- Cigna's medical costs climbed in the third quarter due in part to higher claims associated with new members who enrolled in individual coverage during the Affordable Care Act special enrollment period and the impact of COVID-19. The payer posted a medical care ratio — an important measure of what it spends on care — of 84.4%, missing Wall Street expectations.
- Still, the insurer posted net income of $1.6 billion, a 17% increase from the prior-year period that experienced abnormally low utilization as patients feared contracting the coronavirus. Cigna reported revenues increased 8% to $44.3 billion, driven by pharmacy services and investment income.
- Analysts characterized the third quarter results as mixed, even as Cigna hiked its forecast for the remainder of the year.
Cigna is not the only insurer to report that the special enrollment period led to higher medical claims among marketplace members. Molina executives also said there was higher non-COVID-19 utilization among members who joined during the special enrollment period.
The Biden administration relaxed the rules on when people could enroll for individual plans to ensure Americans could obtain coverage amid the deadly pandemic, which spurred sizable job losses and put millions at risk of losing insurance coverage.
The risk with a special enrollment period is that it can potentially attract adverse selection, or people who seek out a plan after they're sick or need care. It's unclear how much of that is a factor here. But insurers didn't seem concerned about adverse selection earlier this year as plans for a special enrollment period were announced.
Cigna said it expects the medical costs associated with SEP members to moderate in 2022.
Still, amid this trend Cigna was able to post an increased profit from the prior-year period that saw significant profit gains as many deferred care out of fear of the virus, a benefit to insurers who subsequently paid for less care.
In other news on Thursday's call with investors, Cigna said it had renewed a seven-year contract with the Department of Defense for its TRICARE pharmacy program. Cigna will continue providing prescription and other pharmacy services to more than 10 million active duty and retired military personnel and their families.
The company also said it plans to enter three new states and 93 counties in 2022, with the potential to reach 1.5 million customers for individual coverage.
Cigna ended the quarter with 17 million members, a slight increase from the prior-year period, but a positive sign nonetheless, according to some analysts.
"While small, this represents a reversal in the membership losses it had experienced within its health plan segment throughout the pandemic," a note from SVB Leerink said.