Health insurer Cigna Group is currently engaged in exclusive discussions to sell its Medicare Advantage business to Health Care Service Corp (HCSC).
Sources familiar with the matter revealed that this potential deal could place a valuation on the unit ranging from $3 billion to $4 billion.
However, HCSC, a Blue Cross Blue Shield licensee operating in five U.S. states, refrained from commenting on the speculation surrounding this development.
Upon the news of these negotiations, Cigna’s shares experienced a modest decrease of approximately 2%, and the company has not yet responded to requests for official comments.
The sources indicate that the deal is poised for announcement in the coming days, provided the discussions proceed smoothly.
For Cigna, the sale of its Medicare Advantage segment would signify a strategic shift.
This segment involves managing government health insurance for individuals aged 65 and older.
Cigna had previously entered this market through the acquisition of HealthSpring for $3.8 billion in 2011.
However, this potential divestiture coincides with the U.S. government tightening its fiscal policies, including a reduction in reimbursement rates for health insurers in early 2023.
Cigna primarily derives its revenue from its commercial business and pharmacy benefits division, having reinforced the latter with a substantial $52 billion acquisition of Express Scripts in 2018.
In 2022, Cigna’s Medicare Advantage business accounted for 4.4% of the company’s total revenue of $179.4 billion generated from external customers.
Reports initially surfaced in November regarding Cigna’s exploration of a potential sale of this business.
The Wall Street Journal has now reported that Cigna is nearing an agreement with Health Care Service Corp.
Notably, Health Care Service Corp faced competition from Elevance Health in their pursuit to acquire Cigna’s Medicare Advantage business, as per a recent Bloomberg report.
In conclusion, Cigna’s ongoing negotiations with Health Care Service Corp to sell its Medicare Advantage business signify a significant potential change in its strategic direction within the healthcare industry.
If the deal materializes as expected, it will further reshape the landscape of health insurance providers in the United States.