Cigna has been cutting costs to boost profits, and while the company has made progress, it still has a ways to go. Per member costs at Cigna are still about 10% higher than key managed care competitors. It plans more job cuts, vendor consolidation, administrative efficiencies through technology, outsourcing and real estate sales. In the second quarter alone, the company cut 465 jobs. Second-quarter operating expenses at Cigna’s healthcare segment fell 3% or $25 million from a year earlier.
Cigna has been struggling to get its costs in line given hefty membership losses. Total medical membership fell 7% in the second quarter, compared to a year earlier, with at-risk down 13%, experience-rated 17% and ASO 6%.
In some ways, Cigna is an extreme example of a problem potentially facing other managed care plans: how to boost margins without losing so much membership that overall cost structures get out of line. What was it the Pointy-Haired Boss said in Dilbert? Imagine how much money we’d save if we fired everybody.
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