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Cigna rumored to be in talks to sell Medicare Advantage business

by John R. Fischer, Senior Reporter | November 13, 2023
Business Affairs Insurance
Cigna is reportedly considering selling its Medicare Advantage business.
Over a decade after entering the Medicare Advantage market, health insurer Cigna Group may be looking to sell the business, say people familiar with the matter.

Speaking with Reuters, the sources, who requested anonymity due to the confidential nature of the subject, said that limits by the U.S. government on reimbursement were pushing Cigna to consider the possibility and that it is consulting an investment bank about its options, including a potential divestment that could draw in billions of dollars.

The health insurer created its Medicare Advantage business with the $3.8 billion acquisition of HealthSpring in 2011. The program oversees government health insurance for people aged 65 and older, and Cigna's stake within it was responsible for 4.4% of its $179.4 billion revenue in 2022, reported Reuters.

A company spokesperson told Reuters that it does not comment "on rumors or speculation."

The sources say that discussions with interested parties, which include other companies and private equity firms, are still in the early stages and that Cigna could choose to hold on to the business.

In its Q3 earnings call, the company said that it had expanded the geographic footprint for its Medicare Advantage business from 20% in 2019 to 40% and saw its customer base rise 13% year-over-year.

But it also said that 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, plus changes in the U.S. reimbursement model. It also expects further decreases in the business' rating in 2024 due to changes in the government’s star rating system, which affects certain reimbursement decisions.

The company recently paid $172 million to settle allegations that it overcharged Medicare Advantage patients to obtain tens of millions in Medicare funds. It also entered into a corporate integrity agreement with the U.S. Office of Inspector General, reported Reuters.

Aside from Medicare Advantage, it made another notable change this summer that affected all of its beneficiaries when it announced that it would slash prior authorizations for 25% of its medical services to eliminate administrative bottlenecks and make it easier to access nonemergency procedures.

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