CT insurance giant Cigna to sell Medicare Advantage policies to Chicago-based company for $3.3B

Cigna Group is exiting the Medicare Advantage business, selling it to Chicago-based Health Care Service Corp., company officials announced today. The deal, which is subject to regulatory approval, is for a reported $3.3 billion, according to the Wall Street Journal.

Medicare advantage has been a growth engine for UnitedHealth and Humana, with Cigna exploring an acquisition of the latter company last year to go all in on Medicare Advantage. Instead, it is now selling the business, with an unspecified number of employees to transfer to Health Care Service Corp., a Cigna spokesperson said in response to a CT Insider query.

Health Care Service Corp. runs Blue Cross and Blue Shield plans in Illinois, Texas, Oklahoma, New Mexico and Montana.

Cigna has its headquarters in Bloomfield, with the giant ranked last year as the fourth largest insurance carrier in the United States by the American Medical Association, after UnitedHealth, Elevance and CVS and its Aetna subsidiary based in Hartford. UnitedHealth offers Oxford Health Plans in Connecticut, while Elevance’s divisions include Anthem, which is the dominant carrier in Connecticut.

Article continues below this ad

Under Medicare Advantage, insurers get paid by the federal government to offer Medicare, often offering extra benefits not available under standard Medicare. Cigna has about 600,000 members in its Medicare Advantage plan, also offering smaller supplemental plans to roughly 450,000 Medicare beneficiaries.

In a Wednesday morning press release, Cigna CEO David Cordani said the company’s Medicare businesses “require sustained investment, focus, and dedicated resources disproportionate to their size” within the overall business. The deal includes a four-year pact for Cigna’s Evernorth Health Services division to provide pharmacy benefit services to the Medicare Advantage lines HCSC is getting.

In the third quarter of 2023, Medicare Advantage premiums produced $2.2 billion in revenue for Cigna and Medicare Part D prescription premiums another $224 million, combining for 5 percent of Cigna’s total revenue for the third quarter. Cigna is scheduled to release on Friday its full results for 2023.

Speaking earlier this month at at JPMorgan Chase investment conference, Cordani did not discuss any imminent deal was in place for Cigna.

Article continues below this ad

“Our government benefits business and our Evernorth Care business, we’ve historically called those out as two we would like to augment with additional M&A,” Cordani said. “We are very attracted to the government services portfolio on both sides — on benefits as well as services.”

The sale is subject to government regulatory review, with Cigna and HCSC anticipating completing the deal early next year. Cigna scrapped plans late last year to acquire Humana, the second largest Medicare Advantage carrier after UnitedHealth, after U.S. Sen. Richard Blumenthal, D-Conn., and others signaled they would pressure federal regulators to scrutinize the deal on antitrust considerations.

Last fall, Cigna agreed to a $173 million settlement with the U.S. Department of Justice, following an investigation into whether it overcharged the U.S. Centers for Medicare and Medicaid Services for its Medicare Advantage plans.