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Other Insurance Liabilities and Separate Accounts | 12 Months Ended
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Dec. 31, 2022
Insurance [Abstract] |
Other Insurance Liabilities and Separate Accounts | Other Insurance Liabilities and Separate Accounts New Accounting Pronouncements Recently Adopted Targeted Improvements to the Accounting for Long-Duration Insurance Contracts In August 2018, the Financial Accounting Standards Board issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (Topic 944) (the “long-duration insurance standard”). 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 Company adopted this accounting standard on January 1, 2023, using the modified retrospective transition method as of January 1, 2021, also referred to as the “transition date”, for changes to its liabilities for future policy benefits, deferred acquisition costs and value of business acquired intangible asset. Upon adoption, the Company recorded a transition date net adjustment to reduce accumulated other comprehensive income (loss) by $986 million ($766 million after-tax) with a corresponding increase to its liability for future policy benefits, the majority of which is included within other insurance liabilities and other long-term liabilities on the consolidated balance sheets. The transition date net adjustment was a result of updating the rate used to discount the liabilities to reflect the yield for an upper-medium grade fixed-income instrument compared to the Company’s expected investment yield under the historical guidance. The Company was not required to record an adjustment to retained earnings on the transition date. Prior period financial information subsequent to the transition date has been revised to reflect the adoption of the long-duration insurance standard. The following summarizes changes in the balances of long-duration insurance liabilities as a result of the adoption of the long-duration insurance standard effective January 1, 2021:
In millions | Large Case Pensions |  | Long-Term Care |  | Other
Balance at December 31, 2020, net of reinsurance | $ | 3,224 |  | $ | 1,142 |  | $ | 480
Add: Reinsurance recoverable | — |  | — |  | 274
Balance at December 31, 2020 | 3,224 |  | 1,142 |  | 754
Change in discount rate assumptions | 604 |  | 553 |  | 44
Removal of shadow adjustments in accumulated other comprehensive income | (181) |  | — |  | —
Adjusted balance at January 1, 2021 | 3,647 |  | 1,695 |  | 798
Less: Reinsurance recoverable | — |  | — |  | 308
Adjusted balance at January 1, 2021, net of reinsurance | $ | 3,647 |  | $ | 1,695 |  | $ | 490
Impact of New Long-Duration Insurance Contracts Standard on Financial Statement Line Items As a result of applying the long-duration insurance standard using a modified retrospective method, the following adjustments were made to amounts reported in the consolidated statement of operations for the years ended December 31, 2022 and 2021:
| Impact of Change in Accounting Policy
In millions | As Reported December 31, 2022 |  | Adjustments |  | Adjusted December 31, 2022
Consolidated Statement of Operations: |  |  |  |  |
Operating costs: |  |  |  |  |
Benefit costs | $ | 71,281 |  | $ | (208) |  | $ | 71,073
Total operating costs | 314,721 |  | (208) |  | 314,513
Operating income | 7,746 |  | 208 |  | 7,954
Income before income tax provision | 5,628 |  | 208 |  | 5,836
Income tax provision | 1,463 |  | 46 |  | 1,509
Income from continuing operations | 4,165 |  | 162 |  | 4,327
Net income | 4,165 |  | 162 |  | 4,327
Net income attributable to CVS Health | 4,149 |  | 162 |  | 4,311
Basic earnings per share: |  |  |  |  |
Income from continuing operations attributable to CVS Health | $ | 3.16 |  |  | $ | 0.13 |  |  | $ | 3.29 |
Net income attributable to CVS Health | $ | 3.16 |  |  | $ | 0.13 |  |  | $ | 3.29 |
Diluted earnings per share: |  |  |  |  |
Income from continuing operations attributable to CVS Health | $ | 3.14 |  |  | $ | 0.12 |  |  | $ | 3.26 |
Net income attributable to CVS Health | $ | 3.14 |  |  | $ | 0.12 |  |  | $ | 3.26 |
| Impact of Change in Accounting Policy
In millions | As Reported December 31, 2021 |  | Adjustments |  | Adjusted December 31, 2021
Consolidated Statement of Operations: |  |  |  |  |
Operating costs: |  |  |  |  |
Benefit costs | $ | 64,260 |  | $ | (72) |  | $ | 64,188
Operating expenses | 37,066 |  | (45) |  | 37,021
Total operating costs | 278,918 |  | (117) |  | 278,801
Operating income | 13,193 |  | 117 |  | 13,310
Income before income tax provision | 10,420 |  | 117 |  | 10,537
Income tax provision | 2,522 |  | 26 |  | 2,548
Income from continuing operations | 7,898 |  | 91 |  | 7,989
Net income | 7,898 |  | 91 |  | 7,989
Net income attributable to CVS Health | 7,910 |  | 91 |  | 8,001
Basic earnings per share: |  |  |  |  |
Income from continuing operations attributable to CVS Health | $ | 6.00 |  |  | $ | 0.07 |  |  | $ | 6.07 |
Net income attributable to CVS Health | $ | 6.00 |  |  | $ | 0.07 |  |  | $ | 6.07 |
Diluted earnings per share: |  |  |  |  |
Income from continuing operations attributable to CVS Health | $ | 5.95 |  |  | $ | 0.07 |  |  | $ | 6.02 |
Net income attributable to CVS Health | $ | 5.95 |  |  | $ | 0.07 |  |  | $ | 6.02 |
As a result of applying the long-duration insurance standard using a modified retrospective method, the following adjustments were made to amounts reported in the consolidated balance sheet as of December 31, 2022 and 2021:
| Impact of Change in Accounting Policy
In millions | As Reported December 31, 2022 |  | Adjustments |  | Adjusted December 31, 2022
Consolidated Balance Sheet: |  |  |  |  |
Other current assets | $ | 2,685 |  | $ | (49) |  | $ | 2,636
Total current assets | 65,682 |  | (49) |  | 65,633
Intangible assets, net | 24,754 |  | 49 |  | 24,803
Total assets | 228,275 |  | — |  | 228,275
Health care costs payable | 10,406 |  | (264) |  | 10,142
Other insurance liabilities | 1,140 |  | (51) |  | 1,089
Total current liabilities | 69,736 |  | (315) |  | 69,421
Deferred income taxes | 3,880 |  | 136 |  | 4,016
Other long-term insurance liabilities | 6,108 |  | (273) |  | 5,835
Other long-term liabilities | 6,732 |  | (2) |  | 6,730
Total liabilities | 156,960 |  | (454) |  | 156,506
Retained earnings | 56,145 |  | 253 |  | 56,398
Accumulated other comprehensive loss | (1,465) |  | 201 |  | (1,264)
Total CVS Health shareholders’ equity | 71,015 |  | 454 |  | 71,469
Total shareholders’ equity | 71,315 |  | 454 |  | 71,769
Total liabilities and shareholders’ equity | 228,275 |  | — |  | 228,275
| Impact of Change in Accounting Policy
In millions | As Reported December 31, 2021 |  | Adjustments |  | Adjusted December 31, 2021
Consolidated Balance Sheet: |  |  |  |  |
Other current assets | $ | 5,292 |  | $ | 27 |  | $ | 5,319
Total current assets | 60,008 |  | 27 |  | 60,035
Intangible assets, net | 29,026 |  | 26 |  | 29,052
Total assets | 232,999 |  | 53 |  | 233,052
Health care costs payable | 8,808 |  | (130) |  | 8,678
Other insurance liabilities | 1,303 |  | 42 |  | 1,345
Total current liabilities | 67,807 |  | (88) |  | 67,719
Deferred income taxes | 6,270 |  | (155) |  | 6,115
Other long-term insurance liabilities | 6,402 |  | 833 |  | 7,235
Other long-term liabilities | 1,904 |  | 3 |  | 1,907
Total liabilities | 157,618 |  | 593 |  | 158,211
Retained earnings | 54,906 |  | 91 |  | 54,997
Accumulated other comprehensive loss | 965 |  | (631) |  | 334
Total CVS Health shareholders’ equity | 75,075 |  | (540) |  | 74,535
Total shareholders’ equity | 75,381 |  | (540) |  | 74,841
Total liabilities and shareholders’ equity | 232,999 |  | 53 |  | 233,052
As a result of applying the long-duration insurance standard using a modified retrospective method, the following adjustments were made to amounts reported in the consolidated statement of cash flows for the years ended December 31, 2022 and 2021:
| Impact of Change in Accounting Policy
In millions | As Reported December 31, 2022 |  | Adjustments |  | Adjusted December 31, 2022
Consolidated Statement of Cash Flows: |  |  |  |  |
Reconciliation of net income to net cash provided by operating activities: |  |  |  |  |
Net income | $ | 4,165 |  | $ | 162 |  | $ | 4,327
Adjustments required to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Depreciation and amortization | 4,247 |  | (23) |  | 4,224
Deferred income taxes | (2,075) |  | 46 |  | (2,029)
Change in operating assets and liabilities, net of effects from acquisitions: |  |  |  |  |
Other assets | (566) |  | 75 |  | (491)
Health care costs payable and other insurance liabilities | 1,247 |  | (255) |  | 992
Other liabilities | 6,468 |  | (5) |  | 6,463
| Impact of Change in Accounting Policy
In millions | As Reported December 31, 2021 |  | Adjustments |  | Adjusted December 31, 2021
Consolidated Statement of Cash Flows: |  |  |  |  |
Reconciliation of net income to net cash provided by operating activities: |  |  |  |  |
Net income | $ | 7,898 |  | $ | 91 |  | $ | 7,989
Adjustments required to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Depreciation and amortization | 4,512 |  | (26) |  | 4,486
Deferred income taxes | (428) |  | 26 |  | (402)
Change in operating assets and liabilities, net of effects from acquisitions: |  |  |  |  |
Other assets | (3) |  | (27) |  | (30)
Health care costs payable and other insurance liabilities | 169 |  | (68) |  | 101
Other liabilities | 2,852 |  | 4 |  | 2,856
Future Policy Benefits The following tables show the components of the change in the liability for future policy benefits, which is included in other insurance liabilities and other long-term insurance liabilities on the consolidated balance sheets, during the years ended December 31, 2022 and 2021:
| 2022
In millions | Large Case Pensions |  | Long-Term Care |  |  |  |
Present value of expected net premiums (1) |  |  |  |  |  |  |
Liability for future policy benefits, beginning of period - current discount rate |  |  | $ | 389 |  |  |  |  |
Beginning liability for future policy benefits at original (locked-in) discount rate |  |  | $ | 323 |  |  |  |  |
Effect of changes in cash flow assumptions |  |  | (15) |  |  |  |  |
Effect of actual variances from expected experience |  |  | 18 |  |  |  |  |
Adjusted beginning liability for future policy benefits - original (locked-in) discount rate |  |  | 326 |  |  |  |  |
Interest accrual (using locked-in discount rate) |  |  | 16 |  |  |  |  |
Net premiums (actual) |  |  | (40) |  |  |  |  |
Ending liability for future policy benefits at original (locked-in) discount rate |  |  | 302 |  |  |  |  |
Effect of changes in discount rate assumptions |  |  | (2) |  |  |  |  |
Liability for future policy benefits, end of period - current discount rate |  |  | $ | 300 |  |  |  |  |
Present value of expected future policy benefits |  |  |  |  |  |  |
Liability for future policy benefits, beginning of period - current discount rate | $ | 3,034 |  |  | $ | 1,991 |  |  |  |  |
Beginning liability for future policy benefits at original (locked-in) discount rate | $ | 2,650 |  |  | $ | 1,480 |  |  |  |  |
Effect of changes in cash flow assumptions | — |  |  | 99 |  |  |  |  |
Effect of actual variances from expected experience | (44) |  |  | 18 |  |  |  |  |
Adjusted beginning liability for future policy benefits - original (locked-in) discount rate | 2,606 |  |  | 1,597 |  |  |  |  |
Issuances | 4 |  |  | — |  |  |  |  |
Interest accrual (using locked-in discount rate) | 106 |  |  | 80 |  |  |  |  |
Benefit payments (actual) | (291) |  |  | (64) |  |  |  |  |
Ending liability for future policy benefits at original (locked-in) discount rate | 2,425 |  |  | 1,613 |  |  |  |  |
Effect of changes in discount rate assumptions | (173) |  |  | (47) |  |  |  |  |
Liability for future policy benefits, end of period - current discount rate | $ | 2,252 |  |  | $ | 1,566 |  |  |  |  |
Net liability for future policy benefits | $ | 2,252 |  |  | $ | 1,266 |  |  |  |  |
Less: Reinsurance recoverable | — |  |  | — |  |  |  |  |
Net liability for future policy benefits, net of reinsurance recoverable | $ | 2,252 |  |  | $ | 1,266 |  |  |  |  |
_____________________________________________ (1)The present value of expected net premiums is equivalent to the present value of expected gross premiums for the long-term care insurance contracts as net premiums are set equal to gross premiums.
| 2021
In millions | Large Case Pensions |  | Long-Term Care |  |  |  |
Present value of expected net premiums (1) |  |  |  |  |  |  |
Liability for future policy benefits, beginning of period - current discount rate |  |  | $ | 417 |  |  |  |  |
Beginning liability for future policy benefits at original (locked-in) discount rate |  |  | $ | 330 |  |  |  |  |
Effect of changes in cash flow assumptions |  |  | 8 |  |  |  |  |
Effect of actual variances from expected experience |  |  | 9 |  |  |  |  |
Adjusted beginning liability for future policy benefits - original (locked-in) discount rate |  |  | 347 |  |  |  |  |
Interest accrual (using locked-in discount rate) |  |  | 17 |  |  |  |  |
Net premiums (actual) |  |  | (41) |  |  |  |  |
Ending liability for future policy benefits at original (locked-in) discount rate |  |  | 323 |  |  |  |  |
Effect of changes in discount rate assumptions |  |  | 66 |  |  |  |  |
Liability for future policy benefits, end of period - current discount rate |  |  | $ | 389 |  |  |  |  |
Present value of expected future policy benefits |  |  |  |  |  |  |
Liability for future policy benefits, beginning of period - current discount rate | $ | 3,582 |  |  | $ | 2,051 |  |  |  |  |
Beginning liability for future policy benefits at original (locked-in) discount rate | $ | 2,979 |  |  | $ | 1,430 |  |  |  |  |
Effect of changes in cash flow assumptions | (96) |  |  | 35 |  |  |  |  |
Effect of actual variances from expected experience | (39) |  |  | 3 |  |  |  |  |
Adjusted beginning liability for future policy benefits - original (locked-in) discount rate | 2,844 |  |  | 1,468 |  |  |  |  |
Issuances | 2 |  |  | — |  |  |  |  |
Interest accrual (using locked-in discount rate) | 117 |  |  | 74 |  |  |  |  |
Benefit payments (actual) | (313) |  |  | (62) |  |  |  |  |
Ending liability for future policy benefits at original (locked-in) discount rate | 2,650 |  |  | 1,480 |  |  |  |  |
Effect of changes in discount rate assumptions | 384 |  |  | 511 |  |  |  |  |
Liability for future policy benefits, end of period - current discount rate | $ | 3,034 |  |  | $ | 1,991 |  |  |  |  |
Net liability for future policy benefits | $ | 3,034 |  |  | $ | 1,602 |  |  |  |  |
Less: Reinsurance recoverable | — |  |  | — |  |  |  |  |
Net liability for future policy benefits, net of reinsurance recoverable | $ | 3,034 |  |  | $ | 1,602 |  |  |  |  |
_____________________________________________ (1)The present value of expected net premiums is equivalent to the present value of expected gross premiums for the long-term care insurance contracts as net premiums are set equal to gross premiums. The amount of undiscounted expected gross premiums and expected future benefit payments for long-duration insurance liabilities as of December 31, 2022 and 2021 were as follows:
In millions | 2022 |  | 2021 |  |  |  |
Large case pensions |  |  |  |  |  |  |
Expected future benefit payments | $ | 3,539 |  | $ | 3,882 |  |  |  |
Expected gross premiums | — |  | — |  |  |  |
Long-term care |  |  |  |  |  |  |
Expected future benefit payments | $ | 3,265 |  | $ | 3,115 |  |  |  |
Expected gross premiums | 437 |  | 478 |  |  |  |
The weighted-average interest rate used in the measurement of the long-duration insurance liabilities as of December 31, 2022 and 2021 were as follows:
| 2022 |  | 2021
Large case pensions |  |  |
Interest accretion rate | 4.20% |  | 4.20%
Current discount rate | 5.24% |  | 2.53%
Long-term care |  |  |
Interest accretion rate | 5.11% |  | 5.11%
Current discount rate | 5.39% |  | 2.88%
The weighted-average durations (in years) of the long-duration insurance liabilities as of December 31, 2022 and 2021 were as follows:
| 2022 |  | 2021
Large case pensions | 7.4 |  | 7.5
Long-term care | 12.6 |  | 13.5
The Company did not have any material differences between the actual experience and expected experience for the significant assumptions used in the computation of the liability for future policy benefits. Policyholders’ Funds The following table shows the components of the change in policyholders’ funds related to long-duration insurance contracts, which are included in policyholders’ funds and other long-term liabilities on the consolidated balance sheets, during the years ended December 31, 2022 and 2021:
In millions, except weighted average crediting rate | 2022 |  | 2021
Policyholders’ funds, beginning of the period | $ | 522 |  | $ | 568
Deposits received | 13 |  | 20
Policy charges | (2) |  | (2)
Surrenders and withdrawals | (31) |  | (21)
Interest credited | 11 |  | 12
Change in net unrealized gains (losses) | (148) |  | (42)
Other | (20) |  | (13)
Policyholders’ funds, end of the period | $ | 345 |  | $ | 522
Weighted average crediting rate | 4.72% |  | 4.81%
Net amount at risk | $ | — |  |  | $ | — |
Cash surrender value | $ | 339 |  |  | $ | 346 |
Separate Accounts The following table shows the fair value of assets, by major investment category, supporting Separate Accounts as of December 31, 2022 and 2021:
In millions | 2022 |  | 2021
Cash and cash equivalents | $ | 156 |  |  | $ | 188 |
Debt securities: |  |  |
U.S. government securities | 717 |  |  | 1,234 |
States, municipalities and political subdivisions | 27 |  |  | 48 |
U.S. corporate securities | 1,667 |  |  | 2,339 |
Foreign securities | 201 |  |  | 325 |
Residential mortgage-backed securities | 41 |  |  | 144 |
Commercial mortgage-backed securities | 6 |  |  | 57
Other asset-backed securities | 18 |  |  | 134 |
Total debt securities | 2,677 |  |  | 4,281 |
Equity securities and common/collective trusts | 480 |  |  | 548 |
Total (1) | $ | 3,313 |  |  | $ | 5,017 |
_____________________________________________ (1)Excludes $85 million of other payables and $70 million of other receivables at December 31, 2022 and 2021, respectively. The following table shows the components of the change in Separate Accounts liabilities during the years ended December 31, 2022 and 2021:
In millions | 2022 |  | 2021
Separate Accounts liability, beginning of the period | $ | 5,087 |  |  | $ | 4,881 |
Premiums and deposits | 853 |  |  | 1,118 |
Surrenders and withdrawals | (581) |  |  | (42) |
Benefit payments | (947) |  |  | (984) |
Investment earnings | (1,130) |  |  | 53 |
Net transfers from general account | 9 |  |  | 14 |
Other | (63) |  |  | 47 |
Separate Accounts liability, end of the period | $ | 3,228 |  |  | $ | 5,087 |
Cash surrender value, end of the period | $ | 2,087 |  |  | $ | 3,513 |
The Company did not recognize any gains or losses on assets transferred to Separate Accounts during the years ended December 31, 2022 and 2021.

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- Definition The entire disclosure for cost related directly to successful acquisition of new and renewal of insurance contract. Includes, but is not limited to, deferred policy acquisition cost, deferred sale inducement cost, and present value of future profit of insurance contract acquired in business combination. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 30 -URI https://asc.fasb.org/subtopic&trid=4737841 + Details
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