Giant health insurer Centene Corp. announced today that it has agreed to pay $2.2 billion in cash for Magellan Health Inc., the large behavioral health care manager.
Completing the deal would add 21 million behavioral health program enrollees from Magellan to the 20 million people in Centene’s own behavioral health programs. This would be timely especially when the COVID-19 pandemic has focused attention on concerns about depression, anxiety, substance use disorders and the effects the virus that causes COVID-19 has on the brain.
Direct spending on behavioral health care accounts for about 15% of all claims at health insurers, employer plans, government plans and other “payers,” according to a Centene.
Behavioral health problems also affect other types of health payer spending, because overall spending on medical conditions is about two to three times higher than average when a patient has a behavioral health problem as well as another type of health problem, Centene said.
Magellan also would bring Centene other types of specialty health programs that serve about 30 million people, a special medical pharmacy program that serves 16 million people, and a commercial pharmacy benefit manager (PBM) that serves 2 million people, according to a slide deck Magellan managers posted in October, when they released the company’s third-quarter earnings.
Michael Neidorff, Centene’s chairman, said, in a comment included in the deal announcement, that the United States has a critical need for better ways to support people with complex, chronic conditions through better integration of physical and mental health care.
“This acquisition accelerates our diversification strategy and enhances our ability to build next-generation capabilities in our specialty care business, by leveraging our scale and investments in technology,” Neidorff said.
Centene has been a Magellan customer for many years, and it’s very familiar with Magellan programs, Neidorff said.
Magellan Chief Executive Officer Ken Fasola and other Magellan managers would stay in place after the deal was completed, Centene said.
Centene said it hopes to complete the deal sometime between July 1 and Dec. 31.
Centene is a St. Louis-based carrier that was founded in 1984. For years, it focused on winning contracts to manage health plans for Medicaid and other government programs that serve low-income people.
The firm added commercial plan operations as well as some government plan operations in California and other western states in 2016, when it paid $6.8 billion for Health Net.