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Health insurer Cigna Group (CI) is in talks to sell its Medicare Advantage business to Health Care Service Corporation for up to $4 billion, per a Wall Street Journal report. This potential divestment comes as Medicare Advantage faces growing government scrutiny.
Yahoo Finance Health Reporter Anjalee Khemlani breaks down the details.
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Editor's note: This article was written by Angel Smith
Video transcript
JULIE HYMAN: Well, health insurer Cigna Group reportedly in talks to potentially sell its Medicare Advantage business. Yahoo Finance's Anjalee Khemlani here with the details. The shares down almost 2%. And this is a reversal, right, for Cigna?
ANJALEE KHEMLANI: Yeah. Well, we also-- we do know that they had been looking to offload that. That was part of the conversation, if you remember, at the end of last year when they were looking to combine with Humana, one of the largest providers of Medicare Advantage plans. In fact, UnitedHealth and Humana combined are 47% of that market just alone. So just to tell you where Humana stands in that conversation.
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But going back to what Cigna gets from this, they're looking to offload their Medicare Advantage business and what could be up to a $4 billion deal according to Wall Street Journal with Health Care Services Corp and that is a Blue Cross Blue Shield provider that operates in five states in the country, including Texas and Illinois. So large populations there.
They've also been on a growing streak. They've had the last three years of just growth in their Medicare Advantage business. 2024 marks the third consecutive year there. And they serve 18.6 million people. So that's a very large population that they have in the books. And this kind of speaks to how Medicare Advantage is just kind of growing as a business per se. But for Cigna, it doesn't have as large a share of that. It's just about 2% of the market. So that might be why a little bit.
JOSH LIPTON: And why is Cigna offloading the Medicare Advantage business now? Is there a reason at this moment it makes more sense?
ANJALEE KHEMLANI: Yeah. Medicare Advantage, while it is a profitable business based on Humana and UnitedHealth alone, as you can see on your screen, the Blue Cross plans have about 14% of that business, so it's a good fit there, they have been under a lot of pressure. Medicare Advantage has come under the government's microscope for overcharging, delaying, or denying care. They've had hospitals drop plans because of these practices, because they feel like these patients aren't really worth the struggle to get paid.