Cigna Corp. spent more premium dollars on medical and prescription drug claims in the first quarter this year for its members in both employer-based and government-sponsored health plans, the company said Thursday.
That makes Cigna the second large-cap health insurer in as many days to record higher medical-loss ratios. Humana said Wednesday that its medical costs increased and that it was also witnessing higher hospital admission rates, which sent health insurance stocks downward.
But the business community did not react as negatively to Cigna's earnings report, likely because the Bloomfield, Conn.-based insurer beat investor expectations. Cigna posted $533 million in profit for the quarter, a 1% uptick from the same period of 2014. That equaled $1.96 in earnings per share, which tracked 12 cents ahead of Wall Street's prediction. Total revenue in the quarter rose 11% to $9.5 billion.
“There should be at least some sigh of relief that this report did not mirror the Humana results from yesterday,” Joshua Raskin, an analyst with Barclays Capital, said in a research note Thursday.
Cigna's medical-loss ratio for commercial health plans went up from 74.8% in the first quarter of last year to 75.2% in this year's first quarter. The ratio for government-based plans, which includes Medicare and Medicaid, went up almost 3 percentage points to 89.4%.
Cigna Chief Financial Officer Tom McCarthy downplayed the government cost increase, telling investors on an earnings call it was mostly attributable to “seasonal costs from our growing Medicare Part D business” and had nothing to do with potential increases in Medicare hospital admissions.
“We really didn't see any significant change in (Medicare Advantage) utilization in the quarter,” McCarthy said.
Cigna's membership in stand-alone Medicare Part D prescription drug plans grew 18% year over year to 1.47 million. The company expects total government medical costs as a percentage of premiums will be between 84.5% and 85.5% by the end of the year.
A vast majority of Cigna's membership is made up of those with employer or individual health coverage. Of Cigna's 14.7 million total health plan members, 14.1 million, or 96%, are enrolled in domestic or international commercial coverage. Cigna had only 489,000 Medicare Advantage members and 66,000 Medicaid beneficiaries as of March 31.
However, the government health plans are becoming a much larger piece of the company's pie. Medicare Advantage, Medicare Part D and Medicaid represented 40% of Cigna's $5.7 billion first-quarter premium revenue.