Release Date: January 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you provide details on the stop-loss business performance and the impact on margins? A: Brian Evanko, CFO, explained that the stop-loss business faced higher-than-expected medical costs, particularly from high-cost claimants, impacting margins. The overall stop-loss medical care ratio (MCR) ran in the low 90s, which was a mid-single-digit percentage worse than expected. The company plans to recapture approximately 100 basis points of margin over the next two years, with the majority in 2026.
Q: How does the stop-loss issue affect client retention and membership? A: Brian Evanko noted that Cigna does not offer standalone stop-loss coverage; it is part of an integrated employer offering. Despite the stop-loss claims pressure, overall client relationships remain profitable, and over 50% of employer clients have been with Cigna for five years or more. The company is confident in its ability to manage client persistency while recovering margins.
Q: What are the drivers behind the stop-loss claims pressure, and how does it relate to specialty medications? A: Brian Evanko clarified that the pressure was due to a higher frequency of high-dollar claimants, driven by specialty injectables like KEYTRUDA and OCREVUS, and high acuity surgical activity, particularly in oncology and cardiac procedures. GLP-1s were not a significant factor in this pressure.
Q: How will the recent innovations in Express Scripts impact profitability and client uptake? A: David Cordani, CEO, stated that the innovations, such as lowering prices at the pharmacy counter, are not expected to change the profit model significantly. The vast majority of rebates are already passed through. Eric Palmer, CEO of Evernorth Health Services, added that these innovations will be the default offering, providing clients with more choice and transparency.
Q: What is the impact of the Medicare business divestiture on the 2025 outlook? A: Brian Evanko explained that the divestiture, expected to close in Q1 2025, will remove about $12 billion in revenue. The majority of proceeds will be used for share repurchase, reflected in the share count guidance. The removal of Medicare is factored into the Cigna Healthcare income guidance for 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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