This Week In Your Wallet: Mergers And Markets And Taxes, Oh My!
After several weeks of focusing on things like holiday deals (and holiday meals), this week we’re covering some heftier issues. Healthcare. The markets. Taxes. They could all affect your wallet in a major way. So, we’ve decided to dive right in.
Drugstore giant CVS is buying health insurer Aetna for about $69 billion, reports The New York Times. Here’s the scoop:
What’s happening and why? Can you say Amazon? Jeff Bezos’ behemoth is making noise about bringing the brilliance that is one-click ordering to the pharmaceutical business. Following its disruption of other industries (ahem, groceries), it seems only natural. So, Aetna and CVS are attempting to get ahead of it in healthcare — a business widely viewed as “very expensive” and “messy,” says David E. Williams, president of Health Business Group. The “pharmacy benefits” arm of CVS — they’re the ones who negotiate cheaper prescriptions from drug manufacturers — will combine with Aetna’s health insurance plans. This could mean they’re more likely to use CVS MinuteClinics to keep customers out of the hospital. Think about it like this: If someone had asthma and they didn’t get their inhaler on time — or didn’t know how to properly use it — they could take a trip to the emergency room. If that happened, the health insurer side of the newly merged company would have to foot the bill. To avoid this, the company might increase care quality and up the number of in-store MinuteClinics to encourage customers to go there instead. Aetna might also encourage its customers to fill prescriptions at CVS over other outlets with incentives like lower co-pays.
When is it happening? Any large merger has to be approved by the Federal Trade Commission (FTC) to ensure it doesn’t violate antitrust laws. Williams says it’ll likely take six months or a year to close the deal, and after that, it could be a year or two before consumers see significant changes.
Who might this help and hurt? The “rosy view” is that the merger will bring economies of scale that lead to lower overall healthcare costs and insurance premiums for consumers, says Amanda Starc, associate professor at Northwestern’s Kellogg School of Management. On the flip side, the consolidated company could keep the savings on its own balance sheet and make market competition difficult.
Should we expect more healthcare mergers? There have been quite a few attempted mergers and acquisitions in the healthcare industry over the last few years. Because of antitrust laws, some haven’t been approved. The next year could mean some reshuffling as companies propose new mergers to the FTC.
Dow 30,000?!?
I’ve seen headlines along those lines, and I’ve got to tell you, they don’t make me excited. They make me nervous. I’m not alone. Stocks have risen so far so fast that many investors are wondering if it’s, as Representative Tim Ryan (D-OH) called it, a sugar high from the expected passage of the new tax laws or something more substantial. If you’re in the same boat, it’s a good idea to take a step back from the market chatter and return to your long-term financial goals. Ask yourself: How long is my time horizon? Do my investments line up with my goals? If you’re considering selling any of your assets for cash, I’d first recommend reading Michael A. Pollock’s piece in The Wall Street Journal.
“The broadly simple answer, many financial experts say, is that taking some money off the table could make sense for anyone who needs it soon,” he writes. “But, they add, it might be a really bad idea for those who have a long-term investment horizon and are mainly just worried about another market correction.” The problem with going to cash in times like these is that history has shown most people have no idea when it’s time to get back in — and sitting in cash as the market starts climbing again can be extremely costly. (Just think how you’d feel if you’d missed the run-up that has occurred since 2009.) If you’re truly anxious (can’t sleep, can’t stop checking your portfolio), one solution may be moving 5 to 10 percent out of stocks, then re-taking your pulse to see if you feel better. If that doesn’t do it, take out 5 percent more. And I find talking it out helps. If you’d like an advisor’s opinion and you work for a large employer, check with employee benefits about whether you have access to any through your workplace. If you’d like to look for an advisor on your own, PlannerSearch.org can help you access members of the Financial Planning Association, NAPFA.org will hook you up with fee-only financial advisors and Garrett Planning Network lists fee-only financial advisors that charge by the hour.
Okay, Taxes
I went for a run on Sunday with Mitch Roschelle, an old friend who also happens to be a partner at PwC. (You may have seen him with Maria Bartiromo on Fox Business, where he’s a regular.) We talked about taxes, naturally. His advice: If you plan to itemize this year — but are not sure that you will in subsequent ones after the standard credit climbs to an expected $12,000 for individuals, $18,000 for heads of household and $24,000 for married joint filers (and the deduction of state and local taxes is possibly eliminated) — it makes sense to use free cash to pay taxes and expenses that you can deduct before the end of the year. For example? If an installment of your 2017 property taxes is not due until early 2018, you can pay them in December. If you’re a quarterly filer, you could also pay your last installment of estimated state income taxes before year-end. Of course, we’re still waiting for the final reconciliation of the bill and its passage into law. We’ll keep you posted.
Best Bang For Your Hotel Bucks
Whether you’re a travel junkie or you only vacation once in a blue moon, it’s still a good idea to sign up for hotel loyalty programs, suggests a new study from The Points Guy, a site covering travel news and rewards. The site ranked the top 10 hotel loyalty programs in the world after using criteria like ease and value of redeeming points. Weighing in at number one is the Starwood Preferred Guest program. (Each Starpoint’s value (currently 2.7 cents) regularly beats that of other hotel companies.)
Why take the time to join one of these programs? “Even if you’re only visiting one of their hotels a few times a year — or even once a year… they do give rewards,” says Nick Ewen, senior analyst at The Points Guy. Exhibit A: Sign-up perks alone can include free Wi-Fi (at a usual cost of $5 to $15 a day) and free late check-out. Plus, Ewen says there’s been an “explosion of members-only rates” for these hotel companies due to market competition. Members can log into their accounts to check available discounts, which could range from 10 to 20 percent depending on season, location and other factors.
Have a great week,
Jean
