Cigna 4Q16 Earnings Call Notes

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David Cordani

The real challenges for the healthcare system are aging populations, eroding health status and rise of chronic conditions

“Turning now to how we are effectively positioning our business for the future. In the United States, once again, we have a new administration advocating for health care reform and we expect the U.S. regulatory and legislative environment to be dynamic. That said, the core issues that have pressured health care markets more broadly and have recently challenged the U.S. Individual exchange marketplace in particular arise from the same market forces and pressures that pressure the status quo health care systems both in the United States as well as across the globe. More specifically, aging populations, eroding health status and the rise of chronic conditions all pose challenges for health care consumers individually as well as society at large. These forces in turn contribute to increasing demand for greater access to health care services and sense of security offerings that are both affordable and of high quality.”

Thoughts on entering North Carolina, Illinois, Virginia

“Our conclusion is within the current rule set, the only viable way to make this work is to have a well-coordinated, highly aligned, value-based care arrangement with the health care professionals that is the underbelly or foundation of the offering. Additionally, we’ve been able to successfully expand relationships with our Collaborative Accountable Care partners or delivery system alliances being physician groups or hospitals across multiple lines of business; Commercial, Medicare Advantage, Commercial Individual, et cetera.”

There are bright spots around the country of value based care

“Two sides, but let’s go to the first dimension. Indisputably as a country, we have an aging population, eroding health status and continued growth in chronic disease. Continuing to finance the access to care through traditional programs that simply attempt to, for example, push rates lower as a means of balancing budgets is running out of steam, period. Secondly, there are bright spots around the country of more innovative programs that state officials are driving to try to get more engagement of individuals and better value creation with health care professionals. That is resulting in changes in the delivery system, and there’s a lot of bright spots around the country where delivery systems, be they physician groups, multispecialty groups, integrated hospital systems are aggressively exploring how they could do more value-based care. All those forces are changing. I wouldn’t limit it to any one. All those forces are changing. But at the cornerstone is an increasing demand and need for care to be delivered and coordinated and the need to explore new solutions.”

ACA affected more than just individual insurance

“Specific to repeal and replace, and I appreciate you using that language, because I think repeal and replace is being used as language that is relatively broad sweeping, so as you very well know, the ACA had an impact, based on the way you asked your question, on the employer market, on the MA market, on the Medicaid market, as well as on the Individual market. And what we see happening today versus eight years ago is that there’s a need for a change unequivocally, but there’s also a lot of bright spots that have evolved over the last eight years. For example, in the employer market, there’s way more adoption today of incentives, engagement and value-based care programs. MA has further evolved even more broadly adopting value-based care programs. As I noted in a prior comment, there are states that are changing Medicaid programs and evolving them to be more incentive or engagement based as we go forward. As it relates to the individual program, as noted by several people’s questions, the marketplace is still unsustainable. And there’s a lot of pressure to put a series of transparent changes in place for 2018 in the near future because organizations will have to make determinations in the spring of this year.”

Tom McCarthy

Costs grew at low end of 4%

Turning to medical costs, we continued to deliver medical costs that reflect better health outcomes and strong clinical excellence for our customers and clients as a result of our deep collaborative relationships with physicians and our focus on personalization of care. For our total U.S. Commercial book of business, full year medical cost trend for 2016 was modestly below the low end of our previous guidance range of 4% to 5%.”