Summary of Signficant Accounting Policies

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2– Summary of Significant Accounting Policies

Basis of Presentation

The Consolidated Financial Statements include the accounts of Cigna Corporation and its subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation.  These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Amounts recorded in the Consolidated Financial Statements necessarily reflect management’s estimates and assumptions about medical costs, investment valuation, interest rates and other factors. Significant estimates are discussed throughout these Notes; however, actual results could differ from those estimates. The impact of a change in estimate is generally included in earnings in the period of adjustment. Certain reclassifications have been made to prior year amounts to conform to the current presentation.

Variable interest entities. See Note 13 for a discussion of consolidated variable interest entities.

Recent Accounting Guidance

The following tables provide information about recently adopted accounting guidance and accounting guidance not yet adopted that is applicable to Cigna.

Recently Adopted Accounting Guidance

Accounting Standard and Adoption Date	Effects of Adopting New Guidance
GUIDANCE ADOPTED IN 2017
Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 118 ("SAB 118"), adopted December 31, 2017	Guidance:
	•	Allows a company to recognize the effects of U.S. tax reform as provisional in its 2017 financial statements when it does not have the necessary information in reasonable detail to complete its accounting for the change in tax law.
	•	Establishes a maximum one-year measurement period that ends when a company has obtained the information necessary to finalize its accounting. During the measurement period, adjustments for the effects of the law will be recorded to the extent a reasonable estimate for all or a portion of the effects of the law can be made.
	Effects of adoption:
	•	The Company has reported reasonable estimates of the income tax effects of U.S. tax reform as provisional in its financial statements.
	•	See Note 20 for disclosures about the impact of U.S. tax reform on the Company's financial statements.

Accounting Guidance Not Yet Adopted

Accounting Standard and Effective Date Applicable for Cigna	Requirements and Expected Effects of New Guidance Not Yet Adopted
GUIDANCE TO BE ADOPTED JANUARY 1, 2018
Revenue from Contracts with Customers (Accounting Standards Update ("ASU") 2014-09 and related amendments)Required as of January 1, 2018	Requires:
	•	Companies to estimate and allocate the expected customer contract revenues among distinct goods or services based on relative standalone selling prices
	•	Revenues to be recognized as goods or services are delivered
	•	New disclosures including presenting relevant categories of revenues and information about related contract assets and liabilities
	•	Adoption through retrospective restatement with or without using certain practical expedients or adoption with a cumulative effect adjustment
	Expected effects:
	•	Guidance applies to the Company’s administrative service, mail order pharmacy and other non-insurance contracts, but does not apply to certain contracts within the scope of other GAAP, such as the Company's insurance and investment contracts accounted for under the Financial Accounting Standards Board's Accounting Standards Codification ("ASC") 944.
	•	The Company has completed its evaluation of the new requirements and the adoption of the new guidance will not have a material impact to its pattern of revenue recognition or net income.
	•	The Company will adopt the new guidance through retrospective restatement and is currently working to develop required disclosures and restate historical periods in line with its chosen method of adoption. The Company does not anticipate significant changes to its systems, processes or controls.
	•	The Company's cumulative effect of implementing this guidance will result in an immaterial decrease to the opening balance of retained earnings from establishing a contract liability for service fee revenue that must be recognized when services are provided after the termination of certain administrative service contracts.
	•	The Company also will reclassify certain fees as a result of clarifications in the new guidance and its related interpretations.
Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01)Required as of January 1, 2018	Requires:
	•	Entities to measure equity investments at fair value in net income if they are neither consolidated nor accounted for under the equity method
	•	Cumulative effect adjustment to the beginning balance of retained earnings at adoption
	Expected effects:
	•	Certain limited partnership interests carried at cost of approximately $200 million as of December 31, 2017 will be reported at fair value at adoption with future changes in fair value reported in net investment income.
	•	Changes in fair value for equity securities previously reported in accumulated other comprehensive income will now be reported in net realized investment gains.
	•	Retained earnings will increase by approximately $60 million after-tax on January 1, 2018.

Accounting Standard and Effective Date Applicable for Cigna	Requirements and Expected Effects of New Guidance Not Yet Adopted
GUIDANCE TO BE ADOPTED JANUARY 1, 2018
Intra-Entity Asset Transfers of Assets Other than Inventory (ASU 2016-16)Required as of January 1, 2018	Requires:
	•	Entities to recognize the tax impacts of all intra-entity sales of assets other than inventory even though the pre-tax effects of those transactions are eliminated in consolidation
	•	Modified retrospective approach for adoption with a cumulative-effect adjustment recorded in retained earnings
	Expected effects: the adoption of this standard will not have a material effect on the Company’s financial statements.
Clarifying the Definition of a Business (ASU 2017-01)Required as of January 1, 2018	Guidance:
	•	Revises the definition of a business and provides a more robust framework for entities to use in determining when a set of assets and activities is a business.
	•	Requires entities to apply this new definition to business transactions beginning in the first quarter of 2018.
	Expected effects: the Company does not expect this change in definition will have a material impact on its financial statements.
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07)Required as of January 1, 2018	Requires:
	•	Employers to separate the service cost component from the other components of net benefit cost
	•	Only service cost is eligible for capitalization (as either deferred policy acquisition costs or capitalized software), to be applied prospectively upon adoption
	•	Income statement captions used for each component of net benefit cost to be disclosed
	Expected effects: the Company does not expect the effect of this new guidance to be material to results of operations because its most significant plans are frozen. See Note 15 for additional information.
GUIDANCE TO BE EARLY ADOPTED JANUARY 1, 2018
Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12)Required as of January 1, 2019, with early adoption permitted in 2017	Guidance:
	•	Relaxes requirements for financial and nonfinancial hedging strategies to be eligible for hedge accounting and changes how companies assess effectiveness.
	•	Amends presentation and disclosure requirements to improve transparency about the uses and results of hedging programs.
	Expected effects: the Company is planning to adopt this guidance on January 1, 2018 with an immaterial impact to its financial statements for existing hedges.

Accounting Standard and Effective Date Applicable for Cigna	Requirements and Expected Effects of New Guidance Not Yet Adopted
GUIDANCE TO BE ADOPTED AFTER 2018 OR ADOPTION DATE HAS NOT BEEN DETERMINED
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02)Effective as of January 1, 2019 with early adoption permitted for reporting periods for which financials have not been issued.	Guidance:
	•	Allows companies to reclassify tax effects stranded in accumulated other comprehensive income as a result of U.S. tax reform to retained earnings.
	•	Requires additional disclosures of the company's accounting policy for releasing income tax effects from accumulated other comprehensive income.
	•	Allows companies to apply the guidance retrospectively or in the period of adoption.
	Effects of adoption:
	•	The Company is evaluating this new standard and its expected timing of adoption.
	•	If adopted as of December 31, 2017, approximately $230 million of accumulated other comprehensive income would have been reclassified to retained earnings.
Leases (ASU 2016-02)Required as of January 1, 2019	Requires:
	•	Balance sheet recognition of assets and liabilities arising from leases, including leases embedded in other contracts
	•	Additional disclosures of the amount, timing and uncertainty of cash flows from leases will be required
	•	Modified retrospective approach for leases in effect as of and after the date of adoption with a cumulative-effect adjustment recorded in retained earnings
	Expected effects:
	•	The Company is continuing to evaluate the impact this standard will have on its financial statements.
	•	While not yet quantified, the Company expects a material impact to the Consolidated Balance Sheets from recognizing additional assets and liabilities of operating leases upon adoption. The actual increase in assets and liabilities will depend on the volume and terms of leases in place at the time of adoption.
	•	The Company is implementing a new lease system in connection with the adoption.
Measurement of Credit Losses on Financial Instruments (ASU 2016-13)Required as of January 1, 2020, with early adoption permitted as of January 1, 2019	Requires:
	•	A new approach using expected credit losses to estimate and recognize credit losses for certain financial instruments such as mortgage loans, reinsurance recoverables and other receivables
	•	Changes in the criteria for impairment of available-for-sale debt securities
	•	Adoption using a modified retrospective approach with a cumulative-effect adjustment recorded in retained earnings
	Expected effects:
	•	The Company is evaluating this new standard, its expected timing of adoption and effects on its financial statements and disclosures.
	•	An additional allowance for future expected credit losses for certain financial instruments may be required at adoption.
Simplifying the Test for Goodwill Impairment (ASU 2017-04)Required as of January 1, 2020, with early adoption permitted as of January 1, 2017	Guidance:
	•	Simplifies the accounting for goodwill impairment by eliminating the need to determine the fair value of individual assets and liabilities of a reporting unit to measure a goodwill impairment.
	•	Redefines the amount of goodwill impairment to be equal to the amount by which a reporting unit’s carrying value exceeds its fair value, limited to the total amount of goodwill of the reporting unit.
	•	Requires prospective adoption.
	Expected effects: the Company is evaluating this new standard and its expected timing of adoption.

Significant Accounting Policies

The Company’s accounting policies are described either in this Note or in the applicable Notes to the Consolidated Financial Statements as indicated in the table below.

Note Number	Footnote and policy	Page
4	Earnings per share	71
7	Global Health Care medical costs payable	73
8	Liabilities for unpaid claims and claim expenses	75
9	Reinsurance	78
	·GMDB	79
	·GMIB	79
10	Fair value measurements	80
	·Fixed maturities, equity securities, short-term investments and derivatives	81
	·Separate accounts	83
	·Commercial mortgage loans	85
	·Contractholder deposit funds	85
	·Long-term debt	85
11	Investments, investment income and gains and losses	85
	·Fixed maturities and equity securities	85
	·Commercial mortgage loans	87
	·Other long-term investments	88
	·Short-term investments and cash equivalents	88
	·Net investment income	89
	·Realized investment gains and losses	89
12	Derivative financial instruments	89
13	Variable interest entities	91
15	Pension and other postretirement benefit plans	92
16	Employee incentive plans	95
17	Goodwill, other intangibles and property and equipment	98
20	Income taxes	100
21	Contingencies and other matters	102

A. Investments – Policy Loans

Policy loansare carried at unpaid principal balances plus accumulated interest, the total of which approximates fair value. These loans are collateralized by life insurance policy cash values and therefore have minimal exposure to credit loss. Interest rates are reset annually based on a rolling average of benchmark interest rates.

B. Cash and Cash Equivalents

Cash and cash equivalents are carried at cost that approximates fair value. Cash equivalents consist of short-term investments with maturities of three months or less from the time of purchase. The Company reclassifies cash overdraft positions to accounts payable, accrued expenses and other liabilities when the legal right of offset does not exist.

C. Premiums, Accounts and Notes Receivable and Reinsurance Recoverables

Premiums, accounts and notes receivable and reinsurance recoverables are reported net of allowances for doubtful accounts and unrecoverable reinsurance of $210 million as of December 31, 2017 and $ 203 million as of December 31, 2016. The Company estimates these allowances for doubtful accounts and unrecoverable reinsurance using management’s best estimates of collectability, taking into consideration the age of the outstanding amounts, historical collection patterns and other economic factors. See Note 22 for additional discussion of the allowance established in 2016 for the risk corridor receivable.

D. Deferred Policy Acquisition Costs

Costs eligible for deferral include incremental, direct costs of acquiring new or renewal insurance and investment contracts and other costs directly related to successful contract acquisition. Examples of deferrable costs include commissions, sales compensation and benefits, policy issuance and underwriting costs and premium taxes. The Company records acquisition costs differently depending on the product line. Acquisition costs for:

• Supplemental health, life and accident insurance products(primarily individual products) that comprise the majority of the Company’s deferred policy acquisition costs and group health and accident insurance products are deferred and amortized, generally in proportion to the ratio of periodic revenue to the estimated total revenues over the contract periods.
• Universal life productsare deferred and amortized in proportion to the present value of total estimated gross profits over the expected lives of the contracts.
• Other products are expensed as incurred.

Deferred policy acquisition costs also include the value of business acquired for certain acquisitions with material long-duration insurance contracts.The Company recorded amortization of deferred policy acquisition costs of $322 million in 2017, $292 million in 2016 and $286 million in 2015 primarily in other operating expenses.

Each year, deferred policy acquisition costs are tested for recoverability. For universal life and other individual products, management estimates the present value of future revenues less expected payments. For group health and accident insurance products, management estimates the sum of unearned premiums and anticipated net investment income less future expected claims and related costs. If management’s estimates of these sums are less than the deferred costs, the Company reduces deferred policy acquisition costs and records an additional expense.

E.Other Assets, including Other Intangibles

Other assets, including other intangibles consist primarily of GMIB assets, accrued net investment income, other intangible assets and various other insurance-related assets. See Note 9 for the Company’s accounting policy for GMIB assets and see Note 17 for the Company’s accounting policy for other intangibles. Additionally, these other assets include the carrying value of our equity-method investments in joint ventures in China, India (as of 2017) and other foreign jurisdictions.

F. Contractholder Deposit Funds

Liabilities for contractholder deposit funds primarily include deposits received from customers for investment-related and universal life products and investment earnings on their fund balances. These liabilities are adjusted to reflect administrative charges and, for universal life fund balances, mortality charges. In addition, this caption includes: 1) premium stabilization reserves under group insurance contracts representing experience refunds left with the Company to pay future premiums; 2) deposit administration funds used to fund non-pension retiree insurance programs; 3) retained asset accounts; and 4) annuities or supplementary contracts without significant life contingencies. Interest credited on these funds is accrued ratably over the contract period.

G. Future Policy Benefits

Future policy benefits represent the present value of estimated future obligations under long-term life and supplemental health insurance policies and annuity products currently in force. These obligations are estimated using actuarial methods and consist primarily of reserves for annuity contracts, life insurance benefits, GMDB contracts (see Note 9 for additional information) and certain health, life and accident insurance products of our Global Supplemental Benefits segment.

Obligations for annuities represent specified periodic benefits to be paid to an individual or groups of individuals over their remaining lives. Obligations for life insurance policies and GMDB contracts represent benefits expected to be paid to policyholders, net of future premiums expected to be received. Management estimates these obligations based on assumptions as to premiums, interest rates, mortality or morbidity, future claim adjudication expenses and surrenders, allowing for adverse deviation as appropriate. Mortality, morbidity and surrender assumptions are based on the Company’s own experience and published actuarial tables. Interest rate assumptions are based on management’s judgment considering the Company’s experience and future expectations, and range from 0.1% to 9%. Obligations for the run-off settlement annuity business include adjustments for realized and unrealized investment returns consistent with GAAP when a premium deficiency exists.

H. Redeemable Noncontrolling Interests

Products and services are offered in Turkey and India through joint venture entities. The Company is the principal equity holder and primary beneficiary of the Turkey joint venture and accordingly, this entity is consolidated. In 2017, Cigna modified the agreement governing its joint venture in India due to changes in the local regulatory environment that require control by a local partner. As a result of the changes in the joint venture agreement, the Company determined that it is no longer the primary beneficiary of the joint venture and, effective with the third quarter of 2017, no longer consolidates its results.

As of December 31, 2017 the redeemable noncontrolling interests on our Consolidated Balance Sheets represent the Turkey joint venture partner’s preferred and common stock interests in the entity. Our joint venture partner may, at their election, require the Company to purchase their redeemable noncontrolling interests. We also have the right to require our joint venture partner to sell their redeemable noncontrolling interests to us. The redeemable noncontrolling interests were recorded at fair value as of the dates of purchase.  When the estimated redemption value for a redeemable noncontrolling interest exceeds its carrying value, an adjustment to increase the redeemable noncontrolling interest is recorded with an offsetting reduction to additional paid-in capital. When an adjustment is made to the carrying value of the redeemable noncontrolling interest, the calculation of shareholders’ net income per share will be adjusted if the redemption value exceeds the greater of the carrying value or fair value.

I. Accounts Payable, Accrued Expenses and Other Liabilities

Accounts payable, accrued expenses and other liabilities include liabilities for pension, other postretirement and postemployment benefits (see Note 15), GMIB contract liabilities (see Note 9), self-insured exposures, management compensation, cash overdraft positions and various insurance-related liabilities, including experience-rated refunds, reinsurance contracts and the risk adjustment and minimum medical loss ratio rebate accruals under The Patient Protection and Affordable Care Act (the “ACA”). Legal costs to defend the Company’s litigation and arbitration matters are expensed when incurred in cases where the Company cannot reasonably estimate the ultimate cost to defend. In cases where the Company can reasonably estimate the cost to defend, a liability for these costs is accrued when the claim is reported.

J. Translation of Foreign Currencies

The Company generally conducts its international business through foreign operating entities that maintain assets and liabilities in local currencies that are generally their functional currencies. The Company uses exchange rates as of the balance sheet date to translate assets and liabilities into U.S. dollars. Translation gains or losses on functional currencies, net of applicable taxes, are recorded in accumulated other comprehensive income (loss). The Company uses average monthly exchange rates during the year to translate revenues and expenses into U.S. dollars.

K. Premiums and Related Expenses

Premiums for group life, accident and health insurance and managed care coverages are recognized as revenue on a pro rata basis over the contract period. Benefits and expenses are recognized when incurred and, for our Global Health Care insured business, medical costs are presented net of pharmaceutical manufacturer rebates. For experience-rated contracts, premium revenue includes an adjustment for experience-rated refunds based on contract terms and calculated using the customer’s experience (including estimates of incurred but not reported claims).

Premium revenue also includes an adjustment to reflect the estimated effect of rebates due to customers under the commercial minimum medical loss ratio provisions of the ACA. These rebates are settled in the year following the policy year.

Premiums received for the Company’s Medicare Advantage Plans and Medicare Part D products from the Centers for Medicare and Medicaid Services (“CMS”) and customers are recognized as revenue ratably over the contract period. CMS provides risk-adjusted premium payments for Medicare Advantage Plans and Medicare Part D products based on the demographics and wellness of enrollees. The Company recognizes periodic changes to risk-adjusted premiums as revenue when the amounts are determinable and collection is reasonably assured. Additionally, Medicare Part D premiums include payments from CMS for risk sharing adjustments. The risk sharing adjustments are estimated quarterly based on claim experience by comparing actual incurred drug benefit costs to estimated costs submitted in original contracts. These adjustments may result in more or less revenue from CMS. Final revenue adjustments are determined and settled with CMS in the year following the contract year. Premium revenue also includes an adjustment to reflect the estimated effect of rebates due to CMS under the Medicare Advantage and Medicare Part D minimum medical loss ratio provisions of the ACA.

The ACAprescribed three programs to mitigate the risk for participating health insurance companies selling coverage on the public exchanges: risk adjustment, reinsurance and risk corridor. The reinsurance and risk corridor programs expired at the end of 2016, while the permanent risk adjustment program continues. A summary of these programs and the Company’s accounting policy is provided below.

• The risk adjustment program reallocates funds from insurers with lower risk populations to insurers with higher risk populations based on the relative risk scores of participants in non-grandfathered plans in the individual and small group markets, both on and off the exchanges. We estimate our receivable or payable based on the risk of our members compared to the risk of other members in the same state and market, considering data obtained from industry studies and the United States Department of Health and Human Services (“HHS”). Receivables or payables are recorded as adjustments to premium revenue based on our year-to-date experience when the amounts are reasonably estimable and collection is reasonably assured. Final revenue adjustments are determined by HHS in the year following the policy year.

• The reinsurance program (discontinued as of December 31, 2016) was designed to provide reimbursement to insurers for high cost individual business sold on or off the public exchanges. Reinsurance contributions associated with non-grandfathered individual plans were reported as reductions in premium revenues, and estimated reinsurance recoveries were established with offsetting reductions in Global Health Care medical costs. Reinsurance fee contributions for other insured business were reported in other operating expenses.

• The risk corridor program (also discontinued as of December 31, 2016) was designed to limit insurer gains and losses by comparing allowable medical costs to a target amount as defined by HHS. The Company recorded receivables or payables as adjustments to premium revenue based on year-to-date experience when the amounts were reasonably estimable and collection was reasonably assured. In 2016, the Company also recorded an allowance against these risk corridor receivables that is discussed further in Note 22.

Premiums for individual life, accident and supplemental health insurance and annuity products, excluding universal life and investment-related products, are recognized as revenue when due. Benefits and expenses are matched with premiums.

Revenue for universal life products is recognized as follows:

• Investment income on assets supporting universal life products is recognized in net investment income as earned.
• Charges for mortality, administration and policy surrender are recognized in premiums as earned. Administrative fees are considered earned when services are provided.

Benefits and expenses for universal life products consist of benefit claims in excess of policyholder account balances and income earned by policyholders. Expenses are recognized when claims are incurred, and income is credited to policyholders in accordance with contract provisions.

The unrecognized portion of premiums received is recorded as unearned premiums.

L. Fees, Related Expenses and Mail Order Pharmacy Revenues and Costs

Contract fees for administrative services only (“ASO”) programs and pharmacy programs and services are recognized in fees and other revenues as services are provided, net of estimated pharmaceutical manufacturer rebates payable to ASO clients using our network of retail pharmacies and estimated refunds under performance guarantees. Expenses associated with these programs and services are recognized in other operating expenses as incurred, net of estimated pharmaceutical rebates from manufacturers for prescriptions filled through our network of retail pharmacies.

In some cases, the Company provides performance guarantees associated with meeting certain service standards, clinical outcomes or financial metrics. If these service standards, clinical outcomes or financial metrics are not met, the Company may be financially at risk up to a stated percentage of the contracted fees or a stated dollar amount. The Company defers revenues for estimated payouts associated with these performance guarantees. Approximately 11% of ASO fees reported for the year ended December 31, 2017 were at risk under performance guarantees, with reimbursements estimated to be less than 1% of revenues.

Revenues for investment-related products are recognized as follows:

• Investment income on assets supporting investment-related products is recognized in net investment income as earned.
• Contract fees based upon related administrative expenses are recognized in fees and other revenues as they are earned ratably over the contract period.

Benefits and expenses for investment-related products consist primarily of income credited to policyholders in accordance with contract provisions.

Mail order pharmacy revenues and the cost of prescriptions are recognized as each prescription is shipped. Mail order pharmacy revenues are presented net of estimated pharmaceutical manufacturer rebates payable to ASO clients using our mail order business. Mail order pharmacy costs include the cost of prescriptions sold and other costs to operate this business including supplies, shipping and handling, net of estimated pharmaceutical rebates from manufacturers for prescriptions filled through our mail order business.