As Medicare Advantage becomes an increasingly important – and controversial – payer for skilled nursing services, operators should note a major shift has occurred in the insurance landscape. Cigna Group (NYSE: CI) agreed Wednesday to sell its Medicare businesses and CareAllies to Health Care Service Corporation (HCSC).
HCSC said it intends to acquire the Cigna assets, which include its Medicare Advantage (MA), Medicare Supplemental Benefits and Medicare Part D, for $3.3 billion. The deal is expected to close in early 2025.
HCSC aims to enhance its capabilities and reach through the growth of its Medicare segment. In 2023, Cigna made up 2% of MA enrollment, or less than one million beneficiaries, according to enrollment data published by KFF in August.
Cigna’s Medicare plans overall serve 3.6 million members, with nearly 600,000 in MA plans, more than 450,000 with Medicare Supplement plans and 2.5 million with Medicare Part D, according to HCSC.
The agreement with HCSC is meant to drive meaningful value for all stakeholders, while also accelerating investment and growth in its services platform along with its existing health benefits platform, Cigna Chairman and CEO David Cordani said in a statement.
“In tandem, the transaction will position our Medicare businesses and CareAllies for additional growth as they continue to serve the needs of their customers as part of HCSC,” Cordani said.
Cigna is divesting its Medicare businesses following involvement in a federal class action lawsuit which alleges the company used AI to deny claims, according to a report from Axios – Cigna’s PxDx system was allegedly used to refuse about 300,000 pre-approved claims over a two-month period in 2022. That’s a 1.2 second average time taken to reject each claim.
The lawsuit, filed in California’s eastern district in July 2023 by public advocacy law firm Clarkson, is part of a growing portfolio of AI claims. Clarkson has also filed lawsuits against OpenAI and Google.
Meanwhile, HCSC announced last July it intended to speed up the prior authorization process using “augmented intelligence,” including those tied to post-acute and long-term care claims.
HCSC has said that no prior authorization requests are denied using the tool. Instead, they are approved or advanced to a hands-on review by an HCSC clinician.
CareAllies is focused on driving the transition to physician value-based care by partnering with providers to form independent physician associations and accountable care organizations (ACOs), as well as providing management services to support value-based care arrangements. CareAllies serves about 450,000 patients.
“The acquisition will bring many opportunities to HCSC and its members — including a wider range of product offerings, robust clinical programs and a larger geographic reach,” Maurice Smith, HCSC CEO, said in a statement. “It builds on our commitment to expand access to quality, affordable care for people in all phases of their lives.”
HCSC serves more than 22 million people through health plans in Illinois, Montana, New Mexico, Oklahoma and Texas. Dr. Opella Ernest, president of HCSC Markets, said the acquisition accelerates company growth in an important market segment.
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