Cigna Pronounces Sale of Medicare Companies to Well being Care Service Corp. for $3.3 Billion in Money

The Bloomfield, Conn.-based well being insurer Cigna introduced on Jan. 31 that it had made a definitive settlement with the Chicago-based Well being Care Service Company, which encompasses Blue Cross Blue Defend plans in 5 states, for HCSC to purchase its Medicare companies for $3.3 billion in money, with a complete transaction worth of $3.7 billion.

 A press launch posted to PR Newswire early on Wednesday morning started thus: “World well being firm The Cigna Group (NYSE: CI) as we speak introduced that it has entered right into a definitive settlement whereby Well being Care Service Company (HCSC) will purchase The Cigna Group’s Medicare Benefit, Cigna Supplemental Advantages, Medicare Half D and CareAllies companies, for a complete transaction worth of roughly $3.7 billion. As a part of the transaction, The Cigna Group and HCSC have agreed to enter right into a four-year companies settlement underneath which Evernorth Well being Companies, a subsidiary of The Cigna Group, will proceed to supply pharmacy profit companies to the Medicare companies, efficient on closing of the transaction. The transaction is predicted to shut within the first quarter of 2025, topic to receipt of relevant regulatory approvals and different customary closing situations. There is no such thing as a financing situation.”

The press launch quoted David M. Cordani, chairman and CEO of The Cigna Group as stating that “The settlement will allow The Cigna Group to drive significant worth for all our stakeholders, offering an enhanced potential to speed up funding and progress in our companies platform, whereas additional deepening our dedication to our present well being advantages platform. In tandem, the transaction will place our Medicare companies and CareAllies for added progress as they proceed to serve the wants of their clients as a part of HCSC. This choice is aligned with our extremely disciplined method to managing our portfolio and allocating sources towards progress alternatives in our Evernorth Well being Companies and Cigna Healthcare portfolios,” Cordani stated. “Whereas we proceed to imagine the general Medicare area is a beautiful phase of the healthcare market, our Medicare companies require sustained funding, focus, and devoted sources disproportionate to their measurement inside The Cigna Group’s portfolio. We proceed to see vital, significant progress alternatives for presidency companies, together with Medicare, in our Evernorth Well being Companies portfolio of companies.”

And in its press launch posted to its company web site on Wednesday morning, HCSC quoted Maurice Smith, its CEO, president, and vice chair, as stating that, “At HCSC, now we have an extended historical past of constructing it attainable for individuals to realize their greatest well being, and we proceed to drive improvements and enhancements in well being care. The acquisition will convey many alternatives to HCSC and its members — together with a wider vary of product choices, strong scientific applications and a bigger geographic attain. It builds on our dedication to develop entry to high quality, inexpensive look after individuals in all phases of their lives,” Smith stated. “We look ahead to welcoming new members who will profit from our confirmed community-first member and supplier engagement mannequin that values native relationships. We lead and function with a deep sense of care and dedication that informs how we serve our members, interact in our communities and ship differentiated worth.”

HCSC’s press launch went on to notice that “Well being Care Service Company is the nation’s largest customer-owned well being insurer, serving greater than 22 million individuals throughout the US by way of well being plans in Illinois, Montana, New Mexico, Oklahoma and Texas. HCSC supplies protection choices for employers giant and small, people and households, and Medicare and Medicaid plans. HCSC additionally affords associated well being care services and products comparable to pharmacy options, life and dental insurance coverage, and well being expertise by way of a community of associates and subsidiaries.” And it quoted Opella Ernest, M.D., president of HCSC Markets, who stated that “This acquisition accelerates our progress in an essential market phase. The best way we do enterprise is as essential to us as what we do. We have now a tradition of compassion and deal with data-driven insights to assist members obtain more healthy outcomes. We’re excited to have Cigna’s Medicare and CareAllies groups convey their confirmed expertise and experience to HCSC,” Dr. Ernest stated.

The sale consists of Cigna’s Medicare strains, together with Medicare Benefit, Medicare complement and Medicare drug plans, in addition to a unit referred to as CareAllies that works with doctor teams and different healthcare suppliers. As a staff-produced report in Reuters famous, “The divestiture marks a change in Cigna’s technique for the sector it had entered with its $3.8-billion acquisition of HealthSpring in 2011. Well being Care Service holds a license to supply Blue Cross Blue Defend insurance policy in 5 U.S. states. It employs greater than 27,000 individuals and 18.6 million members. The overwhelming majority of Cigna’s income comes from its business enterprise and pharmacy advantages division, which it bolstered with the $52-billion buy of Categorical Scripts in 2018. Cigna’s Medicare Benefit enterprise generated 4.4 p.c of the corporate’s $179.4 billion income from exterior clients in 2022. Its plans presently serve 3.6 million Medicare members.”

And The Wall Avenue Journal’s Anna Wilde Matthews famous in her report posted early Wednesday morning that, “Underneath the phrases, HCSC would pay money for Cigna’s Medicare strains, together with Medicare Benefit, Medicare complement and Medicare drug plans, in addition to a unit referred to as CareAllies that works with doctor teams and different healthcare suppliers, the businesses stated Wednesday.  The transaction entails a companies settlement, underneath which HCSC will proceed to make use of a Cigna subsidiary to deal with drug advantages for the acquired models.” Matthews added in her report that “The Wall Avenue Journal had first reported that Cigna, one of many largest well being insurers within the U.S. and proprietor of a serious pharmacy-benefit supervisor, and HCSC, an enormous nonprofit well being insurer, have been nearing settlement. The deal would mark a serious enlargement for HCSC, which is the dad or mum of Blue Cross Blue Defend plans in 5 states, together with Illinois and Texas.” And she or he quoted HCSC chief govt Maurice Smith as saying that “We’ve been steadily rising our capabilities and diversifying our companies whereas retaining our deal with native relationships.” Matthews added that “The sale of its Medicare Benefit enterprise to HCSC leaves Cigna and not using a foothold in a sector that has lengthy been a serious progress engine for the health-insurance business.”

Matthews added that “Cigna additionally stated that the deal will allow it to release $400 million in monetary reserves that it may possibly retain and deploy. In consequence, it stated the transaction would successfully be value $3.7 billion.  HCSC has about 217,000 Medicare Benefit members unfold throughout its 5 Blue states, which embrace Montana, New Mexico and Oklahoma, along with Illinois and Texas. Based on the businesses, Cigna had about 600,000 members enrolled in Medicare Benefit, the private-insurance model of the federal program for the aged and disabled. Cigna had roughly 450,000 in complement plans, which beneficiaries buy to fill gaps within the conventional authorities Medicare providing, and a couple of.5 million with Medicare Half D drug plans.” And, she famous, “The Medicare enterprise is dealing with a serious problem, with members’ rising use of medical companies rising prices for insurers. Humana, the second-largest Medicare insurer, reported a steep loss for the fourth quarter and stated its monetary woes will prolong into subsequent 12 months and doubtlessly farther. The disclosure helped push down shares of your complete sector and took a little bit of the shine off a enterprise that has lengthy been a Wall Avenue favourite.”