Executives at Cigna say they're happy with the performance of the company's stop-loss insurance business but expect profit margins at the company's big Express Scripts pharmacy benefit manager business to be narrower for the next two years.
Employers use stop-loss insurance to protect self-insured health plans against catastrophic risk. Product issuers said last year that claims were much higher than expected, and they talked about plans to increase rates and get tougher on underwriting.
Cigna did raise rates, and raising rates worked to get the performance of the stop-loss business under control, according to Brian Evanko, Cigna's chief operating officer.
"We took corrective action to reprice the stop-loss business beginning early this year and expect to benefit from margin expansion within that business in 2026," Evanko said.
Cigna achieved typical stop-loss customer retention levels, in spite of the price increases, and, in the third quarter, the business "performed in line with expectations," Evanko said.
Cigna hopes to get stop-loss profit margins up to the desired levels by the end of 2027.
At the PBM business, Evanko said, about 97% of customers keep their PBM contracts, but the company accepted narrower profit margins to keep three big customers — the U.S. Department of Defense, Centene and Prime Therapeutics — that account for about $90 billion in annual revenue.
In the near term, margins at the PBM business could also suffer from the need for Cigna to invest in the systems needed to shift away from a reliance on rebates and toward a service-fee-based pricing model, Evanko said.
Related: Cigna to eliminate drug rebates in commercial health plans
Cigna hopes to move all enrollees in its fully insured plans to the new model by 2027 and about half of all Cigna business to the new model by the end of 2028, according to David Cordani, Cigna's chief executive officer.
What it means: The stop-loss insurance might be starting to recover.
The earnings: Cigna held the call to go over results for the third quarter, which ended Sept. 30.
Cigna streamed the call live and posted a recording on its website.
Cigna is reporting $2 billion in net income for the latest quarter on $70 billion in revenue, up from $825 million in net income on $64 billion in revenue for the third quarter of 2024.
The company ended the quarter providing or administering coverage for 18 million people, down from 19 million people a year earlier.
The number of people in insured employer plans fell 2%, to 2.2 million, and the number in self-insured U.S. employer plans that Cigna administers increased 2%, to 14 million.
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