Just days after UnitedHealth Group’s CEO said their move into the new marketplace was a mistake, Cigna CEO David Cordani reaffirmed that his company remains committed for 2016, although the firm is so far losing money on that business.
Cigna has a small share of the health law market with only 230,000 individual customers this year. But that could grow rapidly if a $54 billion purchase bid by insurer Anthem wins federal approval because Anthem is a big player in the individual market. The deal is one of two giant mergers in the works: Aetna is also working to get approval to buy Humana.
If Cigna’s deal is approved, Mr. Cordani is expected to remain with the new company as president and chief operating officer. He sat down with Julie Appleby of Kaiser Health News to discuss the marketplace. This interview has been edited for length.
When looking at the merger, many have asked how can having fewer insurers competing be good for consumers?
When you look at Cigna and Anthem, we are amazingly complementary. Cigna’s strength is for employers … we have unbelievably diverse global set of programs. Anthem is a strong U.S.-based corporation [with] a history and focus really around the individual market and small employers in the states it operates in. We were not historically in the individual market. We’re actually going to create more choice than less. We will be able to take Anthem’s individual infrastructure beyond the 14 states [in which it now operates].
What else?
We’ll take their leading Medicaid program and our leading Medicare program and put them together to design solutions for the dual-eligible population. In terms of employer marketplace, we will be able to bring population health and management programs to their employer programs and help expand the geographic footprint.
UnitedHealth’s CEO last month said the insurer is losing hundreds of millions of dollars on its individual insurance market business and hinted it might pull back from the market in 2017. While Cigna is smaller in that market, did you lose money or make money on Affordable Care Act business in 2014 and 2015?
When the law put in place the exchanges, we took a bit of a different public position than many of our competitors. We saw the exchange marketplace as a potentially attractive long-term viable market. We also said we viewed 2014, 2015, and 2016 as version 1.0 of that market and that it would take those 3 years for the market to shake itself out. We said from day 1 we didn’t expect to make money on it. We didn’t make money on it in 2014 and we aren’t making money on it in 2015.
Two of the reasons United gave for the losses were people moving in and out of the market and higher costs for people who signed up after the official 3-month open enrollment period closed. [There are a number of special exemptions that allow sign-ups during other times of the year.] How could the law be tweaked to lessen those concerns?
Societally, we are just starting to understand how the market is operating. What is the other market with some similarity? Medicare Advantage [the private alternative to traditional Medicare]. It has a one-time limited enrollment period [that is shorter than the ACA] – I think that’s a good thing. Compress the enrollment period, focus it and have a limited number of exceptions.
Secondly, [provide] more flexibility on how [insurers’ provider] networks are designed.
What Medicare Advantage shows us is by offering more choice, and choice is not necessarily different names of insurers, but benefit designs and network configurations, you get the right choice for you … as opposed to socializing things down.
[The market] has to also have a real focus on transparency [for consumers]. It can have more choice aided by transparency [and] network visibility for individuals to understand what they are buying before they sign up.
Only about 40% of the people eligible to enroll have – and they’re mainly concentrated in the income levels with the highest subsidies. What can be done to encourage more people to enroll?
You have to ask the consumer why they’re not enrolling. There’s a perceived affordability challenge. Perception is reality.
If [insurers] are allowed more flexibility in benefit and network configuration, we’re probably going to get solutions that are much more relevant to a part of the population that is not buying.
How would that work? Would you set higher deductibles to get lower premiums?