Cigna to Put More Eggs in Another Basket

Thomas Richards, president of the individual and family plans business at Cigna, says the transaction will open up opportunities both for Cigna distributors and the independent agents who have been selling Great American supplemental products.

Cigna has been wanting to add U.S. individual critical illness insurance products and Medigap products for years, and the company believes Cigna distributors will be happy to get access to the Great American products, Richards says.

Great American agents should also get access to Cigna products, Richards say.

If Cigna had tried to build a Medigap business and a supplemental health business from scratch, “it would have taken a long time,” Richards says.

The Great American deal also could open up opportunities for consumers who are eligible for Medicare to move back and forth more easily between the Medigap products developed by Great American and the Medicare Advantage plans developed by HealthSpring, Richards says.

Richards says he believes the deal will make sense no matter how government efforts to implement PPACA progress, or fail to progress.

“There’s a great market for these products,” Richards says.

As Americans grow older, they will be looking for the kinds of Medigap products and other senior markets products, such as senior dental plans, that Great American sells, Richards says.

Younger consumers can use critical illness insurance to fill the kinds of gaps in major medical coverage that are likely to persist no matter what happens with PPACA, Richards adds.

Scott Robinson and Ellen Fagin, analysts at Moody’s Investors Service, New York, say in a commentary on the deal that adding the Great American operations should help Cigna diversify its earnings and premium revenue.

“For Cigna, which has primarily been focused on the large group market, this acquisition fits in with the company’s growth strategy of ‘go individual,’” the Moody’s analysts say. “Given the current uncertainty around the health care reform law and the unsettled health care environment, we expect to see more health care companies seeking opportunities to build more diverse revenue and earnings streams.”