Wellcare's $158M Deal Signals Medicaid Shift

GOLDMINE Its all about business

While health plans struggle to make profits off individuals buying commercial coverage on public exchanges under the Affordable Care Act, the insurance industry still sees promise in the law’s Medicaid expansion.

Take Wellcare Health Plans’ announcement that it has signed a deal to buy the Arizona operations of Care1st Health for $157.5 million in a deal that will add 114,000 Medicare and Medicaid beneficiaries in the state’s largest market, Maricopa and Pima counties. “Our acquisition of Care1st Arizona provides us with an opportunity to expand our footprint into Arizona’s growing Medicaid and Medicare markets,” said Ken Burdick, WellCare’s chief executive officer.

A demonstrator in support of the Affordable Care Act holds up a “Don’t Take My Care” sign after the U.S. Supreme Court ruled 6-3 to save Obamacare tax subsidies on June 25, 2015. (Photo: Andrew Harrer/Bloomberg)

To be sure, Arizona has a booming aging population of seniors enrolling in Medicare plans and its Medicaid market has come off of two years of large growth. Most of Arizona’s 1.6 million Medicaid beneficiaries are enrolled in private managed care plans, benefiting national players like Wellcare, Aetna, UnitedHealth Group and Centene that are now looking to gobble up smaller plans with less scale.
“The increased consolidation activity over the past several months bears watching as sub-scale plans exit and scale players seek to grow, optimize returns and spread administrative costs through rolling up smaller plans,” PwC’s Ari Gottlieb, wrote in an analysis of the Medicaid market that was released last month.

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Managed-care plans are taking on an unprecedented role in providing health coverage to poor Americans across the country thanks in part to more states opting to go along with the ACA’s Medicaid expansion. PwC said 73% of Medicaid beneficiaries–or 54.7 million of the 75.2 million covered by program–are enrolled in private plans that contract with the Medicaid program.
“Plans that achieve the scale necessary to invest to support existing business today and the more complex business of tomorrow will likely be most successful,” the PWC report said. “Service providers that recognize where the market is headed and can deliver meaningfully differentiated capabilities, with real performance impacts, will likely be most successful in the market.”
Wellcare executives said they plan to provide more details of the proposed purchase during their Nov. 1 third-quarter earnings call.

source - http://www.forbes.com

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