While Cigna Saddles Patients with Increasing Out-of-Pocket Requirements, the Company Bought Back $5 Billion of Its Own Stock

Cigna, my former employer, disclosed this morning that during the first seven months of this year, it spent $5 billion of the money it took from its health plan and pharmacy benefit customers to buy back shares of its own stock, a gimmick that rewards shareholders at the expense of those customers. 

Cigna also disclosed that its revenues increased a stunning 25% – to $60.5 billion – during the second quarter of this year compared to the same period in 2023. Profits also grew, from $1.8 billion to $1.9 billion. 

One of the ways Cigna made so much money was by purging health plan enrollees it decided were not profitable enough to meet Wall Street’s profit expectations. Enrollment in its U.S. health plans fell by nearly half a million people – from 17.9 million to 17.4 million – over the past year. The company signaled to investors that it was more than OK with that decline, noting that it ran off those customers through “targeted pricing actions in certain geographies.” What that means is that Cigna increased premiums so much for those folks that they either found other insurers or joined the ranks of the uninsured. 

It was an entirely different story in Cigna’s pharmacy benefit (PBM) business, which saw a 24% increase in total pharmacy customers. The vast majority of Cigna’s revenues now come from its role as one of the country’s largest middlemen in the pharmacy supply chain. Revenue from Cigna’s pharmacy operations totaled nearly $50 billion in the second quarter of this year, up from $38.2 billion last year. By contrast, revenue from its health plan business increased modestly, from $12.7 billion to $13.1 billion. But by purging 478,000 men, women and children from its rolls, Cigna reported a profit margin of 9.2% for its health plan operations. That, folks, is exceedingly high in the health insurance business.  

One way Cigna and the other industry giants can reward their shareholders so handsomely is by making their health plan and pharmacy customers pay more and more out of their own pockets before the insurers pay a dime.

The Affordable Care Act made it illegal for insurers to refuse to sell coverage to people with preexisting conditions or to set premiums based on someone’s health status. But that law kept open a big back door that enables insurers like Cigna to make people with health problems pay huge sums of money for their care through deductibles and copayments. As a consequence, millions of Americans are walking away from the pharmacy counter without their medications, and many others who simply cannot live without their meds often wind up buried under a mountain of medical debt.  

Aware of this, President Biden in his State of the Union address called on Congress to limit out-of-pocket requirements for prescription drugs to $2,000 a year. Such a limit will go into effect next year for people enrolled in Medicare’s prescription drug program. Biden said that limit should apply to all Americans enrolled in private health care plans, like Cigna’s. 

A growing number of bills have been or soon will be introduced by members of Congress to fulfill Biden’s pledge, but you can expect Cigna and other big insurers to insist that doing so will mean premiums will have to go up. That’s bullshit. It might mean that Cigna and the other giants might have to curtail their stock buyback programs and accept slimmer profit margins, but it does not mean premiums will have to go up. Wall Street will howl if one of the tools insurers use to gouge their customers is taken away – just as investors are punishing Cigna today for the sin of not predicting even higher profits for the rest of the year – but reducing out-of-pocket requirements would put a significant dent in the enormous and ongoing transfer of wealth by middlemen like Cigna from middle-class Americans, especially those struggling with health issues, to fat cat investors and corporate executives.