For years, Cigna has been considered an acquisition option for one of the nation's other large insurers; Aetna was often mentioned as a possibility. But after Cigna announced Oct. 24 its proposed acquisition of Medicare player HealthSpring, it became obvious the insurer had other ideas.
As Cigna CEO David Cordani hinted at in previous public statements, Cigna chose to expand its Medicare capabilities by purchasing an established plan. The estimated $3.8 billion deal will close in the first half of 2012 and will broaden the scope of Cigna's operations. Aside from a handful of markets, Cigna's strength is concentrated in commercial products. It discontinued its Medicare private fee-for-service plans for 2011 because of new network requirements but retains a national Part D presence with more than 500,000 PDP lives, according to HealthLeaders-InterStudy data.
Cigna operates its own PBM, and HealthSpring contracts with SXC for retail, mail and specialty pharmacy, so Cigna will see an equally significant bump in Rx lives. Because most of Cigna's commercial customers come from self-funded plans, it does not have the same volume of Rx lives as many of its top competitors.
Like WellPoint's purchase of CareMore Health Plans in California and UnitedHealth Group's acquisition of Physicians Health Choice HMO in Texas earlier this year, this purchase places Cigna on strong Medicare footing. HealthSpring operates Medicare Advantage plans in 11 states and a nationwide Part D standalone plan.
Outside of Phoenix, where it owns Cigna Medical Group and operates clinics, Cigna never made great inroads into Medicare Advantage. But it has been a leader in accountable care partnerships with provider groups around the country. The Living Well Center concept that HealthSpring used in Texas, Tennessee and Alabama, which features a HealthSpring-owned clinic for seniors, is similar to the clinic/health plan concept Cigna has maintained in Phoenix.
In August 2010, HealthSpring acquired another big Medicare Advantage player, Bravo Health, which operates Advanced Care Centers in Baltimore and Philadelphia for non-emergent care and chronically ill members who need care beyond a primary-care physician's scope.
Those centers could also play into Cigna's accountable care future. Cigna already has a strong accountable care presence in Texas, HealthSpring's largest market by enrollment.. HealthSpring also supports Living Well Practices in Houston, in which a HealthSpring team including nurse practitioners and pharmacists support with a physician practice that sees high volumes of HealthSpring patients. High-scoring MA plans in Tenneessee and Florida, where HealthSpring's plan recently earned four stars from the Centers for Medicare & Medicaid Services, could also play a role.
Cigna will retain HealthSpring's executive team to manage the integration of the Medicare operations into Cigna's structure and expand the business geographically. Their expertise should aid Cigna in rivaling UnitedHealth and Humana in key HealthSpring markets and potentially in new markets.
Fifteen million people will age into Medicare over the next 10 years; by jump-starting its Medicare business with HealthSpring, Cigna is clearly indicating it wants to be a player in that market.