CI
#<UNK>tine, that isn't a factor at all.
So to underline the MCR, our focus on physician engagement continues to deliver exactly the results we'd expect ---+ quality and affordable care to Medicare Advantage customers.
So the sanctions have not had an impact.
The quarter-over-quarter impact is two major factors.
First, there's less favorable impact from favorable prior-year development, so we had significant favorable prior-year development last year, de minimis amount of prior-year development this year.
Second, we are seeing some impact from the growth in the recent market expansions, and those markets, when we first did launch a market, tend to run at a higher MCR than our established markets, so that's somewhat shown up as a little bit of an increase in the quarter-over-quarter comparison.
But underlying the results, so excluding the prior year, our Medicare Advantage business results and the MCR are very consistent with our expectations.
We expect to see M&A opportunities as we go forward in the marketplace.
So as you recall, first, broadly, one of our priorities for M&A has been and continues to be seniors and MA in a broader sense of the word.
We are not aware of any impediment in any way, shape or form correlating the sanctions to our ability to be active from an M&A standpoint even in the current period.
<UNK>, I don't think we are going to give specific details, but you can rest assured it's going to have a negative sign in front of it.
I apologize.
It sounds like we temporarily had a line issue.
If you don't mind starting over with your question; unfortunately, the line blanked out for a period.
<UNK>, I don't think it's helpful to reconcile in detail, but a way to think about it is, and we tried to be very clear both in the press release and in our comments today, you could think about, as we step from the first-quarter results to this quarter, taking everything into consideration for the impact of the disability business and the life business, we noted a $0.90 change for the full year to our EPS outlook.
And to the prior comments, we indicated you can think about that as approximately driven by two-thirds of the disability portfolio and one-third by the life portfolio.
We had not provided a segment outlook for you, but as we stepped into the year, our expectations stepped down from start of the year through the first quarter.
We knew we had operational changes and, as I noted in my prepared remarks, it is clear that the magnitude of the impact and the timeframe to remediate is longer.
So we understood we were putting those processes in place.
We believe we made provisions for that, but the impact is order of magnitude significant relative to that.
But I think the, A, understanding we knew we were making the process changes; B, put some provisions forward for that, but, at the end of the day, the most important part for you to think about is that $0.90 impact for the year as we sit today with the majority of that, or two-thirds of that, more specifically being driven by disability.
So, first and foremost, the core MA business absent the step-up in costs for the MA sanctions activity is performing well.
Two, as we look to 2017, to the core of your question, we would expect to improve margins in part driven by the runoff or absence of the sanction costs.
And three, maybe broadly inferred in your question, we continue to look at this as an attractive both growth and earnings segment from the ability to both grow it and have attractive margins over time as we leverage the proven physician engagement models we have.
First, just to define for everybody's benefit, when we talk select segment for our Company, this is for employers with 51 to 250 employees, so the over 50 marketplace.
We have focused on bringing innovative, transparent both engagement and incentive-based models and over time our results here have been tremendous not just from a growth standpoint or earnings standpoint, but from the value we deliver back to those employers and employees by having those aligned models.
As for results, we have grown again this year.
Our customer base in a pattern at least on a year-to-date basis is similar to last year's pattern.
And to the core of your question, we continue to see this as an attractive growth market as employers in that space continue to look more aggressively toward alternatives that again are transparent and aligned and these programs are performing well and we are excited and optimistic about the future for this business.
Well, we are seeing pressure both in the on-exchange ACA compliant and the off-exchange ACA compliant.
Expect both.
Meaning our assumption for the remaining part of the year, yes.
And as we noted before, those programs that have the more advanced models with the physician-aligned collaboratives are performing better, and our expectation is to position as many markets as we are going to be in with those models into 2017.
As we noted, our employer health care business and our Global Supplemental or Global Individual business continues to perform very well.
Obviously, that performance was eclipsed by the items you made reference to.
So as you are looking for offsets or the positive forces, the positive forces come out of those two large well-performing businesses with the offsets that you made reference to.
<UNK>, I would ask you to think about every business has seasonality patterns that are attached to them.
So for example, in the employer health care business, we always have an uptick in spending in the latter part of the year to prepare for 1/1 activities and enrollment activities, etc.
That's an illustration of movement of seasonal patterns in the book of business.
The MLRs tend to perform differently because of the high deductibility plans, etc.
Simple answer is no.
<UNK>, obviously, a very important point you raise.
We are quite cognizant of the timing, the decision criteria, etc.
, and our team is poised to be able to dynamically manage that as the next 30-day window unfolds in front of us and we are prepared to make whatever trade-off decisions we need to make as our final judgment around the enrollment cycle unfolds.
I'm not going to comment or speculate on CMS's conclusion.
The most important piece is we are 100% focused on fully remediating and getting the validation as quickly as possible so we can put ourselves in a sustainable position.
Obviously, we will update you as soon as we have clarity and conclusion to the final steps there.
I'm not disclosing at this point in time.
As we noted, we expect as we look forward for 2017 we have margin improvement opportunities in the Medicare book of business in part driven by the removal of the remediation costs, and then we will talk further as the year unfolds relative to 2017 guidance more comprehensively.
A couple of comments, <UNK>.
Broadly speaking, we've been quite pleased over an elongated period of time for both the intersection of the service and productivity service delivery we provide to clients and customers.
The ongoing growth of that portfolio of businesses in very difficult economic times, low interest rates, low employment, growth rates, etc.
, and a tremendous margin level.
Our strategic objective has been to maintain margins in line with our historic performance and continue to grow that book and that portfolio.
These investments will put us in position to continue to further improve the customer experience, as I noted before, be aligned with emerging regulatory best practices and be in position to again exceed those margins on a long-term basis.
I think that's a good way of thinking about it, and as we think about infrastructure, as I noted before, this is not a technology problem; it's a workflow and human capital program.
So to be clear, we operate at about 27% today, which is low based on historical levels, low based on our goals and objectives.
We see the ability to raise that 10 points for, I will call it ordinary course of business, and illustratively 15 points for strategic M&A.
Broadly speaking, you should think about the vast majority of the costs and the resources for purposes of annual enrollment period as largely being variable.
So if you are putting them in buckets, nothing is ever at 100%, but you should think about them as largely variable.
Two, as noted by prior callers, the timeframe is rapidly coming upon us to make final decisions relative to ramping and staging.
That's both beneficial.
That is not a cliff decision in terms of your cost structure, the variability allows you to dial up and dial down, and we would expect to be confronting some focused decisions over the near-term 30-plus day window and we are highly focused on that.
<UNK>, historically, we've prioritized Medicaid below certain other segments, so seniors or Medicare, expanding our global footprint, expanding our retail capabilities as examples.
We have viewed that over time that the Medicaid marketplace would continue to move more toward, we will use the broad term, managed Medicaid, programs within states to focus on high risk populations where we believe we have the opportunity to create differentiated value through physician collaboratives or clinical models, etc.
And we believe over time that will continue to present opportunities be it organically or inorganically.
So it's a subset of the Medicaid world as it allows where we believe we could actually create differentiated value through either clinical engagement, physician engagement or both.
I would think about prior-year this way.
So in the quarter, we had about the same level of favorable prior-year department in our commercial employer business this year as last year, but we had reductions in both Individual and Medicare and that resulted in an overall de minimis amount for the entire Company.
Actually Individual is included, but so is our broader employer business.
So in the overall scheme of things, Individual is a smaller contribution to the trend result and, as I said when this came up earlier, we really don't see any significant changes in the underlying trend factors in the components.
Thank you.
So just briefly to conclude our call, I'd like to highlight some key points.
Cigna's second-quarter results reflected solid revenue and earnings contributions from our Global Health Care and Global Supplemental Benefits business and a disappointing financial performance in our Group Disability and Life segment, reflective of short-term challenges that will improve.
The 40,000 outstanding members of the Cigna team around the globe work diligently every day to fulfill our mission of improving the health, well-being and sense of security of the people we serve, and we will seek to continue to effectively operate our business guided by our strategic framework to create sustained value for customers, clients and shareholders.
Again, we thank you for joining our call today.
