Cigna 2013 Annual Report Download - page 35

PART I
ITEM 1. Business
of Columbia, the U.S. Virgin Islands, Canada, Europe, the Middle Choice Fund Suite of Consumer-Driven Products. Our medical plans
East, and Asia. We offer a variety of medical plans including: are often combined with the Cigna Choice Fund suite of products,
including Health Reimbursement Accounts (‘‘HRA’’), Health
Managed Care Plans. Our managed care benefit plans (including Savings Accounts (‘‘HSA’’) and Flexible Spending Accounts (‘‘FSA’’)
Open Access Plus and Health Maintenance Organizations that are designed to encourage customers to understand and manage
(‘‘HMO’’)) encourage the use of ‘‘in-network’’ versus their health and health benefits. Customers can use these accounts
‘‘out-of-network’’ health care providers and primary care physicians. to pay medical care expenses not covered by their base medical plan.
Employers may elect to use a subset of our network to better manage In most cases, these products are combined with a high deductible
costs and quality. medical plan.
Preferred Provider Plans. Our preferred provider (‘‘PPO’’) product
line features a network with broader provider access than the
Managed Care Plans. The preferred provider product line may be at
a higher medical cost than our Managed Care Plans.
Approximately 85% of our commercial medical customers are in funding arrangements where lower medical costs directly benefit our corporate
clients and their employees. These funding arrangements for our commercial medical health plans and dental coverages are as follows:
% of Commercial
Funding Arrangement Medical Customers Description
Administrative Services 81% ASO plan sponsors are responsible for self-funding all claims, but may purchase stop loss insurance
Only (‘‘ASO’’ or to limit exposure for claims in excess of a predetermined amount.
‘‘self-insured’’) We collect fees from sponsors for providing access to our participating provider network and for
other services and programs including: claim administration; behavioral health; disease management;
utilization management; cost containment; dental; and pharmacy benefit management.
In some cases, we provide performance guarantees associated with meeting certain service standards,
clinical outcomes or financial metrics.
Retrospectively 6% Premium charged during the policy period (‘‘initial premium’’) may be adjusted following the policy
Experience-rated period for actual claim, and in some cases, administrative cost experience of the policyholder.
(‘‘Insured – Experience- When claims and expenses are less than the initial premium charged (an ‘‘experience surplus’’), the
rated’’) policyholder may be credited for a portion of this premium.
However, if claims and expenses exceed the initial premium (an ‘‘experience deficit’’), we generally
bear the risk. In certain cases, experience deficits may be recovered through future year experience
surpluses if the policyholder account renews.
Insured – Guaranteed 13% We establish the cost to the policyholder at the beginning of a policy period and generally cannot
Cost subsequently adjust premiums to reflect actual claim experience until the next annual renewal.
Employers and other groups with guaranteed cost policies are generally smaller than those with
experience-rated group policies; accordingly, our claim and expense assumptions may be based in
whole or in part on prior experience of the policyholder or on a pool of accounts, depending on the
policyholder’s size and the statistical credibility of their experience.
HMO and individual plans (medical and dental) are offered on a guaranteed cost basis only.
Beginning in 2014, the Patient Protection and Affordable Care Act requires that non-grandfathered
individual and small group plans be community rated.
We offer stop loss insurance coverage for ASO plans that provides medical loss ratio (‘‘MLR’’) requirements are not met. The MLR
reimbursement for claims in excess of a predetermined amount for represents the percentage of premiums used to pay customer medical
individuals (‘‘specific’’), the entire group (‘‘aggregate’’), or both. We claims and other activities that improve the quality of care. See the
also include stop loss features in our experience-rated group medical ‘‘Regulation’’ section of this Form 10-K for additional information on
insurance policies. the commercial MLR requirements of Health Care Reform.
In most states, individual and group insurance/HMO premium rates
must be approved by the applicable state regulatory agency (typically
Government Health Plans
department of insurance) and state laws may restrict or limit the use of
Medicare Advantage
rating methods. Premium rates for groups and individuals are subject
We offer Medicare Advantage plans in 15 states and the District of
to state review for unreasonable increases. In addition, the Patient
Columbia through Cigna-HealthSpring. Under a Medicare
Protection and Affordable Care Act (also referred to as ‘‘Health Care
Advantage plan, Medicare-eligible beneficiaries may receive health
Reform’’) subjects rate increases above an identified threshold to
care benefits, including prescription drugs, through a managed care
review by the United States Department of Health and Human
health plan such as our coordinated care plans. A significant portion
Services (‘‘HHS’’), requires most non-grandfathered individual and
of our Medicare Advantage customers receive medical care from our
small group health insurance policies to be community rated
innovative plan models that focus on developing highly engaged
(beginning in 2014) and requires payment of premium refunds on
physician networks, aligning payment incentives to improved health
individual and group medical insurance products if minimum
CIGNA CORPORATION - 2013 Form 10-K 3
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