Health insurance provider Cigna Group is in exclusive discussions to divest its Medicare Advantage business to Health Care Service (HCSC) in a deal valued between $3bn and $4bn, the Wall Street Journal reported, citing sources privy to the development.

The potential deal is due to be announced shortly unless negotiations falter.

If materialised, the transaction would signify a strategic pivot for Cigna, which has historically derived the bulk of its revenue from its commercial operations and pharmacy benefits management, according to Reuters.

Cigna strengthened these operations through the acquisition of Express Scripts in 2018 for $52bn. The Medicare Advantage segment, which caters to individuals aged 65 years and above with government health insurance, has been a part of Cigna’s portfolio since its $3.8bn acquisition of HealthSpring in 2011.

However, with the US Government reducing reimbursement rates for health insurers early last year, Cigna appears to be reassessing its involvement in this space, the media publication noted.

In 2022, the Medicare Advantage unit of Cigna contributed 4.4% to its $179.4bn revenue from external customers.

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The company has roughly 599,000 Medicare Advantage members and generated $7.9bn in revenue from this segment in 2022.

It had previously engaged in a pursuit for rival Humana, a Medicare-focused insurer but abandoned the acquisition plan after failing to agree on financial terms.

Since the end of November last year, the US health insurance giants were in talks to sign a merger deal that would have resulted in an industry behemoth with a combined value of nearly $140bn.

The tepid reaction from investors to the potential Humana acquisition prompted Cigna to reconsider its strategy. It is now planning a further $10bn in stock buybacks and aiming for smaller, more manageable acquisitions.

Cigna and Health Care Service did not respond to Reuters’ requests for comment on the matter.

The company announced plans to expand its Medicare Advantage presence to four new counties in the US in October last year.

Cigna intends to offer various plans with $0 premiums and additional benefits such as a dental incentives, hearing and vision benefits as well as financial wellness benefits.

These plans will be offered to eligible customers under Medicare in Avery, Madison, Mitchell and Yancey counties.