Cigna Healthcare said it will buy back $11.3 billion of its own shares of stock. That announcement made the company's CEO and other investors much richer.

Since Cigna announced last week that instead of buying Humana it will spend $11.3 billion buying back its own shares of stock, the company’s investors have made a fortune. One of the investors who is now much richer is none other than Cigna CEO David Cordani. 

Cordani holds 589,331 shares of Cigna stock, according to recent disclosures. During the days after we reported that Cigna was working on a deal to buy Humana, Cigna’s stock price dropped $26.80 a share, from $284.74 a share (on Nov. 28) to $257.94 (on Dec. 7).  During that time, Cordani saw that investors’ dim view of the proposed acquisition had cost him $15.8 million. 

To keep from getting any poorer, Cordani had his investor relations and PR folks do something they rarely ever do: issue a press release on a Sunday. On Dec. 10, less than 24 hours before trading would begin at the New York Stock Exchange the next day, Cigna announced that it planned to repurchase an unprecedented number of its shares, a gimmick, illegal until the Reagan administration, that rewards shareholders by increasing the value and earnings of each remaining share of common stock. 

He was betting that Wall Street would love the share buyback, and he was right. By the end of the day on Monday, Dec. 11, Cigna’s stock price had increased by 17%, to $301.97 a share. For Cordani, that meant he was $26 million richer than he was just 12 days earlier. His holdings in Cigna stock had increased to $178 million. 

He was not alone in reaping such a windfall. Other members of Cigna’s executive leadership team, all of whom get a significant percentage of their pay in the form of Cigna stock, were also much wealthier.

Now let’s look at that $11.3 billion and put it in perspective. For one thing, it is more than these 26 states (and the District of Columbia) allocated last year to Medicaid to provide health care for their poorest residents:

• Alabama

• Alaska

• Arkansas

• Connecticut

• Delaware

• Washington, D.C.

• Hawaii

• Idaho

• Iowa

• Kansas

• Maine

• Mississippi

• Montana

• Nebraska

• Nevada

• New Hampshire

• New Mexico

• North Dakota

• Oklahoma

• Rhode Island

• South Carolina

• South Dakota

• Tennessee

• Utah

• Vermont

• West Virginia

• Wyoming

It is also more than these 13 states’ entire annual budgets:

• Alaska

• Delaware

• Idaho

• Iowa

• Maine

• Nebraska

• New Hampshire

• Oklahoma

• Rhode Island

• South Dakota

• Vermont

• Wyoming

Cigna’s massive share buyback plans outraged at least a few members of Congress, including Sen. Bernie Sanders who tweeted about it last Friday:

This week Cigna said it would be spending $11.3 billion not to lower premiums, deductibles, or improve health care for its policyholders, but to buy back its stock to make its executives and stockholders even richer. This is what a corrupt & broken health care system looks like.

It is not just liberal members of Congress who are concerned about the growing size, power and influence of Big Insurance. Just two days before Cigna called off the Humana deal (and likely one of the reasons it did), two of the most conservative members of Congress–Sen. Mike Braun (R-IN) and Rep. Diana Harshbarger (R-TN)--joined Sen. Elizabeth Warren (D-MA) and Rep. Pramila Jayapal (D-WA and chair of the Congressional Progressive Caucus) in sending a letter to the Federal Trade Commission and the U.S. Department of Justice demanding close scrutiny of the deal.

They wrote that:

The U.S. health insurance market is dominated by a few massive conglomerates, following market consolidation by companies that have bulked up at the expense of patients and taxpayers…The risks of this merger are clear and profound. As one expert noted, “when you have anti-competitive markets, it not only increases prices, but it severely decreases the pressure to improve the product…”

It’s important to note that Cigna became one of America’s biggest conglomerates in 2018 when it bought pharmacy benefit manager Express Scripts for $67 billion. As a result of that deal, 80% of the PBM market is now controlled by Cigna, UnitedHealth Group and CVS/Aetna. 

Earlier this year, the FTC’s Republican appointees joined the Democratic appointees in announcing an investigation into America’s PBM business. I predict that there will be growing pressure on the FTC and courts next year to break up these companies as more and more people become aware of how they have come to control the U.S. health care system and how they use taxpayers’ and policyholders’ hard-earned money to reward their shareholders and executives.