Cigna Corporation (NYSE: CI) is reportedly contemplating the sale of its Medicare Advantage business and working with an investment bank to explore options for a business that could be worth billions, according to Reuters.

The move follows a decade of expansion in the sector, including the acquisition of HealthSpring for $3.8 billion in 2011, and could signal Cigna's response to a challenging reimbursement environment. 

Also Read: Cigna Reports $1.4B Q3 Profit On Health Plan, Evernorth Growth; Lifts Annual Guidance.

However, a shift in the U.S. government's reimbursement model and heightened administrative costs have pressured the division's profitability, prompting a potential divestment, Reuters reported.

With profit margins falling short of Cigna's 4% to 5% target, changes to the government's star rating system, which impacts reimbursement levels, are also expected to decrease the ratings of Cigna's Medicare Advantage plans in 2024, Reuters wrote.

Despite the speculation, Cigna has made significant progress in expanding its Medicare Advantage footprint, now covering over 40% of eligible individuals, up from 20% in 2019, and reported a 13% growth in customer base year-to-date.

The ongoing exploration of the sale comes amid broader concerns over the sector's prospects. 

Citing a Goldman Sachs analyst, the report added the new reimbursement rules as a potential headwind for Medicare Advantage providers. 

Price Action: CI shares are down 1.71% at $305.35 on the last check Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.