Cigna Corp. earned hundreds of millions of dollars in the second quarter in spite of facing U.S. Department of Justice opposition to its deal with Anthem, a costly Medicare Advantage program audit, problems with a new group disability claim review strategy, and challenges in the Affordable Care Act public exchange program.
Executives talked about the headaches today during a conference call with securities analysts. The Bloomfield, Connecticut-based company held the call, which was streamed live on the Web, to go over earnings for the quarter.
The company as a whole is reporting $510 million in net income for the quarter on $10 billion in revenue, compared with $588 million in net income on $9.5 billion in revenue for the second quarter of 2015.
The company ended the quarter providing insured medical coverage for 3.1 million at the end of the quarter, which is up 2 percent more than it was covering a year earlier.
Cigna also administers self-insured health plans for many large employers. Enrollment in the self-insured plans Cigna administers increased 3 percent to 15 million.
Cigna now offers ACA exchange plans through the exchange programs in 12 states. Enrollment in Cigna exchange plans fell 17 percent, to 185,000.
During the earnings call, executives said they will meet their obligations to Anthem under the Anthem-Cigna deal agreement, but that Cigna has plenty of financial resources it can use to improve its operations and pursue growth opportunities if the Anthem deal falls through.
Executives said a Centers for Medicare & Medicaid Services probe of its Medicare Advantage operations has been costly, and that the company will soon have to make decisions about how much to spend on marketing Medicare plans during the upcoming open enrollment period for 2017, given that the company is uncertain about the kinds of restrictions it might face.
Executives added that they expect the company’s Medicare Advantage plans to have high enrollee retention levels, even if CMS keeps Cigna from selling new Medicare Advantage plans in 2017.
For the disability business, Cigna has expanded its claim review staff and changed the way it reviews claim. In part because of the effects of that change, group life and disability benefits expenses increased to $889 million for the quarter, up 27 percent from the benefits expense level for the year-earlier quarter. Disability premium revenue increased 7 percent to $477 million.
The global health care unit increased premium revenue 2 percent, to $5.8 billion, and fee revenue 7 percent, to $1.1 billion.
The company is not giving separate financial results for the ACA exchange plan business.
When a securities analyst asked about the likely profit or loss margin for the individual business for all of 2016, Thomas McCarthy, the company’s chief financial officer, said, “You can rest assured it will have a negative sign in front of it.”
The Medicare ratio for all fully insured commercial plan enrollees rose to 78.8 percent during the quarter, from 77.5 percent for the second quarter of 2015.
McCarthy said an analyst might ask, “Gee, how [individual health] have that much impact?
“If you do the math,” McCarthy said, “it actually can have that much impact.”