Cigna CEO Weighs In On New Health Law

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Health insurance companies stand to pick up millions of new customers as the new health care legislation takes effect. Robert Siegel talks to David Cordani, president and CEO of CIGNA Corp., about what the enactment of the overhaul means for the insurance industry and CIGNA in particular.

ROBERT SIEGEL, host:

Health insurance companies stand to pick up more than 20 million new customers as the new health-care legislation takes effect. But that doesn't mean that the industry is altogether thrilled. And in fact, there's been quite a bit of grumbling. David Cordani is president and CEO of one of the nation's largest health insurers, Cigna, and he joins us from his offices in Philadelphia. Welcome to the program, Mr. Cordani.

Mr. DAVID CORDANI (President and CEO, Cigna): Good to be with you today, thank you.

SIEGEL: And the first question that many people are asking is: Will my premiums go up? And in the interest of full disclosure, some of those people are NPR employees, because Cigna coverage is offered here. Will their premiums go up?

Mr. CORDANI: Over the near term in the employer marketplace, premiums will probably go up somewhat. Over the near term, some of the aspects of the current legislation will actually put cost pressure over the next several years as some of the fees and levies that are passed through to the industry begin to unfold.

For employers, though, theres a significant number of employers that use a lot of innovative programs with us around health improvement, productivity improvement wellness, that offset some of those increases. So, it depends on the employer's programs currently as to whether or not they will increase and how much so.

SIEGEL: But you're saying that as there are fees that are paid by the insurance companies and such, you'll just pass those along to policyholders. So that's one reason that prices will go up over the years?

Mr. CORDANI: Ill cite two. That's one and specifically, the CBO's estimate assessed that the fees on the industry would indeed be passed through to individuals and employers, and that was their assumption. In addition, as the Medicaid programs grow, there's a natural cost shifting from a Medicaid reimbursement to physicians to the commercial system for employers and individuals to pay for.

SIEGEL: Let me ask you a question that some people are remarking on, and the president has alluded to this. Cigna's profits rose 7 percent last year. You had more than $18 billion in revenue; your predecessor left with $110 million retirement package, it sounds like it's a profitable-enough company to absorb some of the fees that'll be added to your business by this bill.

Mr. CORDANI: The health-care business - so, for our company or for the industry, but specifically if we stay with Cigna, our health-care businesses had a profit margin of about 2 percent. And that's been consistent over the last five years. We've worked with a lot of disclosures with the government. So it's a thin margin business on an after-tax basis.

A final way of looking at it is, you could take the profits of the entire health-care industry, and that will pay for health care for Americans for about two days. So the challenge is, what do we do for the other 360-plus days of the year to be able to pay for that?

SIEGEL: Mr. Cordani, when you next report to Cigna's shareholders - or to the board, for that matter - what's the word? A law has been passed and now, we're going to work with it and it's the future? Or a disaster has just happened in Washington, it's calamitous for our business? What's the line here?

Mr. CORDANI: We look at our corporation as a global health service company, so we have services outside the U.S. as well as inside the U.S. The broad level of services we offer are primarily to employers who are on health improvement, wellness improvement, productivity improvement, etc. So for that focus of our business, we actually see it as having significant opportunity both in the United States as well as outside of the United States.

SIEGEL: Would Cigna welcome a trade association that it belongs to, or any other lobby that represents it, to actively work for the repeal of provisions of this act?

Mr. CORDANI: I don't believe focusing on repeal right now is in anybody's best interest. I believe focusing on the next leg of the stool, as rapidly as possible, is critical - which is to drive sustainability to cost. That's what the focus needs to be on, as opposed to trying to repeal what's already been done and the country spent the year on.

SIEGEL: So just to make sure, you're saying doesn't make sense to you to work for repeal right now, but to continue working for cost containment in some way. Given what the country's just been through to get the bill that was signed into law today, can you imagine another big health-care bill that would address health-care costs actually going through Congress anytime soon?

Mr. CORDANI: I guess the question is time. So, go back and look at the Massachusetts model. Massachusetts model has been operating for two to three years, and is now at the brink of bankruptcy and has to deal with the cost equation. So you could view that as an outer limit, as an indication of what will probably transpire at a federal level.

SIEGEL: So you think around 2013, 2014, we have an appointment with another big health-care bill, is what you're saying.

Mr. CORDANI: And ideally - that's correct - and ideally, with some smaller steps along the way so we're not waiting for one, big, fell swoop, but we could actually build upon what has been enacted.

SIEGEL: Well, Mr. Cordani, I hope we can check in with you in the coming months as we see what the impact of this health-care law is on the country and on your business.

Mr. CORDANI: I would look forward to that as well.

SIEGEL: Great. That's David Cordani, who joined us from Cigna's corporate headquarters in Philadelphia. He is the president and CEO of Cigna.

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