Cigna is allegedly in talks to sell its Medicare Advantage business to HCSC for $3 billion to $4 billion.

Cigna in talks to sell Medicare Advantage business to HCSC for $3 billion to $4 billion, says source

January 05, 2024
by John R. Fischer, Senior Reporter
Health insurer Cigna Group has reportedly found a potential buyer for its Medicare Advantage business in Health Care Service Corp., with the two in exclusive talks for a deal valued between $3 billion and $4 billion.

An anonymous source familiar with the matter told The Wall Street Journal that the two are expected to announce the sale in the coming days.

A Blue Cross Blue Shield licensee, HCSC manages plans for more than 18.6 million members in Illinois, Montana, New Mexico, Oklahoma, and Texas. The company told Reuters that it does not comment on “rumor or speculation.”

Cigna, which has been rumored to be looking for a buyer for the business since November, did not respond for comment. It also is said to be in talks with Elevance Health, according to Bloomberg News.

Upon breaking on January 3, the news sent shares for the company down 2%, reported Reuters.

Cigna’s Medicare Advantage business made up 4.4% of its $179.4 billion revenue from external customers in 2022, far below the majority made by its commercial business and pharmacy benefits division.

It is reportedly seeking to leave the business due to changes in the U.S. reimbursement model, and also anticipates decreases in the business' rating in 2024 due to changes in the government’s star rating system, which affects certain reimbursement decisions.

The company entered the Medicare Advantage market in 2011 with the $3.8 billion acquisition of HealthSpring. In its Q3 2023 earnings call, it said it had expanded the geographic footprint for the business from 20% in 2019 to 40%, and saw its customer base rise 13% year-over-year. Still, profit margins for the division were below its 4% to 5% target and were expected to continue this way in 2024 due to administrative expenses for expanding it.

Cigna was recently in talks to merge with Humana into a $140 billion enterprise but called them off in December, weeks after announcing they were discussing a potential deal. It attributed the breakdown to shareholder concerns about the merger and failure to agree on financial terms.

It also said it would be repurchasing $10 billion worth of its shares, increasing its total planned repurchases to $11.3 billion.