Though Cigna ultimately proved quite profitable in the fourth quarter of 2020, by the end of the year the insurer was seeing costs related to COVID-19 outpace savings from care deferrals.
Chief Financial Officer Brian Evanko told investors on the company's earnings call Thursday that the ratio between COVID costs and decreases in care utilization evolved over the course of the year. In the second quarter, for instance, savings from care deferrals significantly offset costs related to the pandemic.
In Q3, by contrast, COVID costs were largely on par with savings related to lower utilization, Evanko said. By the end of the fourth quarter, however, costs related to COVID-19 were higher than money saved in care deferrals, he said.
"We started to see the cost of COVID-19 claims for both testing and treatment start to exceed the benefits we were seeing from increased care deferral activity," he said.
Cigna observed this trend in both its commercial and Medicare Advantage plans, Evanko said.
These trends echo similar experiences for other health plans, who saw sky-high profits in the second quarter amid widespread utilization declines. However, over the course of 2020, those massive margins have declined as care utilization returns to near-normal levels.
Humana posted a loss in the fourth-quarter as COVID-19 cases increased significantly across most of its markets, the insurer said earlier this week.
Cigna earned $4.1 billion in profit for the fourth quarter of 2020.
That figure fell short of Wall Street analysts' expectations. Cigna did beat the Street on quarterly revenue, however, bringing in $41.7 billion, according to the company's earnings release (PDF).
And, despite missing analysts' profit projections, Cigna's quarterly earnings were up significantly year over year. In the fourth quarter of 2019, the insurer brought in $977 million in profit.
For full-year 2020, Cigna earned $8.5 billion in profit, up from $5.1 billion for full-year 2019. Full-year revenues reached $160.4 billion.
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“I’m extremely proud of the ways in which our 70,000-plus Cigna employees delivered for our customers, our clients, our providers, our partners, and our shareholders amid the ongoing COVID-19 pandemic,” said David Cordani, president and CEO. “Our fourth-quarter results were in line with expectations, as we continued to make investments in our customers, capabilities and co-workers—all while covering elevated COVID-related costs."
"As a result, we have entered 2021 with great momentum, and our health services portfolio, fueled by the launch of Evernorth, is well-positioned for sustained long-term growth," Cordani said.
At Evernorth, Cigna's health services subsidiary that includes Express Scripts, revenues for the quarter were up 19% year over year, reaching $30.5 billion. The insurer said the hike was driven by continued offloading of its membership to Evernorth's pharmacy services as well as growth in its retail network and specialty pharmacy segment.
Evernorth filled 388 million pharmacy scripts in the fourth quarter of 2020, also representing a 19% increase from the prior-year quarter.
Full-year revenue for Evernorth was $116.1 billion, according to the release.
Cigna also saw a revenue boost in its U.S.-based insurance business, with revenues reaching $9.7 billion, up 6% year over year. Cigna attributed the increase to growth in Medicare Advantage and its Select Segment employer plans as well as some premium increases.
For 2021, the insurer expects earnings per share of at least $20 and revenues to reach at least $165 billion, according to the release.