Cigna plans to comply fully with sweeping Medicare Advantage audits announced by the CMS this week, according to CEO David Cordani. The audits, which health insurers have heavily opposed, are expected to result in the government recouping billions of dollars in overpayments.
Cordani told investors Friday morning on Cigna’s fourth-quarter earnings call that the payer is pleased with the government’s proposal to not extrapolate samples of diagnostic coding errors to their entire membership before 2018, which effectively gives plans seven years of immunity from any repayments.
However, the payer is concerned about the elimination of the fee-for-service adjuster, a method of adjusting coding discrepancies between MA and the traditional Medicare program. Cordani said the payer is also worried about the lack of specifics in the methodology that regulators will use in calculating repayments.
It’s been a tumultuous week for MA payers. The CMS also proposed a 2% rate hike for plans in the increasingly popular program that many insurers said was not high enough.
MA represents a significant market opportunity for Cigna, but currently makes up less than 5% of its portfolio, Cordani said. Because of that, lower rates will ding the business, but not significantly. Stock in payers with a major footprint in MA, notably UnitedHealth and Humana, dropped Thursday morning after the CMS published its notice.
”The initial rate letter that came out does have lower or somewhat anemic revenue,” Cordani said. Though it’s early to presuppose 2024 growth, if the rate is finalized in that range, “it’ll create some revenue dislocations.”
Cigna announced fourth-quarter and full-year results premarket Friday, reporting quarterly revenue of $45.8 billion, up slightly year over year. Net income was $1.2 billion, up 5% year over year.
Health services portfolio Evernorth reported solid results in the quarter, while medical benefits business Cigna Healthcare’s results were more mixed, analysts said. Cigna has been increasingly leaning on Evernorth to drive growth.
Cigna’s medical loss ratio was 84%, compared to 87% in the fourth quarter of 2021, reflecting lower COVID-19 costs and cost management measures, management said.
“Despite an elevated flu and RSV season, our [MLR] was slightly better than we expected,” CFO Brian Evanko told investors.
Cigna closed the year with 18 million members, up 5% year over year, driven by a growth in commercial members and offset by a decrease in government lives. The drop in its government membership was due to Cigna selling its Texas Medicaid contracts to Molina Healthcare last year.
Cigna expects to add another 1.2 million customers in 2023. That forecast does not include any effects from Medicaid state redeterminations, which will resume on April 1. Millions are expected to be booted from the coverage, which could benefit plans in the Affordable Care Act exchanges.
“Redeterminations represent an opportunity for us, not a risk,” Cordani said.
Meanwhile Evernorth, a segment that includes pharmacy benefit manager Express Scripts, notched some big contract wins in the fourth quarter, including nabbing a pharmacy benefits contract with Centene to manage $35 billion in drug spend.
Evernorth also announced in the quarter it would invest up to $2.7 billion for a 14% stake in VillageMD’s acquisition of Summit Health.
Cigna historically has deferred from owning delivery assets, even as rivals like UnitedHealth and CVS begin to focus more on leveraging their brick-and-mortar clinics. Cordani said the VillageMD partnership gives Cigna reach in the space to work collectively and address the healthcare delivery market in a payer-agnostic way.
Evernorth and VillageMD are currently securing approvals and contracts for joint care coordination measures, like putting capabilities in place for more access to high-performing specialists within Evernorth’s portfolio. Down the line, Cigna will work with VillageMD on exclusive products with a more targeted value proposition through Evernorth — an opportunity with Cigna Healthcare to bring benefit alternatives forward in targeted geographies, according to the CEO.
“We don’t mark it as a significant revenue or earnings driver in 2023 for us,” but it should be a big contributor in 2024, Cordani said.
Cigna brought in $180.5 billion in revenue in the full year. Net income was $6.7 billion, up 24% year over year.
Cigna expects to bring in adjusted revenues of at least $187 billion in 2023, slightly lower than analyst expectations.
The payer expects outsized growth in specific, accelerating segments in 2023, including in U.S. government benefits, care management and delivery arm Evernorth Care Services and specialty pharmacy Accredo, Cordani said.
Cigna plans to deploy $1.4 billion in capital expenditures this year focused on those businesses.
