Cigna V Aetna

Topics: Health insurance, Health care, Health economics Pages: 9 (3050 words) Published: May 8, 2007
Innovation Comparative Analysis: Cigna vs. Aetna

The purpose of this paper is to provide a comparative analysis of two companies within the same industry (Cigna vs. Aetna) and an evaluation of their innovation processes. Current Situation Analysis

A recent survey of the nation's top CEO's concludes that innovation remains the lifeblood of business. "For CEO's today, it's all about achieving growth and efficiency through innovation. It's not about product innovation so much anymore as about innovating business models, process, culture and management." (April, 2006).

In comparing Aetna and Cigna, it's interesting to note that the companies share a number of important similarities. Both are recognized leaders in the health insurance industry, and both are recent award winners for their innovative processes. Both are led by CEOs who are relatively new in their top positions, and both ascended from leadership positions within their company. Perhaps most significantly, both are national companies competing for similar books of business. Both sell health insurance benefit plans to employers and single policies to individuals; both offer managed Medicare plans, seeking to capitalize on the opportunities for privatization created by the new Medicare Modernization Act of 2004. They compete directly against each other in most markets, and both have identified the emerging consumer-directed health plan market as a key target for expansion and growth.

Innovation expert Tom Kelly recently stated "it's not enough to be an innovator anymore. You have to out-innovate the competition." (Kelly, 2006). Interestingly, it wouldseem that both Aetna and Cigna are adopting pages from Kelly's playbook that says those who succeed will be those who "passionately pursue new ways to serve your customers." (Kelly, 2006).

This paper will examine ways in which both Aetna and Cigna have embraced technology (radical innovation) and a sharpened focus on customer service (architectural innovation) to protect their business and create new appeal for their customers. First, however, a brief profile of each company's current situation: AETNA

Aetna is the larger of the two players: with 9% of the commercial enrollment market in early 2006 (27.9 million members), it ranked as the nation's third largest provider of employee health insurance products, behind United Health at 19% and Well-Point with 14% (All Business, 2006).

By following a focused business strategy of heavy investment in technology, cost-cutting measures and premium increases, Aetna more than quintupled its stock price over three years. This was a significant financial turnaround, reversing a net loss of $2.5 billion in 2002 to a reported net income of $1.63 billion in 2005 (All Business, 2006).

Like most major health plans, Aetna is looking for growth in the consumer-driven health plan segment. Although the numbers are still small in this emerging market, Aetna is making significant gains. According to president and CEO Ron Williams, "Aetna's Consumer Driven Health Insurance Plan (CDHIP) book was at 614,000 at the end of the first quarter, a 52 percent increase from the year-ago quarter." (DuBose, 2006). CIGNA

Cigna is a significantly smaller player, with only one-third the enrollment of Aetna (at 9 million members, down from 13 million last year). Unlike Aetna, Cigna is struggling with profits and earnings. In early 2005, Cigna achieved the highest profit margin of the thirteen publicly-held insurance plans profiled by Health Leaders InterStudy (at 8.6%), while Aetna ranked 4th with 6.5% (DuBose, 2006). But 2006 has been more challenging. "Cigna Corp. reported its fourth straight quarterly drop in profit… for the second quarter. Competition with No. 3 health insurer Aetna and Independence Blue Cross and Blue Shield plans in certain U.S. regions hurt Cigna's ability to increase premiums enough to keep pace with rising medical costs." (Rapaport, 2006)

Like Aetna,...

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CIGNA Corporation (August 2006). Press releases. Retrieved August 14, 2006 at
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Dyson, E. (2002). Inspiring innovation. Harvard Business Review.
Enrado, P. (June, 2006). Aetna sharpens IT edge. Healthcare IT News. Retrieved August 21, 2006 at
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Hempel, J. & Brady, D. (January, 2006). Aetna: succession at full speed. Business Week. Retrieved August 16, 2006 at
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Pitney Bowes (2006). Aetna and Pitney Bowes mark ADF achievements. Retrieved August 18, 2006 at
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Singh, S. & Sawhney, T. (2006). Predictive analytics and the new world of retail healthcare. Health Management Technology. Retrieved September 13, 2006 at
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