This week’s announcement by Cigna Corp. (Philadelphia) that it would cut 1100 jobs, or 4% of its global workforce, is really no big surprise. Cigna had said in its third-quarter conference call (transcript) that it was taking a look at operating costs given declining membership (a result of higher premiums aimed at improved margins). Membership is expected to fall further in 2009.
Aetna announced a similar layoff last month, affecting 1000 jobs or 3% of its workforce. Now the question is who’s next?
Both Aetna and Cigna blamed the economic downturn for the need to reduce staff. But in the case of Cigna, that’s only part of the issue. The real question, notes Oppenheimer analyst Carl McDonald, is whether Cigna’s business is in a downward spiral, with big reductions in risk membership yielding tiny improvements in margin.
In other words, a down underwriting cycle for the managed care industry is being exacerbated by a down economy. And that can only mean more pink slips ahead.