Cigna Set to Grab a Bigger Pie of Medicare Advantage Business

Cigna Corp. CI will expand its Medicare Advantage (MA) health plan offerings to seniors in 67 new counties next year in what is quickly becoming a competitive business proposition for health insurance giants.

The MA health plan will be extended by increasing the company’s MA policy offerings for the 2021 MA enrollment season, which begins Oct 15 and runs through Dec 7. Plans selected during that time will be effective Jan 1, 2021.

Cigna has a relatively smaller share of the Medicare Advantage market, dominated by Humana Inc. HUM and Centene Corp. CNC followed by UnitedHealth Group Inc. UNH.

However, the growing opportunities in this market are attracting Cigna to grab a greater slice of the MA market. An aging U.S. population and bipartisan support from the government made the MA market a prospective place to be which are the private version of the government sponsored Medicare plans. The company targets a 22% growth rate from the previous year in the MA business by offering plans in 369 counties covering 23 states. By 2024, it is targeting 50% of the market.

Margins provided by the  MA plans are almost double the ones offered by individual and commercial group plans. And this high-margin business makes every health insurer vie for a pie of this market.

Thus the company will enter the MA markets in five new states during 2021. These are Ohio, Virginia, Oklahoma, Utah and New Mexico. It is already present in 18 states and the District of Columbia, and currently serves 5,00,000 MA customers.

Cigna is also broadening its portfolio with less restrictive preferred provider organization (PPO) products in 154 counties across its existing footprint. With geographical expansion, Cigna is set to enter 67 new counties in 2021, thus strengthening its presence with HMO and/or PPO plans.

While HMOs generally restrict choices of the medical care providers to health plan networks, PPOs can be more popular by allowing choices outside their network though generally at a greater cost to the health plan enrollees.

Cigna has been laying a groundwork to serve the MA customers by expanding its physicians’ network. It has more than 25,000 physicians throughout its service territory.

The company’s MA model works on value-based care for which, it is imperative to have a broad network of physicians. It currently has on its network more than 25,000 physicians who treat 85% of its customers. In the current COVID situation, the company provided efficient services to its MA members via all the modes of communication like in-person, over the phone or virtually.

Cigna also made the plan more attractive by reducing or keeping the premium unchanged with $0 premium plan available in every market and virtual care offered at no cost.

Several health plans including Aetna, Anthem, Centene, Humana and UnitedHealth Group are looking to expand their Medicare Advantage businesses next year.

The company boasts an impressive MA growth trajectory. It expects 10-15% average annual customer growth through 2025. It anticipates having 30 million MA enrollees by 2025. As of Jun 30, 2020, the company delivered 16% growth in MA customers.

Year to date, the stock has gained 17.1% against its industry’s decline of 16.2%.

The stock carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Srong Buy) stocks here.

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