Cigna Exits ACA Marketplace: Implications for Individual Insurance
Cigna is set to exit the Affordable Care Act (ACA) individual insurance marketplace at the end of the year, impacting approximately 369,000 individuals across 11 states. This strategic decision, coupled with the forthcoming sale of its Medicare Advantage business in 2025, highlights a shift in Cigna's priorities toward employer-sponsored insurance and pharmacy services.
Ari Gottlieb, principal at A2 Strategy Corp, noted that Cigna's decision might seem contrary to its traditional focus on mid-sized employers and alternative funding, which are key markets for Individual Coverage Health Reimbursement Arrangements (ICHRAs). ICHRAs offer a tax-advantaged way for employers to fund employees' individual health insurance, but adoption rates remain modest, with participation estimated between 400,000 to 800,000 U.S. residents.
Cigna confirmed its departure from both on-exchange and off-exchange individual markets, explicitly ruling out ICHRA as part of its business strategy. "Cigna has never hyped ICHRA," Gottlieb explained, suggesting the exit reflects a lack of perceived potential in this area.
On Cigna's first-quarter earnings call, President and COO Brian Evanko cited the inability to scale the individual exchange business and the need to concentrate management resources elsewhere as reasons for the exit. Enhanced subsidies had previously inflated enrollment, and their expiration contributed to a decline via premium increases, Gottlieb elaborated.
Cigna will now direct its efforts toward core growth areas, including specialty services, pharmacy benefits, and employer-based insurance. This move aligns with recent trends, as other insurers like Aetna and Baylor Scott & White Health Plan have announced similar exits from the ACA marketplace, amid premium spikes caused by subsidy changes and unexpected utilization rates.
Looking ahead, industry experts anticipate more insurers could reassess their participation in the ACA marketplace. Tyler Giesting from West Monroe pointed out that insurers are increasingly focused on optimizing profitability and growth by concentrating on core, scalable businesses. Hal Andrews, CEO of Trilliant Health, remarked that Cigna's pivot wasn't shocking, reflecting broader industry challenges and potential future directions, including focusing on administratively serviced organizations (ASO) and services under Evernorth.
Gottlieb views Cigna's withdrawal as a potential indication that ICHRAs might not fulfill the anticipated disruptive role in the near term. Michael Abrams of Numerof & Associates echoed the sentiment, noting that ICHRAs present innovative solutions for employers, but their viability as a significant revenue source for traditional insurers remains uncertain. The adoption of ICHRAs may represent a shift in employer strategies, but it appears to be a longer-term prospect rather than an immediate growth avenue for traditional insurers.