Strong performance in Cigna Corp.'s Evernorth health services division, investment portfolio and low member medical costs at the end of last year increased the company's revenue 6.5% year-over-year during the first quarter of 2021.
The Bloomfield, Conn.-based insurer generated $40.9 billion in revenue during the first quarter, up from $38.4 billion during the same time in 2020. On an investor call, Chief Financial Officer Brian Evanko said the company benefited from its recent partnership with Prime Therapeutics, and named investments in its Express Scripts pharmacy benefit manager as a potential growth area going forward.
"We continue to invest aggressively in Evernorth to expand and diversify that suite of care solutions, pharmacy benefit management products and insights, and continue to make organizational investments to expand that portfolio," he said during the call.
Meanwhile, the company's net income fell slightly to $1.17 billion in the first quarter, down 1.5% from $1.18 billion the year prior. The drop can be attributed to a decline in customers in its middle and national account segments, which the company said was due to the COVID-19 pandemic's impact on the job market. Its commercial membership remained flat year-over-year, while its service business fell 5% to 11.4 million. These factors were partially offset by 4% year-over-year growth in its government business. Total membership came in at 15 million, down 3% from 15.5 million the year before. The company's medical loss ratio, or how much it spent on member medical claims, came in 81.8%.
CEO David Cordani named Medicare Advantage as a continued bright spot for the insurer and an area the company was interested in growing further through acquisitions.
"We continue to have expansion of our U.S. government program as an M&A priority, so we'll be opportunistic," Cordani said.
Here are five things to know about Cigna's Q1 2021 results:
1. A legal settlement cut into net income. Cigna's net income was also impacted by a legal settlement, according to Evanko. He called the settlement a one-time expense that had stemmed from "litigation-oriented matters" several years before. "Those matters should now be closed," Evanko said. He said the settlement was not related to the company's failed merger with Anthem. In Cigna's 10-Q, the company mentioned that the Department of Justice requested information about its Medicare Advantage risk adjustment practices.
2. Cigna's $1 billion Texas Medicaid business had a "diminuous" impact on the enterprise. Cordani offered more information about Cigna's $60 million sale of its Texas Medicaid business to Molina Healthcare earlier this month, saying it was a "one-off" business within Cigna's portfolio and had a "diminous" impact to the company's profits on an enterprise level.
3. The special enrollment period spurred Obamacare growth. Evanko said individual member enrollment grew "a little above" expectations thanks to the special enrollment period. Cigna expanded to 80 new counties in 2020 and plans to double its footprint in the exchange by 2025. So far, the company has no reason to believe these new members will cause Cigna to experience adverse selection, particularly since its exchange business represents just 6% of its medical portfolio, Evanko said.
"It won't be a significant needle mover for our outlook," he said.
4. MDLive won't be the end of Cigna's digital efforts. Cordani said the company's MDLive acquisition is part of its long-term strategy to merge physical and behavioral health services and promote affordability and healthcare access. He noted that the company has already experienced a drop in unnecessary diagnostic services thanks to virtual care and said that digital tools have also helped members better manage chronic conditions. A key area of growth for Cigna going forward will be promoting care in alternative, lower-cost sites, Cordani said.
"We do not believe that this is a one-and-done type activity. We don't believe a corporation secures itself a virtual care asset and then is squared for," Cordani said. "In the alternative delivery space, this is a fluid environment."
5. It joins most health insurers in increasing its revenue expectations for 2021. Like many major health insurers that reported earlier in 2021, Cigna's strong quarter inspired it to increase its full-year adjusted revenue guidance. During the first quarter, UnitedHealth Group, CVS Health, Centene Corp. and Molina Healthcare all also raised their guidance. Humana did not increase its outlook, although during its earnings call executives said the insurer was being conservative due to the uncertainty caused by COVID-19.
