The Healthcare Breakdown No. 032 - Breaking down why Cigna ain’t even in the insurance game anymore
Brought to you by the Ludovico technique… you just can’t look away
What we’re breaking down: What business Cigna is really in
Why it matters: How can we lower costs, if we don’t know their highest drivers?
Read time: Beethoven’s ninth (4 minutes for real though)
Wouldn’t it be nice if things were transparent and clear in healthcare?
That just once we could get a straight answer and see what’s really going on?
For example, I bet you thought Cigna was an insurance company. A “payor” as we all put it.
Well y’all, I’m just gonna say it. Cigna is faker than a Real Housewife of whatever rich person city, going on an apology tour.
One, they don’t pay for things. They process claims. You pay for things. Employers pay for things. The government pays for things (with your tax money, so that’s actually you paying again).
Basically anyone but an insurer pays.
On top of not paying for things, as it turns out, Cigna isn’t really in the insurance business at all. Well, a little. But really, it’s in the pharmacy business. It’s in the administrative services business. It’s in the stock buy-back and dividend paying business. And slightly, microscopically, it’s in the insurance business.
What’s really interesting about all this is the facts hide in plain sight. I feel like I am playing hide and seek with my 3 year old. Like I get it, the corner two steps from where I am counting seems like a good hiding place, but I see you.
Maybe it’s one of those moves where you hide so conspicuously that it defies all logic so blatantly that everyone is blind to it.
All we really have to do is look at the 4th page of Cigna’s Q3 earnings highlights. And the first page is a title page, the second page is the table of contents and disclaimers, and the third page is a bunch of adjusted lies.
So, really, the first page.
Here it is….
Boom. What?! Need I go on?
$144B in revenue Q1-Q3 and $101B of it came from pharmacy.
Cool, see you in two weeks.
Oh. Wait, there’s more?
Of course there is.
Because despite the wildly obvious fact that Cigna is in fact a pharmacy benefit company with an emphasis on specialty pharmacy and home delivery, I think it’s warranted to dive a little deeper into the 30% to see just how small of an insurance company it really is.
By the way, here’s the split of pharmacy revenue if you’re curious.
Basically a 50/50 split between delivering drugs to your house in 90 day supplies (thank you Express Scripts) and specialty pharmacy (thank you Accredo).
And if you don’t know, those are two ways to jack up drug costs, provide no real value, and fund wild profits.
Back to the $33B in premium revenue.
Let’s see how that figure really breaks down….
$12.3B in premiums are for commercially insured folks.
For the math wizards among you, that’s 8.5% of the total revenue.
But wait… there’s more.
Cigna, because they think we can’t see them under the dinosaur blanket with their feet sticking out, also breaks down its covered lives for us.
Here’s the covered lives sitch.
It only insures, actually insures (whatever that means), 2.2M people.
Now, the fact that it generates $12.3B in premium revenue from these poor souls in 9 months is either a catastrophe or a feat of… you know what, I’m just going to stick with catastrophe.
$5,600 per covered life. To have the privilege of paying their deductible.
Anyways, did you notice the line at the bottom?
Cigna is the TPA or third-party administrator for 13.8M covered lives. These are people who are employees of self-funded insurance plans. Meaning, the company pays for 100% of everything. And outsources the administration to Cigna.
Mostly so it can funnel all 13.8M of them into pharmacy services. But who’s counting?
Oh, crap. Me. I’m counting. I really need a hobby. Other than the renaissance fair that is. But I mean, where else can you get a turkey leg, watch jousting, get a sweet wax wizard candle that your wife keeps trying to make you get rid of, and walk around with a giant sword like it’s normal? I’m about that life.
We’re not even going into the whole Medicare melee. But for what it’s worth, you may have noticed (cause you’re awesome) that Cigna reports it’s Medicare advantage segment, which it may sell, it’s Part D segment, which is tiny, and this wild catchall “other” which is about 40% of it’s government segment. The “other” is a bunch of supplemental by the way.
Well, what’s easier, making it rain in crazy unregulated PBM, specialty pharmacy, overpriced supplemental government insurance, and valueless administrative services land? Or insuring people, making that segment grow when you’re a terrible commodity, and denying care to seniors in weird nonsense new fangled reincarnation of HMO plan land?
Ya, I’d do the first thing too.
To sum up the two most important parts of this episode; (1) the red and black knight was the best and (2) Cigna isn’t an insurance company. Not anymore.
Until next time.