Exclusive-Cigna explores shedding Medicare Advantage business -sources By Reuters

© Reuters. FILE PHOTO: Signage for Cigna is pictured at a well being facility in Queens, New York Metropolis, U.S., November 30, 2021. REUTERS/Andrew Kelly/File Photograph

By David Carnevali

NEW YORK (Reuters) – U.S. well being insurer Cigna (NYSE:) Group is exploring the sale of its Medicare Benefit enterprise, which gives extra advantages to these lined by federal medical insurance, a transfer that may mark a reversal of its growth within the sector, in response to folks acquainted with the matter.

Cigna, which bought into the Medicare Benefit enterprise with its $3.8 billion acquisition of HealthSpring in 2011, could be backing away at a time the U.S. authorities is tightening its purse strings in reimbursing well being insurers for his or her companies ought to it undergo with the transfer.

Cigna is working with an funding financial institution to judge choices for its Medicare Benefit enterprise, which might fetch a number of billions of {dollars} in a possible divestment, the sources stated.

The discussions with events, together with different corporations and personal fairness companies, are at an early stage and Cigna might resolve to maintain the enterprise, the sources added, requesting anonymity as a result of the matter is confidential.

A Cigna spokesperson stated the corporate doesn’t remark “on rumors or hypothesis” as a matter of coverage.

Cigna generated 14% of its $135.7 billion income in 2022 from the Medicare Benefit enterprise, which incorporates insurance policies that complement advantages supplied by federal insurance coverage in addition to a prescription drug enterprise. These eligible should already be lined by Medicare, a authorities program that primarily applies to these age 65 and over, or these with some disabilities.

The Bloomfield, Connecticut-based firm stated final week on its quarterly earnings name that it has expanded the geographic footprint of the enterprise from 20% of these eligible for Medicare Benefit protection in 2019 to greater than 40%. It additionally disclosed its buyer base had elevated 13% year-to-date.

Cigna additionally stated revenue margins in Medicare Benefit in 2023 proceed to be beneath its long-term goal of 4% to five%, which it anticipated to stay the case in 2024. The corporate blamed administrative bills because it expanded the enterprise, but in addition cited modifications within the U.S. authorities’s reimbursement mannequin as weighing on the unit in its newest annual report.

Cigna has stated it expects modifications to the federal government’s star ranking system, which informs a number of the reimbursement selections, will result in a lower within the scores of its Medicare Benefit enterprise in payment-year 2024.

Goldman Sachs analysts stated in an April notice that the brand new reimbursement framework launched by the U.S. Facilities for Medicare & Medicaid Companies earlier this 12 months would create a near-term “overhang” on Medicare Benefit companies, and that its actual influence could be exhausting to evaluate.

The overwhelming majority of Cigna’s income comes from its industrial platform serving giant employers, and from its pharmacy advantages division, bolstered by a $52 billion buy of Specific Scripts in 2018.