Cigna to expand into new state exchanges despite early exchange financial losses

Insurer Cigna Corp. plans to enter health insurance exchanges in Maryland, Georgia and Missouri next year, expanding its investment in the newly created markets despite losses seen in other exchange markets.

Those losses were manageable in light of the company's overall performance, company executives said.

Cigna CEO David Cordani said in a call Thursday with analysts that the insurer is expected to enter three new states next year after marketing health plans on exchanges in Arizona, Colorado, Florida, Tennessee and Texas this year.

Cigna's second-quarter revenue increased 9% to $8.7 billion from the same quarter a year ago, when revenue totaled roughly $8 billion, the company reported. Net income for the quarter was $573 million, an increase of 13% from the prior year's second-quarter net income of $505 million.

Applications to enter the exchanges are pending in all three states, a Cigna spokesman said. Cigna's entry into Maryland was previously announced.

Losses as the company entered exchanges were expected, but Cigna executives anticipate better performance in coming years, Mr. Cordani said. “What we think is we're in the early part of a shakeout here,” he said. “We didn't expect to make money and we're not making money here.”

Cigna will seek to more closely manage medical care for individually insured consumers through collaboration with physicians, he said. Cordani described such consumers as underserved. “We believe that this marketplace has the potential for being an attractive and sustainable market,” he said. The company anticipates a margin from exchanges of 3% to 5%. “Make no doubt about it, our expectation is to improve off the 2014 result, which is not sustainable.”

He cited some success at care management and cost control under the insurer's accountable care contracts, which total 100 agreements and cover 1.4 million individuals.

Among ACOs under contract with Cigna for at least two years, Mr. Cordani said, nearly three-quarters met savings targets and roughly the same amount met quality goals.

“By closing gaps in care through programs that improve prescription adherence, coordinate health screenings and ensure follow-up care, we are seeing improved health outcomes and, as a result, better affordability,” he said.

Cigna's strong performance elsewhere, such as its global health segment, offsets pressure from the individual market, executives said.

Melanie Evans writes for Modern Healthcare, a sister publication of Business Insurance.