Centene to Enter New York State Individual Health Market

Centene provides coverage for about 12 million people

(Photo: Thinkstock) (Photo: Thinkstock)

Centene Corp., a Medicaid plan manager that has been doing well in the Affordable Care Act public exchange market, is expanding into New York state.

The St. Louis-based company said Tuesday it will pay $3.75 billion to acquire "substantially all of the assets" of New York State Catholic Health Plan Inc., which does business as Fidelis Care. Fidelis is a nonprofit health coverage provider based in New York.

Fidelis was providing or administering health coverage for 1.6 million people on June 30, and it generated about $4.8 billion in revenue during the first half of the year. The company competes in the Medicaid plan, Children's Health Insurance Program and individual major medical markets in New York state. 

(Related: New York Health Insurers Ask for 16.6% Boost to ACA Exchange Rates

Fidelis has been selling commercial major medical coverage through New York's state-based ACA exchange, NY State of Health.

Fidelis has faced big ACA risk-adjustment program bills in connection with its individual major medical operation in recent years: It owed about $57 million to the ACA risk-adjustment program for 2015, and $72 million for 2016, according to the Centers for Medicare and Medicaid Services.

Essential Plan Coverage

Fidelis has also offered Essential plan coverage. The Essential plan program is based on the ACA Basic Health Plan program provision. The provision lets states offer the lowest-income residents who could be eligible for public exchange coverage access to a state-managed alternative. The alternative program resembles a managed Medicaid program and lets participants choose between signing up for two or more standard plans designed and organized by the state government.

Minnesota and New York state have been the only states with Basic Health Plan program plans. The emergency program Iowa has been designing as a potential backup for ordinary individual commercial health insurance market, in case the state's market fails in 2018, appears to resemble a Basic Health Plan program.

2018 (Image: iStock)

(Image: iStock)

If many states suffer from sudden individual commercial health market failure in 2018, they may follow Iowa's lead and try to fill in coverage access gaps by quickly setting up programs similar to New York's Essential plan program. That could expand the market for Essential plan program administration services.

Centene's Strategy

Centene has been providing public program or commercial coverage for about 12 million people.

Centene says it already has the cash it needs to complete the Fidelis deal. The financing includes $2.3 billion in cash from the issuance of new equity and $1.6 billion in new long-term debt.

Centene would keep the Rev. Patrick Frawley, the current chief executive officer of Fidelis, as the head of the Fidelis Care operations, it would keep the Fidelis Care offices in Queens, Albany, Buffalo, Rochester and Syracuse.

Centene hopes toclose on Fidelis by March 31. 

--- Read 10 Top ACA Individual Risk-Adjustment Bills on ThinkAdvisor.


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