Cigna Group will sell its Medicare benefits and provider services businesses to Healthcare Services Corporation, the parent company of five Blue Cross and Blue Shield plans, for $3.3 billion.
Under the terms of the transaction, Healthcare Services, Inc. will provide Cigna Medicare Advantage Plans, Cigna Supplemental Benefits, Medicare Part D drug benefits, and a business that assists healthcare providers with various managed services and contracts. The company is seeking to acquire Care Allies, which is Health Care Service operates Blue Cross and Blue Shield health insurance plans in Illinois, Texas, Oklahoma and New Mexico, and nationally, the company has more than 18 million health plan members and provides Medicare Advantage products. We are looking to expand into a wider regional market.
However, neither Healthcare Services nor Cigna are as good as Medicare health insurance, such as UnitedHealth Group's UnitedHealthcare, CVS Health's Aetna health insurance business, and Humana's Medicare health insurance, which all have millions of Medicare Advantage enrollees. There is no scale of insurance business. Cigna has nearly 600,000 Medicare Advantage customers and an additional 468,000 with Medicare supplement or other insurance coverage, according to the company's third-quarter 2023 earnings report. Cigna Group will report fourth-quarter and full-year 2023 earnings on Friday.
Cigna, on the other hand, has strengths in its fast-growing business selling coverage for businesses and employers as well as coverage for individuals under the Affordable Care Act. Cigna executives acknowledge that significant investment will be required.
Cigna Chairman and Chief Executive Officer David Cordani said Wednesday, “This decision reflects our extraordinary commitment to managing the portfolio and allocating resources to growth opportunities in the Evernorth Health Services and Cigna Healthcare portfolios. “This is in line with our disciplined approach.” “While we continue to believe that the overall Medicare space is an attractive segment of the healthcare market, our Medicare business requires sustained investment, focus and focus that is disproportionate to its size within the Cigna Group portfolio. , requires dedicated resources. We continue to believe that our Evernorth Health Services business portfolio has significant and meaningful growth opportunities in government services, including Medicare.”
The total transaction value is approximately $3.7 billion and includes a “four-year service agreement under which Evernorth Health Services, a subsidiary of Cigna Group, will continue to provide pharmacy benefit services to the Medicare business; A transaction that remains in effect even after the transaction closes. “The transaction is expected to close in the first quarter of 2025, subject to antitrust regulatory approval.
The acquisition makes Health Care Services Corporation a Medicare Advantage player in a market where it is often the largest provider of commercial health insurance.
Maurice Smith, CEO of Healthcare Services, said: “HCSC is reinforcing our commitment to leading and expanding access to affordable, high-quality care for people at every stage of life.'' “I am doing so,” he said. “This acquisition complements our growth strategy in the large and growing Medicare market and creates many opportunities for HCSC and its members, including a broader product offering, stronger clinical programs, and broader geographic reach. We look forward to bringing our proven member-provider engagement model to even more people and welcome the proven talent and expertise of Cigna's Medicare and CareAllies teams. I’m excited about that.”
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