How Cigna Actually Makes Money (Explained Like You’re Seven — But Smarter Than Most Adults)

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How Cigna Actually Makes Money (Explained Like You’re Seven — But Smarter Than Most Adults)

The Quick Take

Cigna is like a giant piggy bank that helps people pay for doctors and medicine — but it doesn’t make medicine, and it doesn’t own hospitals.

It’s more like a referee for healthcare money. It stands in the middle, makes sure everyone plays by the rules, and takes a small fee every time the ball moves.

And because America’s healthcare system moves trillions of dollars every year… even a tiny slice makes Cigna very, very rich.

Imagine This

You break your arm playing soccer. (Ouch.)
Your parents pay for health insurance every month so they don’t have to pay the full doctor bill.

Here’s what happens:

You go to the doctor.
The doctor sends a big bill to Cigna — let’s say $1,000.
Cigna pays most of it, maybe $800.
You pay a smaller part, maybe $200.
Cigna still keeps some money from all the monthly payments it collects.

That leftover money — after paying doctors and keeping its lights on — is profit.

That’s the whole trick.

Cigna’s business model is basically “collect more than you pay out, but don’t make it too obvious.”

The Three Ways Cigna Makes Money

Cigna has three big money-making machines, and all of them are hiding in plain sight:

1. Health Insurance (The Piggy Bank)

This is the normal part: people or companies pay Cigna every month to cover hospital visits, surgeries, and checkups.

Cigna bets that most people won’t get sick enough to use all that money. The leftover funds — after paying for claims — become profit.

If you’ve ever bought movie tickets for a film you didn’t go see, you already understand how insurance works.

2. Evernorth (The Medicine Middleman)

Cigna also owns Evernorth, a giant pharmacy benefit manager.

That means it helps decide which medicines are covered, how much they cost, and how pharmacies get paid.

Whenever someone picks up medicine at CVS or Walgreens, there’s a good chance Evernorth quietly moves the money behind the scenes — and takes a tiny fee for doing so.

It’s like a tollbooth for medicine: each time a car drives through (a prescription gets filled), Evernorth gets paid.

3. Data and Smart Predictions (The Fortune Teller)

Cigna collects mountains of data about doctor visits, prescriptions, and patient habits.
It uses that data to:

Predict who might get sick soon.
Help companies design cheaper health plans.
Negotiate better prices with hospitals and drugmakers.

Think of it like a weather app — but for your health. The better Cigna predicts the storm, the more money it saves.

How Cigna’s Money Math Works

Cigna makes money off something called the medical loss ratio, or MLR.

If people give Cigna $1 in premiums, and Cigna spends 80 cents paying doctors, that means 20 cents are left for admin, profit, and growth.

That 20 cents — multiplied by millions of people — adds up to billions.

In a good year, Cigna’s MLR might be 82%. In a bad year (say, during a pandemic), it might hit 88–90%.
But because Cigna has Evernorth (the drug tollbooth), it still earns steady fees even when healthcare costs rise.

That’s what makes it one of the most reliable profit engines in the healthcare world.

Why Cigna Is So Big

Cigna helps over 190 million people around the world manage their healthcare — that’s like half the U.S. population, plus a few extra football stadiums.

With that kind of scale, it can:

Buy medicine cheaper.
Negotiate better deals with hospitals.
Use data to set smarter prices for everyone.

It’s a snowball: the more people Cigna insures, the more money it moves, the more negotiating power it gets, and the more savings it pockets.

That’s why it’s worth over $80 billion today — and why Wall Street loves it.

Why It Works (and Keeps Working)

Cigna’s genius isn’t in being flashy — it’s in being boring.
Boring is good when you’re managing risk.

Here’s what makes it unstoppable:

Scale: Millions of customers mean predictable math.
Diversity: Insurance + PBM + analytics = three steady income streams.
Stickiness: Once companies choose Cigna for employee health plans, switching is painful — new networks, new forms, new systems.
Cash Flow: Cigna collects premiums upfront but pays bills later — earning investment income in the meantime.

It’s like holding everyone’s lunch money, investing it for a while, and still having enough left to buy dessert.

The Funny (But True) Part

Most people think Cigna just “pays doctor bills.”
In reality, it’s one of the most sophisticated math companies on Earth.

Every single year, it:

Processes hundreds of millions of claims.
Predicts how often people will get sick.
Prices insurance plans to cover all that risk.
Still finds a way to make billions.

That’s not luck — that’s actuarial magic.

The Risks (Because Nothing’s Perfect)

Cigna isn’t untouchable — it’s just very good at being cautious.
Here’s what could make its life harder:

Government Rules: If new laws make drug prices more transparent, Cigna’s Evernorth might make less money.
Higher Medical Costs: If hospitals and drugmakers raise prices faster than Cigna can adjust, profits shrink.
Competition: UnitedHealth and CVS have similar models and are fighting for the same customers.
Politics: Any move toward “Medicare for All” could cap profits or change how private insurers operate.

But Cigna’s diversified model means it always has a backup plan. When one part hurts, another part helps.

The Future: Cigna as a Health Math Company

Cigna’s future isn’t about paying doctor bills — it’s about using data to prevent them.

Expect more investment in:

Virtual care and telehealth.
AI tools that predict expensive diseases before they happen.
Behavioral health programs to reduce stress and burnout.

If Cigna keeps people healthier, it pays fewer claims. That’s good for customers — and even better for Cigna’s margins.

My Take: The Healthcare Tollbooth

Cigna isn’t just an insurance company. It’s a tollbooth on the road to every doctor’s office and pharmacy.

Every time money changes hands in healthcare, Cigna takes a little toll — not enough to notice, but enough to build an empire.

It doesn’t need to invent the next miracle drug or open a single hospital.
It just needs to keep the system running smoothly — and collect its share along the way.

That’s why, even in the most expensive healthcare system on Earth, Cigna always wins quietly.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.

MACROHINT

MACROHINT

How Cigna Actually Makes Money (Explained Like You’re Seven — But Smarter Than Most Adults)