(AP Photo/Richard Drew)

CIGNA Corp. has made a move to expand its Medicare operations by agreeing to pay about $3.8 billion in cash for the outstanding shares of HealthSpring Inc.

CIGNA, Bloomfield, Conn. (NYSE:CI), will be paying a price that should give shareholders a 37% premium over the price the shares were fetching Friday, CIGNA says.

HealthSpring, Nashville, Tenn. (NYSE:HS), has 340,000 Medicare Advantage plan enrollees in 11 states and the District of Columbia and a Medicare Part D prescription drug plan business with about 800,000 enrollees.

CIGNA plans to put Herb Fritch, the chairman and chief executive officer of HealthSpring, in charge of CIGNA’s own seniors and Medicare operations, CIGNA says.

The boards of both companies have approved the deal. The companies hope to get the regulatory approvals they need to complete the deal by June 30, 2012.

Completion of the deal is not subject to a financing condition, the companies say.

CIGNA says it will use cash on hand to pay part of the price and work with Morgan Stanley Inc., New York, to pay for the rest by issuing about $700 million in new stock and issuing enough debt to cover any gap.

The deal should be lucrative, because CIGNA will get a chance to introduce HealthSpring’s Medicare plans in more states and apply HealthSpring’s innovative methods for working with physicians to CIGNA’s own individual and group commercial plans, CIGNA says.

HealthSpring customers should be good prospects for CIGNA’s existing specialty insurance programs, CIGNA says.