Cigna still deciding about 2018 exchange footprint, pushes back on Anthem's merger extension

David Cordani speaking
To CEO David Cordani, Cigna’s participation in the exchange markets since their inception has been with the primary goal of figuring out what works.

While Cigna is still determining whether it will participate in the Affordable Care Act exchanges next year, CEO David Cordani expressed optimism that the insurer is on its way to determining what products work best in the individual markets.

With regard to how it will approach the exchanges in 2018, “we will fully assess whether we participate, where and how, as we get through the spring cycle,” Cordani said during Cigna’s fourth-quarter earnings call with investors Thursday. The marketplace’s current state, he noted, “is fragile at best.”

Anthem is also still deciding whether to offer exchange plans next year, CEO Joseph Swedish said this week, but he noted that it would have to pull back if it doesn’t soon see signs of more stability. UnitedHealth CEO Stephen Hemsley did not indicate whether the company will participate in 2018, but was optimistic about the future of healthcare reform under Republicans.

Aetna CEO Mark Bertolini, meanwhile, indicated his company had already decided not to re-enter any marketplaces in 2018 after joining UnitedHealth and pulling out of many markets in 2017.

To Cordani, Cigna’s participation in the exchange markets since their inception has been with the primary goal of figuring out what works and what doesn't.

“We chose to participate in that marketplace on a very focused basis, initially in five states, not expecting to make money but expecting to learn,” he said. “And broadly speaking, those goals were achieved.”

Cigna is participating in seven states’ exchange markets this year after entering three new states and exiting three others, he said. The company expects its individual membership to grow by about 100,000 lives, and is offering products that are “heavily oriented” around its collaborative accountable care relationships.

“Our conclusion is, within the current rule set, the only viable way to make this work is to have a well-coordinated, highly aligned value-based care arrangement with healthcare professionals that is the underbelly or foundation of the offering,” Cordani said.

Cigna reported (PDF) a net income of $1.9 billion, or $7.19 per share, for 2016—down from $2.1 billion, or $8.04 per share, in 2015. In the fourth quarter, shareholders’ net income was $382 million, or $1.47 per share, compared with $426 million, or $1.64 per share, for the fourth quarter of 2015. Cordani also noted that while the company is in the "latter stages" of its work to address a recent federal audit that resulted in sanctions for its Medicare Advantage offerings, it expects to have 50,000 fewer senior customers in 2017.

Cigna responds to Anthem’s merger deadline extension

Two weeks ago, when a federal judge was expected to rule against its acquisition of Cigna, Anthem filed a form with the Securities and Exchange Commission to extend the end date of their merger agreement to April 30. While the judge still has not issued her ruling, Cigna has submitted its own filing that indicated it may not agree to the extension.

The filing, which the company submitted this week, said Cigna “still intends to evaluate its options” once the ruling comes down. “Cigna has made no determination with respect to Anthem's notice seeking to extend the termination date, including whether Cigna will seek to terminate the merger agreement, and has informed Anthem that it is reserving all of its rights in this regard,” the document stated.

On the earnings call Thursday, Cordani commented only briefly about the pending deal, saying, “Obviously we await the court’s decision, and from a governance standpoint, we thought we took the appropriate step by issuing [the filing].”

Cordani also noted that Cigna expects to have between $7 billion and $14 billion in deployable capital for 2017, which it could used for either mergers and acquisitions or share repurchase. "To the extent we do not have a transaction to finalize here, we will aggressively evaluate and conclude upon all options that are available to us," he said.