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Battle of the Blues: HCSC and Elevance Bid for Cigna's MA Business

Analysis  |  By Laura Beerman  
   December 18, 2023

The immediate outcome is only part of the picture as short-term versus long-term and growth versus transformation mark a shifting Medicare Advantage landscape.

It’s a tale of two bidders. Reports emerged last week that Elevance Health is now competing with Health Care Service Corporation (HCSC) for The Cigna Group’s 600,000 Medicare Advantage (MA) members.

The move could make HCSC the next Elevance and Elevance the hands-down dominant player among BlueCross BlueShield companies.

Here are seven things to know.

  1. HCSC and Elevance competing in $3B bid.

Bloomberg notes that Cigna’s MA business could fetch more than $3 billion, with final bids due this week from the reported suitors.

  1. How bad does Cigna want a deal?

The company is more likely to secure a richer asking price now that there are multiple bidders. If it can’t, Reuters reports that the insurer might be willing to delay a sale. We already know that Cigna is willing to walk away from a deal in a big way — i.e., its failed Humana acquisition, if you’ve been living under a rock.

  1. How bad does Cigna want a deal now?

What might sweeten the pot if Cigna can’t quite get its asking price? Freedom and stronger finances overall. If Cigna sells, it will presumably avoid five years of HHS compliance oversight as part of its $172 settlement of MA reimbursement fraud charges. In addition, Cigna’s MA unit will reportedly lose money in 2024. A sale now could curtail losses in two areas and provide added funds for the “bolt-on acquisitions” that Cigna is still considering.

  1. Price, alignment, desire: Then and now

Price: Cigna will want to fetch more than $3 billion for its MA portfolio, given that it paid $3.8B a decade ago to acquire it from HealthSpring. In 2011, that price tag equated to $10K per MA member and $500 per member for PDP. Since then, Cigna’s MA enrollment has grown from 340,000 to 600,000 and its PDP enrollment from 800,000 to 2.5 million.

Desire: Analysts were surprised in 2011 when Cigna hearted HealthSpring, with Forbes reporting: “Cigna hasn’t expressed a lot of interest recently in becoming bigger in government business, with their near universal focus on growing internationally.”

What a difference a decade makes.

Fast forward to a Goldman Sachs analysis from 2022: “Cigna said that it considered government business a significant growth driver, with a targeted annual growth rate of 10% to 15% . . . and that it had identified government business as an area where it could grow via M&A” (SeekingAlpha).

What a difference a year makes.

Alignment: Given that Cigna would be offloading its MA business, it doesn’t have to worry about the “limited cost and revenue synergies” that might have played in role with Humana. HCSC and Elevance won’t need this synergy either unless unique Cigna MA customer expectations significantly impact cost and revenue. What the two Blues plans will need is the ability to retain the customers they acquire and synergy with their existing business models.

  1. Who is the likely buyer?

Based on buying power alone, Elevance is more likely to prevail. Its 2022 revenue was nearly triple that of HCSC ($156B versus $54B, respectively). If Elevance was Cigna’s second MA suiter, it likely made a more attractive bid in either pure dollars or other details. Being a publicly traded company, Elevance can make a cash-and-stock offer whereas HCSC would be limited to a cash-only deal.

  1. Who is the ideal buyer?

Current and long-term factors affect how Elevance or HCSC would steward Cigna’s 600,000 MA lives:

  • Membership: HCSC’s current MA enrollment is roughly 1 million — 5.3% of its total 18.6 million enrollment. Elevance’s MA enrollment is larger and a bigger percentage of its total enrollment: 2.9 million of 47.3 million lives, or 6.3%. (In contrast, Cigna’s MA enrollment represents 3.3% of its 18 million lives.)
  • Footprint: Elevance has a much larger MA footprint, operating in 22 states compared to HCSC’s five (IL, TX, NM, OK and MT). Both plans overlap with current Cigna MA markets while operating in a few states that Cigna doesn’t.
  • Networks: Elevance’s footprint reflects an existing national infrastructure and provider network, which HCSC lacks.

Elevance has the size and scale to absorb 600,000 new MA members. That growth would increase its MA market share among BlueCross BlueShield plans from 67% to 81% (if other BCBS growth remains relatively flat). That’s significant but not transformational in the short term.

Conversely, HCSC’s acquisition would be transformational immediately, shifting it from a company that prides itself on its local approach to one that would become a national player overnight and would begin to resemble Elevance in the Medicare Advantage space.

7. All that glitters is not gold?

In the long term, a larger MA footprint could increase the buying power of both companies, particularly of other BCBS plans. Elevance is already demonstrating this with a $2.5B acquisition of BlueCross BlueShield of Louisiana that is now back on. The last time HCSC acquired a Blues company was in Montana in 2013.

There is also the longer long-term. Earlier this month, The Wall Street Journal noted that the “Medicare Gold Rush” was slowing down, citing the now-dead Cigna-Humana deal and slower projected growth from UnitedHealth Group.

Cigna couldn’t take advantage of the Gold Rush. It remains to be seen if Elevance or HCSC can and what role a Cigna MA acquisition would play.

Laura Beerman is a contributing writer for HealthLeaders.


Health Care Service Corporation and Elevance Health are reportedly competing for The Cigna Group’s Medicare Advantage portfolio, with final bids expected this week

Elevance has the size and scale to absorb 600,000 MA members, significant but not transformational. However, an HCSC acquisition would be — shifting the plan from a regional to a national player overnight.

What would a win by either player mean, given that a short-term MA acquisition rush is on while an extended Medicare Gold Rush appears to fade?

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