020, the Company issued $1.5 billion aggregate principal amount of 1.3% unsecured senior notes due August 21, 2027, $1.25 billion aggregate principal amount of 1.75% unsecured senior notes due August 21, 2030 and $1.25 billion aggregate principal amount of 2.7% unsecured senior notes due August 21, 2040 (collectively, the “August 2020 Notes”) for total proceeds of approximately $3.97 billion, net of discounts and underwriting fees.

On March 31, 2020, the Company issued $750 million aggregate principal amount of 3.625% unsecured senior notes due April 1, 2027, $1.5 billion aggregate principal amount of 3.75% unsecured senior notes due April 1, 2030, $1.0 billion aggregate principal amount of 4.125% unsecured senior notes due April 1, 2040 and $750 million aggregate principal amount of 4.25% unsecured senior notes due April 1, 2050 (collectively, the “March 2020 Notes”) for total proceeds of approximately $3.95 billion, net of discounts and underwriting fees..

The net proceeds of these offerings will be used for general corporate purposes, which may include working capital, capital expenditures, as well as the repurchase and/or repayment of indebtedness. Net proceeds from these offerings that had not been used for these purposes were held in cash or temporarily invested in cash equivalents and short-term investment-grade securities from the date of issuance through September 30, 2020.

During March 2020, the Company entered into several interest rate swap transactions to manage interest rate risk. These agreements were designated as cash flow hedges and were used to hedge the exposure to variability in future cash flows resulting from changes in interest rates related to the anticipated issuance of the March 2020 Notes. In connection with the issuance of the March 2020 Notes, the Company terminated all outstanding cash flow hedges. The Company paid a net amount of $7 million to the hedge counterparties upon termination, which was recorded as a loss, net of tax, of $5 million in accumulated other comprehensive income and will be reclassified as interest expense over the life of the March 2020 Notes. See Note 8 ‘‘Other Comprehensive Income’’ for additional information.

Early Extinguishments of Debt

In August 2020, the Company purchased $6.0 billion of its outstanding senior notes through cash tender offers. The senior notes purchased included the following: $723 million of its 4.0% senior notes due 2023, $2.3 billion of its 3.7% senior notes due 2023 and $3.0 billion of its 4.1% senior notes due 2025. In connection with the purchase of such senior notes, the Company paid a premium of $706 million in excess of the aggregate principal amount of the senior notes that were purchased, wrote-off $47 million of unamortized deferred financing costs and incurred $13 million in fees, for a total loss on early extinguishment of debt of $766 million.

In August 2019, the Company purchased $4.0 billion of its outstanding senior notes through cash tender offers. The senior notes purchased included the following: $1.3 billion of its 3.125% senior notes due 2020, $723 million of its floating rate notes due 2020, $328 million of its 4.125% senior notes due 2021, $297 million of 4.125% senior notes due 2021 issued by Aetna, $413 million of 5.45% senior notes due 2021 issued by Coventry Health Care, Inc., a wholly-owned subsidiary of Aetna and $962 million of its 3.35% senior notes due 2021. In connection with the purchase of such senior notes, the Company paid a premium of $76 million in excess of the aggregate principal amount of the senior notes that were purchased, incurred $8 million in fees and recognized a net gain of $5 million on the write-off of net unamortized deferred financing premiums, for a net loss on early extinguishment of debt of $79 million.

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Shareholders' Equity

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

Share Repurchases

On November 2, 2016, CVS Health’s Board of Directors (the “Board”) authorized the 2016 share repurchase program (“2016 Repurchase Program”) for up to $15.0 billion of the Company’s common shares. The 2016 Repurchase Program permits the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase transactions, and/or other derivative transactions. The 2016 Repurchase Program can be modified or terminated by the Board at any time.

During the nine months ended September 30, 2020 and 2019, the Company did not repurchase any shares of its common stock. At September 30, 2020, the Company had remaining authorization to repurchase an aggregate of up to approximately $13.9 billion of its common shares under the 2016 Repurchase Program.

DividendsThe quarterly cash dividend declared by the Board was $0.50 per share in each of the three-month periods ended September 30, 2020 and 2019. Cash dividends declared by the Board were $1.50 per share in each of the nine-month periods ended September 30, 2020 and 2019. CVS Health has paid cash dividends every quarter since becoming a public company. Future dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Board.

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Other Comprehensive Income

9 Months Ended

Sep. 30, 2020

Other Comprehensive Income (Loss), Net of Tax [Abstract]

Other Comprehensive Income

Other Comprehensive Income

Shareholders’ equity included the following activity in accumulated other comprehensive income for the three and nine months ended September 30, 2020 and 2019:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Net unrealized investment gains:
Beginning of period balance	$	987	$	682	$	774	$	97
Other comprehensive income before reclassifications ($83, $214, $278 and $933 pretax)	52		192		218		799
Amounts reclassified from accumulated other comprehensive income ($(10), $(63), $47 and $(93) pretax) (1)	(8)		(56)		39		(78)
Other comprehensive income	44		136		257		721
End of period balance	1,031		818		1,031		818
Foreign currency translation adjustments:
Beginning of period balance	(2)		(154)		4		(158)
Other comprehensive income (loss) before reclassifications	1		(1)		(5)		3
Amounts reclassified from accumulated other comprehensive income (loss) (2)	—		154		—		154
Other comprehensive income (loss)	1		153		(5)		157
End of period balance	(1)		(1)		(1)		(1)
Net cash flow hedges:
Beginning of period balance	267		305		279		312
Other comprehensive loss before reclassifications ($0, $(25), $(7) and $(25) pretax)	—		(18)		(5)		(18)
Amounts reclassified from accumulated other comprehensive income ($(4), $(7), $(14) and $(16) pretax) (3)	(3)		(5)		(10)		(12)
Other comprehensive loss	(3)		(23)		(15)		(30)
End of period balance	264		282		264		282
Pension and other postretirement benefits:
Beginning of period balance	(39)		(149)		(38)		(149)
Other comprehensive loss before reclassifications ($0, $0, $(8) and $0 pretax)	—		—		(6)		—
Amounts reclassified from accumulated other comprehensive loss ($0, $0, $7 and $0 pretax) (4)	—		—		5		—
Other comprehensive loss	—		—		(1)		—
End of period balance	(39)		(149)		(39)		(149)
Total beginning of period accumulated other comprehensive income	1,213		684		1,019		102
Total other comprehensive income	42		266		236		848
Total end of period accumulated other comprehensive income	$	1,255	$	950	$	1,255	$	950

_____________________________________________

(1)Amounts reclassified from accumulated other comprehensive income for specifically identified debt securities are included in net investment income in the unaudited condensed consolidated statements of operations.

(2)Amounts reclassified from accumulated other comprehensive income (loss) represent the elimination of the cumulative translation adjustment associated with the sale of Onofre, which was sold on July 1, 2019. The loss on the divestiture of Onofre is reflected in operating expenses in the unaudited condensed consolidated statements of operations.

(3)Amounts reclassified from accumulated other comprehensive income for specifically identified cash flow hedges are included in interest expense in the unaudited condensed consolidated statements of operations. The Company expects to reclassify approximately $15 million, net of tax, in net gains associated with its cash flow hedges into net income within the next 12 months.

(4)Amounts reclassified from accumulated other comprehensive loss for specifically identified pension and other postretirement benefits are included in other income in the unaudited condensed consolidated statements of operations.

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Earnings Per Share

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Earnings per share is computed using the two-class method. Stock appreciation rights and options to purchase 17 million and 16 million shares of common stock were outstanding, but were excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2020, respectively, because their exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. For the same reason, stock appreciation rights and options to purchase 18 million and 19 million shares of common stock were outstanding, but were excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2019, respectively.

The following is a reconciliation of basic and diluted earnings per share for the respective periods:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions, except per share amounts	2020		2019		2020		2019
Numerator for earnings per share calculation:
Net income	$	1,219	$	1,529	$	6,217	$	4,887
Income allocated to participating securities	—		—		—		(3)
Net (income) loss attributable to noncontrolling interests	5		1		(11)		—
Net income attributable to CVS Health	$	1,224	$	1,530	$	6,206	$	4,884
Denominator for earnings per share calculation:
Weighted average shares, basic	1,310		1,302		1,308		1,300
Effect of dilutive securities	5		3		6		3
Weighted average shares, diluted	1,315		1,305		1,314		1,303
Earnings per share:
Basic	$	0.93	$	1.17	$	4.74	$	3.76
Diluted	$	0.93	$	1.17	$	4.72	$	3.75

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

COVID-19

The COVID-19 pandemic continues to evolve. We believe COVID-19’s impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the geographies impacted and the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to the pandemic. Those primary drivers are beyond our knowledge and control. As a result, the impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be adverse and material. COVID-19 also may result in legal and regulatory proceedings, investigations and claims against us.

Lease Guarantees

Between 1995 and 1997, the Company sold or spun off a number of subsidiaries, including Bob’s Stores and Linens ‘n Things, each of which subsequently filed for bankruptcy, and Marshalls. In many cases, when a former subsidiary leased a store, the Company provided a guarantee of the former subsidiary’s lease obligations for the initial lease term and any extension thereof pursuant to a renewal option provided for in the lease prior to the time of the disposition. When the subsidiaries were disposed of and accounted for as discontinued operations, the Company’s guarantees remained in place, although each initial purchaser agreed to indemnify the Company for any lease obligations the Company was required to satisfy. If any of the purchasers or any of the former subsidiaries fail to make the required payments under a store lease, the Company could be required to satisfy those obligations, and any significant adverse impact of COVID-19 on such purchasers and/or former subsidiaries increases the risk that the Company will be required to satisfy those obligations. As of September 30, 2020, the Company guaranteed 76 such store leases (excluding the lease guarantees related to Linens ‘n Things, which have been recorded as a liability on the unaudited condensed consolidated balance sheets), with the maximum remaining lease term extending through 2030.

Guaranty Fund Assessments, Market Stabilization and Other Non-Voluntary Risk Sharing Pools

Under guaranty fund laws existing in all states, insurers doing business in those states can be assessed (in most states up to prescribed limits) for certain obligations of insolvent insurance companies to policyholders and claimants. The life and health insurance guaranty associations in which the Company participates that operate under these laws respond to insolvencies of long-term care insurers and life insurers as well as health insurers. The Company’s assessments generally are based on a formula relating to the Company’s health care premiums in the state compared to the premiums of other insurers. Certain states allow assessments to be recovered over time as offsets to premium taxes. Some states have similar laws relating to HMOs and/or other payors such as not-for-profit consumer-governed health plans established under the ACA.

In 2009, the Pennsylvania Insurance Commissioner placed long-term care insurer Penn Treaty Network America Insurance Company and one of its subsidiaries (collectively, “Penn Treaty”) in rehabilitation, an intermediate action before insolvency, and subsequently petitioned a state court to convert the rehabilitation into a liquidation. Penn Treaty was placed in liquidation in March 2017. The Company has recorded a liability for its estimated share of future assessments by applicable life and health insurance guaranty associations. It is reasonably possible that in the future the Company may record a liability and expense relating to other insolvencies which could have a material adverse effect on the Company’s operating results, financial condition and cash flows, and this risk is heightened by any significant adverse impact of the COVID-19 pandemic on the solvency of other insurers, including long-term care insurers and life insurers. While historically the Company has ultimately recovered more than half of guaranty fund assessments through statutorily permitted premium tax offsets, significant increases in assessments could lead to legislative and/or regulatory actions that limit future offsets.

HMOs in certain states in which the Company does business are subject to assessments, including market stabilization and other risk-sharing pools, for which the Company is assessed charges based on incurred claims, demographic membership mix and other factors. The Company establishes liabilities for these assessments based on applicable laws and regulations. In certain states, the ultimate assessments the Company pays are dependent upon the Company’s experience relative to other entities subject to the assessment, and the ultimate liability is not known at the financial statement date. While the ultimate amount of the assessment is dependent upon the experience of all pool participants, the Company believes it has adequate reserves to cover such assessments.

Litigation and Regulatory Proceedings

The Company is a party to numerous legal proceedings, investigations, audits and claims arising, for the most part, in the ordinary course of its businesses, including the matters described below. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and reasonably estimable, the Company does not establish an accrued liability. None of the Company’s accruals for outstanding legal matters are material individually or in the aggregate to the Company’s financial condition.

Except as otherwise noted, the Company cannot predict with certainty the timing or outcome of the legal matters described below, and the Company is unable to reasonably estimate a possible loss or range of possible loss in excess of amounts already accrued for these matters. It is reasonably possible that the outcome of such legal matters could be material to the Company.

Usual and Customary Litigation

The Company is named as a defendant in a number of lawsuits, including the cases below, that allege that the Company’s retail stores overcharged for prescription drugs by not submitting the price available to members of the CVS Health Savings Pass program as the pharmacy’s usual and customary price, and related theories. The Company is defending itself against these claims.

Corcoran et al. v. CVS Health Corporation (U.S. District Court for the Northern District of California) and Podgorny et al. v. CVS Health Corporation (U.S. District Court for the Northern District of Illinois). These putative class actions were filed against the Company in July and September 2015. The cases were consolidated in the U.S. District Court for the Northern District of California. Plaintiffs seek damages and injunctive relief under the consumer protection statutes of certain states on behalf of a class of consumers who purchased certain prescription drugs. Several third-party payors filed similar putative class actions on behalf of payors captioned Sheet Metal Workers Local No. 20 Welfare and Benefit Fund v. CVS Health Corp. and Plumbers Welfare Fund, Local 130 v. CVS Health Corporation (both pending in the U.S. District Court for the District of

Rhode Island) in February and August 2016. In all of these cases the plaintiffs allege the Company overcharged for certain prescription drugs by not submitting the price available to members of the CVS Health Savings Pass program as the pharmacy’s usual and customary price. In the Corcoran case, the U.S. District Court granted summary judgment to the Company on plaintiffs’ claims in their entirety and certified certain subclasses in September 2017. In June 2019, the U.S. Court of Appeals for the Ninth Circuit reversed the U.S. District Court’s grant of summary judgment and reversed the U.S. District Court’s narrowing of the requested class. The Corcoran case is proceeding to a trial on a six state class basis, and trial is scheduled to occur in 2021. The Sheet Metal Workers plaintiffs have amended their complaint to assert a claim under the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) premised on an alleged conspiracy between the Company and other PBMs.

State of Mississippi v. CVS Health Corporation, et al. (Circuit Court of DeSoto County, Mississippi, Third Judicial District). In July 2016, the Company was served with a complaint filed on behalf of the State of Mississippi. The complaint alleged that CVS retail pharmacies in Mississippi submitted false claims for reimbursement to the Mississippi Medicaid program by not submitting the price available to members of the CVS Health Savings Pass program as the pharmacy’s usual and customary price. In June 2019, the Company’s motion for judgment on the pleadings was granted in part and denied in part. Also in June 2019, the State of Mississippi’s motion to dismiss the Company’s counterclaim for declaratory relief was granted. In April 2020, the Company’s motion to dismiss the State of Mississippi’s second amended complaint was denied.

Blue Cross and Blue Shield of Alabama, et al. v. CVS Health Corporation, et al. and Horizon Healthcare Services, Inc. (d/b/a Horizon Blue Cross Blue Shield of New Jersey) et al. v. CVS Health Corporation, et al. (U.S. District Court for the District of Rhode Island). In May 2020, eight Blue Cross Blue Shield entities from six states filed a lawsuit against the Company alleging fraud and other state causes of action premised on a theory that the Company’s retail stores overcharged for prescription drugs by not submitting accurate usual and customary prices, including by not submitting the price available to members of the former CVS Health Savings Pass program. In October 2020, two Horizon Blue Cross Blue Shield entities from New Jersey filed an almost identical lawsuit premised on the same theories.

PBM Litigation and Investigations

The Company is named as a defendant in a number of lawsuits and is subject to a number of investigations concerning its PBM practices.

Klein, et al. v. Prime Therapeutics, et al. (U.S. District Court for the District of Minnesota). This putative class action was filed against the Company and other PBMs in June 2017 on behalf of ERISA plan members who purchased and paid for EpiPen or EpiPen Jr. Plaintiffs allege that the PBMs are ERISA fiduciaries to plan members and have violated ERISA by allegedly causing higher inflated prices for EpiPens through the process of negotiating increased rebates from EpiPen manufacturer Mylan. This case was consolidated with a similar matter and was proceeding as In re EpiPen ERISA Litigation. In October 2020, the lawsuit was voluntarily dismissed with prejudice following denial of the plaintiffs’ motion for class certification.

County of Harris, Texas v. Eli Lilly and Company, et al. (U.S. District Court for the Southern District of Texas). This lawsuit was filed against Caremark, Aetna, the manufacturers of insulin and other PBMs in November 2019 by Harris County. Harris County alleges that it was overcharged for insulin as a result of a “price fixing conspiracy” between the manufacturers and PBMs to artificially increase the price of insulin and other diabetes medications. The complaint alleges violations of RICO and claims that the manufacturers and PBMs engaged in an “Insulin Pricing Scheme” whereby the manufacturers artificially increased the reported prices of their insulin products while “secretly” paying rebates to the PBMs in exchange for preferred treatment on the PBMs’ drug formularies. The Company is defending itself against these claims.

In re Direct Purchaser EpiPen Litigation (U.S. District Court for the District of Minnesota). This putative class action (originally captioned as Rochester Drug Cooperative, Inc. v. Mylan Inc., et al.) was filed in March 2020 against Caremark, other PBMs and the manufacturer of EpiPen products and their authorized generics on behalf of purported classes of direct purchasers of these products. The complaint alleges violations of RICO and claims that rebate agreements between the drug manufacturer and PBMs caused the direct purchasers to pay inflated prices for these drug products. A nearly identical case was separately filed in the same court (Dakota Drug, Inc. v. Mylan Inc., et al.). The court granted a motion to consolidate the two complaints. The Company is defending itself against these claims.

In re Direct Purchaser Insulin Pricing Litigation (U.S. District Court for the District of New Jersey). This putative class action (originally captioned as Rochester Drug Cooperative, Inc. v. Eli Lilly and Co., et al.) was filed in March 2020 against Caremark, other PBMs and the manufacturers of analog insulin products on behalf of purported classes of direct purchasers of these products. The complaint alleges violations of RICO and claims that rebate agreements between the drug manufacturers and PBMs caused the direct purchasers to pay inflated prices for these drug products. Two nearly identical cases were

separately filed in the same court (FWK Holdings, LLC v. Novo Nordisk, et al. and Value Drug Company v. Eli Lilly & Co., et al.). The court granted a motion to consolidate all three complaints. The Company is defending itself against these claims.

United States ex rel. Behnke v. CVS Caremark Corporation, et al. (U.S. District Court for the Eastern District of Pennsylvania). In April 2018, the Court unsealed a complaint filed in February 2014. The government has declined to intervene in this case. The relator alleges that the Company submitted, or caused to be submitted, to Part D of the Medicare program Prescription Drug Event data and/or Direct and Indirect Remuneration reports that misrepresented true prices paid by the Company’s PBM to pharmacies for drugs dispensed to Part D beneficiaries with prescription benefits administered by the Company’s PBM. In April 2020, the Company’s motion to dismiss was granted in part and denied in part. The Company is defending itself against these claims.

The Company has received subpoenas, civil investigative demands (“CIDs”) and other requests for documents and information from, and is being investigated by, Attorneys General of several states regarding its PBM practices, including pricing and rebates. In addition, the Company has received inquiries from congressional committees regarding insulin pricing. The Company has been providing documents and information in response to these subpoenas, CIDs and requests for information.

Controlled Substances Litigation, Audits and Subpoenas

In December 2017, the U.S. Judicial Panel on Multidistrict Litigation consolidated numerous cases filed against various defendants by plaintiffs such as counties, cities, hospitals, Indian tribes and third-party payors, alleging claims generally concerning the impacts of widespread prescription opioid abuse. The consolidated multidistrict litigation captioned In re National Prescription Opiate Litigation (MDL No. 2804) is pending in the U.S. District Court for the Northern District of Ohio. This multidistrict litigation presumptively includes hundreds of relevant federal court cases that name the Company as a defendant. A significant number of similar cases that name the Company as a defendant in some capacity are pending in state courts. In addition, the Company has been named as a defendant in similar cases brought by certain state Attorneys General. The Company is defending itself against all such claims. Additionally, the Company has received subpoenas, CIDs and/or other requests for information regarding opioids from state Attorneys General and insurance and other regulators of several states. The Company has been cooperating with the government with respect to these subpoenas, CIDs and other requests for information.

The Company routinely is audited by the U.S. Drug Enforcement Administration (the “DEA”). In some instances, the Company is in discussions with the DEA and U.S. Attorney’s Offices concerning allegations that the Company violated certain requirements of the federal Controlled Substances Act.

In January 2020, the DOJ served the Company with a DEA administrative subpoena. The subpoena seeks documents relating to practices with respect to prescription opioids and other controlled substances at CVS Pharmacy locations in connection with an investigation concerning potential violations of the federal Controlled Substances Act and the federal False Claims Act. The Company has been cooperating with the government with respect to this subpoena.

Prescription Processing Litigation and Investigations

U.S. ex rel. Bassan et al. v. Omnicare, Inc. and CVS Health Corp. and U.S. ex rel. Mohajer et al. v. Omnicare, Inc. and CVS Health Corp. (U.S. District Court for the Southern District of New York). In December 2019, the U.S. Attorney’s Office for the Southern District of New York (the “SDNY”) filed complaints-in-intervention in these two previously sealed qui tam cases. With respect to the Bassan complaint, all states and Washington, D.C. have declined to intervene at this time. The government’s investigation related to these complaints included the previously disclosed CID that the Company received in October 2015 from the SDNY concerning the Company’s Omnicare pharmacies’ cycle fill process for assisted living facilities. The complaints allege that for certain non-skilled nursing facilities, Omnicare improperly filled prescriptions beyond one year where a valid prescription did not exist and that these dispensing events violated the federal False Claims Act. The Mohajer relators have amended their complaint to include claims based on similar theories related to certain skilled nursing facilities. The Company is defending itself against these claims.

In July 2017, the Company also received a subpoena from the California Department of Insurance requesting documents concerning the Company’s Omnicare pharmacies’ cycle fill process for assisted living facilities. The Company has been cooperating with the California Department of Insurance and providing documents and information in response to this subpoena.

In December 2016, the Company received a CID from the U.S. Attorney’s Office for the Northern District of New York requesting documents and information in connection with a federal False Claims Act investigation concerning whether the Company’s retail pharmacies improperly submitted certain insulin claims to Part D of the Medicare program rather than Part B of the Medicare program. The Company has been cooperating with the government and providing documents and information in response to this CID.

In May 2017, the Company received a CID from the SDNY requesting documents and information concerning possible false claims submitted to Medicare in connection with reimbursements for prescription drugs under the Medicare Part D program. The Company has been cooperating with the government and providing documents and information in response to this CID.

Provider Proceedings

The Company is named as a defendant in purported class actions and individual lawsuits arising out of its practices related to the payment of claims for services rendered to its members by health care providers with whom the Company has a contract and with whom the Company does not have a contract (“out-of-network providers”). Among other things, these lawsuits allege that the Company paid too little to its health plan members and/or providers for these services and/or otherwise allege that the Company failed to timely or appropriately pay or administer claims and benefits (including the Company’s post payment audit and collection practices and reductions in payments to providers due to sequestration). Other major health insurers are the subject of similar litigation or have settled similar litigation.

The Company also has received subpoenas and/or requests for documents and other information from, and been investigated by, state Attorneys General and other state and/or federal regulators, legislators and agencies relating to, and the Company is involved in other litigation regarding, its out-of-network benefit payment and administration practices. It is reasonably possible that others could initiate additional litigation or additional regulatory action against the Company with respect to its out-of-network benefit payment and/or administration practices.

CMS Actions

The U.S. Centers for Medicare & Medicaid Services (“CMS”) regularly audits the Company’s performance to determine its compliance with CMS’s regulations and its contracts with CMS and to assess the quality of services it provides to Medicare beneficiaries. CMS uses various payment mechanisms to allocate and adjust premium payments to the Company’s and other companies’ Medicare plans by considering the applicable health status of Medicare members as supported by information prepared, maintained and provided by health care providers. The Company collects claim and encounter data from providers and generally relies on providers to appropriately code their submissions to the Company and document their medical records, including the diagnosis data submitted to the Company with claims. CMS pays increased premiums to Medicare Advantage plans and Medicare PDP plans for members who have certain medical conditions identified with specific diagnosis codes. Federal regulators review and audit the providers’ medical records to determine whether those records support the related diagnosis codes that determine the members’ health status and the resulting risk-adjusted premium payments to the Company. In that regard, CMS has instituted risk adjustment data validation (“RADV”) audits of various Medicare Advantage plans, including certain of the Company’s plans, to validate coding practices and supporting medical record documentation maintained by health care providers and the resulting risk adjusted premium payments to the plans. CMS may require the Company to refund premium payments if the Company’s risk adjusted premiums are not properly supported by medical record data. The Office of the Inspector General of Health and Human Services (the “OIG”) also is auditing the Company’s risk adjustment-related data and that of other companies. The Company expects CMS and the OIG to continue these types of audits.

In 2012, CMS revised its audit methodology for RADV audits to determine refunds payable by Medicare Advantage plans for contract year 2011 and forward. Under the revised methodology, among other things, CMS will extrapolate the error rate identified in the audit sample of approximately 200 members to all risk adjusted premium payments made under the contract being audited. For contract years prior to 2011, CMS did not extrapolate sample error rates to the entire contract. As a result, the revised methodology may increase the Company’s exposure to premium refunds to CMS based on incomplete medical records maintained by providers. Since 2013, CMS has selected certain of the Company’s Medicare Advantage contracts for various contract years for RADV audit, and the number of RADV audits continues to increase. The Company is currently unable to predict which of its Medicare Advantage contracts will be selected for future audit, the amounts of any retroactive refunds of, or prospective adjustments to, Medicare Advantage premium payments made to the Company, the effect of any such refunds or adjustments on the actuarial soundness of the Company’s Medicare Advantage bids, or whether any RADV audit findings would require the Company to change its method of estimating future premium revenue in future bid submissions to CMS or compromise premium assumptions made in the Company’s bids for prior contract years, the current contract year or future contract years. Any premium or fee refunds or adjustments resulting from regulatory audits, whether as a result of

RADV, Public Exchange related or other audits by CMS, the OIG, the U.S. Department of Health and Human Services or otherwise, including audits of the Company’s minimum medical loss ratio (“MLR”) rebates, methodology and/or reports, could be material and could adversely affect the Company’s operating results, cash flows and/or financial condition.

Medicare and Medicaid CIDs

The Company has received CIDs from the Civil Division of the DOJ in connection with a current investigation of the Company’s patient chart review processes in connection with risk adjustment data submissions under Parts C and D of the Medicare program. The Company has been cooperating with the government and providing documents and information in response to these CIDs.

In April 2020, the Company received a CID from the Office of the Washington Attorney General, Medicaid Fraud Control Division, on behalf of the State of Washington and all other states, as well as the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The investigation involves, among other things, possible retention of overpayments and possible submission of false claims for Medicaid reimbursement relating to drugs prescribed by providers who were excluded by the applicable federal and/or state Medicaid programs. The Company is cooperating with the government with respect to this investigation.

Stockholder Matters

The Company and/or its current and/or former directors and/or executive officers are named as defendants in a number of lawsuits and a request for access to information initiated by holders or putative holders of CVS Health common stock.

Between February and August 2019, six class action complaints were filed by putative plaintiffs against the Company and certain current and former officers and directors: Anarkat v. CVS Health Corp., et al. (U.S. District Court for the District of Rhode Island); Labourers’ Pension Fund of Central and Eastern Canada v. CVS Health Corp., et al. (New York Supreme Court); City of Warren Police and Fire Retirement Sys. v. CVS Health Corp., et. al. (Rhode Island Superior Court); Cambria Co. Employees Retirement Sys. v. CVS Health Corp., et al. (New York Supreme Court); Freundlich v. CVS Health Corp., et al. (Rhode Island Superior Court); and In re CVS Health Corp. Securities Act Litigation (formerly captioned Waterford Twp. Police & Fire Retirement Sys. v. CVS Health Corp., et al.) (U.S. District Court for the District of Rhode Island). The plaintiffs in these cases assert a variety of causes of action under federal securities laws that are premised on allegations that the defendants made certain omissions and misrepresentations relating to the performance of the Company’s LTC business unit, which allegedly injured investors who acquired CVS Health securities between February 9, 2016 and February 20, 2019. The Labourers’ Pension Fund and Cambria County cases have been consolidated into a single action based on the Labourers’ Pension Fund complaint. The Freundlich and City of Warren cases have been consolidated into In re CVS Health Corp. Securities Litigation and stayed in favor of the earlier-filed Anarkat and Labourers’ Pension Fund cases. The Company is defending itself against these claims.

In January 2020, a derivative complaint was filed against the Company’s directors and current and former executive officers in the U.S. District Court for the District of Rhode Island by a stockholder. Lovoi v. Aguirre, et al. makes allegations similar to those contained the six stockholder class action complaints described above, including that the Company made false or misleading statements about its LTC business unit’s financial health. The Lovoi complaint alleges claims for breach of fiduciary duty against the Company’s directors and certain of its current and former executive officers and for violation of the federal securities laws. The Lovoi complaint seeks damages, restitution and equitable relief on behalf of the Company. The Lovoi case has been stayed pending the resolution of the two federal class action complaints described above. The Company’s directors and current and former executive officers are defending themselves against these claims.

In August and September 2020, two ERISA class actions were filed in the U.S. District Court in the District of Connecticut against CVS Health Corp., Aetna Inc., and several current and former executives, directors and/or members of Aetna’s Compensation and Talent Management Committee: Radcliffe v. Aetna Inc., et al. and Flaim v. Aetna Inc., et al. The plaintiffs in these cases assert a variety of causes of action premised on allegations that the defendants breached fiduciary duties and engaged in prohibited transactions relating to participants in the Aetna 401(k) plan’s investment in company stock between December 3, 2017 and February 20, 2019, claiming losses related to the performance of the Company’s LTC business unit. The Company also received a related document request pursuant to ERISA § 104(b). The Company is evaluating these matters.

Other Legal and Regulatory Proceedings

The Company is also a party to other legal proceedings and is subject to government investigations, inquiries and audits and has received and is cooperating with the government in response to CIDs, subpoenas or similar process from various governmental agencies requesting information, arising, for the most part, in the ordinary course of its businesses. These other legal

proceedings and government actions include claims of or relating to bad faith, medical or professional malpractice, claims processing, dispensing of medications, non-compliance with state and federal regulatory regimes, marketing misconduct, failure to timely or appropriately pay or administer claims and benefits, provider network structure (including the use of performance-based networks and termination of provider contracts), rescission of insurance coverage, improper disclosure or use of personal information, anticompetitive practices, general contractual matters, product liability, intellectual property litigation and employment litigation. Some of these other legal proceedings are or are purported to be class actions or derivative claims. The Company is defending itself against the claims brought in these matters.

Awards to the Company and others of certain government contracts, particularly Medicaid contracts and other contracts with government customers in the Company’s Health Care Benefits segment, frequently are subject to protests by unsuccessful bidders. These protests may result in awards to the Company being reversed, delayed or modified. The loss or delay in implementation of any government contract could adversely affect the Company’s operating results. The Company will continue to defend contract awards it receives.

There also continues to be a heightened level of review and/or audit by regulatory authorities and legislators of, and increased litigation regarding, the Company’s and the rest of the health care and related benefits industry’s business and reporting practices, including premium rate increases, utilization management, development and application of medical policies, complaint, grievance and appeal processing, information privacy, provider network structure (including provider network adequacy, the use of performance-based networks and termination of provider contracts), provider directory accuracy, calculation of minimum medical loss ratios and/or payment of related rebates, delegated arrangements, rescission of insurance coverage, limited benefit health products, student health products, pharmacy benefit management practices (including manufacturers’ rebates, pricing, the use of narrow networks and the placement of drugs in formulary tiers), sales practices, customer service practices, vendor oversight and claim payment practices (including payments to out-of-network providers).

As a leading national health care company, the Company regularly is the subject of government actions of the types described above. These government actions may prevent or delay the Company from implementing planned premium rate increases and may result, and have resulted, in restrictions on the Company’s businesses, changes to or clarifications of the Company’s business practices, retroactive adjustments to premiums, refunds or other payments to members, beneficiaries, states or the federal government, withholding of premium payments to the Company by government agencies, assessments of damages, civil or criminal fines or penalties, or other sanctions, including the possible suspension or loss of licensure and/or suspension or exclusion from participation in government programs.

The Company can give no assurance that its businesses, financial condition, operating results and/or cash flows will not be materially adversely affected, or that the Company will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations as they may relate to one or more of the Company’s businesses, one or more of the industries in which the Company competes and/or the health care industry generally; (iii) pending or future federal or state government investigations of one or more of the Company’s businesses, one or more of the industries in which the Company competes and/or the health care industry generally; (iv) pending or future government audits, investigations or enforcement actions against the Company; (v) adverse developments in any pending qui tam lawsuit against the Company, whether sealed or unsealed, or in any future qui tam lawsuit that may be filed against the Company; or (vi) adverse developments in pending or future legal proceedings against the Company or affecting one or more of the industries in which the Company competes and/or the health care industry generally.

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Segment Reporting

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company has three operating segments, Pharmacy Services, Retail/LTC and Health Care Benefits, as well as a Corporate/Other segment. The Company’s segments maintain separate financial information, and the Company’s chief operating decision maker (the “CODM”) evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company’s segments based on adjusted operating income, which is defined as operating income (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. See the reconciliations of operating income (GAAP measure) to adjusted operating income below for further context regarding the items excluded from operating income in determining adjusted operating income. The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying business performance and trends. Non-GAAP financial measures the Company discloses, such as consolidated adjusted operating income, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.

The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:

In millions	Pharmacy  Services (1)		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Three Months Ended
September 30, 2020
Revenues from external customers	$	33,492	$	14,770	$	18,557	$	33	$	—	$	66,852
Intersegment revenues	2,219		7,955		20		—		(10,194)		—
Net investment income	—		—		121		83		—		204
Total revenues	35,711		22,725		18,698		116		(10,194)		67,056
Adjusted operating income (loss)	1,619		1,412		1,080		(303)		(186)		3,622
September 30, 2019
Revenues from external customers	$	33,680	$	13,805	$	17,027	$	35	$	—	$	64,547
Intersegment revenues	2,338		7,661		8		—		(10,007)		—
Net investment income	—		—		146		117		—		263
Total revenues	36,018		21,466		17,181		152		(10,007)		64,810
Adjusted operating income (loss)	1,439		1,516		1,423		(252)		(179)		3,947
Nine Months Ended
September 30, 2020
Revenues from external customers	$	98,233	$	44,314	$	55,972	$	83	$	—	$	198,602
Intersegment revenues	7,350		22,822		51		—		(30,223)		—
Net investment income	—		—		341		209		—		550
Total revenues	105,583		67,136		56,364		292		(30,223)		199,152
Adjusted operating income (loss)	4,127		4,371		6,035		(931)		(539)		13,063
September 30, 2019
Revenues from external customers	$	95,494	$	41,536	$	51,976	$	76	$	—	$	189,082
Intersegment revenues	8,924		22,492		20		—		(31,436)		—
Net investment income	—		—		458		347		—		805
Total revenues	104,418		64,028		52,454		423		(31,436)		189,887
Adjusted operating income (loss)	3,682		4,674		4,423		(685)		(521)		11,573

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(1)Total revenues of the Pharmacy Services segment include approximately $2.5 billion and $2.7 billion of retail co-payments for the three months ended September 30, 2020 and 2019, respectively, and $8.5 billion and $8.9 billion of retail co-payments for the nine months ended September 30, 2020 and 2019, respectively.

The following are reconciliations of consolidated operating income to adjusted operating income for the three and nine months ended September 30, 2020 and 2019:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Operating income (GAAP measure)	$	3,249	$	2,928	$	11,387	$	8,950
Amortization of intangible assets (1)	587		607		1,751		1,822
Acquisition-related integration costs (2)	57		111		196		365
(Gain) loss on divestiture of subsidiary (3)	(271)		205		(271)		205
Store rationalization charges (4)	—		96		—		231
Adjusted operating income	$	3,622	$	3,947	$	13,063	$	11,573

_____________________________________________

(1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

(2)During the three and nine months ended September 30, 2020 and 2019, acquisition-related integration costs relate to the Aetna Acquisition. The acquisition-related integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

(3)During the three and nine months ended September 30, 2020, the gain on divestiture of subsidiary represents the pre-tax gain on the sale of the Workers’ Compensation business, which the Company sold on July 31, 2020 for approximately $850 million. The gain on divestiture is reflected as a reduction in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Health Care Benefits segment. During the three and nine months ended September 30, 2019, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of Onofre, which occurred on July 1, 2019. The loss on divestiture primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income and is reflected in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment.

(4)During the three and nine months ended September 30, 2019, the store rationalization charges relate to the planned closure of 22 underperforming retail pharmacy stores in the first quarter of 2020. During the nine months ended September 30, 2019, the store rationalization charges also relate to the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Retail/LTC segment.

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Subsequent Event

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

Subsequent Event

Subsequent Event

The ACA established a temporary risk corridor program, which expired at the end of 2016, for qualified individual and small group health insurance plans. Under this program, health insurance companies were to make payments to, or receive payments from, the U.S. Department of Health and Human Services (“HHS”) based on their ratio of allowable costs to target costs (as defined by the ACA).

The Company filed a lawsuit in August 2019 to recover the $313 million it was owed under the ACA’s risk corridor program, which had been stayed pending the Supreme Court decision. In April 2020, the U.S. Supreme Court ruled that health insurance companies may sue the federal government for amounts owed as calculated under the ACA’s temporary risk corridor program. At September 30, 2020, the Company did not record any ACA risk corridor receivables because payment was uncertain.

On October 22, 2020, the Company received the $313 million it was owed under the ACA’s risk corridor program. The Company recorded the risk corridor payment as an increase to premium revenue in the fourth quarter of 2020. After considering offsetting items such as the ACA’s minimum MLR rebate requirements and premium taxes, the Company expects to record pre-tax income of approximately $305 million and after-tax income of approximately $220 million during the fourth quarter of 2020.

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Segment Reporting

The Company has four reportable segments: Pharmacy Services, Retail/LTC, Health Care Benefits and Corporate/Other, which are described below.

Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services, mail order pharmacy, specialty pharmacy and infusion services, clinical services, disease management services and medical spend management. The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on public health insurance exchanges (“Public Exchanges”) and private health insurance exchanges, other sponsors of health benefit plans and individuals throughout the United States. The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services.

Retail/LTC Segment

The Retail/LTC segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products, cosmetics and personal care products, provides health care services through its MinuteClinic® walk-in medical clinics, provides medical diagnostic testing and conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to long-term care facilities and other care settings. As of September 30, 2020, the Retail/LTC segment operated more than 9,900 retail locations, approximately 1,100 MinuteClinic locations as well as online retail pharmacy websites, LTC pharmacies and onsite pharmacies.

Health Care Benefits Segment

The Health Care Benefits segment is one of the nation’s leading diversified health care benefits providers. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, Medicaid health care management services and health information technology products and services. The Health Care Benefits segment also provided workers’ compensation administrative services through its Coventry Health Care Workers’ Compensation business (“Workers’ Compensation business”) prior to the sale of this business on July 31, 2020. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.”

Corporate/Other Segment

The Company presents the remainder of its financial results in the Corporate/Other segment, which consists of:

•Management and administrative expenses to support the Company’s overall operations, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and enterprise modernization programs and acquisition-related integration costs; and

•Products for which the Company no longer solicits or accepts new customers such as its large case pensions and long-term care insurance products.

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of CVS Health and its subsidiaries have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In accordance with such rules and regulations, certain information and accompanying note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Because of the influence of various factors on the Company’s operations, including business combinations, certain holidays and other seasonal influences, net income for any interim period may not be comparable to the same interim period in previous years or necessarily indicative of income for the full year.

Principles of Consolidation

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated.

The Company continually evaluates its investments to determine if they represent variable interests in a VIE. If the Company determines that it has a variable interest in a VIE, the Company then evaluates if it is the primary beneficiary of the VIE. The evaluation is a qualitative assessment as to whether the Company has the ability to direct the activities of a VIE that most significantly impact the entity’s economic performance. The Company consolidates a VIE if it is considered to be the primary beneficiary.

Assets and liabilities of VIEs for which the Company is the primary beneficiary were not significant to the Company’s unaudited condensed consolidated financial statements. VIE creditors do not have recourse against the general credit of the Company.

Reclassifications

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Restricted Cash

Restricted CashRestricted cash included in other assets on the unaudited condensed consolidated balance sheets represents amounts held in a trust in one of the Company’s captive insurance companies to satisfy collateral requirements associated with the assignment of certain insurance policies. All restricted cash is invested in time deposits, money market funds or commercial paper.

Accounts Receivable

Accounts ReceivableAccounts receivable are stated net of allowances for credit losses, customer credit allowances, contractual allowances and estimated terminations

Accounts Receivable, Expected Credit Losses

The Company’s allowance for credit losses was $363 million as of September 30, 2020. When developing an estimate of the Company’s expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable. The Company’s accounts receivable are short duration in nature and typically settle in less than 30 days. The Company’s allowance for doubtful accounts was $319 million as of December 31, 2019.

Revenue Recognition

Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration, and include ExtraBucks® Rewards and unredeemed Company gift cards. The consideration received remains a contract liability until goods or services have been provided to the customer. In addition, the Company recognizes breakage on Company gift cards based on historical redemption patterns.

Health Insurer Fee

Health Insurer FeeSince January 1, 2014, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) has imposed an annual premium-based health insurer fee (the “HIF”). The HIF, which is payable each September, is not deductible for federal income tax purposes. There was no expense related to the HIF in the three and nine months ended September 30, 2019, since there was a one-year suspension of the HIF for 2019. In the three and nine months ended September 30, 2020, operating expenses included $255 million and $774 million, respectively, related to the Company’s share of the 2020 HIF. The Company paid approximately $1.0 billion, representing the Company’s portion of the non tax-deductible HIF in 2020. In December 2019, the HIF was repealed for calendar years after 2020.

Related Party Transactions

Related Party Transactions

The Company has an equity method investment in SureScripts, LLC (“SureScripts”), which operates a clinical health information network. The Company utilizes this clinical health information network in providing services to its client plan members and retail customers. The Company expensed fees for the use of this network of $5 million and $14 million in the three months ended September 30, 2020 and 2019, respectively, and expensed fees for the use of this network of approximately $28 million and $26 million in the nine months ended September 30, 2020 and 2019, respectively. The Company’s investment in and equity in the earnings of SureScripts for all periods presented is immaterial.

The Company has an equity method investment in Heartland Healthcare Services, LLC (“Heartland”). Heartland operates several LTC pharmacies in four states. Heartland paid the Company $15 million and $20 million for pharmaceutical inventory purchases during the three months ended September 30, 2020 and 2019, respectively, and $58 million and $72 million for pharmaceutical inventory purchases during the nine months ended September 30, 2020 and 2019, respectively. Additionally, the Company performs certain collection functions for Heartland and then transfers those customer cash collections to Heartland. The Company’s investment in and equity in the earnings of Heartland for all periods presented is immaterial.

New Accounting Pronouncements Recently Adopted and Not Yet Adopted

New Accounting Pronouncements Recently Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This standard requires the use of a forward-looking expected credit loss impairment model for trade and other receivables, held-to-maturity debt securities, loans and other instruments. This standard also requires impairments and recoveries for available-for-sale debt securities to be recorded through an allowance account and revises certain disclosure requirements. The Company adopted this new accounting standard on January 1, 2020. The Company adopted the credit loss impairment model on a modified retrospective basis and recorded a $3 million cumulative effect adjustment to reduce retained earnings as of the adoption date. The Company adopted the available-for-sale debt security impairment model on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated operating results, cash flows or financial condition.

Refer to “Accounts Receivable” above for a discussion of the Company’s expected credit loss impairment policy for its accounts receivable. The following is a discussion of the Company’s available-for-sale debt security impairment policy and expected credit loss impairment policy for mortgage loans under the new credit loss impairment standard:

Debt Securities

Debt securities consist primarily of United States Treasury and agency securities, mortgage-backed securities, corporate and foreign bonds and other debt securities. Debt securities are classified as either current or long-term investments based on their contractual maturities unless the Company intends to sell an investment within the next 12 months, in which case it is classified as current within the unaudited condensed consolidated balance sheets. Debt securities are classified as available for sale and are carried at fair value.

If a debt security is in an unrealized loss position and the Company has the intent to sell the security, or it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis, the amortized cost basis of the security is written down to its fair value and the difference is recognized in net income. If a debt security is in an unrealized loss position and the Company does not have the intent to sell and it is more likely than not that the Company will not have to sell such security before recovery of its amortized cost basis, the Company bifurcates the impairment into credit-related and non-credit related components. In evaluating whether a credit related loss exists, the Company considers a variety of factors including: the extent to which the fair value is less than the amortized cost basis; adverse conditions specifically related to the issuer of a security, an industry or geographic area; the payment structure of the security; the failure of the issuer of the security to make scheduled interest or principle payments; and any changes to the rating of the security by a rating agency. The amount of the credit-related component is recorded as an allowance for credit losses and recognized in net income, and the amount of the non-credit related component is included in other comprehensive income. Interest is not accrued on debt securities when management believes the collection of interest is unlikely.

The credit-related component is determined by comparing the present value of cash flows expected to be collected from the security, considering all reasonably available information relevant to the collectability of the security, with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, the Company records an allowance for credit losses, which is limited by the amount that the fair value is less than amortized cost basis.

For mortgage-backed and other asset-backed securities, the Company recognizes income using an effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The Company’s investment in the security is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the security, with adjustments recognized in net income.

Mortgage Loans

Mortgage loan investments are valued at the unpaid principal balance, net of an allowance for credit losses. Mortgage loans with a maturity date or a committed prepayment date within twelve months are classified as current on the unaudited condensed consolidated balance sheets. The Company assesses whether its loans share similar risk characteristics and, if so, groups such loans in a risk pool when measuring expected credit losses. The Company considers the following characteristics when evaluating whether its loans share similar risk characteristics: loan-to-value ratios, property type (e.g., office, retail, apartment, industrial), geographic location, vacancy rates and property condition.

Credit loss reserves are determined using a loss rate method that multiplies the unpaid principal balance of each loan within a risk pool group by an estimated loss rate percentage. The loss rate percentage considers both the expected loan loss severity and the probability of loan default. For periods where the Company is able to make or obtain reasonable and supportable forecasts of expected economic conditions (e.g., gross domestic product, employment), the Company adjusts its expected loss rates to reflect these forecasted economic conditions. For periods beyond which the Company is able to make or obtain reasonable and supportable forecasts of expected economic conditions, the Company reverts to historical loss rates in determining expected credit losses.

Interest income on a potential problem loan (i.e., high probability of default) or restructured loan is accrued to the extent it is deemed to be collectible and the loan continues to perform under its original or restructured terms. Interest income on problem loans (i.e., more than 60 days delinquent, in bankruptcy or in process of foreclosure) is recognized on a cash basis. Cash payments on loans in the process of foreclosure are treated as a return of principal.

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and other - Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Topic 350-40 to determine which implementation costs to capitalize as assets. The Company adopted this new accounting guidance on January 1, 2020 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated operating results, cash flows, financial condition or related disclosures.

New Accounting Pronouncements Not Yet Adopted

Targeted Improvements to the Accounting for Long-Duration Insurance Contracts

In August 2018, the FASB issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (Topic 944). This standard requires the Company to review cash flow assumptions for its long-duration insurance contracts at least annually and recognize the effect of changes in future cash flow assumptions in net income. This standard also requires the Company to update discount rate assumptions quarterly and recognize the effect of changes in these assumptions in other comprehensive income. The rate used to discount the Company’s liability for future policy benefits will be based on an estimate of the yield for an upper-medium grade fixed-income instrument with a duration profile matching that of the Company’s liabilities. In addition, this standard changes the amortization method for deferred acquisition costs and requires additional disclosures regarding the long duration insurance contract liabilities in the Company’s interim and annual financial statements. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Accounting Standards Codification 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.

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Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Schedule of Cash, Cash Equivalents, and Restricted Cash

The following is a reconciliation of cash and cash equivalents on the unaudited condensed consolidated balance sheets to total cash, cash equivalents and restricted cash on the unaudited condensed consolidated statements of cash flows:

In millions	September 30, 2020		December 31, 2019
Cash and cash equivalents	$	9,256	$	5,683
Restricted cash (included in other assets)	276		271
Total cash, cash equivalents and restricted cash in the statements of cash flows	$	9,532	$	5,954

Accounts Receivable, Net

Accounts receivable, net is composed of the following:

In millions	September 30, 2020		December 31, 2019
Trade receivables	$	7,265	$	6,717
Vendor and manufacturer receivables	10,528		7,856
Premium receivables	2,852		2,663
Other receivables	3,171		2,381
Total accounts receivable, net	$	23,816	$	19,617

Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by major source in each segment for the three and nine months ended September 30, 2020 and 2019:

In millions	Pharmacy Services		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Three Months Ended September 30, 2020
Major goods/services lines:
Pharmacy	$	35,505	$	17,608	$	—	$	—	$	(10,051)	$	43,062
Front Store	—		4,740		—		—		—		4,740
Premiums	—		—		17,165		17		—		17,182
Net investment income	—		—		121		83		—		204
Other	206		377		1,412		16		(143)		1,868
Total	$	35,711	$	22,725	$	18,698	$	116	$	(10,194)	$	67,056
Pharmacy Services distribution channel:
Pharmacy network (1)	$	21,473
Mail choice (2)	14,032
Other	206
Total	$	35,711
Three Months Ended September 30, 2019
Major goods/services lines:
Pharmacy (3)	$	35,872	$	16,687	$	—	$	—	$	(9,999)	$	42,560
Front Store	—		4,614		—		—		—		4,614
Premiums	—		—		15,507		32		—		15,539
Net investment income	—		—		146		117		—		263
Other (3)	146		165		1,528		3		(8)		1,834
Total	$	36,018	$	21,466	$	17,181	$	152	$	(10,007)	$	64,810
Pharmacy Services distribution channel:
Pharmacy network (1) (3)	$	22,411
Mail choice (2) (3)	13,461
Other	146
Total	$	36,018

In millions	Pharmacy Services		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Nine Months Ended September 30, 2020
Major goods/services lines:
Pharmacy	$	104,924	$	51,833	$	—	$	—	$	(30,032)	$	126,725
Front Store	—		14,601		—		—		—		14,601
Premiums	—		—		51,699		50		—		51,749
Net investment income	—		—		341		209		—		550
Other	659		702		4,324		33		(191)		5,527
Total	$	105,583	$	67,136	$	56,364	$	292	$	(30,223)	$	199,152
Pharmacy Services distribution channel:
Pharmacy network (1)	$	63,109
Mail choice (2)	41,815
Other	659
Total	$	105,583
Nine Months Ended September 30, 2019
Major goods/services lines:
Pharmacy (3)	$	103,983	$	49,197	$	—	$	—	$	(31,416)	$	121,764
Front Store	—		14,288		—		—		—		14,288
Premiums	—		—		47,543		69		—		47,612
Net investment income	—		—		458		347		—		805
Other (3)	435		543		4,453		7		(20)		5,418
Total	$	104,418	$	64,028	$	52,454	$	423	$	(31,436)	$	189,887
Pharmacy Services distribution channel:
Pharmacy network (1) (3)	$	65,917
Mail choice (2) (3)	38,066
Other	435
Total	$	104,418

_____________________________________________

(1)Pharmacy Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice® activity, which is included within the mail choice category. Maintenance Choice permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS Pharmacy retail store for the same price as mail order.

(2)Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program.

(3)Certain prior year amounts have been reclassified for consistency with the current period presentation.

Contracts With Customers, Assets and Liabilities

The following table provides information about receivables and contract liabilities from contracts with customers:

In millions	September 30, 2020		December 31, 2019
Trade receivables (included in accounts receivable, net)	$	7,265	$	6,717
Contract liabilities (included in accrued expenses)	75		73

During the nine months ended September 30, 2020 and 2019, the contract liabilities balance includes increases related to customers’ earnings in ExtraBucks Rewards or issuances of Company gift cards and decreases for revenues recognized during the period as a result of the redemption of ExtraBucks Rewards or Company gift cards and breakage of Company gift cards. Below is a summary of such changes:

	Nine Months Ended September 30,
In millions	2020		2019
Contract liabilities, beginning of the period	$	73	$	67
Rewards earnings and gift card issuances	266		269
Redemption and breakage	(264)		(264)
Contract liabilities, end of the period	$	75	$	72

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Investments (Tables)

9 Months Ended

Sep. 30, 2020

Investments [Abstract]

Total Investments

Total investments at September 30, 2020 and December 31, 2019 were as follows:

	September 30, 2020						December 31, 2019
In millions	Current		Long-term		Total		Current		Long-term		Total
Debt securities available for sale	$	2,578	$	17,820	$	20,398	$	2,251	$	14,671	$	16,922
Mortgage loans	253		871		1,124		122		1,091		1,213
Other investments	—		1,525		1,525		—		1,552		1,552
Total investments	$	2,831	$	20,216	$	23,047	$	2,373	$	17,314	$	19,687

Debt Securities Available For Sale

Debt securities available for sale at September 30, 2020 and December 31, 2019 were as follows:

In millions	Gross Amortized Cost		Allowance for Credit Losses (1)		Net Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2020
Debt securities:
U.S. government securities	$	2,455	$	—	$	2,455	$	146	$	—	$	2,601
States, municipalities and political subdivisions	2,393		—		2,393		150		(3)		2,540
U.S. corporate securities	7,665		(4)		7,661		878		(15)		8,524
Foreign securities	2,479		—		2,479		252		(10)		2,721
Residential mortgage-backed securities	680		—		680		33		—		713
Commercial mortgage-backed securities	930		—		930		82		—		1,012
Other asset-backed securities	2,239		—		2,239		33		(10)		2,262
Redeemable preferred securities	22		—		22		3		—		25
Total debt securities (2)	$	18,863	$	(4)	$	18,859	$	1,577	$	(38)	$	20,398
December 31, 2019
Debt securities:
U.S. government securities	$	1,791	$	—	$	1,791	$	62	$	(1)	$	1,852
States, municipalities and political subdivisions	2,202		—		2,202		108		(1)		2,309
U.S. corporate securities	7,167		—		7,167		573		(3)		7,737
Foreign securities	2,149		—		2,149		200		(1)		2,348
Residential mortgage-backed securities	508		—		508		25		—		533
Commercial mortgage-backed securities	654		—		654		46		—		700
Other asset-backed securities	1,397		—		1,397		13		(5)		1,405
Redeemable preferred securities	30		—		30		8		—		38
Total debt securities (2)	$	15,898	$	—	$	15,898	$	1,035	$	(11)	$	16,922

_____________________________________________

(1)Effective January 1, 2020, the Company adopted the available-for-sale debt security impairment model under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The new impairment model requires the write down of amortized cost through an allowance for credit losses, rather than through a reduction of the amortized cost basis of the available-for-sale debt security. As the Company adopted the new available-for-sale debt security impairment model on a prospective basis, there was no allowance for credit losses recorded on available-for-sale debt securities at December 31, 2019.

(2)Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At September 30, 2020, debt securities with a fair value of $928 million, gross unrealized capital gains of $122 million and gross unrealized capital losses of $1 million and at December 31, 2019, debt securities with a fair value of $965 million, gross unrealized capital gains of $83 million and no gross unrealized capital losses were included in total debt securities, but support experience-rated products. Changes in net unrealized capital gains (losses) on these securities are not reflected in accumulated other comprehensive income.

Fair Value of Debt Securities by Contractual Maturity

The net amortized cost and fair value of debt securities at September 30, 2020 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity.

In millions	Net Amortized Cost		Fair Value
Due to mature:
Less than one year	$	1,588	$	1,604
One year through five years	6,009		6,329
After five years through ten years	3,466		3,774
Greater than ten years	3,947		4,704
Residential mortgage-backed securities	680		713
Commercial mortgage-backed securities	930		1,012
Other asset-backed securities	2,239		2,262
Total	$	18,859	$	20,398

Debt Securities In An Unrealized Capital Loss Position

Summarized below are the debt securities the Company held at September 30, 2020 and December 31, 2019 that were in an unrealized capital loss position, aggregated by the length of time the investments have been in that position:

	Less than 12 months					Greater than 12 months					Total
In millions, except number of securities	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
September 30, 2020
Debt securities:
U.S. government securities	58	$	311	$	—	—	$	—	$	—	58	$	311	$	—
States, municipalities and political subdivisions	95	196		3		—	—		—		95	196		3
U.S. corporate securities	704	639		15		4	2		—		708	641		15
Foreign securities	198	312		10		—	—		—		198	312		10
Residential mortgage-backed securities	19	70		—		3	—		—		22	70		—
Commercial mortgage-backed securities	28	106		—		—	—		—		28	106		—
Other asset-backed securities	288	543		7		90	80		3		378	623		10
Total debt securities	1,390	$	2,177	$	35	97	$	82	$	3	1,487	$	2,259	$	38
December 31, 2019
Debt securities:
U.S. government securities	52	$	168	$	1	—	$	—	$	—	52	$	168	$	1
States, municipalities and political subdivisions	66	115		1		2	5		—		68	120		1
U.S. corporate securities	181	305		2		2	—		1		183	305		3
Foreign securities	39	75		1		—	—		—		39	75		1
Residential mortgage-backed securities	30	16		—		9	—		—		39	16		—
Commercial mortgage-backed securities	16	49		—		—	—		—		16	49		—
Other asset-backed securities	138	254		1		187	182		4		325	436		5
Total debt securities	522	$	982	$	6	200	$	187	$	5	722	$	1,169	$	11

The maturity dates for debt securities in an unrealized capital loss position at September 30, 2020 were as follows:

	Supporting experience-rated products				Supporting remaining products				Total
In millions	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Due to mature:
Less than one year	$	—	$	—	$	36	$	—	$	36	$	—
One year through five years	1		—		623		7		624		7
After five years through ten years	11		1		493		12		504		13
Greater than ten years	11		—		285		8		296		8
Residential mortgage-backed securities	—		—		70		—		70		—
Commercial mortgage-backed securities	2		—		104		—		106		—
Other asset-backed securities	7		—		616		10		623		10
Total	$	32	$	1	$	2,227	$	37	$	2,259	$	38

Activity in Mortgage Loan Portfolio

During the three and nine months ended September 30, 2020 and 2019, the Company had the following activity in its mortgage loan portfolio:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
New mortgage loans	$	31	$	12	$	55	$	90
Mortgage loans fully repaid	37		56		114		127
Mortgage loans foreclosed	—		—		—		—

Mortgage Loan Internal Credit Rating

Based on the Company’s assessments at September 30, 2020 and December 31, 2019, the amortized cost basis of the Company's mortgage loans within each credit quality indicator by year of origination was as follows:

	Amortized Cost Basis by Year of Origination
In millions, except credit quality indicator	2020		2019		2018		2017		2016		Prior		Total
September 30, 2020
1	$	—	$	—	$	—	$	23	$	—	$	39	$	62
2 to 4	57		95		90		129		129		516		1,016
5 and 6	—		—		4		4		—		29		37
7	—		—		—		9		—		—		9
Total	$	57	$	95	$	94	$	165	$	129	$	584	$	1,124
December 31, 2019
1			$	—	$	—	$	15	$	—	$	43	$	58
2 to 4			93		93		206		140		611		1,143
5 and 6			—		—		—		—		12		12
7			—		—		—		—		—		—
Total			$	93	$	93	$	221	$	140	$	666	$	1,213

Net Investment Income

Sources of net investment income for the three and nine months ended September 30, 2020 and 2019 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Debt securities	$	151	$	145	$	441	$	437
Mortgage loans	15		19		45		54
Other investments	37		60		64		163
Gross investment income	203		224		550		654
Investment expenses	(8)		(10)		(25)		(28)
Net investment income (excluding net realized capital gains or losses)	195		214		525		626
Net realized capital gains (1)	9		49		25		179
Net investment income (2)	$	204	$	263	$	550	$	805

_____________________________________________

(1)Net realized capital gains include credit-related and yield-related impairment losses on debt securities of $1 million and $2 million, respectively, in the three months ended September 30, 2020. Net realized capital gains include credit-related and yield-related impairment losses on debt securities of $4 million and $44 million, respectively, in the nine months ended September 30, 2020. Net realized capital gains are net of other than temporary impairment losses on debt securities of $9 million and $22 million, respectively, in the three and nine months ended September 30, 2019.

(2)Net investment income includes $10 million and $31 million for the three and nine months ended September 30, 2020, respectively, and $10 million and $33 million for the three and nine months ended September 30, 2019, respectively, related to investments supporting experience-rated products.

Proceeds and Related Gross Realized Capital Gains and Losses From the Sale of Debt Securities

Excluding amounts related to experience-rated products, proceeds from the sale of available for sale debt securities and the related gross realized capital gains and losses for the three and nine months ended September 30, 2020 and 2019 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Proceeds from sales	$	905	$	1,325	$	2,324	$	4,087
Gross realized capital gains	17		55		60		127
Gross realized capital losses	3		9		59		13

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Financial assets measured at fair value on a recurring basis on the condensed consolidated balance sheets at September 30, 2020 and December 31, 2019 were as follows:

In millions	Level 1		Level 2		Level 3		Total
September 30, 2020
Cash and cash equivalents	$	5,670	$	3,586	$	—	$	9,256
Debt securities:
U.S. government securities	2,498		103		—		2,601
States, municipalities and political subdivisions	—		2,540		—		2,540
U.S. corporate securities	—		8,476		48		8,524
Foreign securities	—		2,721		—		2,721
Residential mortgage-backed securities	—		713		—		713
Commercial mortgage-backed securities	—		1,012		—		1,012
Other asset-backed securities	—		2,262		—		2,262
Redeemable preferred securities	—		24		1		25
Total debt securities	2,498		17,851		49		20,398
Equity securities	20		—		26		46
Total	$	8,188	$	21,437	$	75	$	29,700
December 31, 2019
Cash and cash equivalents	$	3,397	$	2,286	$	—	$	5,683
Debt securities:
U.S. government securities	1,785		67		—		1,852
States, municipalities and political subdivisions	—		2,309		—		2,309
U.S. corporate securities	—		7,700		37		7,737
Foreign securities	—		2,348		—		2,348
Residential mortgage-backed securities	—		533		—		533
Commercial mortgage-backed securities	—		700		—		700
Other asset-backed securities	—		1,405		—		1,405
Redeemable preferred securities	—		26		12		38
Total debt securities	1,785		15,088		49		16,922
Equity securities	34		—		39		73
Total	$	5,216	$	17,374	$	88	$	22,678

During the three and nine months ended September 30, 2020 and 2019, there were no transfers into or out of Level 3.

Fair Value, by Balance Sheet Grouping

The carrying value and estimated fair value classified by level of fair value hierarchy for financial instruments carried on the condensed consolidated balance sheets at adjusted cost or contract value at September 30, 2020 and December 31, 2019 were as follows:

	Carrying Value		Estimated Fair Value
In millions			Level 1		Level 2		Level 3		Total
September 30, 2020
Assets:
Mortgage loans	$	1,124	$	—	$	—	$	1,148	$	1,148
Equity securities (1)	146		N/A		N/A		N/A		N/A
Liabilities:
Investment contract liabilities:
With a fixed maturity	5		—		—		5		5
Without a fixed maturity	322		—		—		370		370
Long-term debt	66,995		76,642		—		—		76,642
December 31, 2019
Assets:
Mortgage loans	$	1,213	$	—	$	—	$	1,239	$	1,239
Equity securities (1)	149		N/A		N/A		N/A		N/A
Liabilities:
Investment contract liabilities:
With a fixed maturity	5		—		—		5		5
Without a fixed maturity	372		—		—		392		392
Long-term debt	68,480		74,306		—		—		74,306

_____________________________________________

(1)It was not practical to estimate the fair value of these cost-method investments as it represents shares of unlisted companies.

Schedule of Fair Value of Separate Accounts by Major Category of Investment

Separate Accounts financial assets as of September 30, 2020 and December 31, 2019 were as follows:

	September 30, 2020								December 31, 2019
In millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	2	$	72	$	—	$	74	$	2	$	143	$	—	$	145
Debt securities	1,538		2,576		—		4,114		1,224		2,589		—		3,813
Equity securities	—		2		—		2		—		2		—		2
Common/collective trusts	—		603		—		603		—		499		—		499
Total	$	1,540	$	3,253	$	—	$	4,793	$	1,226	$	3,233	$	—	$	4,459

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Health Care Costs Payable (Tables)

9 Months Ended

Sep. 30, 2020

Health Care and Other Insurance Liabilities [Abstract]

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense

The following table shows the components of the change in health care costs payable during the nine months ended September 30, 2020 and 2019:

	Nine Months Ended September 30,
In millions	2020		2019
Health care costs payable, beginning of the period	$	6,879	$	6,147
Less: Reinsurance recoverables	5		4
Health care costs payable, beginning of the period, net	6,874		6,143
Acquisition	444		—
Add: Components of incurred health care costs
Current year	40,777		39,657
Prior years	(448)		(511)
Total incurred health care costs (1)	40,329		39,146
Less: Claims paid
Current year	34,198		33,032
Prior years	5,865		5,253
Total claims paid	40,063		38,285
Add: Premium deficiency reserve	1		6
Health care costs payable, end of the period, net	7,585		7,010
Add: Reinsurance recoverables	8		4
Health care costs payable, end of the period	$	7,593	$	7,014

_____________________________________________

(1)Total incurred health care costs for the nine months ended September 30, 2020 and 2019 in the table above exclude (i) $1 million and $6 million, respectively, related to a premium deficiency reserve related to the Company’s Medicaid products, (ii) $31 million and $31 million, respectively, of benefit costs recorded in the Health Care Benefits segment that are included in other insurance liabilities on the Company’s unaudited condensed consolidated balance sheets and (iii) $173 million and $213 million, respectively, of benefit costs recorded in the Corporate/Other segment that are included in other insurance liabilities on the Company’s unaudited condensed consolidated balance sheets.

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Summary of Company's Borrowings

The following table is a summary of the Company’s borrowings at September 30, 2020 and December 31, 2019:

In millions	September 30, 2020		December 31, 2019
Long-term debt
3.125% senior notes due March 2020	$	—	$	723
Floating rate notes due March 2020 (2.515% at December 31, 2019)	—		277
2.8% senior notes due July 2020	—		2,750
3.35% senior notes due March 2021	2,038		2,038
Floating rate notes due March 2021 (0.968% at September 30, 2020 and 2.605% at December 31, 2019)	1,000		1,000
4.125% senior notes due May 2021	222		222
2.125% senior notes due June 2021	1,750		1,750
4.125% senior notes due June 2021	203		203
5.45% senior notes due June 2021	187		187
3.5% senior notes due July 2022	1,500		1,500
2.75% senior notes due November 2022	1,000		1,000
2.75% senior notes due December 2022	1,250		1,250
4.75% senior notes due December 2022	399		399
3.7% senior notes due March 2023	3,723		6,000
2.8% senior notes due June 2023	1,300		1,300
4% senior notes due December 2023	527		1,250
3.375% senior notes due August 2024	650		650
2.625% senior notes due August 2024	1,000		1,000
3.5% senior notes due November 2024	750		750
5% senior notes due December 2024	299		299
4.1% senior notes due March 2025	2,000		5,000
3.875% senior notes due July 2025	2,828		2,828
2.875% senior notes due June 2026	1,750		1,750
3% senior notes due August 2026	750		750
3.625% senior notes due April 2027	750		—
6.25% senior notes due June 2027	372		372
1.3% senior notes due August 2027	1,500		—
4.3% senior notes due March 2028	9,000		9,000
3.25% senior notes due August 2029	1,750		1,750
3.75% senior notes due April 2030	1,500		—
1.75% senior notes due August 2030	1,250		—
4.875% senior notes due July 2035	652		652
6.625% senior notes due June 2036	771		771
6.75% senior notes due December 2037	533		533
4.78% senior notes due March 2038	5,000		5,000
6.125% senior notes due September 2039	447		447
4.125% senior notes due April 2040	1,000		—
2.7% senior notes due August 2040	1,250		—
5.75% senior notes due May 2041	133		133
4.5% senior notes due May 2042	500		500
4.125% senior notes due November 2042	500		500
5.3% senior notes due December 2043	750		750
4.75% senior notes due March 2044	375		375
5.125% senior notes due July 2045	3,500		3,500
3.875% senior notes due August 2047	1,000		1,000
5.05% senior notes due March 2048	8,000		8,000
4.25% senior notes due April 2050	750		—
Finance lease obligations	1,036		808
Other	276		279
Total debt principal	67,721		69,246
Debt premiums	245		262
Debt discounts and deferred financing costs	(971)		(1,028)
	66,995		68,480
Less:
Current portion of long-term debt	(5,443)		(3,781)
Long-term debt	$	61,552	$	64,699

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Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2020

Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

Shareholders’ equity included the following activity in accumulated other comprehensive income for the three and nine months ended September 30, 2020 and 2019:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Net unrealized investment gains:
Beginning of period balance	$	987	$	682	$	774	$	97
Other comprehensive income before reclassifications ($83, $214, $278 and $933 pretax)	52		192		218		799
Amounts reclassified from accumulated other comprehensive income ($(10), $(63), $47 and $(93) pretax) (1)	(8)		(56)		39		(78)
Other comprehensive income	44		136		257		721
End of period balance	1,031		818		1,031		818
Foreign currency translation adjustments:
Beginning of period balance	(2)		(154)		4		(158)
Other comprehensive income (loss) before reclassifications	1		(1)		(5)		3
Amounts reclassified from accumulated other comprehensive income (loss) (2)	—		154		—		154
Other comprehensive income (loss)	1		153		(5)		157
End of period balance	(1)		(1)		(1)		(1)
Net cash flow hedges:
Beginning of period balance	267		305		279		312
Other comprehensive loss before reclassifications ($0, $(25), $(7) and $(25) pretax)	—		(18)		(5)		(18)
Amounts reclassified from accumulated other comprehensive income ($(4), $(7), $(14) and $(16) pretax) (3)	(3)		(5)		(10)		(12)
Other comprehensive loss	(3)		(23)		(15)		(30)
End of period balance	264		282		264		282
Pension and other postretirement benefits:
Beginning of period balance	(39)		(149)		(38)		(149)
Other comprehensive loss before reclassifications ($0, $0, $(8) and $0 pretax)	—		—		(6)		—
Amounts reclassified from accumulated other comprehensive loss ($0, $0, $7 and $0 pretax) (4)	—		—		5		—
Other comprehensive loss	—		—		(1)		—
End of period balance	(39)		(149)		(39)		(149)
Total beginning of period accumulated other comprehensive income	1,213		684		1,019		102
Total other comprehensive income	42		266		236		848
Total end of period accumulated other comprehensive income	$	1,255	$	950	$	1,255	$	950

_____________________________________________

(1)Amounts reclassified from accumulated other comprehensive income for specifically identified debt securities are included in net investment income in the unaudited condensed consolidated statements of operations.

(2)Amounts reclassified from accumulated other comprehensive income (loss) represent the elimination of the cumulative translation adjustment associated with the sale of Onofre, which was sold on July 1, 2019. The loss on the divestiture of Onofre is reflected in operating expenses in the unaudited condensed consolidated statements of operations.

(3)Amounts reclassified from accumulated other comprehensive income for specifically identified cash flow hedges are included in interest expense in the unaudited condensed consolidated statements of operations. The Company expects to reclassify approximately $15 million, net of tax, in net gains associated with its cash flow hedges into net income within the next 12 months.

(4)Amounts reclassified from accumulated other comprehensive loss for specifically identified pension and other postretirement benefits are included in other income in the unaudited condensed consolidated statements of operations.

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Earnings Per Share

The following is a reconciliation of basic and diluted earnings per share for the respective periods:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions, except per share amounts	2020		2019		2020		2019
Numerator for earnings per share calculation:
Net income	$	1,219	$	1,529	$	6,217	$	4,887
Income allocated to participating securities	—		—		—		(3)
Net (income) loss attributable to noncontrolling interests	5		1		(11)		—
Net income attributable to CVS Health	$	1,224	$	1,530	$	6,206	$	4,884
Denominator for earnings per share calculation:
Weighted average shares, basic	1,310		1,302		1,308		1,300
Effect of dilutive securities	5		3		6		3
Weighted average shares, diluted	1,315		1,305		1,314		1,303
Earnings per share:
Basic	$	0.93	$	1.17	$	4.74	$	3.76
Diluted	$	0.93	$	1.17	$	4.72	$	3.75

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Summarized Financial Information Of Segments

The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:

In millions	Pharmacy  Services (1)		Retail/ LTC		Health Care Benefits		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Three Months Ended
September 30, 2020
Revenues from external customers	$	33,492	$	14,770	$	18,557	$	33	$	—	$	66,852
Intersegment revenues	2,219		7,955		20		—		(10,194)		—
Net investment income	—		—		121		83		—		204
Total revenues	35,711		22,725		18,698		116		(10,194)		67,056
Adjusted operating income (loss)	1,619		1,412		1,080		(303)		(186)		3,622
September 30, 2019
Revenues from external customers	$	33,680	$	13,805	$	17,027	$	35	$	—	$	64,547
Intersegment revenues	2,338		7,661		8		—		(10,007)		—
Net investment income	—		—		146		117		—		263
Total revenues	36,018		21,466		17,181		152		(10,007)		64,810
Adjusted operating income (loss)	1,439		1,516		1,423		(252)		(179)		3,947
Nine Months Ended
September 30, 2020
Revenues from external customers	$	98,233	$	44,314	$	55,972	$	83	$	—	$	198,602
Intersegment revenues	7,350		22,822		51		—		(30,223)		—
Net investment income	—		—		341		209		—		550
Total revenues	105,583		67,136		56,364		292		(30,223)		199,152
Adjusted operating income (loss)	4,127		4,371		6,035		(931)		(539)		13,063
September 30, 2019
Revenues from external customers	$	95,494	$	41,536	$	51,976	$	76	$	—	$	189,082
Intersegment revenues	8,924		22,492		20		—		(31,436)		—
Net investment income	—		—		458		347		—		805
Total revenues	104,418		64,028		52,454		423		(31,436)		189,887
Adjusted operating income (loss)	3,682		4,674		4,423		(685)		(521)		11,573

_____________________________________________

(1)Total revenues of the Pharmacy Services segment include approximately $2.5 billion and $2.7 billion of retail co-payments for the three months ended September 30, 2020 and 2019, respectively, and $8.5 billion and $8.9 billion of retail co-payments for the nine months ended September 30, 2020 and 2019, respectively.

Reconciliation of Operating Earnings to Net Income

The following are reconciliations of consolidated operating income to adjusted operating income for the three and nine months ended September 30, 2020 and 2019:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2020		2019		2020		2019
Operating income (GAAP measure)	$	3,249	$	2,928	$	11,387	$	8,950
Amortization of intangible assets (1)	587		607		1,751		1,822
Acquisition-related integration costs (2)	57		111		196		365
(Gain) loss on divestiture of subsidiary (3)	(271)		205		(271)		205
Store rationalization charges (4)	—		96		—		231
Adjusted operating income	$	3,622	$	3,947	$	13,063	$	11,573

_____________________________________________

(1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

(2)During the three and nine months ended September 30, 2020 and 2019, acquisition-related integration costs relate to the Aetna Acquisition. The acquisition-related integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

(3)During the three and nine months ended September 30, 2020, the gain on divestiture of subsidiary represents the pre-tax gain on the sale of the Workers’ Compensation business, which the Company sold on July 31, 2020 for approximately $850 million. The gain on divestiture is reflected as a reduction in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Health Care Benefits segment. During the three and nine months ended September 30, 2019, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of Onofre, which occurred on July 1, 2019. The loss on divestiture primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income and is reflected in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment.

(4)During the three and nine months ended September 30, 2019, the store rationalization charges relate to the planned closure of 22 underperforming retail pharmacy stores in the first quarter of 2020. During the nine months ended September 30, 2019, the store rationalization charges also relate to the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Retail/LTC segment.

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Significant Accounting Policies - Narrative (Details) person in Millions, patient in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($) patient clinic state person building	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) patient Segment clinic state person building	Sep. 30, 2019 USD ($)	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Significant Accounting Policies [Line Items]
Number of pharmacy plan members | person	103		103
Number of patients served per year | patient	1		1
Number of reportable segments | Segment			4
Allowance for credit losses	$ 363		$ 363				$ 319
Health insurer fee	255		774
Non tax-deductible health insurance fee			1,000
Related party transaction, expenses from transactions with related party	5	$ 14	28	$ 26
Related party transaction, other revenues from transactions with related party	15	20	$ 58	72
Accounting Standards Update [Extensible List]			us-gaap:AccountingStandardsUpdate201613Member
Change in Accounting Principle, Accounting Standards Update, Transition Option Elected [Extensible List]			us-gaap:AccountingStandardsUpdate201615ProspectiveMember
Cumulative adjustment to retained earnings as a result of new accounting standard adoption	$ 69,112	62,933	$ 69,112	62,933	$ 68,355	$ 65,474	64,170	$ 61,599	$ 60,006	$ 58,543
Heartland Healthcare Services
Significant Accounting Policies [Line Items]
Number of states in which entity operates | state	4		4
Retail/ LTC
Significant Accounting Policies [Line Items]
Number of stores | building	9,900		9,900
Number of walk in medical clinics | clinic	1,100		1,100
Health Care Benefits
Significant Accounting Policies [Line Items]
Number of people served through health insurance products and related services | person	33		33
Retained Earnings
Significant Accounting Policies [Line Items]
Cumulative adjustment to retained earnings as a result of new accounting standard adoption	$ 49,328	$ 44,017	$ 49,328	$ 44,017	$ 48,768	$ 46,455	45,108	$ 43,136	$ 41,859	40,911
Cumulative Effect, Period of Adoption, Adjustment
Significant Accounting Policies [Line Items]
Cumulative adjustment to retained earnings as a result of new accounting standard adoption							(3)			178	[1]
Cumulative Effect, Period of Adoption, Adjustment | Retained Earnings
Significant Accounting Policies [Line Items]
Cumulative adjustment to retained earnings as a result of new accounting standard adoption							$ (3)			$ 178	[1]

[1] Reflects the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which resulted in an increase to retained earnings of $178 million during the three months ended March 31, 2019.

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Significant Accounting Policies - Cash and Cash Equivalents, Restricted Cash and Cash Equivalents (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Cash and cash equivalents	$ 9,256	$ 5,683
Restricted cash (included in other assets)	276	271
Total cash, cash equivalents and restricted cash in the statements of cash flows	$ 9,532	$ 5,954	$ 5,469	$ 4,295

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Significant Accounting Policies - Accounts Receivable (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
Trade receivables	$ 7,265	$ 6,717
Vendor and manufacturer receivables	10,528	7,856
Premium receivables	2,852	2,663
Other receivables	3,171	2,381
Total accounts receivable, net	$ 23,816	$ 19,617

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Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Net investment income	$ 204	$ 263	$ 550	$ 805
Total revenues	67,056	64,810	199,152	189,887
Pharmacy Services
Disaggregation of Revenue [Line Items]
Total revenues	35,711	36,018	105,583	104,418
Retail/ LTC
Disaggregation of Revenue [Line Items]
Total revenues	22,725	21,466	67,136	64,028
Health Care Benefits
Disaggregation of Revenue [Line Items]
Total revenues	18,698	17,181	56,364	52,454
Corporate/ Other
Disaggregation of Revenue [Line Items]
Net investment income	83	117	209	347
Total revenues	116	152	292	423
Pharmacy
Disaggregation of Revenue [Line Items]
Revenues	43,062	42,560	126,725	121,764
Pharmacy | Corporate/ Other
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Front Store
Disaggregation of Revenue [Line Items]
Revenues	4,740	4,614	14,601	14,288
Front Store | Corporate/ Other
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Premiums
Disaggregation of Revenue [Line Items]
Revenues	17,182	15,539	51,749	47,612
Premiums | Corporate/ Other
Disaggregation of Revenue [Line Items]
Revenues	17	32	50	69
Other
Disaggregation of Revenue [Line Items]
Revenues	1,868	1,834	5,527	5,418
Other | Corporate/ Other
Disaggregation of Revenue [Line Items]
Revenues	16	3	33	7
Operating Segments | Pharmacy Services
Disaggregation of Revenue [Line Items]
Net investment income	0	0	0	0
Total revenues	35,711	36,018	105,583	104,418
Operating Segments | Retail/ LTC
Disaggregation of Revenue [Line Items]
Net investment income	0	0	0	0
Total revenues	22,725	21,466	67,136	64,028
Operating Segments | Health Care Benefits
Disaggregation of Revenue [Line Items]
Net investment income	121	146	341	458
Total revenues	18,698	17,181	56,364	52,454
Operating Segments | Pharmacy | Pharmacy Services
Disaggregation of Revenue [Line Items]
Revenues	35,505	35,872	104,924	103,983
Operating Segments | Pharmacy | Retail/ LTC
Disaggregation of Revenue [Line Items]
Revenues	17,608	16,687	51,833	49,197
Operating Segments | Pharmacy | Health Care Benefits
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Operating Segments | Front Store | Pharmacy Services
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Operating Segments | Front Store | Retail/ LTC
Disaggregation of Revenue [Line Items]
Revenues	4,740	4,614	14,601	14,288
Operating Segments | Front Store | Health Care Benefits
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Operating Segments | Premiums | Pharmacy Services
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Operating Segments | Premiums | Retail/ LTC
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Operating Segments | Premiums | Health Care Benefits
Disaggregation of Revenue [Line Items]
Revenues	17,165	15,507	51,699	47,543
Operating Segments | Other | Pharmacy Services
Disaggregation of Revenue [Line Items]
Revenues	206	146	659	435
Operating Segments | Other | Retail/ LTC
Disaggregation of Revenue [Line Items]
Revenues	377	165	702	543
Operating Segments | Other | Health Care Benefits
Disaggregation of Revenue [Line Items]
Revenues	1,412	1,528	4,324	4,453
Operating Segments | Pharmacy network | Pharmacy Services
Disaggregation of Revenue [Line Items]
Total revenues	21,473	22,411	63,109	65,917
Operating Segments | Mail choice | Pharmacy Services
Disaggregation of Revenue [Line Items]
Total revenues	14,032	13,461	41,815	38,066
Operating Segments | Other | Pharmacy Services
Disaggregation of Revenue [Line Items]
Total revenues	206	146	659	435
Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues	(10,194)	(10,007)	(30,223)	(31,436)
Net investment income	0	0	0	0
Total revenues	(10,194)	(10,007)	(30,223)	(31,436)
Intersegment Eliminations | Pharmacy Services
Disaggregation of Revenue [Line Items]
Revenues	2,219	2,338	7,350	8,924
Intersegment Eliminations | Retail/ LTC
Disaggregation of Revenue [Line Items]
Revenues	7,955	7,661	22,822	22,492
Intersegment Eliminations | Health Care Benefits
Disaggregation of Revenue [Line Items]
Revenues	20	8	51	20
Intersegment Eliminations | Corporate/ Other
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Intersegment Eliminations | Pharmacy
Disaggregation of Revenue [Line Items]
Revenues	(10,051)	(9,999)	(30,032)	(31,416)
Intersegment Eliminations | Front Store
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Intersegment Eliminations | Premiums
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Intersegment Eliminations | Other
Disaggregation of Revenue [Line Items]
Revenues	$ (143)	$ (8)	$ (191)	$ (20)

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Significant Accounting Policies - Receivables and Contracted Balances (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Trade receivables	$ 7,265	$ 6,717
Contract liabilities (included in accrued expenses)	$ 75	$ 73	$ 72	$ 67

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Significant Accounting Policies - Contract Balances (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Change in Contract with Customer, Liability [Roll Forward]
Contract liabilities (included in accrued expenses) beginning balance	$ 73	$ 67
Rewards earnings and gift card issuances	266	269
Redemption and breakage	(264)	(264)
Contract liabilities (included in accrued expenses) ending balance	$ 75	$ 72

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Divestitures (Details) $ in Millions		3 Months Ended		9 Months Ended
	Jul. 31, 2020 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Jul. 01, 2019 store
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from sale of subsidiary				$ 834	$ 0
Gain (loss) on divestiture, pretax		$ 271	$ (205)	271	$ (205)
Discontinued Operations, Disposed of by Sale | Coventry Health Care Workers Compensation business | Health Care Benefits
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from sale of subsidiary	$ 850
Gain (loss) on divestiture, pretax		271		$ 271
Discontinued Operations, Disposed of by Sale | Drogaria onofre Ltda. | Retail/ LTC
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of retail pharmacy stores | store						50
Gain (loss) on divestiture, pretax		$ (205)

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Investments (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Total Investments [Line Items]
Current investments	$ 2,831	$ 2,373
Long-term investments	20,216	17,314
Total investments	23,047	19,687
Debt securities available for sale
Total Investments [Line Items]
Current investments	2,578	2,251
Long-term investments	17,820	14,671
Total investments	20,398	16,922
Mortgage loans
Total Investments [Line Items]
Current investments	253	122
Long-term investments	871	1,091
Total investments	1,124	1,213
Other investments
Total Investments [Line Items]
Current investments	0	0
Long-term investments	1,525	1,552
Total investments	$ 1,525	$ 1,552

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Investments - Debt Securities (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Gross Amortized Cost	$ 18,863,000,000	$ 15,898,000,000
Allowance for Credit Losses	(4,000,000)	0
Net Amortized Cost	18,859,000,000	15,898,000,000
Gross Unrealized Gains	1,577,000,000	1,035,000,000
Gross Unrealized Losses	(38,000,000)	(11,000,000)
Fair Value	20,398,000,000	16,922,000,000
U.S. government securities
Debt Securities, Available-for-sale [Line Items]
Gross Amortized Cost	2,455,000,000	1,791,000,000
Allowance for Credit Losses	0	0
Net Amortized Cost	2,455,000,000	1,791,000,000
Gross Unrealized Gains	146,000,000	62,000,000
Gross Unrealized Losses	0	(1,000,000)
Fair Value	2,601,000,000	1,852,000,000
States, municipalities and political subdivisions
Debt Securities, Available-for-sale [Line Items]
Gross Amortized Cost	2,393,000,000	2,202,000,000
Allowance for Credit Losses	0	0
Net Amortized Cost	2,393,000,000	2,202,000,000
Gross Unrealized Gains	150,000,000	108,000,000
Gross Unrealized Losses	(3,000,000)	(1,000,000)
Fair Value	2,540,000,000	2,309,000,000
U.S. corporate securities
Debt Securities, Available-for-sale [Line Items]
Gross Amortized Cost	7,665,000,000	7,167,000,000
Allowance for Credit Losses	(4,000,000)	0
Net Amortized Cost	7,661,000,000	7,167,000,000
Gross Unrealized Gains	878,000,000	573,000,000
Gross Unrealized Losses	(15,000,000)	(3,000,000)
Fair Value	8,524,000,000	7,737,000,000
Foreign securities
Debt Securities, Available-for-sale [Line Items]
Gross Amortized Cost	2,479,000,000	2,149,000,000
Allowance for Credit Losses	0	0
Net Amortized Cost	2,479,000,000	2,149,000,000
Gross Unrealized Gains	252,000,000	200,000,000
Gross Unrealized Losses	(10,000,000)	(1,000,000)
Fair Value	2,721,000,000	2,348,000,000
Residential mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Gross Amortized Cost	680,000,000	508,000,000
Allowance for Credit Losses	0	0
Net Amortized Cost	680,000,000	508,000,000
Gross Unrealized Gains	33,000,000	25,000,000
Gross Unrealized Losses	0	0
Fair Value	713,000,000	533,000,000
Commercial mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Gross Amortized Cost	930,000,000	654,000,000
Allowance for Credit Losses	0	0
Net Amortized Cost	930,000,000	654,000,000
Gross Unrealized Gains	82,000,000	46,000,000
Gross Unrealized Losses	0	0
Fair Value	1,012,000,000	700,000,000
Other asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Gross Amortized Cost	2,239,000,000	1,397,000,000
Allowance for Credit Losses	0	0
Net Amortized Cost	2,239,000,000	1,397,000,000
Gross Unrealized Gains	33,000,000	13,000,000
Gross Unrealized Losses	(10,000,000)	(5,000,000)
Fair Value	2,262,000,000	1,405,000,000
Redeemable preferred securities
Debt Securities, Available-for-sale [Line Items]
Gross Amortized Cost	22,000,000	30,000,000
Allowance for Credit Losses	0	0
Net Amortized Cost	22,000,000	30,000,000
Gross Unrealized Gains	3,000,000	8,000,000
Gross Unrealized Losses	0	0
Fair Value	25,000,000	38,000,000
Supporting experience-rated products
Debt Securities, Available-for-sale [Line Items]
Gross Unrealized Gains	122,000,000	83,000,000
Gross Unrealized Losses	(1,000,000)	0
Fair Value	$ 928,000,000	$ 965,000,000

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Investments - Debt Securities by Maturity (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Net Amortized Cost
Less than one year	$ 1,588
One year through five years	6,009
After five years through ten years	3,466
Greater than ten years	3,947
Net Amortized Cost	18,859	$ 15,898
Fair Value
Less than one year	1,604
One year through five years	6,329
After five years through ten years	3,774
Greater than ten years	4,704
Total	20,398	16,922
Residential mortgage-backed securities
Net Amortized Cost
Debt securities, maturity, without single maturity date	680
Net Amortized Cost	680	508
Fair Value
Debt securities, maturity, without single maturity date	713
Total	713	533
Commercial mortgage-backed securities
Net Amortized Cost
Debt securities, maturity, without single maturity date	930
Net Amortized Cost	930	654
Fair Value
Debt securities, maturity, without single maturity date	1,012
Total	1,012	700
Other asset-backed securities
Net Amortized Cost
Debt securities, maturity, without single maturity date	2,239
Net Amortized Cost	2,239	1,397
Fair Value
Debt securities, maturity, without single maturity date	2,262
Total	$ 2,262	$ 1,405

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Investments - Unrealized Loss Position (Details) $ in Millions	Sep. 30, 2020 USD ($) security	Dec. 31, 2019 USD ($) security
Number of Securities
Number of Securities, Less than 12 months | security	1,390	522
Number of Securities, Greater than 12 months | security	97	200
Number of Securities | security	1,487	722
Fair Value
Fair Value, Less than 12 months	$ 2,177	$ 982
Fair Value, Greater than 12 months	82	187
Fair Value	2,259	1,169
Unrealized Losses
Unrealized Losses, Less than 12 months	35	6
Unrealized Losses, Greater than 12 months	3	5
Unrealized Losses	$ 38	$ 11
U.S. government securities
Number of Securities
Number of Securities, Less than 12 months | security	58	52
Number of Securities, Greater than 12 months | security	0	0
Number of Securities | security	58	52
Fair Value
Fair Value, Less than 12 months	$ 311	$ 168
Fair Value, Greater than 12 months	0	0
Fair Value	311	168
Unrealized Losses
Unrealized Losses, Less than 12 months	0	1
Unrealized Losses, Greater than 12 months	0	0
Unrealized Losses	$ 0	$ 1
States, municipalities and political subdivisions
Number of Securities
Number of Securities, Less than 12 months | security	95	66
Number of Securities, Greater than 12 months | security	0	2
Number of Securities | security	95	68
Fair Value
Fair Value, Less than 12 months	$ 196	$ 115
Fair Value, Greater than 12 months	0	5
Fair Value	196	120
Unrealized Losses
Unrealized Losses, Less than 12 months	3	1
Unrealized Losses, Greater than 12 months	0	0
Unrealized Losses	$ 3	$ 1
U.S. corporate securities
Number of Securities
Number of Securities, Less than 12 months | security	704	181
Number of Securities, Greater than 12 months | security	4	2
Number of Securities | security	708	183
Fair Value
Fair Value, Less than 12 months	$ 639	$ 305
Fair Value, Greater than 12 months	2	0
Fair Value	641	305
Unrealized Losses
Unrealized Losses, Less than 12 months	15	2
Unrealized Losses, Greater than 12 months	0	1
Unrealized Losses	$ 15	$ 3
Foreign securities
Number of Securities
Number of Securities, Less than 12 months | security	198	39
Number of Securities, Greater than 12 months | security	0	0
Number of Securities | security	198	39
Fair Value
Fair Value, Less than 12 months	$ 312	$ 75
Fair Value, Greater than 12 months	0	0
Fair Value	312	75
Unrealized Losses
Unrealized Losses, Less than 12 months	10	1
Unrealized Losses, Greater than 12 months	0	0
Unrealized Losses	$ 10	$ 1
Residential mortgage-backed securities
Number of Securities
Number of Securities, Less than 12 months | security	19	30
Number of Securities, Greater than 12 months | security	3	9
Number of Securities | security	22	39
Fair Value
Fair Value, Less than 12 months	$ 70	$ 16
Fair Value, Greater than 12 months	0	0
Fair Value	70	16
Unrealized Losses
Unrealized Losses, Less than 12 months	0	0
Unrealized Losses, Greater than 12 months	0	0
Unrealized Losses	$ 0	$ 0
Commercial mortgage-backed securities
Number of Securities
Number of Securities, Less than 12 months | security	28	16
Number of Securities, Greater than 12 months | security	0	0
Number of Securities | security	28	16
Fair Value
Fair Value, Less than 12 months	$ 106	$ 49
Fair Value, Greater than 12 months	0	0
Fair Value	106	49
Unrealized Losses
Unrealized Losses, Less than 12 months	0	0
Unrealized Losses, Greater than 12 months	0	0
Unrealized Losses	$ 0	$ 0
Other asset-backed securities
Number of Securities
Number of Securities, Less than 12 months | security	288	138
Number of Securities, Greater than 12 months | security	90	187
Number of Securities | security	378	325
Fair Value
Fair Value, Less than 12 months	$ 543	$ 254
Fair Value, Greater than 12 months	80	182
Fair Value	623	436
Unrealized Losses
Unrealized Losses, Less than 12 months	7	1
Unrealized Losses, Greater than 12 months	3	4
Unrealized Losses	$ 10	$ 5

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Investments - Unrealized Loss Position Maturities (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Less than one year	$ 36
One year through five years	624
After five years through ten years	504
Greater than ten years	296
Fair Value	2,259	$ 1,169
Unrealized Losses
Less than one year	0
One year through five years	7
After five years through ten years	13
Greater than ten years	8
Unrealized Losses	38	11
Residential mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, maturity, without single maturity date, fair value	70
Fair Value	70	16
Unrealized Losses
Debt securities, maturity, without single maturity date, unrealized losses	0
Unrealized Losses	0	0
Commercial mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, maturity, without single maturity date, fair value	106
Fair Value	106	49
Unrealized Losses
Debt securities, maturity, without single maturity date, unrealized losses	0
Unrealized Losses	0	0
Other asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, maturity, without single maturity date, fair value	623
Fair Value	623	436
Unrealized Losses
Debt securities, maturity, without single maturity date, unrealized losses	10
Unrealized Losses	10	$ 5
Supporting experience-rated products
Debt Securities, Available-for-sale [Line Items]
Less than one year	0
One year through five years	1
After five years through ten years	11
Greater than ten years	11
Fair Value	32
Unrealized Losses
Less than one year	0
One year through five years	0
After five years through ten years	1
Greater than ten years	0
Unrealized Losses	1
Supporting experience-rated products | Residential mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, maturity, without single maturity date, fair value	0
Unrealized Losses
Debt securities, maturity, without single maturity date, unrealized losses	0
Supporting experience-rated products | Commercial mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, maturity, without single maturity date, fair value	2
Unrealized Losses
Debt securities, maturity, without single maturity date, unrealized losses	0
Supporting experience-rated products | Other asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, maturity, without single maturity date, fair value	7
Unrealized Losses
Debt securities, maturity, without single maturity date, unrealized losses	0
Supporting remaining products
Debt Securities, Available-for-sale [Line Items]
Less than one year	36
One year through five years	623
After five years through ten years	493
Greater than ten years	285
Fair Value	2,227
Unrealized Losses
Less than one year	0
One year through five years	7
After five years through ten years	12
Greater than ten years	8
Unrealized Losses	37
Supporting remaining products | Residential mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, maturity, without single maturity date, fair value	70
Unrealized Losses
Debt securities, maturity, without single maturity date, unrealized losses	0
Supporting remaining products | Commercial mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, maturity, without single maturity date, fair value	104
Unrealized Losses
Debt securities, maturity, without single maturity date, unrealized losses	0
Supporting remaining products | Other asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, maturity, without single maturity date, fair value	616
Unrealized Losses
Debt securities, maturity, without single maturity date, unrealized losses	$ 10

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Investments - Mortgage Loans (Details) - Commercial Real Estate - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Mortgage Loans on Real Estate [Line Items]
New mortgage loans	$ 31	$ 12	$ 55	$ 90
Mortgage loans fully repaid	37	56	114	127
Mortgage loans foreclosed	$ 0	$ 0	$ 0	$ 0

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Investments - Mortgage Loans Credit Ratings Indicator (Details) - Commercial Real Estate - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	$ 1,124	$ 1,213
Category 1
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	62	58
Category 2 to 4
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	1,016	1,143
Categories 5 and 6
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	37	12
Category 7
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	9	0
2020
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	57
2020 | Category 1
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0
2020 | Category 2 to 4
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	57
2020 | Categories 5 and 6
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0
2020 | Category 7
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0
2019
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	95	93
2019 | Category 1
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0	0
2019 | Category 2 to 4
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	95	93
2019 | Categories 5 and 6
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0	0
2019 | Category 7
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0	0
2018
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	94	93
2018 | Category 1
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0	0
2018 | Category 2 to 4
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	90	93
2018 | Categories 5 and 6
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	4	0
2018 | Category 7
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0	0
2017
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	165	221
2017 | Category 1
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	23	15
2017 | Category 2 to 4
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	129	206
2017 | Categories 5 and 6
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	4	0
2017 | Category 7
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	9	0
2016
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	129	140
2016 | Category 1
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0	0
2016 | Category 2 to 4
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	129	140
2016 | Categories 5 and 6
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0	0
2016 | Category 7
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	0	0
Prior
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	584	666
Prior | Category 1
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	39	43
Prior | Category 2 to 4
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	516	611
Prior | Categories 5 and 6
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	29	12
Prior | Category 7
Debt Securities, Held-to-maturity, Credit Quality Indicator [Line Items]
Mortgage loans	$ 0	$ 0

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Investments - Net Investment Income (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Gross investment income	$ 203,000,000	$ 224,000,000	$ 550,000,000	$ 654,000,000
Investment expenses	(8,000,000)	(10,000,000)	(25,000,000)	(28,000,000)
Net investment income (excluding net realized capital gains or losses)	195,000,000	214,000,000	525,000,000	626,000,000
Net realized capital gains	9,000,000	49,000,000	25,000,000	179,000,000
Net investment income	204,000,000	263,000,000	550,000,000	805,000,000
Credit-related impairment loss (reversal of loss)	1,000,000		4,000,000
Yield-related impairment loss	2,000,000		44,000,000
Other-than-temporary impairment loss		9,000,000		22,000,000
Supporting experience-rated products
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Net investment income	10,000,000	10,000,000	31,000,000	33,000,000
Debt securities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Gross investment income	151,000,000	145,000,000	441,000,000	437,000,000
Mortgage loans
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Gross investment income	15,000,000	19,000,000	45,000,000	54,000,000
Other investments
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Gross investment income	$ 37,000,000	$ 60,000,000	$ 64,000,000	$ 163,000,000

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Investments - Realized Gains (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Investments [Abstract]
Proceeds from sales	$ 905	$ 1,325	$ 2,324	$ 4,087
Gross realized capital gains	17	55	60	127
Gross realized capital losses	$ 3	$ 9	$ 59	$ 13

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Fair Value - Measurement on a Recurring Basis (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	$ 20,398,000,000	$ 16,922,000,000
Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial liabilities at fair value on a recurring basis	0	0
Cash and cash equivalents	9,256,000,000	5,683,000,000
Debt securities	20,398,000,000	16,922,000,000
Equity securities	46,000,000	73,000,000
Total	29,700,000,000	22,678,000,000
Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	5,670,000,000	3,397,000,000
Debt securities	2,498,000,000	1,785,000,000
Equity securities	20,000,000	34,000,000
Total	8,188,000,000	5,216,000,000
Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	3,586,000,000	2,286,000,000
Debt securities	17,851,000,000	15,088,000,000
Equity securities	0	0
Total	21,437,000,000	17,374,000,000
Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	0	0
Debt securities	49,000,000	49,000,000
Equity securities	26,000,000	39,000,000
Total	75,000,000	88,000,000
U.S. government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,601,000,000	1,852,000,000
U.S. government securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,601,000,000	1,852,000,000
U.S. government securities | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,498,000,000	1,785,000,000
U.S. government securities | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	103,000,000	67,000,000
U.S. government securities | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
States, municipalities and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,540,000,000	2,309,000,000
States, municipalities and political subdivisions | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,540,000,000	2,309,000,000
States, municipalities and political subdivisions | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
States, municipalities and political subdivisions | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,540,000,000	2,309,000,000
States, municipalities and political subdivisions | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
U.S. corporate securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	8,524,000,000	7,737,000,000
U.S. corporate securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	8,524,000,000	7,737,000,000
U.S. corporate securities | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
U.S. corporate securities | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	8,476,000,000	7,700,000,000
U.S. corporate securities | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	48,000,000	37,000,000
Foreign securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,721,000,000	2,348,000,000
Foreign securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,721,000,000	2,348,000,000
Foreign securities | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Foreign securities | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,721,000,000	2,348,000,000
Foreign securities | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	713,000,000	533,000,000
Residential mortgage-backed securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	713,000,000	533,000,000
Residential mortgage-backed securities | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Residential mortgage-backed securities | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	713,000,000	533,000,000
Residential mortgage-backed securities | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,012,000,000	700,000,000
Commercial mortgage-backed securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,012,000,000	700,000,000
Commercial mortgage-backed securities | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Commercial mortgage-backed securities | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,012,000,000	700,000,000
Commercial mortgage-backed securities | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Other asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,262,000,000	1,405,000,000
Other asset-backed securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,262,000,000	1,405,000,000
Other asset-backed securities | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Other asset-backed securities | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,262,000,000	1,405,000,000
Other asset-backed securities | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Redeemable preferred securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	25,000,000	38,000,000
Redeemable preferred securities | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	25,000,000	38,000,000
Redeemable preferred securities | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Redeemable preferred securities | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	24,000,000	26,000,000
Redeemable preferred securities | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	$ 1,000,000	$ 12,000,000

XML

Fair Value - Carrying Value and Fair Value Classified by Level (Details) - Nonrecurring - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Carrying Value
Assets:
Mortgage loans	$ 1,124	$ 1,213
Equity securities	146	149
Liabilities:
Investment contracts liabilities with a fixed maturity	5	5
Investment contracts liabilities without a fixed maturity	322	372
Long-term debt	66,995	68,480
Level 1 | Estimated Fair Value
Assets:
Mortgage loans	0	0
Liabilities:
Investment contracts liabilities with a fixed maturity	0	0
Investment contracts liabilities without a fixed maturity	0	0
Long-term debt	76,642	74,306
Level 2 | Estimated Fair Value
Assets:
Mortgage loans	0	0
Liabilities:
Investment contracts liabilities with a fixed maturity	0	0
Investment contracts liabilities without a fixed maturity	0	0
Long-term debt	0	0
Level 3 | Estimated Fair Value
Assets:
Mortgage loans	1,148	1,239
Liabilities:
Investment contracts liabilities with a fixed maturity	5	5
Investment contracts liabilities without a fixed maturity	370	392
Long-term debt	0	0
Total | Estimated Fair Value
Assets:
Mortgage loans	1,148	1,239
Liabilities:
Investment contracts liabilities with a fixed maturity	5	5
Investment contracts liabilities without a fixed maturity	370	392
Long-term debt	$ 76,642	$ 74,306

XML

Fair Value - Separate Accounts Fair Value (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	$ 4,793	$ 4,459
Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	4,793	4,459
Cash and cash equivalents | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	74	145
Debt securities | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	4,114	3,813
Equity securities | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	2	2
Common/collective trusts | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	603	499
Level 1 | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	1,540	1,226
Level 1 | Cash and cash equivalents | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	2	2
Level 1 | Debt securities | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	1,538	1,224
Level 1 | Equity securities | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	0	0
Level 1 | Common/collective trusts | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	0	0
Level 2 | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	3,253	3,233
Level 2 | Cash and cash equivalents | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	72	143
Level 2 | Debt securities | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	2,576	2,589
Level 2 | Equity securities | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	2	2
Level 2 | Common/collective trusts | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	603	499
Level 3 | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	0	0
Level 3 | Cash and cash equivalents | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	0	0
Level 3 | Debt securities | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	0	0
Level 3 | Equity securities | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	0	0
Level 3 | Common/collective trusts | Recurring
Fair Value, Separate Account Investment [Line Items]
Separate accounts assets	$ 0	$ 0

XML

Health Care Costs Payable - Components of Change in Health Care Costs Payable (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Health care costs payable, beginning of the period, net	$ 6,879
Less: Claims paid
Health care costs payable, end of the period, net	7,593
Health Insurance Product Line
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Health care costs payable, beginning of the period	6,879	$ 6,147
Less: Reinsurance recoverables	5	4
Health care costs payable, beginning of the period, net	6,874	6,143
Acquisition	444	0
Add: Components of incurred health care costs
Current year	40,777	39,657
Prior years	(448)	(511)
Total incurred health care costs	40,329	39,146
Less: Claims paid
Current year	34,198	33,032
Prior years	5,865	5,253
Total claims paid	40,063	38,285
Add: Premium deficiency reserve	1	6
Health care costs payable, end of the period, net	7,585	7,010
Add: Reinsurance recoverables	8	4
Health care costs payable, end of the period	7,593	7,014
Premium deficiency reserve	1	6
Health Care Benefits
Less: Claims paid
Benefit costs recorded in other insurance liabilities	31	31
Corporate / Other
Less: Claims paid
Benefit costs recorded in other insurance liabilities	$ 173	$ 213

XML

Health Care Costs Payable - Narrative (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Liability for Claims and Claims Adjustment Expense [Line Items]
Incurred but not reported (IBNR) claims liability, net	$ 5,800
Health Insurance Product Line
Liability for Claims and Claims Adjustment Expense [Line Items]
Decrease in prior years' healthcare costs payable	$ (448)	$ (511)

XML

Borrowings - Schedule of Borrowings (Details) - USD ($) $ in Millions	Sep. 30, 2020	Aug. 31, 2020	Aug. 21, 2020	Mar. 31, 2020	Dec. 31, 2019	Aug. 31, 2019
Debt Instrument [Line Items]
Finance lease obligations	$ 1,036				$ 808
Total debt principal	67,721				69,246
Debt premiums	245				262
Debt discounts and deferred financing costs	(971)				(1,028)
Long-term debt and lease obligation	66,995				68,480
Current portion of long-term debt	(5,443)				(3,781)
Long-term debt	61,552				$ 64,699
Senior Notes | 3.125% senior notes due March 2020
Debt Instrument [Line Items]
Debt interest rate					3.125%	3.125%
Long-term debt	0				$ 723
Senior Notes | 2.8% senior notes due July 2020
Debt Instrument [Line Items]
Debt interest rate					2.80%
Long-term debt	$ 0				$ 2,750
Senior Notes | 3.35% senior notes due March 2021
Debt Instrument [Line Items]
Debt interest rate	3.35%					3.35%
Long-term debt	$ 2,038				2,038
Senior Notes | 4.125% senior notes due May 2021
Debt Instrument [Line Items]
Debt interest rate	4.125%					4.125%
Long-term debt	$ 222				222
Senior Notes | 2.125% senior notes due June 2021
Debt Instrument [Line Items]
Debt interest rate	2.125%
Long-term debt	$ 1,750				1,750
Senior Notes | 4.125% senior notes due June 2021
Debt Instrument [Line Items]
Debt interest rate	4.125%					4.125%
Long-term debt	$ 203				203
Senior Notes | 5.45% senior notes due June 2021
Debt Instrument [Line Items]
Debt interest rate	5.45%					5.45%
Long-term debt	$ 187				187
Senior Notes | 3.5% senior notes due July 2022
Debt Instrument [Line Items]
Debt interest rate	3.50%
Long-term debt	$ 1,500				1,500
Senior Notes | 2.75% senior notes due November 2022
Debt Instrument [Line Items]
Debt interest rate	2.75%
Long-term debt	$ 1,000				1,000
Senior Notes | 2.75% senior notes due December 2022
Debt Instrument [Line Items]
Debt interest rate	2.75%
Long-term debt	$ 1,250				1,250
Senior Notes | 4.75% senior notes due December 2022
Debt Instrument [Line Items]
Debt interest rate	4.75%
Long-term debt	$ 399				399
Senior Notes | 3.7% senior notes due March 2023
Debt Instrument [Line Items]
Debt interest rate	3.70%	3.70%
Long-term debt	$ 3,723				6,000
Senior Notes | 2.8% senior notes due June 2023
Debt Instrument [Line Items]
Debt interest rate	2.80%
Long-term debt	$ 1,300				1,300
Senior Notes | 4% senior notes due December 2023
Debt Instrument [Line Items]
Debt interest rate	4.00%	4.00%
Long-term debt	$ 527				1,250
Senior Notes | 3.375% senior notes due August 2024
Debt Instrument [Line Items]
Debt interest rate	3.375%
Long-term debt	$ 650				650
Senior Notes | 2.625% senior notes due August 2024
Debt Instrument [Line Items]
Debt interest rate	2.625%
Long-term debt	$ 1,000				1,000
Senior Notes | 3.5% senior notes due November 2024
Debt Instrument [Line Items]
Debt interest rate	3.50%
Long-term debt	$ 750				750
Senior Notes | 5% senior notes due December 2024
Debt Instrument [Line Items]
Debt interest rate	5.00%
Long-term debt	$ 299				299
Senior Notes | 4.1% senior notes due March 2025
Debt Instrument [Line Items]
Debt interest rate	4.10%	4.10%
Long-term debt	$ 2,000				5,000
Senior Notes | 3.875% senior notes due July 2025
Debt Instrument [Line Items]
Debt interest rate	3.875%
Long-term debt	$ 2,828				2,828
Senior Notes | 2.875% senior notes due June 2026
Debt Instrument [Line Items]
Debt interest rate	2.875%
Long-term debt	$ 1,750				1,750
Senior Notes | 3% senior notes due August 2026
Debt Instrument [Line Items]
Debt interest rate	3.00%
Long-term debt	$ 750				750
Senior Notes | 3.625% senior notes due April 2027
Debt Instrument [Line Items]
Debt interest rate	3.625%			3.625%
Long-term debt	$ 750				0
Senior Notes | 6.25% senior notes due June 2027
Debt Instrument [Line Items]
Debt interest rate	6.25%
Long-term debt	$ 372				372
Senior Notes | 1.3% senior notes due August 2027
Debt Instrument [Line Items]
Debt interest rate	1.30%		1.30%
Long-term debt	$ 1,500				0
Senior Notes | 4.3% senior notes due March 2028
Debt Instrument [Line Items]
Debt interest rate	4.30%
Long-term debt	$ 9,000				9,000
Senior Notes | 3.25% senior notes due August 2029
Debt Instrument [Line Items]
Debt interest rate	3.25%
Long-term debt	$ 1,750				1,750
Senior Notes | 3.75% senior notes due April 2030
Debt Instrument [Line Items]
Debt interest rate	3.75%			3.75%
Long-term debt	$ 1,500				0
Senior Notes | 1.75% senior notes due August 2030
Debt Instrument [Line Items]
Debt interest rate	1.75%		1.75%
Long-term debt	$ 1,250				0
Senior Notes | 4.875% senior notes due July 2035
Debt Instrument [Line Items]
Debt interest rate	4.875%
Long-term debt	$ 652				652
Senior Notes | 6.625% senior notes due June 2036
Debt Instrument [Line Items]
Debt interest rate	6.625%
Long-term debt	$ 771				771
Senior Notes | 6.75% senior notes due December 2037
Debt Instrument [Line Items]
Debt interest rate	6.75%
Long-term debt	$ 533				533
Senior Notes | 4.78% senior notes due March 2038
Debt Instrument [Line Items]
Debt interest rate	4.78%
Long-term debt	$ 5,000				5,000
Senior Notes | 6.125% senior notes due September 2039
Debt Instrument [Line Items]
Debt interest rate	6.125%
Long-term debt	$ 447				447
Senior Notes | 4.125% senior notes due April 2040
Debt Instrument [Line Items]
Debt interest rate	4.125%			4.125%
Long-term debt	$ 1,000				0
Senior Notes | 2.7% senior notes due August 2040
Debt Instrument [Line Items]
Debt interest rate	2.70%		2.70%
Long-term debt	$ 1,250				0
Senior Notes | 5.75% senior notes due May 2041
Debt Instrument [Line Items]
Debt interest rate	5.75%
Long-term debt	$ 133				133
Senior Notes | 4.5% senior notes due May 2042
Debt Instrument [Line Items]
Debt interest rate	4.50%
Long-term debt	$ 500				500
Senior Notes | 4.125% senior notes due November 2042
Debt Instrument [Line Items]
Debt interest rate	4.125%
Long-term debt	$ 500				500
Senior Notes | 5.3% senior notes due December 2043
Debt Instrument [Line Items]
Debt interest rate	5.30%
Long-term debt	$ 750				750
Senior Notes | 4.75% senior notes due March 2044
Debt Instrument [Line Items]
Debt interest rate	4.75%
Long-term debt	$ 375				375
Senior Notes | 5.125% senior notes due July 2045
Debt Instrument [Line Items]
Debt interest rate	5.125%
Long-term debt	$ 3,500				3,500
Senior Notes | 3.875% senior notes due August 2047
Debt Instrument [Line Items]
Debt interest rate	3.875%
Long-term debt	$ 1,000				1,000
Senior Notes | 5.05% senior notes due March 2048
Debt Instrument [Line Items]
Debt interest rate	5.05%
Long-term debt	$ 8,000				8,000
Senior Notes | 4.25% senior notes due April 2050
Debt Instrument [Line Items]
Debt interest rate	4.25%			4.25%
Long-term debt	$ 750				$ 0
Floating Rate Notes | Floating rate notes due March 2020 (2.515% at December 31, 2019)
Debt Instrument [Line Items]
Debt interest rate					2.515%
Long-term debt	$ 0				$ 277
Floating Rate Notes | Floating rate notes due March 2021 (0.968% at September 30, 2020 and 2.605% at December 31, 2019)
Debt Instrument [Line Items]
Debt interest rate	0.968%				2.605%
Long-term debt	$ 1,000				$ 1,000
Other Debt Obligations
Debt Instrument [Line Items]
Long-term debt	$ 276				$ 279

XML

Borrowings - Narrative (Details) - USD ($)			1 Months Ended			3 Months Ended		9 Months Ended
	Aug. 21, 2020	Mar. 31, 2020	Aug. 31, 2020	Mar. 31, 2020	Aug. 31, 2019	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Debt Instrument [Line Items]
Proceeds from debt	$ 3,970,000,000	$ 3,950,000,000
Derivative settlements				$ 7,000,000				$ 7,000,000	$ 25,000,000
Loss on net cash flow hedges				5,000,000
Premium paid in excess of debt principal			$ 706,000,000		$ 76,000,000
Debt extinguishment fees			13,000,000		8,000,000
Write off of deferred debt issuance cost			47,000,000		5,000,000
Loss on early extinguishment of debt			766,000,000		79,000,000	$ 766,000,000	$ 79,000,000	$ 766,000,000	$ 79,000,000
Senior Notes | 1.3% senior notes due August 2027
Debt Instrument [Line Items]
Face amount of debt	$ 1,500,000,000
Debt interest rate	1.30%					1.30%		1.30%
Senior Notes | 1.75% senior notes due August 2030
Debt Instrument [Line Items]
Face amount of debt	$ 1,250,000,000
Debt interest rate	1.75%					1.75%		1.75%
Senior Notes | 2.7% senior notes due August 2040
Debt Instrument [Line Items]
Face amount of debt	$ 1,250,000,000
Debt interest rate	2.70%					2.70%		2.70%
Senior Notes | 3.625% senior notes due April 2027
Debt Instrument [Line Items]
Face amount of debt		$ 750,000,000		$ 750,000,000
Debt interest rate		3.625%		3.625%		3.625%		3.625%
Senior Notes | 3.75% senior notes due April 2030
Debt Instrument [Line Items]
Face amount of debt		$ 1,500,000,000		$ 1,500,000,000
Debt interest rate		3.75%		3.75%		3.75%		3.75%
Senior Notes | 4.125% senior notes due April 2040
Debt Instrument [Line Items]
Face amount of debt		$ 1,000,000,000.0		$ 1,000,000,000.0
Debt interest rate		4.125%		4.125%		4.125%		4.125%
Senior Notes | 4.25% senior notes due April 2050
Debt Instrument [Line Items]
Face amount of debt		$ 750,000,000		$ 750,000,000
Debt interest rate		4.25%		4.25%		4.25%		4.25%
Senior Notes | Outstanding Senior Notes
Debt Instrument [Line Items]
Aggregate principal of debt extinguished			$ 6,000,000,000.0		$ 4,000,000,000.0
Senior Notes | 3.125% senior notes due March 2020
Debt Instrument [Line Items]
Debt interest rate					3.125%					3.125%
Aggregate principal of debt extinguished					$ 1,300,000,000
Senior Notes | 4.125% senior notes due May 2021
Debt Instrument [Line Items]
Debt interest rate					4.125%	4.125%		4.125%
Aggregate principal of debt extinguished					$ 328,000,000
Senior Notes | 4.125% senior notes due June 2021
Debt Instrument [Line Items]
Debt interest rate					4.125%	4.125%		4.125%
Aggregate principal of debt extinguished					$ 297,000,000
Senior Notes | 5.45% senior notes due June 2021
Debt Instrument [Line Items]
Debt interest rate					5.45%	5.45%		5.45%
Aggregate principal of debt extinguished					$ 413,000,000
Senior Notes | 3.35% senior notes due March 2021
Debt Instrument [Line Items]
Debt interest rate					3.35%	3.35%		3.35%
Aggregate principal of debt extinguished					$ 962,000,000
Senior Notes | 3.7% senior notes due March 2023
Debt Instrument [Line Items]
Debt interest rate			3.70%			3.70%		3.70%
Aggregate principal of debt extinguished			$ 2,300,000,000
Senior Notes | 4% senior notes due December 2023
Debt Instrument [Line Items]
Debt interest rate			4.00%			4.00%		4.00%
Aggregate principal of debt extinguished			$ 723,000,000
Senior Notes | 4.1% senior notes due March 2025
Debt Instrument [Line Items]
Debt interest rate			4.10%			4.10%		4.10%
Aggregate principal of debt extinguished			$ 3,000,000,000.0
Floating Rate Notes [Member] | Floating rate notes due March 2020 (2.515% at December 31, 2019)
Debt Instrument [Line Items]
Aggregate principal of debt extinguished					$ 723,000,000

XML

Shareholders' Equity (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Nov. 02, 2016
Equity, Class of Treasury Stock [Line Items]
Stock repurchased during period (in shares)			0	0
Dividends declared per share (in dollars per share)	$ 0.50	$ 0.50	$ 1.50	$ 1.50
2016 Repurchase Program
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program, authorized amount					$ 15,000,000,000.0
Stock repurchase program, remaining authorized repurchase amount	$ 13,900,000,000		$ 13,900,000,000

XML

Other Comprehensive Income (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended						9 Months Ended
	Mar. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Changes in Accumulated Other Comprehensive Income (Loss) by Component
Balance at beginning of period		$ 68,355	$ 65,474	$ 64,170	$ 61,599	$ 60,006	$ 58,543	$ 64,170	$ 58,543
Other comprehensive income (loss) before reclassifications, net of tax	$ (5)
Other comprehensive income (loss), net of tax		42	526	(332)	266	251	331	236	848
Balance at end of period	$ 65,474	69,112	68,355	65,474	62,933	61,599	60,006	69,112	62,933
Net unrealized investment gains (losses)
Changes in Accumulated Other Comprehensive Income (Loss) by Component
Balance at beginning of period		987		774	682		97	774	97
Other comprehensive income (loss) before reclassifications, net of tax		52			192			218	799
Amounts reclassified from accumulated other comprehensive loss, net of tax		(8)			(56)			39	(78)
Other comprehensive income (loss), net of tax		44			136			257	721
Balance at end of period		1,031	987		818	682		1,031	818
OCI before Reclass, pre-tax		83			214			278	933
Amounts reclassified, pre-tax		(10)			(63)			47	(93)
Foreign currency translation adjustments
Changes in Accumulated Other Comprehensive Income (Loss) by Component
Balance at beginning of period		(2)		4	(154)		(158)	4	(158)
Other comprehensive income (loss) before reclassifications, net of tax		1			(1)			(5)	3
Amounts reclassified from accumulated other comprehensive loss, net of tax		0			154			0	154
Other comprehensive income (loss), net of tax		1			153			(5)	157
Balance at end of period		(1)	(2)		(1)	(154)		(1)	(1)
Net cash flow hedges
Changes in Accumulated Other Comprehensive Income (Loss) by Component
Balance at beginning of period		267		279	305		312	279	312
Other comprehensive income (loss) before reclassifications, net of tax		0			(18)			(5)	(18)
Amounts reclassified from accumulated other comprehensive loss, net of tax		(3)			(5)			(10)	(12)
Other comprehensive income (loss), net of tax		(3)			(23)			(15)	(30)
Balance at end of period		264	267		282	305		264	282
Amount expected to be reclassified		15						15
OCI before Reclass, pre-tax		0			(25)			(7)	(25)
Amounts reclassified, pre-tax		(4)			(7)			(14)	(16)
Pension and OPEB plans
Changes in Accumulated Other Comprehensive Income (Loss) by Component
Balance at beginning of period		(39)		(38)	(149)		(149)	(38)	(149)
Other comprehensive income (loss) before reclassifications, net of tax		0			0			(6)	0
Amounts reclassified from accumulated other comprehensive loss, net of tax		0			0			5	0
Other comprehensive income (loss), net of tax		0			0			(1)	0
Balance at end of period		(39)	(39)		(149)	(149)		(39)	(149)
OCI before Reclass, pre-tax		0			0			(8)	0
Amounts reclassified, pre-tax		0			0			7	0
AOCI Including Portion Attributable to Noncontrolling Interest
Changes in Accumulated Other Comprehensive Income (Loss) by Component
Balance at beginning of period		1,213		$ 1,019	684		$ 102	1,019	102
Balance at end of period		$ 1,255	$ 1,213		$ 950	$ 684		$ 1,255	$ 950

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of EPS (in shares)	17	18	16	19
Numerator for earnings per share calculation:
Net income	$ 1,219	$ 1,529	$ 6,217	$ 4,887
Income allocated to participating securities	0	0	0	(3)
Net (income) loss attributable to noncontrolling interests	5	1	(11)	0
Net income attributable to CVS Health	$ 1,224	$ 1,530	$ 6,206	$ 4,884
Denominator for earnings per share calculation:
Weighted average shares, basic (in shares)	1,310	1,302	1,308	1,300
Effect of dilutive securities (in shares)	5	3	6	3
Weighted average shares, diluted (in shares)	1,315	1,305	1,314	1,303
Earnings per share:
Earnings per share, basic (in dollars per share)	$ 0.93	$ 1.17	$ 4.74	$ 3.76
Earnings per share, diluted (in dollars per share)	$ 0.93	$ 1.17	$ 4.72	$ 3.75

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Commitments and Contingencies (Details)	1 Months Ended		3 Months Ended	7 Months Ended
	Oct. 31, 2020 entity	May 31, 2020 state entity	Mar. 31, 2013 member	Aug. 31, 2019 claim	Sep. 30, 2020 store
Loss Contingencies [Line Items]
Guarantor obligations, number of leases | store					76
Sample size | member			200
Number of pending claims | claim				6
Blue Cross and Blue Shield of Alabama vs. CVS Health Corporation | Pending Litigation
Loss Contingencies [Line Items]
Number of entities filing claims		8
Number of states in which entities filed claims | state		6
Blue Cross And Blue Shield Of New Jersey [Member] | Pending Litigation | Subsequent Event
Loss Contingencies [Line Items]
Number of entities filing claims	2

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Segment Reporting - Narrative (Details)	9 Months Ended
	Sep. 30, 2020 Segment
Segment Reporting [Abstract]
Number of operating segments	3

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Segment Reporting - Reconciliation of Financial Measures of Segments to Consolidated Totals (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue, Major Customer [Line Items]
Revenues from customers	$ 66,852	$ 64,547	$ 198,602	$ 189,082
Net investment income	204	263	550	805
Total revenues	67,056	64,810	199,152	189,887
Adjusted operating income (loss)	3,622	3,947	13,063	11,573
Pharmacy Services
Revenue, Major Customer [Line Items]
Total revenues	35,711	36,018	105,583	104,418
Retail/ LTC
Revenue, Major Customer [Line Items]
Total revenues	22,725	21,466	67,136	64,028
Health Care Benefits
Revenue, Major Customer [Line Items]
Total revenues	18,698	17,181	56,364	52,454
Corporate/ Other
Revenue, Major Customer [Line Items]
Net investment income	83	117	209	347
Total revenues	116	152	292	423
Operating Segments | Pharmacy Services
Revenue, Major Customer [Line Items]
Revenues from customers	33,492	33,680	98,233	95,494
Net investment income	0	0	0	0
Total revenues	35,711	36,018	105,583	104,418
Adjusted operating income (loss)	1,619	1,439	4,127	3,682
Net revenues, retail copayments	2,500	2,700	8,500	8,900
Operating Segments | Retail/ LTC
Revenue, Major Customer [Line Items]
Revenues from customers	14,770	13,805	44,314	41,536
Net investment income	0	0	0	0
Total revenues	22,725	21,466	67,136	64,028
Adjusted operating income (loss)	1,412	1,516	4,371	4,674
Operating Segments | Health Care Benefits
Revenue, Major Customer [Line Items]
Revenues from customers	18,557	17,027	55,972	51,976
Net investment income	121	146	341	458
Total revenues	18,698	17,181	56,364	52,454
Adjusted operating income (loss)	1,080	1,423	6,035	4,423
Operating Segments | Corporate/ Other
Revenue, Major Customer [Line Items]
Revenues from customers	33	35	83	76
Adjusted operating income (loss)	(303)	(252)	(931)	(685)
Intersegment Eliminations
Revenue, Major Customer [Line Items]
Revenues	(10,194)	(10,007)	(30,223)	(31,436)
Net investment income	0	0	0	0
Total revenues	(10,194)	(10,007)	(30,223)	(31,436)
Adjusted operating income (loss)	(186)	(179)	(539)	(521)
Intersegment Eliminations | Pharmacy Services
Revenue, Major Customer [Line Items]
Revenues	2,219	2,338	7,350	8,924
Intersegment Eliminations | Retail/ LTC
Revenue, Major Customer [Line Items]
Revenues	7,955	7,661	22,822	22,492
Intersegment Eliminations | Health Care Benefits
Revenue, Major Customer [Line Items]
Revenues	20	8	51	20
Intersegment Eliminations | Corporate/ Other
Revenue, Major Customer [Line Items]
Revenues	$ 0	$ 0	$ 0	$ 0

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Segment Reporting - Reconciliation from Operating Income to Adjusted Operating Income (Details) $ in Millions		3 Months Ended		9 Months Ended
	Jul. 31, 2020 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($) store	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($) store
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Operating income (GAAP measure)		$ 3,249	$ 2,928	$ 11,387	$ 8,950
Amortization of intangible assets		587	607	1,751	1,822
Acquisition-related integration costs		57	111	196	365
(Gain) loss on sale of subsidiary		(271)	205	(271)	205
Store rationalization charges		0	96	0	231
Adjusted operating income (loss)		3,622	$ 3,947	13,063	11,573
Proceeds from sale of subsidiary				834	$ 0
Retail/ LTC
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Number of under performing stores | store			22		22
Health Care Benefits | Discontinued Operations, Disposed of by Sale | Coventry Health Care Workers Compensation business
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
(Gain) loss on sale of subsidiary		$ (271)		$ (271)
Proceeds from sale of subsidiary	$ 850
Pharmacy Services
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Number of under performing stores | store					46

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Subsequent Event (Details) - U.S. Department of Health and Human Services, ACA Risk Corridor Receivables - USD ($) $ in Millions	Oct. 22, 2020	Dec. 31, 2020	Aug. 31, 2019
Pending Litigation
Subsequent Event [Line Items]
Gain contingency, unrecorded amount			$ 313
Pending Litigation | Subsequent Event
Subsequent Event [Line Items]
Amount awarded from other party	$ 313
Settled Litigation | Premium Revenue | Forecast
Subsequent Event [Line Items]
Former gain contingency, recognized in current period, before tx		$ 305
Former gain contingency, recognized in current period, net of tax		$ 220