Cigna's Medicare sale 'clears path' for M&A

Cigna's plan to sell its Medicare business to Health Care Service Corp. is clearing a path for future mergers and acquisitions, according to S&P analysts. 

The company's Medicare segment "just didn't have that scale relative to where they needed to be and the margins didn't line up," S&P Global Ratings analyst Francesca Mannarino wrote Jan. 31. "So divesting this business could potentially set themselves up for future opportunity."

On Jan. 31, Cigna announced it had reached a deal to sell its Medicare Advantage, supplemental, Part D and CareAllies business to HCSC for $3.3 billion. The sale will nearly quadruple HCSC's Medicare Advantage membership. 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. 

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. 

Cigna CEO David Cordani shied away from direct questions on the rumored deal at the J.P. Morgan Healthcare Conference, but emphasized the company likes its "business portfolio the way it is structured today." He said Cigna has historically looked to bolster its government benefits and health services business. Mr. Cordani added that the company is focused on acquisitions in a few key areas, including home health, behavioral and virtual care. 

"We're picking certain platforms where we seek to own that are valuable, but then we seek to wrap it around the physical medical professional," he said.

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Top 40 articles from the past 6 months