Cigna sells Medicare division to HCSC for $3.3 billion
Cigna recently announced the sale of its Medicare business to Blue Cross Blue Shield licensee Health Care Service Corporation (HCSC) for a substantial $3.3 billion. This move comes at a time when health insurers nationwide are facing challenges such as rising medical costs and declining Medicare Advantage star ratings. With 3.6 million Medicare members under its plans, including almost 600,000 in Medicare Advantage, Cigna’s decision to part ways with this business segment marks a significant shift in its operations.
Following the completion of the acquisition, HCSC will now cater to 26.5 million individuals, with 4.3 million of them being Medicare members previously under Cigna’s umbrella. In a press release, Cigna indicated that the majority of the proceeds from the sale will be allocated towards share buybacks, underlining the financial implications of this transaction.
Cigna’s decision to divest its Medicare assets seems to be motivated by various factors affecting the market. Notably, the company reported a medical cost ratio of 83.2% in 2024, compared to 81.3% in the previous year. This uptick in costs has largely been attributed to expenses related to the stop-loss medical insurance product, which provides coverage for employers who self-fund their employees’ healthcare plans beyond a certain threshold annually. Despite these challenges, Cigna saw a significant increase in revenue, reaching $247 billion for the year, representing a substantial 27% year-over-year growth.
As part of the sale agreement, Cigna’s Evernorth Health Services, which includes Express Scripts, one of the nation’s leading pharmacy benefit managers, will continue to serve the now-divested Medicare business for the next four years. This strategic move aims to ensure a smooth transition for existing members and maintain continuity in services following the change in ownership.
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