With An Obamacare Boost, Cigna Latest To Raise Profit Outlook

May 1 2014, 9:18am CDT | by

Cigna (CI) became the latest in a parade of health insurance companies to report they are going to make even more money than they thought they would in 2014 thanks to new business strategies and a surge of younger customers signing up for coverage under the Affordable Care Act.

Cigna this morning said it now expects income from operations in the range of $1.93 billion and $2 billion or between $7.05 and $7.35 a share for 2014. That’s an increase of 20 cents per share from previous guidance, the company said during its first quarter earnings report.

Cigna chief executive officer David Cordani said the company is performing well across all of its markets and is also moving to new strategies that encourage accountable care, paying “health coaches” and nurse care managers to help traditional medical care providers treat patients more effectively, keeping them well and in less expensive care setting like hospitals. Employers and the health law encourage such “population health” approaches to providing medical care, moving away from traditional fee-for-service medicine to so-called “value-based care.”

And though Cigna executives maintain the insurer will lose money this year on individuals who signed up for coverage via public exchanges under the health law, executives said a surge of younger people signing up in the waning weeks of open enrollment is good news.

Cordani said during a 70-minute conference call with Wall Street analysts sand investors that the null  In addition, the early buyer group in the six-month open enrollment period that began last October also had a higher usage of medical care services in the first two months of this year.

But the second wave of people who signed up for Cigna plans via the public exchanges was younger, Cordani said. null

By the end of 2014, Cigna expects 290,000 customers buying individual policies and 40 percent of them are purchasing “ACA policies,” or policies subsidized under the Affordable Care Act.

In the company’s first quarter, Cigna reported net income from operations of $501 million, or $1.83 per share compared to $387 million, or $497 million, or $1.72 per share in the first quarter of 2013. Revenues increased 4 percent to $8.5 billion.

Cigna is the latest insurance company telling a concerned Wall Street that they going to be able to manage the first year of risk from newly insured customers buying subsidized private health plans via government-run exchanges. Under the law, millions of Americans can get subsidies to purchase an array of health plan choices.

The improved forecast is the latest in a parade of rosy financial projections from health insurance companies benefitting from the health law. Other insurers doing well include Aetna (AET) UnitedHealth Group (UNH), Humana (HUM) and Wellpoint (WLP), a major operator of Blue Cross and Blue Shield plans under the Anthem brand that also raised its profit outlook this week.

 Wondering how Obamacare will affect your health care? The Forbes eBook Inside Obamacare: The Fix For America’s Ailing Health Care System answers that question and more. Available now  at Amazon and Apple.

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