Cigna Group (CI) has reached an agreement to sell its Medicare Advantage business to Health Care Service Corp. (HCSC) for a substantial sum of $3.3 billion in cash, according to a report by the Wall Street Journal. This deal signifies HCSC’s acquisition of Cigna’s Medicare lines, including Medicare Advantage, Medicare supplement, and Medicare drug plans. Additionally, HCSC will also gain control of CareAllies, a unit dedicated to collaborating with physician groups and other healthcare providers. It is anticipated that the transaction will be finalized in early 2025.
Managed care companies currently face challenges due to the mounting medical costs associated with Medicare Advantage customers who are now undergoing postponed procedures, like hip and knee replacements, as a result of the COVID-19 pandemic. Last week, Humana reported a larger-than-expected quarterly loss and reduced its projected profit for 2024 to nearly half of analysts’ predictions. This news had a negative impact on the entire sector, causing a decline in stock prices. While Cigna’s premarket stock saw a slight increase of 0.4%, it has experienced a 5.6% downtrend over the past year. In contrast, the S&P 500 index showed a gain of 20.8%.
It is essential for managed care companies to adapt to the changing landscape of healthcare services in order to ensure continued growth and success. The sale of Cigna’s Medicare Advantage business to HCSC marks a significant strategic move within the industry.