Cigna's self-insured business offsets high flu costs

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Cigna's earnings soared 49 percent in the fourth quarter of 2012, thanks to its acquisition of Medicare provider HealthSpring and a focus on its self-insured business.

The insurer's fourth-quarter net income increased to $406 million, up from $273 million a year earlier. Cigna's total revenue was $7.62 billion, compared to last year's $5.43 billion, according to its earnings report released last week.

After Cigna bought HealthSpring early last year, the insurer gained an additional 1 million members who bring in about three times more revenue than commercial members because they are older and have higher medical utilization rates.

And although the flu negatively affected the fourth-quarter earnings of other insurers like Humana, Cigna's focus on the self-insured sector, which accounts for 85 percent of its business, helped limit the overall impact of the early epidemic.

Looking forward, Cigna CEO David Cordani said it's well-positioned to participate in health insurance exchanges because it doesn't have a lot of individual customers or small business groups with fewer than 50 employees.

"We don't have a book of business that is going to be disrupted that we need to protect," Cordani told Reuters. "We can look at this new marketplace that's forming with a fresh set of eyes and develop a business that works."

However, Cigna still hasn't decided on the exchanges in which it will participate.

To learn more:
- here's the Cigna earnings report
- read the Reuters article

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