Jan 3, 2024 - Business

Cigna eyes buyer for Medicare biz

Illustration: Sarah Grillo/Axios

Health insurance behemoth Cigna is reportedly in advanced talks to sell its Medicare Advantage business to Health Care Service Corp. for as much as $4 billion.

Why it matters: The move marks a reversal of the company's expansion into the senior government health insurance sector and follows a failed December 2023 attempt to negotiate an acquisition of rival Humana.

Details: After running an auction for the unit, Cigna (NYSE: CI) is now in exclusive talks to sell it to Health Care Service Corp. (HCSC) for between $3 billion and $4 billion, the WSJ reported Wednesday.

Zoom in: Chicago-based nonprofit health insurer HCSC is the parent company of Blue Cross Blue Shield plans in five states — including Illinois and Texas — and represents one of the largest health insurers in the U.S. with nearly 16 million members.

Between the lines: If finalized, the proposed Cigna deal would significantly expand HCSC's reach and give it a foothold in the growing Medicare Advantage (MA) space.

  • The move would also further Cigna's previous steps towards offloading its MA business, a source of potential antitrust concerns should Cigna resurrect plans to merge with a rival.

Be smart: MA represents a small portion of Cigna's overall health footprint, which is largely focused on employer benefits and pharmacy benefit management (PBM), plus a smattering of other services provided through its Evernorth division.

  • The unit generated just 4.4% of the company's $179.4 billion in revenue in 2022.

Yes, and: Cigna's MA margins hit below the company's long-term target of 4% to 5%, and the company predicted the trend would continue into 2024, it said during third quarter earnings last November.

This is a breaking news story that will be updated.

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