A page from the 2019 U.S. Medicare Handbook is photographed Thursday, Nov. 8, 2018, in Washington. ... [+]
Centene's decision to buy WellCare Health Plans for more than $15 billion gives the combined national health insurer a stronger presence in the fast-growing Medicare Advantage business.
Both Centene and WellCare are in similar government health insurance businesses and better known for administering Medicaid benefits for poor Americans in contracts with states across the country. Centene also sells subsidized individual coverage known as Obamacare in 20 states under the Affordable Care Act and boasts 20% market share in that business.
On Wednesday, Centene said its proposed acquisition of WellCare gives the combined company 22 million members in all 50 U.S. states and combined 2019 revenues of $97 billion based on projections the companies have made.
With the Trump administration and Republicans in Congress constantly threatening the ACA’s individual coverage known as Obamacare as well as the ACA’s Medicaid expansion, a more certain bet for health insurers these days could be in administering Medicare benefits for seniors. Medicare Advantage plans contract with the federal government to provide extra benefits and services to seniors, such as disease management and nurse help hotlines, with some even providing vision and dental care and wellness programs.
The Trump administration is changing rules to allow private health insurers to offer more benefits in Medicare Advantage plans they sell. And Centene and WellCare are already fighting with rivals and startups to take advantage of more than 10,000 baby boomers turning 65 every day to become eligible for Medicare.
An acquisition of WellCare will allow Centene to gain scale in more markets and potentially better compete with bigger players in the Medicare Advantage business like Humana, UnitedHealth Group and CVS Health’s Aetna health insurance business.
"WellCare brings to Centene a high-quality Medicare platform and further extends Centene's robust Medicaid offerings," the companies said in a statement.
Centene’s enrollment in Medicare plans, including Medicare Advantage, rose 25% to 416,900 in the fourth quarter of last year compared to 333,700 in the fourth quarter of 2017. Centene had 14 million total members at the end of 2018, company reports show. Meanwhile, WellCare’s enrollment in Medicare plans including Medicare Advantage increased nearly 10%, or by 49,000, to 545,000 in the fourth quarter of last year compared to 496,000 in the fourth quarter of 2017.
But the combined Medicare Advantage enrollment of Centene and WellCare is still several times smaller than that of bigger insurers like UnitedHealth Group, which ended 2018 with 4.9 million Medicare Advantage enrollees.
A merger between Centene and WellCare would allow the combined company to catch-up more quickly. The popularity of Medicare Advantage plans among seniors and the rule changes to allow these plans to cover more supplemental benefits are expected to boost total enrollment to 38 million, or 50% market penetration by the end of 2025, according to L.E.K. Consulting.
Michael Neidorff, chairman and chief executive officer of Centene Corp., walks to the morning ... [+]
"This transformational combination creates a leading healthcare enterprise that is committed to helping people live healthier lives through a localized approach and provides access to high-quality healthcare through a wide range of affordable health solutions," Centene's Chairman and Chief Executive Officer Michael Neidorff said.
But WellCare also brings Centene a bigger business in administering Medicare part D drug benefits for seniors as well, executives said. "By combining with Centene, we will create a more competitive, diversified company that is better able to deliver fully integrated, high-quality, cost-effective services for our members and government partners," WellCare Chief Executive Officer Ken Burdick said.
