Cigna intends to raise premiums to compensate for greater-than-expected, $160 million in risk-adjustment charges for its health insurance exchange business this year, the insurer disclosed Thursday.
The company incurred an $80 million risk-adjustment charge during the second quarter and anticipates paying the same amount again later this year, Cigna Chief Financial Officer Brian Evanko said during a call with investors. “This will be isolated to the 2023 calendar year as we have taken corrective pricing actions in our 2024 geographies in our rate filings,” Fischer said.
Cigna is seeking the highest average individual and small group rate increases among insurers in the 16 states that have released preliminary premiums data. Cigna proposes to raise individual market premiums 23.6% and small-group premiums 22.9%, compared to an industry average 9.7% and 10.7%, respectively, the investment bank Stephens Inc. reported this week.
Net income declined 6.2% to $1.5 billion, or $4.92 per share, in the second quarter. Revenue rose 6.8% to $48.6 billion. Cigna's divestiture of its international assets last year had a negative impact on its financial performance relative to the second quarter of 2022, the company reported.
Cigna opened on the New York Stock Exchange at $292.62 per share on Thursday, down 2.3% from Wednesday’s close.
Membership grew 9.5% to 19.5 million, driven by increases in exchange, Medicare Advantage and employer stop-loss coverage. The company expects exchange enrollment will be lower next year, Evanko said.
Higher volumes of outpatient orthopedic and cardiac procedures, dental care, and behavioral health services dinged Cigna's Medicare Advantage finances during the second quarter, similar to what other insurers have experienced, according to the company. Cigna priced in this trend this year and its bids for next year also will reflect it, CEO David Cordani said. “At this point, we remain comfortable in our bid assumptions relative to underlying medical costs,” he said.
Cigna's Express Scripts pharmacy benefit manager increased its customer base by 4.1% to 98.6 million in the second quarter. Express Scripts expects to retain a “mid-90s or higher” share of its large employer customers next year, said Eric Palmer, CEO of Cigna subsidiary Evernorth, which houses the PBM. A contract with Centene, which Cigna won over rival CVS Caremark, will add 28.4 million customers when it takes effect Jan. 1. The company will spend $200 million to incorporate into Centene's operations, Palmer said.
Prescriptions for pricey new weight loss drugs such as Wegovy and Ozempic is a “net positive” for Express Scripts, Palmer said. “GLP-1s are definitely top of mind for many clients, there’s been a meaningful uptick in utilization here,” Palmer said. “We have coverage of these on our formularies with value-based care relationships with manufacturers.”