Regulators slap Cigna with Medicare enrollment suspension

Federal regulators have stopped Cigna from enrolling new Medicare customers until the health insurer deals with problems that have triggered care denials or delays and higher costs for some people.

The insurer, which is being acquired by the Blue Cross-Blue Shield carrier Anthem, has a "longstanding history" of not complying with requirements from the Centers for Medicare and Medicaid Services, or CMS, according to a 12-page letter the agency sent to Cigna earlier this week.

"The nature of Cigna's noncompliance provides sufficient basis for CMS to find the presence of a serious threat to enrollees' health and safety, supporting the immediate suspension of Cigna's enrollment and marketing activities," the letter stated.

Cigna said in a brief regulatory filing Friday that it is cooperating with federal officials and working to resolve the issues as quickly as possible. It said the suspension doesn't affect current customers.

Cigna sells Medicare Advantage plans, which are privately run versions of the government's Medicare program, in several states. This coverage focuses on people over age 65 and the disabled. The insurer also offers prescription drug coverage known as Part D for Medicare enrollees.

The insurer covered about 493,000 Medicare Advantage customers as of last September and provided prescription drug plans for 1.5 million, according to its latest quarterly report.

Cigna's Medicare coverage is a small part of its business, but it represents a fast-growing slice of the overall health insurance market and one of the reasons Indianapolis-based Anthem Inc. launched a $48-billion bid last summer to buy Cigna. That deal is still being reviewed by regulators.

Anthem spokeswoman Jill Becher said Friday that her company remains committed to the acquisition.

The CMS letter did not state how many people have been affected by problems with Cigna coverage.

CMS said that Cigna has "substantially failed" to provide services and benefits in accordance with its requirements. It said customers seeking prescription drugs have been inappropriately denied coverage, had access to their prescriptions delayed, never received the drugs or had to deal with increased out-of-pocket costs.

Regulators also found fault with how the insurer decided whether to cover some claims and with how it paid providers. An audit conducted last fall found that more than 63,000 claims had not been paid on time.

The main annual enrollment window for Medicare Advantage coverage closed in December. But the suspension could last until the next open enrollment period arrives in the fall.

Leerink analyst Ana Gupte said in a research note that it can take as much as a year for an insurer to resolve these cases. That could hamper Cigna's earnings growth next year.

The sanctions against Cigna are disappointing, but other parts of the company's business are well-positioned for growth and can help counter any hit the company might take in its Medicare Advantage business, BMO Capital Markets analyst Jennifer Lynch said in a separate note.

Shares of Bloomfield, Connecticut-based Cigna Corp. fell 1.4 percent, or $1.92, to $138.21 in Friday afternoon trading while the Standard & Poor's 500 index climbed nearly 2 percent.