Cigna’s (CI) commercial services include employer-sponsored insurance, individual insurance, specialty insurance, prescription drug benefits, and health technology services.
About 82% of its commercial members are enrolled in self-insured plans. The remainder are in fully insured plans that are further classified as experience-rated or guaranteed-cost plans.
The private health insurance industry (IYH) has gradually shifted from fully insured to self-insured employer-sponsored coverage. With self-insured coverage, the employer is responsible for the probable claim obligations of the employees, while the health insurer only provides administrative support.
Health insurance companies such as Cigna, Aetna (AET), UnitedHealth Group (UNH), and Anthem (ANTM) also provide stop-loss protection for self-insured employers, meaning the insurer reimburses for claims in excess of a predetermined amount.
Experienced-rated enrollments fall in the fully insured category, meaning the health insurer assumes responsibility for claim obligations in exchange for predetermined payments such as premiums, co-payments, and deductibles. To learn more about various payment options, read Making sense of health insurance companies’ payment options.
The experience rating method determines premiums based on the employee group’s prior and current claims experience. With the ACA (Affordable Care Act) restricting the use of this method for small employers and individuals, these plans can only be offered to large employers. As a result, they constitute only 6% of Cigna’s commercial enrollments.
The guaranteed-cost approach is also known as community rating. Premiums are determined by dividing the insurer’s total expected costs by the profits required by all of the insurer’s enrollees. The adjusted community rating method adjusts the community rating premium for group-specific characteristics such as the percentage of single and family contracts within the group and the average size of the employee’s family.
The ACA requires that health insurers calculate premiums for small employers based on the adjusted community rating method. This has resulted in lower premiums for small employer groups, which are now more inclined to purchase insurance from health insurers.