Cigna Banned From Medicare Sales for `Systemic Failures'

  • U.S. says Cigna has `longstanding history of non-compliance'
  • Anthem, which agreed to buy Cigna, remains committed to deal

Cigna Corp. was banned from marketing its Medicare products to new customers after the U.S. found deficiencies in how the health insurer ran its plans, citing widespread violations that the government said threatened patients’ health.

“Cigna has experienced widespread and systemic failures impacting Cigna enrollees’ ability to access medical services and prescription medications,” the U.S. said in a Jan. 21 letter to the insurer outlining the sanctions. “Cigna has had a longstanding history of non-compliance” with requirements from the Centers for Medicare and Medicaid Services, or CMS.

Cigna and other insurers offer a privately run alternative to traditional Medicare, which includes insurance coverage for hospital and doctor care, known as Medicare Advantage, as well as prescription drug coverage, or Part D. CMS found problems involving Cigna’s appeals and grievances process, as well as with its drug coverage, the insurer said Friday in a regulatory filing.

Cigna won’t be allowed to market or sell Medicare Advantage policies or Part D drug plans to new clients until it fixes the problems. The government said it “determined that Cigna’s conduct poses a serious threat to the health and safety of Medicare beneficiaries.” Clients who are affected by the issues cited by CMS can drop their Cigna coverage and buy policies from other insurers.

Shares of Cigna, which is being bought by Anthem Inc. for about $48 billion, fell 1.2 percent to $138.46 at 12:39 p.m. in New York. Anthem remains committed to the deal, spokeswoman Jill Becher said in an e-mail.

Private Medicare Alternative

“The findings in the audit are unacceptable and will be addressed in full partnership with CMS,” Herb Fritch, president of Medicare unit Cigna-HealthSpring, said in an e-mailed statement. “We have internal quality review processes in place that identified some of the areas in advance of the audit findings and we have already started working to remedy them. In other instances, we will implement the changes as quickly as possible to emerge a stronger organization further dedicated to those we serve.”

For now, the ban mainly affects Cigna’s marketing to people who age into Medicare, the U.S. health program for people 65 and older. Medicare beneficiaries are allowed to shop for new plans every year during a period known as open enrollment that runs from Oct. 15 to Dec. 7.

The effect on Cigna’s results could be worse if the sanctions last through next year’s open enrollment period, according to Brian Wright, an analyst at Sterne Agee CRT. He estimates that if Cigna is barred from the open enrollment period that begins in the fall, the company’s earnings could be cut by about 35 cents a share in 2017.

Past punishments have taken about a year to resolve. Aetna Inc. was blocked from selling Medicare coverage from April 2010 to June 2011 amid a dispute over prescription drug coverage. Health Net Inc. was prevented from offering some Medicare policies from November 2010 to September 2011.

Cigna, which mainly offers coverage via employers, expanded in Medicare with the acquisition of HealthSpring Inc. in 2012. The company has about 543,500 Medicare Advantage clients and about 1.1 million people in its prescription drug plans, according to data compiled by Bloomberg Intelligence.

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