Cigna Sells Medicare Business for $3.7B
Summary: Cigna is selling their Medicare insurance business to Health Care Service Corporation for $3.7B. The deal is expected to close in the first fiscal quarter of 2025. Estimated Read Time: 1 min
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Global health insurance provider, Cigna, has officially announced the sale of their Medicare Advantage, Medicare Prescription Drug plans, and Medicare Supplemental health benefits businesses to Health Care Service Corporation (HCSC).
Headquartered in Chicago, IL, Health Care Service Corporation operates several health insurance plans in multiple states across the U.S. The company is focused on expanding its Medicare Advantage product offering to align with its strategy to become a lead in the Medicare marketplace.
With this acquisition, HCSC gains an impressive book of business that produced just over 4% of Cigna’s total revenue in 2022.
Cigna Deal Terms and Acquisition
The terms of the deal outline HCSC’s acquisition of Cigna Medicare Advantage, Cigna supplemental benefits, Medicare Part D drug plans, and CareAllies. CareAllies is a business, previously owned by Cigna, that helps medical professionals with contracting and administrative services for a total of $3.7B with $3.3B being cash and $400M in capital. This business was bundled into the deal with the health insurance businesses.
As of 2024, Medicare Advantage plans are the top choice for Medicare beneficiaries across the United States. With this acquisition, HCSC hopes to gain traction on larger corporations in the Medicare Advantage space, such as UnitedHealth Group and Humana, who both serve millions of Medicare Advantage enrollees.
Before the acquisition, HCSC reportedly had more than one million Medicare members in their book of business, with 217,000 Medicare Advantage customers in 2024. By adding Cigna’s book of business to their arsenal, HCSC will add an additional 600,000 Medicare Advantage customers and an additional 468,000 customers covered by additional services acquired in the deal.
Cigna’s Chairman and CEO David Cordani states that the decision to remove themselves from the Medicare industry aligns with their portfolio management approach. Cigna is shifting their focus towards growth in other areas. According to Cordani, “While we continue to believe the overall Medicare space is an attractive segment of the healthcare market, our Medicare businesses require sustained investment, focus, and dedicated resources disproportionate to their size within The Cigna Group’s portfolio.”
Service Agreement and Expected Closure
The purchase of Medicare business from Cigna by HCSC includes a four-year agreement in which Evernorth Health Services will continue to provide Medicare and pharmacy benefits under the Cigna corporation. This will be Cigna’s only remaining Medicare product once the deal has been finalized.
The transaction is expected to close in the first fiscal quarter of 2025. However, the timeline can change based on the determination from antitrust regulators. If you are a current client enrolled in a Cigna Medicare product, your coverage will not be impacted until the deal has closed in early 2025. However, as the business transaction progresses, it is important to check back for updates regarding your coverage.
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