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Cigna unphased by early HIX members' claims

By Healthcare Finance Staff

Cigna is hoping to sustain positive first quarter results for the rest of the year,  in part relying on expanding collaborative care initiatives, as new exchange members turn out to be surprisingly high utilizers.

Cigna posted first quarter net income of $528 million, or $1.92 per share, on revenue that increased 4 percent to $8.5 billion.

That income is down from what would have been $615 million is first quarter of 2013, when the company netted only $57 million due to $558 million in after-tax charges for the sale of its run-off reinsurance business. But on an income from operations standpoint, Cigna booked a quarterly $501 million this year, compared to $497 million in 2013's first quarter.

"Our first quarter results represent a strong start to 2014, reflecting continued effective execution of our strategy to deliver improved health outcomes and productivity for our customers and clients," Cigna CEO David Cordani said in a media release.

Of the $8.5 billion in revenue, $5.9 billion came from premiums, a bit more than last year's first quarter, as medical membership grew by about 90,000 lives to 14.16 million, 13.6 million of them in commercial plans and 483,000 spread between Health Spring, Cigna's Medicare Advantage plan, and Medicaid managed care.

Of the commercial members, about 265,000 are individual policyholders, and by the end of year 116,000 of them are expected to be members who bought Affordable Care Act-compliant plans on and off exchanges.

From the get-go, Cordani said, Cigna has been planning to take a loss on new members from the five public exchanges its selling plans in, at least in the first year. While individual plans are a small part of total revenue, about three percent, individual policies account for about 25 percent to 30 percent of Cigna's total full-risk business.

There have been "two waves" of new buyers, Cordani said.

The early buyer group on average "was older than our expectations. They bought a bit richer benefit plan than our expectations, silver was still the nucleus, but it's a bit richer benefit plan. And their medical utilization in the first month or so of experience was much higher than any of our book of business norms," he said.

"The second wave," who came later in open enrollment, "is younger and more in line with our expectation and bought leaner benefits," Cordani said. "What we don't know is what their utilization is."

They know enough, though, that they're expecting a higher full-year medical loss ratio for individual membership, said CFO Thomas McCarthy. And even so, the company is planning to expand to "a few additional" exchange markets for 2015.

For the first quarter, Cigna's commercial MLR came in a 76.1 percent and its Medicare Advantage MLR at 82.7 percent, leading to a consolidated MLR of 78.7 percent.

For those new individual members, as well group members, including those covered on self-funded plans using administrative services, Cordani is bullish that Cigna's value-based initiatives will be able to make some dent in cost curves.

In the first quarter, the company expanded its collaborative care to included specialist groups, and the program now covers 1.3 million members in 31 states receiving care from 24,000 general practitioners and 40,000 specialists

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