Cigna CEO David Cordani says the individual market created by the 2010 health law would be better off if insurers were given more flexibility in designing coverage, as well as a more compressed, focused open enrollment period.
Just days after UnitedHealth Group’s CEO said their move into the new marketplace was a mistake, Cordani reaffirmed that Cigna 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 big player in the individual market. The deal is one of two giant mergers in the works, with Aetna also working to get approval to buy Humana.
If Cigna’s deal is approved, Cordani is expected to remain with the new company as president and chief operating officer. He sat down with KHN’s Julie Appleby last week 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].
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 three years for the market to shake itself out. We said from day one 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 three-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 percent 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?
If you have an individual with a chronic disease, say asthma, you can have a program that is passive: if they want to enroll in a care management plan, they can. Or they can be incented to enroll. Or you can have a plan that is binary: If [you] have that [condition] [you] have to be in that [care management] program. Those are all choices. What we know is if [a patient is] asthmatic and more actively managed, the health outcomes and therefore the affordability can be quite different. This is a case where if you have a chronic illness, you need to be in a management program. We know the quality outcomes will be better and cost outcomes will be more sustainable.
In late December, Cigna will stop paying brokers commissions if they sell gold-level individual plans, which cover more costs than do the less expensive bronze and silver level plans. What is Cigna’s concern with gold products?
Adverse selection. [It’s not that policyholders] are necessarily older or sicker. The whole way the benefits are configured and the way marketplace is working — the performance of those plans — is much less reasonable than all the other plans.
Either there will be more flexibility to configure them in a way to make them sustainable or there won’t be gold plans.
So is Cigna staying in the market?
We’re in for 2016.
How about 2017?
We haven’t made a comment relative to 2017. We view 2014, 2015 and 2016 as Version 1.0.