Centene to Pay $15 Billion to Join the Medicare Gorilla Table

Centene Corp. is coping with the turmoil in health insurance policy in Washington by getting bigger.

The St. Louis-based government plan carrier has agreed to pay $15 billion in cash and stock for WellCare Health Plans Inc. of Tampa, Florida, the companies announced today.

Centene has 8.4 million Medicaid plan members, about 400,000 Medicare Advantage plan members, and 1.5 million enrollees in Affordable Care Act (ACA) private exchange plans.

WellCare has 3.9 million Medicaid plan members, about 300,000 Medicare Advantage plan members.

Deal Chess

The combined company would provide or administer health coverage for a total of 22 million people in all 50 states. It would generate about $5 billion in operating earnings on $97 billion in revenue, with about 65% of revenue coming from Medicaid plans, 15% from Medicare plans and 15% from ACA exchange plan operations.

Centene is already the the top player in the Medicaid plan market. The combined company would be even more dominant.

The deal would have a bigger effect on Centene’s position is in the Medicare plan market.

In 2018, WellCare ranked eighth in terms of Medicare Advantage plan market share, and Centene ranked 10th, according to Mark Farrah Associates.

Combining Centene and WellCare would create a company with about 700,000 Medicare Advantage plan enrollees.

The combined company could end up ranking fifth in terms of Medicare Advantage market share, after UnitedHealth Group Inc., Humana Inc., CVS Health’s Aetna unit and Kaiser.

Deal Details

The Centene shareholders would own about 71% of the combined company, and WellCare shareholders would own about 29%.

Michael Neidorff, the chairman of Centene, would be the chairman and chief executive officer of the combined company.

Ken Burdick, WellCare’s CEO, is expected to join the Centene senior management team in a new position, according to Centene and WellCare.

The Conference Call

A district court ruling on the Texas v. United States case could disrupt the Medicaid program, the ACA exchange plan market and other markets, by abruptly overturning all of the ACA.

Neidorff told securities analysts during a conference call that the company does contingency planning but has to operate under the current law.

Neidorff said he thinks there’s a chance the district court ruling could be overturned, either by the 5th U.S. Circuit Court of Appeals or by the U.S. Supreme Court.

“We’ve always said you base your decisions on the facts as they’re known today,” Neidorff said. “These things have a long time to play out.”

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