Cigna Group is reportedly in advanced negotiations to divest its Medicare Advantage division and is presently in discussions to sell it to Health Care Service Corp Inc for around $3 billion-$4 billion. This potential agreement signifies a substantial stride for HCSC, a nonprofit health insurer recognized as the parent company of Blue Cross Blue Shield plans in multiple states.
The deal would significantly bolster Health Care Service’s Medicare business and broaden its geographical reach. Cigna presently offers Medicare plans across 29 states for the year 2024.
In December, Health Care Service and Elevance Health Inc competed to acquire Cigna’s Medicare Advantage business segment. However, it seems that Health Care Service Corp Inc has emerged as the frontrunner.
Cigna’s pursuit of this sale follows the breakdown of its discussions to acquire Humana Inc, a Medicare-focused insurer. Investors responded tepidly to the proposed mega-deal, leading Cigna to explore other options.
Additionally, Cigna has announced plans for an additional $10 billion in stock repurchases and anticipates concentrating on smaller, incremental acquisitions termed “bolt-on” acquisitions in industry parlance.
While Cigna has been expanding its Medicare Advantage footprint, boasting approximately 599,000 members as of September, it still trails behind industry leaders like UnitedHealth Group Inc and Humana. UnitedHealth Group Inc has around 7.6 million members, while Humana counts 5.9 million members as of the same period.
Cigna’s stock price has experienced a slight decline, with shares down 1.20% at $306.38 on the last check Wednesday.
Overall, this potential deal between Cigna and Health Care Service Corp Inc marks a significant development in the healthcare industry. It showcases the willingness of companies to realign their business strategies and focus on areas of growth and profitability.
