Big merger changes Medicaid insurance equation in Georgia

The merger of insurers Centene and WellCare will create a company with a dominant position in Georgia’s managed care market for Medicaid.

The $17 billion deal, which closed Thursday, will give the resulting entity roughly two-thirds of the Medicaid HMO business in the state.

And that market power has medical providers worried about the company driving tougher bargains in setting rates for reimbursements on medical services. Leading pharmacy and physician organizations opposed the merger here in Georgia, but the deal received state regulatory approval in September.

Such consolidation has shaken up the health insurance industry, just as it has the hospital marketplace.

State officials said Friday that they’re analyzing the merger situation. “We’re considering next steps,’’ said Chas Strong, spokesman for the Georgia Department of Community Health, which runs the Medicaid program in the state.

The resulting company will have more than 800,000 Medicaid and PeachCare members in the state. WellCare is now a wholly owned subsidiary of Centene.

Centene, the acquiring company, currently runs Georgia entities Peach State Health Plan and Ambetter, which offers health insurance exchange plans.

(Here’s a recent GHN article about Ambetter and the exchange.)

The resulting company will serve more than 24 million members nationally. It’s one of the largest insurers for government-sponsored health plans.

Centene is also the largest insurer for individual coverage under the Affordable Care Act, with nearly 1.9 million health plan members who buy such coverage in 20 states on government exchanges, Forbes reported. Centene is expanding in 10 of these states for 2020.

Before the deal closed, Centene and WellCare made previous moves to divest certain Medicaid plans in order to get federal and state approval for the merger. CVS Health bought Centene’s Medicare and Medicaid plans in Illinois, and Anthem acquired WellCare’s Medicare and Medicaid plans in Missouri and Nebraska.

Such spinoffs didn’t happen in Georgia.

Three medical provider organizations wrote a September letter to state Insurance Commissioner John King, asking him not to approve the deal in Georgia. Approval from state regulators is needed for such a merger.

“The undersigned oppose the merger on the grounds that it will substantially lessen competition, be hazardous to Georgia Medicaid managed care patients, and that Centene may lack the competence such that the acquisition would not be in the interest of WellCare patients or the public,” said the letter, signed by the Georgia Pharmacy Association, the Medical Association of Georgia, and the Georgia Society of Clinical Oncology.

The deal received King’s approval in September.

Nationally, the American Hospital Association had urged the Justice Department to thoroughly review the merger, arguing it could reduce competition among managed Medicaid, Medicare Advantage and Affordable Care Act exchange plans.

Centene hopes adding WellCare will bolster its presence in Medicare Advantage, a lucrative, fast-growing segment of the health insurance industry, Modern Healthcare reported.

“We are pleased to have completed this transformational acquisition to create a leading health care enterprise committed to helping people live healthier lives through access to high-quality and affordable health care solutions,” Michael Neidorff, Centene’s chairman, president and CEO, said in a statement Thursday. “Through the integration planning process, it has become even more apparent that our goals, cultures and values are aligned. Centene is committed to building on our mission to further improve the health of the communities we serve. We look forward to Centene’s next chapter where we will continue to drive growth and create value for shareholders.”

Medical providers in Georgia received letters from Peach State on Friday. One letter, obtained by GHN, said the deal “will allow us to become a more robust health plan and enhance the delivery of best-in-class care to our members.’’

“Right now, nothing is changing.  You should continue to treat members from each health plan as you do under your current contract(s).’’

Centene has estimated that the companies’ combined revenue would be near $100 billion.