The Cigna Group reached a deal to sell its Medicare business to Health Care Service Corp. for $3.3 billion.
According to a Jan. 31 news release from Cigna, the sale includes Cigna's Medicare Advantage, supplemental benefits, Medicare Part D offerings, and CareAllies, a value-based care management subsidiary.
The deal will free up $400 million in financial reserves for Cigna, making the total value of the deal $3.7 billion, The Wall Street Journal reported.
The sale will nearly quadruple HCSC's Medicare Advantage membership, according to data from Baltimore Health Analytics. HCSC — which operates Blue Cross Blue Shield affiliates in Illinois, Texas, New Mexico, Oklahoma and Montana — had 217,623 Medicare Advantage members in January 2024.
Cigna has 596,977 Medicare Advantage members, a small share of its 19 million insurance members. The company also has 450,000 Medicare supplement members and 2.5 million members in part D plans.
In the news release, Cigna Group CEO David Cordani said though the company's leadership believes Medicare remains "an attractive segment of the healthcare market," Cigna's Medicare business required resources disproportionate to its size in the company.
"We continue to see significant, meaningful growth opportunities for government services, including Medicare, in our Evernorth Health Services portfolio of businesses," Mr. Cordani said. As part of the deal, Evernorth will continue to provide pharmacy benefit services to the Medicare business for four years after closing.
Reports that Cigna would sell off its Medicare business surfaced in November. Analysts thought a sell-off would make a potential merger between Cigna and Medicare giant Humana more palatable to regulators.
The rumored deal with Humana fell through, but The Wall Street Journal reported earlier in January that Cigna was in exclusive talks to sell its Medicare business to HCSC.
In a news release, HCSC CEO Maurice Smith said the acquisition will expand the company's product offerings and geographic reach.
"We look forward to welcoming new members who will benefit from our proven community-first member and provider engagement model that values local relationships," Mr. Smith said.
The deal is expected to close in the first quarter of 2025.