Are the doubters or supporters right about Medicare Advantage?
The Cigna Group officially closed its $3.3 billion sale of its Medicare lines of business to Health Care Service Corporation (HCSC) on March 19. The deal includes Medicare Advantage (MA) lives, Medicare Part D lives, its Medicare supplement business, and its CareAllies physician entity.
HCSC jumps to 950,000 members from about 240,000 members as of March 1, 2025. It is a phenomenal development for HCSC, a mutual non-profit Big Blue in the Midwest. It is now the seventh largest MA plan by membership. If you look at the old Cigna enrollment and the old HCSC enrollment, they largely do not overlap and HCSC now has a nice national MA footprint.
What does this tell us about MA?
But what does this big MA life sale tell us about the industry and its perceived value to insurers? The sale certainly shows a split in the industry.
The MA doubters
On one side, you have Cigna and some Blues around the country, who are doubters about the future of MA. As Cigna and HCSC were consummating the sale over about a year’s period, Cigna actually grew its MA from about 600,000 to 700,000. But that was due to other Big MA plans’ financial woes. Over time, Cigna CEO David Cordani was known to be frustrated with the lack of profitability and cost in his MA line. He wanted to focus on budding services entity Evernorth and the commercial insurance line.
When Cordani initially floated the idea of getting out of MA some time ago, many questioned his wisdom. Since that time, given the major financial woes and downturn of the MA industry, he looks absolutely prescient. Cordani once said his Evernorth business can benefit from MA by serving other plans without all the risk the industry brings at times. Interesting.
The MA cheerleaders
On the other side, you have other big insurers still committed to MA — United, Elevance Health, CVS Health, Humana, among others — as well as a number of Insurtech startups, non-profits, and other Blues. Many have had to downsize their membership and rethink financial strategies, but most think MA can be the place to be again in the future as rates and other changes settle out. They continue to view MA as a line with high revenue and margin potential.
How did we get here?
There is little question that both external and internal forces caused the recent MA financial downturn.
External factors included COVID and then the rise of utilization, bad rates, and some over-zealous regulation (the last of which may not end).
Internal factors included bad management and hyper-growth of the line by Big MA when warning signs clearly existed. Many MA plans lost financial discipline.
So, what group is right?
So what group is right? Perhaps both.
Healthcare services have taken off and margins here seem to be unfettered and unregulated. Why take on insurance risk when your margin is greater as a vendor? I guess this could change somewhat if Congress and the Trump administration examine vertical integration, but healthcare is here to stay and these services are core to providing benefits.
MA has seen bumps in the road in the past. It has always responded to changing policy and rebounded through financial realignment. More important, MA plans can always count on the better value proposition in MA compared with the traditional Medicare fee-for-service (FFS) program to drive enrollment even if benefits are less generous in the future. And then we have the aging of America.
#medicareadvantage
— Marc S. Ryan
