WellCare Agrees to Buy Meridian

From Health Plan Weekly

WellCare Health Plans, Inc. on May 29 unveiled a $2.5 billion deal to purchase Meridian Health Plan of Michigan, Inc., Meridian Health Plan of Illinois, Inc. and MeridianRx. Meridian serves about 1.1 million Medicaid, Medicare Advantage (MA), integrated dual-eligible and Affordable Care Act (ACA) marketplace members.

The proposed purchase of Meridian was motivated in no small part by a desire to become an even bigger force in government-sponsored care. Purchasing Meridian will increase WellCare’s membership in Medicaid by nearly 40%, add 27,000 MA members and expand the insurer’s geographic footprint by adding three new states — Michigan, Indiana and Ohio.

The transaction will also give WellCare a chance to get back into the ACA marketplaces. Jay Godla of PWC’s consulting practice Strategy& says it makes sense that WellCare is considering getting back in the exchanges, as "largely the Medicaid plans are the ones that have made money consistently" in that market.

Perhaps one of the most attractive assets that Meridian can provide to WellCare, though, is its fully integrated, proprietary PBM platform MeridianRx.

Meridian's Medicaid-focused PBM would complement WellCare's existing capabilities in specialty pharmacy, according to Jefferies analyst David Windley. It would also give WellCare "optionality," he wrote in a research note, as the insurer’s management "has expressed some reservations about the CVS [Health Corp.] deal with [Aetna Inc.], presumably not fully comfortable with the 'firewall' protections of its data and strategies."

Overall, WellCare estimates the deal will contribute 40 cents to 50 cents to its adjusted earnings per share in 2019, 70 cents to 80 cents in 2020 and $1 or more in 2021.

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