Cigna Group may be considering a sale of its Medicare Advantage business, and such a transaction could net several billion dollars for the insurer, news agency Reuters reported Monday.
The outlet cited unnamed sources familiar with the matter who said the company is working with an investment bank to explore options for its Medicare Advantage business. The discussions with other companies and private equity firms are at an early phase and may not lead to a sale, the sources told Reuters.
Cigna did not return a request for comment. A Cigna spokesperson told Reuters the company does not comment "on rumors or speculation.”
Cigna executives told investors on its third-quarter earnings call last week the company was “pleased” with its growth in Medicare Advantage during the past year. It covers about 600,000 members, up 13% year-to-date. The company's Medicare Advantage membership makes up a fraction of Cigna’s 19.6 million total members.
The company has expanded its geographic footprint in the Medicare Advantage business from covering 20% of those eligible for Medicare Advantage in those areas in 2019 to covering more than 40% this year, executives told investors. Cigna projected net consumer growth in the business line for 2024, but said margins would run below its long-term target range of 4-5%.
Cigna exploring the sale of its Medicare Advantage business would be surprising since it's one of the fastest-growing and more lucrative opportunities in the insurance industry, Julie Utterback, senior equity analyst for Morningstar Research Services, wrote in an email. Most insurers are interested in growing their Medicare Advantage businesses, which could bode well for Cigna finding bidders and getting a good price, she said.
Cigna’s total Medicare Advantage market share of 2% in October is relatively small compared with competitors UnitedHealth, Humana and CVS Health, according to a Monday report by investment bank Stephens Inc. Cigna could be considering the sale to position itself for other deal opportunities, Stephens said.
Word of the potential sale comes at a time when the federal government is putting more pressure on companies operating Medicare Advantage plans, including targeting multiple health insurance companies with False Claims Act lawsuits and revamping the risk-adjustment system used to document patient conditions. Cigna agreed to pay $172 million last month to settle allegations it exaggerated its members’ illnesses to collect higher Medicare Advantage payments.