Exclusive: Cigna explores shedding Medicare Advantage business -sources

NEW YORK, Nov 6 (Reuters) – U.S. well being insurer Cigna Group (CI.N) is exploring the sale of its Medicare Advantage business, which manages govt medical health insurance for other people elderly 65 and older, a transfer that might mark a reversal of its growth within the sector, in line with other people acquainted with the topic.

Cigna, which were given into the Medicare Advantage business with its $3.8 billion acquisition of HealthSpring in 2011, can be backing away at a time the U.S. govt is tightening its handbag strings in reimbursing well being insurers for his or her products and services, must it undergo with the transfer.

Cigna is operating with an funding financial institution to judge choices for its Medicare Advantage business, which might fetch a number of billions of greenbacks in a possible divestment, the resources stated.

The discussions with events, together with different firms and personal fairness corporations, are at an early level and Cigna would possibly come to a decision to stay the business, the resources added, soliciting for anonymity since the topic is confidential.

A Cigna spokesperson stated the corporate does no longer remark “on rumors or speculation” as an issue of coverage. Cigna stocks rose up to 1% to $314.06 after Reuters reported the talks, however gave again a few of the ones features and had been up about 0.4% in noon buying and selling.

Cigna’s Medicare Advantage business generated 4.4% of the corporate’s $179.4 billion in earnings from exterior consumers in 2022. Those eligible will have to already be lined via Medicare, a central authority program that basically applies to Americans age 65 and over, or the ones with some disabilities.

The Bloomfield, Connecticut-based corporate stated closing week on its quarterly profits name that it has expanded the geographic footprint of the business from 20% of the ones eligible for Medicare Advantage protection in 2019 to greater than 40%. It additionally disclosed its buyer base had higher 13% year-to-date.

Cigna additionally stated benefit margins in Medicare Advantage in 2023 proceed to be under its long-term goal of four% to five%, which it anticipated to stay the case in 2024. The corporate blamed administrative bills because it expanded the business, but in addition cited adjustments within the U.S. govt’s compensation style as weighing at the unit in its newest annual record.

Cigna has stated it expects adjustments to the federal government’s big name score device, which informs one of the crucial compensation selections, will result in a lower within the score of its Medicare Advantage business in payment-year 2024.

Goldman Sachs analysts in an April word stated the brand new compensation framework presented via the U.S. Centers for Medicare & Medicaid Services previous this 12 months would create a near-term “overhang” on Medicare Advantage companies, and that its actual have an effect on can be arduous to evaluate.

Cigna stated in September it might pay about $172 million to settle fees from U.S. prosecutors that it overcharged the Medicare Advantage program via making sufferers seem extra sick than they in truth had been. It additionally entered right into a five-year compliance settlement with the Office of Inspector General of the U.S. Department of Health and Human Services.

The overwhelming majority of Cigna’s earnings comes from its business platform serving massive employers, and from its pharmacy advantages department, strengthened via a $52 billion acquire of Express Scripts in 2018.

Cigna reported third-quarter profits closing week that beat analysts’ expectancies, and it raised its full-year benefit forecast, at the again of a powerful efficiency in its pharmacy receive advantages unit and lower-than-expected insurance coverage claims.

Our Standards: The Thomson Reuters Trust Principles.