Dive Brief:
- Cigna reported total revenue increased by 9% to $11.4 billion in the first quarter of 2018 year-over-year, beating Wall Street expectations, largely due to growth in commercial membership.
- The payer added 327,000 members in Q1, mostly through the commercial market, bringing its membership to 16.2 million customers.
- Cigna CEO David Cordani said the company is poised for growth in the Medicare Advantage market, after being reinstated following sanctions from CMS over appeals processes.
Dive Insight:
The company also raised its 2018 outlook, now projecting adjusted income from operations to increase between 19% and 23%, or $3.17 billion to $3.27 billion, largely dependent on its acquisition of pharmacy benefits manager Express Scripts at the end of the year.
The Express Scripts transaction, valued at $67 billion including debt, is among a string of recent vertical mergers in the healthcare space.
The Connecticut-based insurer saw strong growth in membership through commercial plans, reporting a total commercial medical care ratio of 73.7% for Q1 compared to an 84.3% MCR in Q4 of 2017. That was driven by premium increases that were a result of pricing impacts from the reinstatement of the Affordable Care Act's health insurance tax. Cigna plans to add another 400,000 to 500,000 medical customers in 2018, largely through commercial plans.
At the end of last year, Cigna saw its membership grow by 700,000 to 15.9 million members, opting to focus on the commercial side rather than look toward trending opportunities in the Medicare Advantage market.
The insurer also reported a government MCR of 84.5% through MA plans, compared to 83.4% in Q4 of 2017. Cigna re-entered the MA market last year after CMS suspended the payer from selling plans, finding issues with the company's appeals and grievance processes and reportedly costing the payer more than 100,000 MA members due to the sanctions.
Cordani said on an earnings call that the payer is back in "growth mode" with MA and is starting to see increased retention. He said the company is "well-positioned" for the MA business in 2019 and beyond.
CFO Eric Palmer said at the end of last year that the payer expects MA enrollment to increase 3% this year, putting Cigna well below competitors.
Others payers have been cashing in on the MA business.This quarter, rival Humana gained 157,700 individual MA members and 51,300 group MA members, while Aetna saw its total MA membership grow by almost 250,000.