Cigna’s strategic move to sell its Medicare business to Health Care Service Corp. for $3.3 billion marks a pivotal moment in healthcare dynamics. The comprehensive deal includes Medicare Advantage, supplemental benefits, and CareAllies, impacting both Cigna and HCSC. While Cigna’s decision aligns with a resource reallocation strategy, HCSC anticipates substantial growth in its Medicare Advantage membership. The deal, set to close in Q1 2025, reflects the evolving landscape of healthcare services.
In a transformative maneuver, Cigna Group announces the $3.3 billion sale of its Medicare business to Health Care Service Corp. This strategic decision encompasses various Medicare components, indicating a shift in Cigna’s resource allocation strategy. HCSC, with its Blue Cross Blue Shield affiliates, stands to significantly expand its Medicare Advantage membership. The move follows speculations of a potential Cigna-Humana merger, highlighting the dynamic nature of the healthcare industry. As the deal progresses toward closure in early 2025, its implications reverberate across the healthcare landscape.
The comprehensive sale encompasses various facets of Cigna’s Medicare offerings, including Medicare Advantage, supplemental benefits, Medicare Part D, and even CareAllies – a subsidiary specializing in value-based care management. As per reports from The Wall Street Journal, the financial intricacies of the deal will not only secure $3.3 billion for Cigna but also release an additional $400 million from financial reserves, elevating the overall value of the transaction to $3.7 billion.
One of the most noteworthy aspects of this deal is the significant impact it is expected to have on HCSC’s Medicare Advantage membership. Data from Baltimore Health Analytics reveals that the acquisition will nearly quadruple HCSC’s Medicare Advantage membership. Currently operating Blue Cross Blue Shield affiliates in multiple states, including Illinois, Texas, New Mexico, Oklahoma, and Montana, HCSC had 217,623 Medicare Advantage members in January 2024. This acquisition will undoubtedly position HCSC as a formidable player in the Medicare space.
Cigna, on the other hand, has 596,977 Medicare Advantage members, a relatively modest proportion considering its extensive membership base of 19 million insurance members. The company’s Medicare portfolio also includes 450,000 Medicare supplement members and 2.5 million members in Part D plans. In light of these figures, Cigna’s decision to divest its Medicare business aligns with a strategic reallocation of resources.
David Cordani, CEO of Cigna Group, emphasized in the news release that while the leadership recognizes the inherent attractiveness of the Medicare segment in the healthcare market, the Medicare business, about its size within the company, demanded disproportionate resources. Cordani stated, “We continue to see significant, meaningful growth opportunities for government services, including Medicare, in our Evernorth Health Services portfolio of businesses.”
As part of the deal, Evernorth, an integral part of Cigna’s portfolio, will continue to provide pharmacy benefit services to the Medicare business for four years post-closing. This strategic move underscores Cigna’s commitment to capitalizing on growth opportunities in government services while ensuring a seamless transition for its Medicare members.
The decision by Cigna to sell its Medicare business did not materialize overnight. Speculations first emerged in November, with industry analysts suggesting that such a move could potentially pave the way for a merger between Cigna and the Medicare giant, Humana. Although the rumored merger with Humana did not materialize, reports from The Wall Street Journal in January indicated that Cigna was engaged in exclusive talks with HCSC regarding the sale of its Medicare business.
Maurice Smith, CEO of HCSC, expressed optimism about the acquisition, stating that it would not only expand the company’s product offerings but also enhance its geographic reach. Smith emphasized the value of the proven community-first member and provider engagement model that HCSC employs, highlighting the importance of local relationships in delivering healthcare services.
Cigna’s exit from the Medicare business signifies a strategic pivot, freeing up resources and paving the way for growth in other sectors. The $3.3 billion deal with HCSC holds implications for both companies, influencing their positions in the evolving healthcare market. As Cigna focuses on government services within its Evernorth Health Services portfolio, HCSC anticipates product expansion and enhanced geographic reach. The healthcare landscape is set to witness significant changes as this transformative deal unfolds, impacting stakeholders and reshaping industry dynamics.
