Wednesday, May 30, 2018

WellCare to buy Meridian for $2.5 billion, boosting its Medicaid membership


By Shelby Livingston  | May 29, 2018 (Updated at 7:15 p.m. ET)

WellCare Health Plans has agreed to acquire Medicaid insurer Meridian Health Plan for $2.5 billion, it announced Tuesday.

The insurers expect the deal to close by the end of 2018. Tampa, Fla.-based WellCare said the acquisition will bolster its Medicaid business by boosting membership in several states. WellCare will also benefit from adding Meridian's in-house pharmacy benefit manager MeridianRx to its portfolio.

The deal "will grow and diversify our Medicaid and Medicare Advantage businesses" and "add new and enhance existing capabilities," WellCare CEO Kenneth Burdick said on Tuesday.

WellCare's announcement comes amid rampant consolidation in the health insurance industry, as health plans pair up with other insurers, ambulatory care providers and PBMs. Anthem last week bought Aspire Health, a Nashville-based palliative care company. Humana has struck deals to buy stakes in home health services provider Kindred Healthcare and hospice operator Curo Health in recent months.

While MeridianRx is a relatively small operation serving mostly Meridian members, bringing a PBM in house could give WellCare a foundation to grow its pharmacy management capabilities as fellow insurers Aetna and Cigna Corp. pair up with PBM giants CVS Health and Express Scripts, respectively.

"This transaction will provide us with additional insights into managing pharmacy costs and improving quality through the integration of pharmacy and medical care," Burdick said. "In addition, it will give us more transparency into the pharmacy ecosystem as we continue to focus on delivering high quality affordable care for our members and lower costs for our state and federal customers."

WellCare has a PBM contract with CVS through 2020, and its officials said it's too early to know what will happen with that relationship in the future.

WellCare is no stranger to M&A. It closed its $800 million acquisition of Universal American Corp. in April 2017, boosting its Medicare Advantage membership by about 120,000 members. But the Meridian deal is all about Medicaid.

Detroit-based Meridian, a family-owned for-profit managed care organization, serves 1.1 million Medicaid, Medicare Advantage and health insurance marketplace members in Michigan, Illinois, Indiana and Ohio. That includes 508,000 Medicaid members in Michigan and 565,000 Medicaid members in Illinois as of May 1. It also covers 27,000 Advantage members, and 6,000 Michigan health insurance exchange members.

Combined, the deal would create a company with 5.4 million members and $23 billion in annual revenue, WellCare said. The insurer's revenue totaled $17 billion in 2017, and its profit totaled $373.7 million.

The deal would also boost WellCare's Medicaid membership of 4.3 million at the end of the first quarter by 40%, and give the insurer the No. 1 market share in six states, up from four. Adding Meridian's Advantage membership to its rolls would expand WellCare's footprint in that line of business to 31 state from 28.

WellCare does not participate in the Affordable Care Act exchanges, having exited the two states where it did sell plans back in 2016. But Burdick said WellCare has retained the capabilities needed to serve exchange customers and suggested the deal with Meridian could lead WellCare to jump back into the exchanges in the future.

"We believe that the combination of our two companies will result in an enhanced ability to successfully participate in the exchanges beyond Michigan and provide optionality for WellCare should exchanges eventually become more stable," Burdick said.

Given Meridian's strong brand, the company will keep its name once the deal closes, WellCare said, but Meridian CEO David Cotton and the rest of the Cotton family won't stay on.

Shelby Livingston is an insurance reporter. Before joining Modern Healthcare in 2016, she covered employee benefits at Business Insurance magazine. She has a master’s degree in journalism from Northwestern University’s Medill School of Journalism and a bachelor’s in English from Clemson University.


No comments:

Post a Comment