The sale leaves Cigna without a foothold in a sector that has long been a major growth engine for the health-insurance industry
The Cigna Group is selling its Medicare health[-] benefits businesses and a medical care provider services operation for $3.3 billion to Health Care Service Corp., the parent of five Blue Cross and Blue Shield plans. In this July 9, 2014 picture is Blue Cross Blue Shield Tower where the offices of Health Care Service Corp. and Blue Cross and Blue Shield of Illinois are located.
In a major shakeup of the Medicare insurance landscape, The Cigna Group has agreed to sell its entire Medicare business to Health Care Service Corp. (HCSC), the parent company of five Blue Cross and Blue Shield plans, for $3.3 billion. The deal includes Cigna’s Medicare Advantage plans, supplemental benefits, Medicare Part D drug benefits, and CareAllies, a subsidiary that aids healthcare providers with administrative tasks and contracting.
This move signifies a strategic shift for both companies. Cigna, with its strong presence in commercial and employer coverage, sees limited growth potential in its smaller Medicare segment and prefers to focus resources on thriving areas like Evernorth Health Services and Affordable Care Act plans. Conversely, HCSC, a major player in commercial insurance, aims to significantly expand its Medicare Advantage offerings through this acquisition.
HCSC Boosts Medicare Advantage Presence: The acquisition will catapult HCSC into a major player in Medicare Advantage within its existing markets, where it already dominates commercial insurance. This allows them to offer seniors a wider range of product options and leverage their successful member and provider engagement model.
Cigna Prioritizes Growth Areas: By exiting the Medicare market, Cigna frees up resources and capital to invest in its more promising segments, particularly Evernorth Health Services and individual coverage under the Affordable Care Act. These areas align better with Cigna’s long-term growth strategy.
Market Consolidation: This deal further consolidates the already concentrated Medicare Advantage market, with players like UnitedHealth Group, Aetna, and Humana holding significant market share. Smaller players like HCSC now have an opportunity to gain ground through strategic acquisitions.
Looking Ahead:
The deal is expected to close in the first quarter of 2025, pending regulatory approval. While it remains to be seen how this shift will impact individual Medicare beneficiaries in the long run, it undoubtedly alters the competitive landscape of the Medicare insurance market, paving the way for further consolidation and potential changes in product offerings and services.
The deal includes a four-year service agreement where Evernorth Health Services will continue to provide pharmacy benefit services to the acquired Medicare businesses.
Cigna’s Medicare Advantage customer base was nearly 600,000, while HCSC had just 217,000 Medicare Advantage enrollees as of January 2024.
_____________________________________________