Centene Corp. announced that it will buy fellow Medicaid insurer WellCare Health Plans in an estimated $17.3 billion deal. When finalized, the two insurers would cover nearly 22 million people in Medicare, Medicaid and the ACA exchanges.
Centene CEO Michael Neidorff will serve as chairman and CEO of the merged company. Centene’s shareholders would own 71% of the merged insurer and its board would fill nine of the 11 board seats after its projected close in the first half of 2020.
Combined, the merged company would have more $80 billion in revenue and $1.3 billion in net income. The company would be the largest Medicaid insurer with more than 12 million beneficiaries a top five Medicare insurer.
The announcement of the deal comes on the heels of a Department of Justice (DOJ) decision that calls into question the future of the Affordable Care Act (ACA).
This decision was a major change from a previous argument in support of the ACA. The new decision is likely to affect both Centene and WellCare negatively.
Centene, to accelerate growth, will be more dependent on its subsidiaries including MHM Services, a national provider of healthcare and staffing services to correctional systems and other government agencies which it acquired in 2018.
MHM provides behavioral health, medical and dental services to governmental agencies in a variety of patient care settings, including correctional facilities, state hospitals, courts, juvenile facilities and community clinics. The business serves over 330,000 individuals in over 300 facilities across the United States.
Centurion, Centene’s joint venture subsidiary with MHM Services Inc., provides comprehensive healthcare services to individuals incarcerated in Florida, Massachusetts, Minnesota, Mississippi, New Mexico, Tennessee and Vermont state correctional facilities.
Another subsidiary that will be important for Centene moving forward is Envolve Pharmacy Solutions. On January 1, 2006, Centene added Envolve Pharmacy Solutions (formerly US Script) to its specialty services division, CenCorp Health Solutions.
Envolve partnered with CVS Caremark in 2017 for pharmacy claims processing and pharmacy network management. Envolve Pharmacy Solutions transforms the traditional pharmacy benefit delivery model through flexible services that improve outcomes for members and manage costs for plan sponsors. A combined pharmacy benefit and specialty drug management solution, Envolve Pharmacy Solutions serves over nine million members across the United States.
In March 2018, Centene announced a strategic partnership with RxAdvance to create its next generation pharmacy management solution. Magnolia Health is the first of Centene’s health plans to implement this new model. Centene, since the acquisition, has provided the investment to RxAdvance to develop a more transparent version of the PBM model on a market-by-market basis through 2019.