Two days after announcing it would sell its Medicare business, Cigna Group outlined plans to double down on growth opportunities for its Evernorth Health Services unit.
Cigna CEO David Cordani told analysts on the company's fourth-quarter earnings call Friday it is looking to grow Evernorth's reach with health plan partners and remains interested in investments in digital-first and data-led capabilities.
It also expects to benefit from the continued growth of Medicare Advantage, despite its pending exit, by offering pharmacy benefits to these plans. For example, Cigna’s Evernorth division will provide pharmacy benefits to Health Care Service Corp.'s Medicare business for four years after the sale is completed.
“Broadly speaking, from a societal standpoint, we see [Medicare Advantage] as an important asset for the U.S. to continue to be served, supported financially and grow,” Cordani said.
“Taken as a whole, we see this as an expansion opportunity for Evernorth,” he later added.
Evernorth provides pharmacy, care delivery and benefits solutions to health plans, employers, government entities and providers. It also houses its Express Scripts pharmacy benefit manager, which is one of the top three largest pharmacy benefit managers by market share.
A sharper focus on Evernorth follows Cigna's announcement Wednesday that it entered into a definitive agreement with Health Care Service Corp. to sell its Medicare business for $3.3 billion. The deal, which pulls Cigna out of the lucrative Medicare Advantage market, is expected to close in the first quarter of 2025 pending customary legal and regulatory approvals.
Cordani told analysts the sale makes sense given the capital, investment and resources needed relative to the size of Cigna's Medicare Advantage business, as well as the heightened regulatory environment. The company recorded fewer than 600,000 Medicare Advantage members among its 19.8 million total members in 2023, reflecting a 9.9% increase compared with the prior year’s total enrollment. Cordani said the company continues to view its commercial employer business as a growth market and sees its individual exchange business as complementary to its portfolio.
Scott Fidel, a managing director at investment bank Stephens, wrote in a note to investors Friday that Cigna likely won’t endure near-term earnings per share risk, has the option to buy Humana on better terms and won’t be affected by large-scale pharmacy benefit manager legislation given the election year.
The company attributed its strong revenue and membership growth to disciplined pricing and medical cost management. UnitedHealth Group and Humana recently disclosed cost pressures from higher medical utilization.
For the fourth-quarter, Cigna’s net income declined 13.7% to $1 billion, or $3.49 per share. Revenue rose 11.7% to $51.1 billion. Full-year net income declined nearly 23% to $5.2 billion, or $17.39 per share. Annual revenue rose 8.2% to $195.3 billion.
The company reported improved medical cost ratios of 82.2% for the quarter and 81.3% for the full year, driven by its commercial employer business outperforming expectations due to lower cost trends.
“We saw lower-than-expected viral costs in the quarter with the combination of flu, COVID and RSV running below projections,” Chief Financial Officer Brian Evanko said. Evanko will move into the additional roles of president and CEO of Cigna Healthcare on Monday.
Cigna projects a drop in membership this year to about 19.3 million customers. The decline will likely be attributed to its individual exchange business given pricing actions taken in certain geographies last year, as well as greater competition in certain Medicare Advantage markets, Evanko said.
Commercial employer customers are likely to be up “modestly” this year, he said. Large employers are looking to consolidate vendors to those that can provide integrated offerings, implement programs that improve mental health, and use digitally enabled care navigation, he said.