Cigna to pay $3.8 billion for Medicare Advantage plan

Cigna has become the latest large health plan to boost its presence in the Medicare Advantage market.

The Bloomfield, Conn., company announced Oct. 24 that it will buy HealthSpring, a Nashville-based health plan with 1 million Medicare members, for $3.8 billion.

When the deal closes -- a date that is yet unscheduled -- physicians in Cigna's network may be part of pay-for-performance programs similar to what HealthSpring has instituted in its network, said Matt Manders, president of U.S. service, clinical and specialty business at Cigna.

"HealthSpring has a unique engagement model with the physician community, which is more important as we move down the path toward health care reform," he said. "Our overall business model is focused on health and productivity, and a key element is around customer engagement. Physician engagement is very important in that context. The physician's patient is our customer."

Part of what HealthSpring pays its network physicians depends on quality, customer service and efficiency scores, Manders said. The scores can be tracked constantly so physicians have a chance to improve their performances.

He said the two companies still were trying to work out how their networks and contracts will be merged.

Cigna sells standalone Medicare Part D drug coverage but offers a Medicare Advantage plan only in Arizona, where it also owns a physician group.

Expanding Cigna's Medicare presence with the HealthSpring purchase "gives us an opportunity to retain a customer through their entire life," Manders said.

The purchase makes Cigna a player in a Medicare Advantage market that has been consolidating rapidly. Humana bought two small Medicare Advantage plans, MD Care of Long Beach, Calif., and Arcadian Management Services of Oakland, Calif., since August. WellPoint bought CareMore of Cerritos, Calif., in June.

HealthSpring has grown rapidly since its founding in 2000, in part with the purchase of Baltimore-based Bravo Health in the fall of 2010. The $545 million deal added nearly 400,000 members to HealthSpring's 600,000.

HealthSpring sells a standalone drug plan and Medicare Advantage plans in Alabama, Delaware, Florida, Georgia, Illinois, Maryland, Mississippi, New Jersey, Pennsylvania, Tennessee, Texas and Washington, D.C.

The Centers for Medicare & Medicaid Services gave the company permission to expand to West Virginia and additional areas of Alabama and Tennessee in 2012.