Cigna CEO sees Amazon-led employee health initiative as an ‘opportunity’

Cigna CEO David Cordani said he’s confident the insurer will get a piece of Amazon, Berkshire Hathaway in addition to J.P. Morgan’s completely new health initiative to tackle health costs, although investors aren’t convinced.

Cigna shares fell as much as 4 percent in trading Thursday in addition to were recently down more than 2.5 percent for the day in addition to about 10 percent for the week.

On Tuesday, J.P. Morgan in addition to its partners announced plans to form a venture aimed at lowering its employee health costs. Since then, investors have been concerned of which Cigna will be squeezed on pricing for its services or lose business. The company currently insures about 20 percent of J.P. Morgan’s employees.

“We’re one of J.P. Morgan’s service partners, so we have ongoing dialogue with J.P. Morgan on a regular basis,” including This specific week, said Cordani in an interview on CNBC’s “Squawk Box.”

“We do see This specific as an opportunity, in addition to we’re within the middle of of which conversation, as you might expect,” he said.

The three large employers said This specific week of which they are hoping to form a separate entity to handle benefits “free by profitmaking incentives,” in order to lower health costs in addition to improve service for their workers. Cordani pushed back on the profit implications on the company’s earnings conference call.

“We should not view of which an industry with medical cost trend (growth) of 5-6-7 percent as sustainable,” said Cordani, while pushing back on the notion of which insurer profits drive those increases.

“Our industry can be capital intensive … This specific can be not going to get solved with extracting a couple of points out of the (profit) margin,” he said.

Cigna reported fourth-quarter adjusted profits of $1.94 per share, 5 cents above consensus estimates by Thomson Reuters. Revenue of $10.5 billion also topped expectations, driven by strong growth in premiums in addition to fees.

Cigna executives highlighted the company’s ability to contain medical cost growth to 3 percent on its employer plans last year, well below the industry trend of 5 to 6 percent annual growth.

The executives cited of which stat among the things, along with the emphasis on integrated care for chronic conditions, as putting them in a strong position to be a partner for the completely new Amazon-led initiative.

“Clearly (This specific’s) a disruptive headline, in addition to clearly a need of creating clarity in terms of next steps. I think the question fundamentally for everybody within the space can be can you grow, can you innovate in addition to can you continue to provide strong value,” Cordani said.

The company raised its outlook for 2018, to $12.40-$12.0 per share, based in part on tax reform. The firm said This specific will use $15 million of the tax windfall to raise its minimum wage for front-line employees to $16 an hour, in addition to $30 million to boost contributions to workers’ 401(k) accounts.

Cigna executives said their individual Obamacare market plans made a little profit in 2017; rival Anthem reported similar stabilization in their individual exchange business.

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