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July 09, 2012 at 06:55 AM
WellPoint Inc. will spend about $4.46 billion for Medicaid coverage provider Amerigroup Corp. in a deal that more than doubles the health insurer’s enrollment in a market segment poised for expansion.
WellPoint, the nation’s second-largest insurer, said Monday that it will pay $92 in cash for each share of Virginia Beach, Va.-based Amerigroup, which runs Medicaid coverage in 13 states, including Texas, Florida and New York. That price represents a 43 percent premium to Amerigroup’s closing price Friday of $64.34.
Amerigroup shares soared close to the acquisition price Monday morning. They climbed 38 percent, or $24.41, to $88.75. WellPoint’s stock rose 3.5 percent, or $2.10, to $62.01 per share.
Medicaid is the state and federally funded program that provides health coverage for the needy and disabled. WellPoint, which is based in Indianapolis, and other insurers see growth opportunities in managing care for patients who qualify for both Medicaid and Medicare, the federally funded program for people over age 65 and the disabled.
These so-called “dual eligible” patients generate a lot of medical claims, and states have been moving them to managed care programs to improve their coverage and cut down on wasteful spending and duplicate tests.
“We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees,” WellPoint Chair, President and CEO Angela Braly said in a statement.
Once the buyout is complete, WellPoint and its affiliated Medicaid plans will serve more than 4.5 million beneficiaries of state sponsored health care programs. WellPoint currently has nearly 1.9 million people enrolled in Medicaid plans.
The combined company will have a presence in 13 states with significant numbers of people eligible for managed care under the dual government programs. This includes the four largest states that have a combined $105 billion in annual dual eligible spending.
