Lower MA, Individual Enrollment Estimates Dim Cigna 4Q Earnings

by Leslie Small

Although Cigna Corp. ended 2021 with earnings that exceeded Wall Street expectations, the company also reported continued struggles with elevated medical costs last year. Further, the insurer disclosed that it expects less Medicare Advantage growth than it originally anticipated in 2022 and a decline in individual/family plan enrollment. 

COVID raised medical costs in 2021 

• For the fourth quarter of 2021, Cigna reported adjusted earnings per share (EPS) of $4.77, beating the consensus estimate of $4.50. Cigna’s full-year adjusted EPS was $20.47, reflecting year-over-year growth of 11% that the company said was largely driven by the Evernorth health services segment. 
• The insurer’s medical loss ratio (MLR) of 87% for the fourth quarter was higher — or worse — than the consensus estimate of 85.5%. And Cigna’s full-year 2021 MLR was 84%. 
• During a Feb. 3 conference call to discuss quarterly and full-year earnings, CEO David Cordani acknowledged that the company struggled throughout the year with elevated medical costs in its commercial and stop-loss businesses, in part due to the impact of COVID testing, treatment and vaccine costs. 
• “The unfavorable fourth-quarter medical costs informed and sharpened our 2022 assumptions,” Chief Financial Officer Brian Evanko added during his prepared remarks. Therefore, Cigna’s “2022 medical costs outlook is now higher than our previous expectations,” he said, later estimating that the company’s MLR will be in the range of 82% to 83.5%. 

Cigna expects ‘flat’ MA membership in 2022 

• Cigna also forecasts its MA membership in 2022 “to be relatively flat compared to 2021” and anticipates that its individual/family plan membership will decline this year. 
• The company had expected 2022 to be “a bit more [of] a dynamic year from an MA standpoint,” Cordani said during the question-and-answer portion of the call. “Hence we managed our portfolio to reduce our internal expectations of life growth and focus on market expansion with an eye toward…2023’s growth being a more accelerated growth environment.” 
• For Cigna’s individual market business, the insurer ended 2021 with about 378,000 lives, according to Evanko. With the Affordable Care Act open enrollment period now over in most states, Cigna expects its individual market membership to be 20-25% lower than its year-end enrollment figure, he said. 
• Later, Cordani defended the strategy, stating that “adding more lives at zero or negative margin is not a shareholder-prudent posture.” 

From Health Plan Weekly

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