- Cigna's traditional medical utilization bounced back to near-normal levels during the third quarter (95%), executives said Thursday during a call with investors. When factoring in COVID-19 testing, treatment and member support (removing cost-sharing for members) it sent Cigna's medical care ratio to 82.6%, above what analysts had expected.
- As the uncontrolled virus continues to dog the economy, Cigna noted that commercial membership held relatively steady. Cigna covered nearly 17 million members at the end of the quarter, which was down about 89,000 members, or fewer than 1%, compared with the third quarter from last year.
- Cigna's expense growth (6.6%) outpaced revenue growth of 6.2%, leading to a dip in adjusted operating income, which reached $1.6 billion in Q3, according to the financial results posted Thursday morning.
Cigna executives had expected medical spending to rise toward the end of the year as patients returned to the healthcare setting after putting off care amid the pandemic. Earlier this year, Cigna executives warned that the medical care ratio would be higher than the traditional baseline in the latter half of the year, and so far that seems to be coming to fruition.
The medical care ratio is an important measure of how much money an insurer spends on member care compared to the amount of premiums it collects.
Tracking the amount of premium dollars spent on member care is an important task for insurers, as many are required by the Affordable Care Act to spend a certain percentage on care as opposed to salaries, other administrative costs and profits.
Cigna reported an MCR of 82.6% for the quarter, significantly up from the second quarter of this year when the MCR fell to 70.5% as providers stopped many electives procedures in response to the pandemic.
"We experienced the return of elevated utilization to more typical levels and ongoing impact of COVID-19," CEO David Cordani told investors Thursday.
On Wednesday, the nation passed a grim milestone amid the pandemic as the daily case count reached a record high of 103,000 reported cases in just one day, according to the COVID Tracking Project.
The uncontrolled virus continues to pressure businesses and many have had to cut employees. Earlier this year, unemployment hit new records. Cigna noted that its has lost customers, primarily in its national accounts segment. However, 18% growth in Medicare Advantage membership has helped offset those declines in the recent quarter.
"Our U.S. commercial book of business remains resilient, due to the industry mix of our clients and continued commitments that employers are making to the health and well being of their employees through furloughs," CFO Eric Palmer said Thursday.
Cigna also noted that prescription volumes in its newly-rebranded Evernorth segment are up 22% year over year due the insourcing of its own U.S. medical pharmacy business.
In a separate unit that includes Cigna's life insurance business, operating income was significantly down by about 50% due to elevated claims related to COVID-19. Cigna is selling this unit to New York Life for $6.3 billion in a deal that is expected to close in the fourth quarter.
Throughout the year, Cigna executives have maintained their guidance for the year, confident they will hit revenue and earnings estimates. Cigna executives now expect revenue for the year to come in at $158 billion, which exceeds earlier targets by about $2 billion from the previous high end.
In fact, executives said they still expect Cigna to achieve EPS targets of $20 to $21 next year, a target the company has long touted.