Dive Brief:
- Cigna has hiked its membership expectations for 2023. The health insurer previously expected to lose commercial members in the back half of the year, prepping for an economic downturn that might cause Americans to lose their jobs — and subsequently, their insurance.
- But the expected economic downturn has yet to materialize, leading Cigna to say on Thursday it expects to add at least 1.6 million members this year, up 200,000 lives from previous forecasts.
- “We’ve not seen the disenrollment levels we incorporated into our prior outlook,” said CFO Brian Evanko on a Thursday call with investors. Cigna also raised its revenue and adjusted earnings per share outlook for 2023, after releasing third-quarter earnings.
Dive Insight:
Cigna’s stock rose in Thursday morning’s trade after the rosier membership expectations and a third-quarter beat on earnings and revenue.
The Connecticut-based payer reported revenue of $49 billion, up 8% year over year thanks to growth in health services segment Evernorth and benefits business Cigna Healthcare.
Cigna’s net income was $1.4 billion, roughly half of its net income in the third quarter last year when Cigna reported a gain from the sale of businesses in six countries.
Cigna’s members increased 9% year over year to 19.6 billion, mostly due to commercial membership adds. The Affordable Care Act individual exchanges makes up a small amount of Cigna’s business, but also contributed to “outsized growth” in the quarter, Leerink analyst Whit Mayo wrote in a note Thursday.
Cigna executives called out margin improvement in the individual exchange business as a tailwind heading into 2024. Individual exchange margins are running below targets this year, partially due to a hefty risk adjustment payment Cigna expects to owe in its two largest ACA states, Texas and Georgia.
Cigna has taken a “sizeable” price increase in both those states for 2024, and expects margin improvement as a result. But those pricing actions could also cause Cigna to lose some members, according to Evanko.
“We are likely to have fewer customers in the individual exchange business relative to where we are in 2023,” Evanko said.
Cigna’s medical loss ratio — a marker of spending on patient care — was 80.5% in the quarter, better than Wall Street and Cigna’s internal expectations.
Executives chalked the lower MLR up to Cigna pushing patients to lower-cost sites of care, like moving inpatient procedures to outpatient settings or administering infusions in the home.
Like its peers, Cigna did see increased utilization in the quarter, especially among Medicare Advantage seniors. However, Cigna accounted for higher medical use in its bids for 2023, so the trend isn’t pressuring its MLR, executives said.
In MA, Cigna is continuing to invest in expanding its geographic footprint and expects to see net customer growth in 2024. CEO David Cordani said he is “pleased” by Cigna’s MA quality ratings, called stars, released by the CMS in October, as the majority of Cigna’s members continue to be in plans with 4 stars or above.
In its commercial business, top priorities for Cigna’s employers include expanded access to behavioral health programs, Cordani said. Cigna plans to launch digital tools to better match patients with therapists and provide better scheduling next year, according to Cordani. The payer has also invested in its telemedicine offerings, purchasing asynchronous care technology from vendor 98point6 in October.
Cigna’s employers are also already benefiting from Evernorth’s minority ownership with VillageMD, the medical network majority owned by Walgreens, according to executives.
Cigna is working to ramp VillageMD with its own clinical assets to build up a high-quality provider network, said Eric Palmer, head of Evernorth.
Evernorth includes Cigna’s pharmacy benefit manager Express Scripts, which won a $35 billion contract with insurer Centene late last year.
Cigna expects to incur $200 million in integration costs related to the contract as they prep to go live in 2024, executives said. The Centene contract should break even in 2024 and contribute positively to margins in 2025, Cordani said.
Evernorth is also seeing tailwinds from GLP-1s and biosimilars, which both present an opportunity to improve access while lowering costs for customers, according to Palmer. Evernorth’s clients are “very interested” in GLP-1s, pricey diabetes medication newly used for weight loss, Palmer said.
Meanwhile, as more biosimilars enter the market, that should become more accretive to Evernorth over time, he added.
PBMs are also facing uncertainty from legislation that could come later this year, potentially forcing more transparency in the heavily-criticized industry.
“Any legislative activity or regulatory activity should not remove choice especially from the commercial market for employers as well as health plans,” Cordani said. “Having said that, there is intensified activity around transparency and we are highly supportive of transparency so long as it is targeted and constructive.”
