Health insurer Cigna announced Thursday it will increase the minimum wage for its employees to $16 an hour and raise contributions to retirement accounts thanks to the passage of the Republican tax law signed by President Trump late last year.
The total cost invested in higher wages, mostly for frontline employees, will be $15 million, and $30 million for its additional 1 percent match to the 401(k) program. Cigna credited the freed up funds with the tax law, which reduced the corporate tax rate from 35 percent to 21 percent.
More than 30,000 of the company's workers are expected to benefit from the increased contribution to retirement funds.
“It is because of our employees that Cigna continues to deliver on our mission to improve the health, well-being and sense of security of those we serve,” David Cordani, Cigna CEO, said in a statement. “Reinvesting a portion of savings from tax reform in our employees is a reinvestment in our mission.”
The company made the announcement ahead of releasing its fourth-quarter earnings results from 2017. Total revenues for 2017 were $41.6 billion, an increase of 5 percent over 2016, driven by continued growth in Cigna's targeted customer segments.
"We’ve entered 2018 with considerable momentum for growth in each of our businesses, as we continue to invest in market-leading capabilities to create differentiated value for our stakeholders," Cordani said.
Shares in Cigna and other health insurers fell Tuesday after Amazon.com Inc., JPMorgan Chase & Co., and Berkshire Hathaway Inc. said they plan to form a new company to address healthcare for their workers. Cigna's shares fell 6 percent.
Asked during the earnings call about the announcement, Cordani replied, "We see initiatives like this providing more opportunities than not."
He said views the move as a potential move away from a fee-for-service model, which pays providers based on the number of services they provide rather than the quality of care that is delivered to make a patient better. The current model, he said, was "not sustainable" and he added he understood why employers were looking for better value. Cigna has been moving toward models that compensate providers more for their quality of care.