Cigna announced on Friday it will acquire telehealth provider MDLive, as more insurers launch plans that require members to schedule virtual visits before seeing their physician in-person.
The company will fold the Miramar, Fla.-based startup into its Evernorth health services division, which it created during a company reorganization last year. The deal's terms were not disclosed, but the Bloomfield, Conn.-based insurer expects the acquisition to close in the second quarter of 2021, pending regulatory approval. Cigna declined to comment on the deal. The company said the acquisition will not impact its earnings forecast of $20 adjusted earnings per share for 2021.
The acquisition could help the insurer accelerate development of its inaugural virtual-first plan, which it has noted as a potential growth area. MDLive has said it plans to "double down" this year on virtual primary care, a service it launched for health plans and employers last year.
During its most recent fourth-quarter earnings call on Feb. 4, Cigna CEO David Cordani said the company expected to spend $1 billion on mergers and acquisitions in 2021.
"In terms of M&A capabilities, we've talked about expanding our ability to serve customers, where they are, and where they seek to be served, whether that's expanded virtual platforms or expanded in-home capabilities," Cordani said during the call.
In a research note, Cantor Fitzgerald analysts Steven Halper and Kyle Mikson called the acquisition "positive for Cigna from a strategic standpoint," saying the deal bolts on the backend technological capabilities necessary for developing a virtual-first offering.
"With the acquisition, Cigna, in our view, locks in these capabilities," analysts wrote. "We believe MDLive's capabilities will improve Cigna's point of differentiation in the highly-competitive commercial insurance market."
The majority, or 85%, of Cigna's commercial customers are self-funded employers, and Cigna already relies on MDLive to power some of the telehealth visits for these customers.
Additionally, the insurer's venture arm is also a leading investor in MDLive, which has raised nearly $199 million in funding, according to Crunchbase. The company had teased that it will go public sometime this year, following the moves of competitors Teladoc and Amwell. MDLive referred questions about an IPO to Cigna, which declined to comment.
Evernorth CEO Tim Wentworth said the deal will help the insurer deliver more affordable and personalized benefits for members, and comes as demand for telehealth rises among beneficiaries. In 2020, MDLive's total membership grew 57%, and the company recorded an 84% increase in the number of visits across its provider network. The startup counts more than 2,000 practitioners as part of its physician group.
"Combining MDLive's platform and strong network for virtual providers with our comprehensive care solutions, we will be better positioned to optimize the care journey to improve affordability and accessibility, and to deliver superior support to health plans as they advance their own care delivery models for the future," Wentworth said in a statement.