https://mailchi.mp/09f9563acfcf/gist-weekly-february-2-2024?e=d1e747d2d8

On Wednesday, Bloomfield, CT-based Cigna announced a definitive agreement with Chicago, IL-based Health Care Service Corporation (HCSC), a large Blue Cross Blue Shield insurer, to sell its 600K-member MA business, as well as its Medicare prescription drug plan and Medigap offerings, for $3.3B. 

The two insurers also agreed to a four-year services agreement where Cigna’s Evernorth Health Services subsidiary, which includes Express Scripts, will continue to provide pharmacy benefit services to the Medicare businesses.

While Cigna is exiting the MA market, other major payers—including UnitedHealth and Humana—are seeing their MA profits drop amid an increase in utilization, according to analysis from Moody’s Investors Service. 

The Gist: While it initially appeared that Cigna’s divesture of its MA business would position it to combine more smoothly with Humana, this deal with HCSC makes sense even in the wake of that reportedly called off merger. 

Cigna has been a bit player in MA for years, covering only two percent of MA lives in 2023, and the shrinking pie of MA profits will discourage all but the most successful or uniquely positioned payers. 

But while increasing utilization rates are contributing to a declining outlook for payers, MA is still a solidly profitable business, covering over half of Medicare beneficiaries and still growing by millions of lives each year. 

The MA payers that last are going to have to work harder at integrating their various care and data assets, and more carefully manage spend for an aging cohort of seniors with increasingly complex needs.