Cigna's customer-centric strategy could ripple across the sector

Cigna’s new plan to bet big on customer service could be a blueprint for other health insurers to follow as the sector grapples with public discontent.

The sweeping changes — at least on paper — to how Cigna interacts with its insurance members and Express Scripts pharmacy benefit manager customers could augur a new era for health insurance.

Related: Insurers inventing more roadblocks to claims, providers say

Enhancing customer experience is a top priority across industries, and patients have long expected, if not actually received, the same focus from healthcare companies. Health insurers have fallen short, said Caitlin Donovan, senior director at the Patient Advocate Foundation, a nonprofit organization that assists patients with medical bills and insurance issues.

“What patients are looking for is something easy and something that's fair and makes sense,” Donovan said.

Patients, providers and policymakers criticize health insurers for onerous prior authorization requirements, coverage denials, and other clinical, administrative and financial headaches. The fatal shooting of UnitedHealthcare CEO Brian Thompson revealed a deep well of anger at the health insurance industry, leading UnitedHealthcare parent company UnitedHealth Group, Elevance Health, Cigna and others to promise change.

Cigna may be taking the most consequential steps by being the first company to unveil a specific strategy to relieve customer pain points and bolster trust.

At the same time, Cigna and its peers must assuage anxious investors, who continue to pressure health insurance companies to improve their margins after the sector underperformed expectations for several consecutive quarters.

“If they instead make more radical concessions around the things that create the most anger, such as prior authorizations and extended claims reviews, then they could risk stimulating further acceleration in utilization resulting in even more acceleration of already elevated medical cost trends,” Scott Fidel, managing partner at the investment bank Stephens, wrote in an email.

Cigna's game plan

Influencing other health insurance companies is an explicit aspect of Cigna's strategy. “The healthcare system in America needs to be better, and we have challenged ourselves to help lead and drive systemic change,” Chair and CEO David Cordani said in a news release Feb. 3.

Cigna outlined its plans to ease access to care and accelerate administrative processes for its 17.5 million insurance policyholders and direct Express Scripts customers to lower-cost pharmaceuticals in separate announcements Jan. 29 and Feb. 3.

“If you want to facilitate consumers being true consumers of their healthcare and be engaged with healthcare, you have to add some of these tools that they're adding,” said Michael Lutz, managing director at the healthcare consulting firm Avalere.

Perhaps most notably, Cigna intends to make customer satisfaction a factor in executive compensation and to issue annual reports charting its progress.

This demonstrates a genuine commitment to improving its relationship with members, said Michael Abrams, managing partner at consulting company Numerof & Associates. “They did acknowledge that they don't really get points for saying what they're going to do. The only thing that ultimately matters is whether or not they impact consumer satisfaction,” he said.

The vast majority of executives at publicly traded health insurance companies are subject to performance-based incentives in one form or another. More than 90% of Cordani's compensation in 2023 derived from performance metrics, compared with about 85% for other Cigna executives, according to the company's financial disclosures.

Cigna would not explain how it will measure customer satisfaction nor specify which employees will be eligible for bonuses based on improvement, other than to say they number in the thousands. Cigna has more than 70,000 employees, according to the company.

A balancing act

The health insurance sector at large, including Cigna, must walk a fine line between encouraging happier customers by making care easier and less expensive to access without rankling Wall Street. That's especially true during a prolonged stretch of elevated costs and sluggish revenue and earnings growth.

At the same time, making substantial patient-centric business changes could draw customers away from rival companies or boost quality ratings tied to Medicare Advantage and other programs, which would benefit the bottom line, Lutz said.

Cigna expects to spend up to $150 million this year on the customer relations campaign, which pales in comparison to $7.9 billion in adjusted income from operations and $252 billion in adjusted revenue that executives told investors to expect this year.

“These initiatives will require that we incur additional costs, but we firmly believe these are critical actions for the benefit of customers and patients,” Cordani said on a call with investor analysts Jan. 30.

Lutz said he expects more companies will mimic Cigna or risk losing out. “We've not made it all the way to a true consumer-focused industry, and we have a lot of work that needs to be done. I think these are first steps in that process,” he said.