Cigna 2009 Annual Report Download - page 27

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Vision. CIGNA Vision offers flexible, cost-effective PPO coverage that includes a range of both in and out-of-network benefits
for routine vision services. CIGNA's national vision care network, which consists of over 48,000 providers in approximately 21,800
locations, includes private practice ophthalmologist and optometrist offices, as well as retail eye care centers. Routine vision products
are offered in conjunction with CIGNA HealthCare’s medical and dental product offerings.
Funding Arrangements
The segment’s health care products and services are offered through the following funding arrangements:
x Guaranteed Cost;
x Experience-rated (“Shared ReturnsSM”, including minimum premium funding arrangements); and
x Administrative Services Only.
Guaranteed Cost. Under guaranteed cost funding arrangements, policyholders pay a fixed premium and CIGNA HealthCare
bears the risk for claims and costs. The HMO product is offered only on a guaranteed cost basis.
Experience-rated (“Shared ReturnsSM”, including minimum premium). Under insurance policies using an experience-rated
funding arrangement, a premium that typically includes a margin to partially protect against adverse claim fluctuations is determined
at the beginning of the policy period. CIGNA HealthCare generally bears the risk if claims and expenses exceed this premium. If
premiums exceed claims and expenses, any surplus amount is generally first used to offset prior deficits and otherwise generally
returned to the policyholder. For additional discussion, see “Pricing, Reserves and Reinsurance” later within this section of the Form
10-K.
Under insurance policies using a minimum premium funding arrangement, instead of paying a fixed monthly premium, the group
policyholder establishes and funds a bank account and authorizes the insurer to draw upon funds in the account to pay claims and
other authorized expenses. The policyholder pays a significantly reduced monthly “residual” premium while the policy is in effect
and a supplemental premium (to cover reserves for run-out claims and administrative expenses) upon termination. Minimum premium
funding arrangements combine insurance protection with an element of self-funding. The policyholder is responsible for funding all
claims up to a predetermined aggregate, maximum monthly amount, and CIGNA HealthCare bears the risk for claim costs incurred in
excess of that amount. As with other experience-rated insurance products, CIGNA HealthCare may recover deficits from margins in
future years if the policy is renewed.
Administrative Services Only. CIGNA HealthCare contracts with employers, unions and other groups sponsoring self-insured
plans on an administrative services only (“ASO”) basis to administer claims and perform other plan related services. CIGNA
HealthCare collects administrative service fees in exchange for providing these self-insured plans with access to CIGNA HealthCare’s
applicable participating provider network and for providing other services and programs including: claim administration; quality
management; utilization management; cost containment; health advocacy; 24-hour help line; 24/7 call center; case management;
disease management; pharmacy benefit management; behavioral health care management services (through its provider networks); or
any combination of these services. The self-insured plan sponsor is responsible for self-funding all claims, but may purchase stop-loss
insurance from CIGNA HealthCare or other insurers for claims in excess of a predetermined amount, for either individuals
(“specific”), the entire group (“aggregate”), or both.
In 2008, CIGNA purchased Great-West Healthcare, the healthcare division of Great-West Life & Annuity Insurance Company
(“Great-West Healthcare”). See Note 3 to the Consolidated Financial Statements beginning on page 112 of this Form 10-K for details
about this purchase.
Financial information, including premiums and fees, is presented in the Health Care section of the MD&A beginning on page 62
and in Note 22 to CIGNA’s Consolidated Financial Statements beginning on page 160 of this Form 10-K.