HCSC Acquires Cigna's Medicare Business in Multi-Billion Dollar Deal

Cigna announced plans to sell its Medicare business to Health Care Service Corporation (HCSC) for $3.3 billion. Pending regulatory and antitrust approval, the deal is expected to close in early 2025. 

The companies announced on January 31, 2024, that HCSC will buy Cigna’s CareAllies unit, Medicare Advantage, Medicare supplement, and Medicare drug plans. Per the services agreement, a Cigna subsidiary will continue to handle drug benefits for the acquired units. 

The sale of its Medicare Advantage business to HCSC leaves Cigna without a foothold in a sector that has long been a significant growth engine for the health insurance industry, reported the Wall Street Journal.  

Cigna’s motivation for selling is that its Medicare business is falling short of target margins. In 2024, Cigna agreed to pay $172 million and settle allegations of improper billing in its Medicare Advantage business, reported the Wall Street Journal.  

“While we continue to believe the overall Medicare space is an attractive segment of the healthcare market, our Medicare businesses require sustained investment, focus, and dedicated resources disproportionate to their size” within the company’s portfolio, said Cigna Chief Executive David Cordani. 

The deal will significantly expand HCSC, which oversees Blue Cross Blue Shield in 5 states with 217,000 Medicare Advantage members. Cigna will benefit from $400 million in financial reserves.  

Medicare business is changing as members increasingly utilize medical services and increase insurer costs, reported the Wall Street Journal. Major Medicare insurers like Humana reported significant financial losses, pushing down the entire sector’s shares.  

“After parting ways with the unit, Cigna said it would use most of the proceeds for share repurchasing,” reported the Wall Street Journal. “The company will also likely intensify its focus on its health-services arm Evernorth, which includes the giant pharmacy-benefit manager Express Scripts.”  

Reference   

Matthews AW. Cigna sells Medicare business to Health Care Service Corp. for $3.3 billion. WSJ. Published January 31, 2024. Accessed February 1, 2024. https://www.wsj.com/health/healthcare/cigna-sells-medicare-business-to-health-care-service-corp-for-3-3-billion-dd802727