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Cigna eying M&A, Medicare Advantage growth

June 25, 2017
  • Cigna Chief Executive David Cordani said Wednesday the payer has between $7 billion and $14 billion that it may use this year on mergers and acquisitions, including expanding its Medicare Advantage (MA) offerings.
  • During an investors’ call, Corandi said Cigna is exploring “growing internationally and building out its pharmacy and physician-related businesses, its retail capabilities and its government risk-based insurance programs.”
  • Corandi declined to say whether Cigna is looking to buy Humana, which is the second-largest Medicare Advantage payer, or when the company may acquire or merge with other companies.

Just last week, the CMS lifted Cigna’s suspension to sell MA plans. In 2016, the restriction was implemented for Medicare Advantage and Medicare Part D plans after the CMS found issues with Cigna’s appeals and grievances processes, Part D formulary and benefits administration.

The sanctions against Cigna for the past 18 months reportedly cost the payer at least $500 million. Now, with the sanctions lifted, Cigna is looking to expand its focus on MA.The payer is also still dealing with the aftermath of its failed $54 billion merger proposal with Anthem. Cigna has a lawsuit against Anthem seeking more than $13 billion in damages, along with the $1.85 contractual breakup fee. Anthem is protesting both payments.

A small group of payers control the MA market. UnitedHealth and Humana constitute a combined 41% of MA enrollment. That percentage may increase with Humana saying it is focusing on Medicare plans after dropping out of the Affordable Care Act (ACA) exchange market for 2018. Currently, the top eight payers in MA make up about three-quarters of the market, according to the Kaiser Family Foundation.

In addition to its MA offerings, Cigna expects to offer ACA exchanges plans in six states next year, but will drop Maryland plans.

MA plans have been in the news lately, and not always in a positive light. The Department of Justice (DOJ) recently became involved in two high-profile False Claims Act cases against UnitedHealth. The DOJ is also investigating possible overpayments to other payers involved in Medicare Advantage. The CMS estimated it overpaid MA organizations $14.1 billion in 2013. MA payers received about $160 billion in 2014 for about 16 million beneficiaries. The CMS estimated about 9.5% of those payments were improper.

One-third of all Medicare beneficiaries, about 19 million people, are enrolled in MA plans.

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