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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Supreme Court Ruling to Uphold ACA Adds Certainty to Related Health Insurance Programs

Julie Utterback, CFA Senior Equity Analyst

Analyst Note

| Julie Utterback, CFA |

In a 7-2 decision, the U.S. Supreme Court voted to uphold the Affordable Care Act. This was largely expected by us and, in our opinion, the rest of the market. This time around, the court ruled that the complaining parties were not sufficiently harmed by the ACA's individual mandate, which was reduced to $0 by the Republican-controlled Congress as part of tax legislation in 2017. Because this court's ruling (or one based on the severability of the individual mandate from the rest of the ACA) was largely expected by us, we are making no changes to our moat ratings or fair value estimates for the narrow-moat health insurers we cover: Anthem, Centene, Cigna, CVS, Humana, and UnitedHealth. However, the ruling does add some certainty around this law that touches so many parts of the U.S. healthcare system.

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Company Profile

Business Description

Cigna primarily provides pharmacy benefit management and health insurance services. Its PBM services were greatly expanded by its 2018 merger with Express Scripts and are mostly sold to health insurance plans and employers. Its largest PBM contract is the Department of Defense. In health insurance and other benefits, Cigna mostly serves employers through self-funding arrangements, but it also operates in government programs, such as Medicare Advantage. The company operates mostly in the U.S. with 15 million medical members covered at the end of 2020, but its services extend internationally, covering another 2 million people.

Contact
900 Cottage Grove Road
Bloomfield, CT, 06002
T +1 860 226-6000
Sector Healthcare
Industry Healthcare Plans
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Aggressive Growth
Employees 73,700

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