CVS Health to acquire IlliniCare Health in agreement with Centene

CVS Health and Centene have announced that, in connection with the previously announced merger agreement between Centene and WellCare Health Plans, Centene has entered into a definitive agreement under which CVS Health will acquire Centene's Illinois health plan subsidiary, IlliniCare Health Plan.

Whle not explicitly detailedin the agreement, the deal helps to avoid antitrust concerns in the approval of the Centene and WellCare merger.

The transaction entails the sale of Centene's Medicaid and Medicare Advantage lines of business in Illinois.

Centene will retain IlliniCare's Medicare-Medicaid Alignment Initiative business and IlliniCare's statewide YouthCare foster care contract, set to commence in February 2020. Centene's Ambetter business in Illinois is not affected. The companies said they are committed to ensuring that there is a smooth transition for members.

Financial terms of the deal were not disclosed. The closing of the transaction with CVS Health is subject to U.S. federal antitrust clearance, receipt of Illinois state regulatory approvals and other customary closing conditions, as well as the closing of the Centene – WellCare transaction.

WHAT'S THE IMPACT

As previously announced on March 27, Centene and WellCare agreed to combine in a transaction that will create a healthcare enterprise focused on government-sponsored healthcare programs; its goal is to be a leader in Medicaid, Medicare and the Health Insurance Marketplace.

The combination has received approvals from insurance and healthcare departments from 26 states. Completion of the Centene-WellCare transaction remains subject to clearance under the Hart-Scott-Rodino Act, receipt of required state regulatory approvals and other customary closing conditions.

Centene and WellCare still expect that this transaction will be completed by the first half of 2020.

Wall Street analysts told Reuters that in September, after the U.S. Department of Justice requested additional information regarding the Centene-WellCare merger, Wellcare agreed to sell its Missouri and Nebraska Medicaid plans due to an overlap in business in states where Centene operates.

Centene anticipates the WellCare deal will enable it to scale up its government-backed Medicare and Medicaid businesses, but in some states like Georgia and Illinois, Medicaid divestitures may be required.

THE LARGER TREND

The Centene-WellCare deal is worth about $15.27 billion, and if finalized the combined company would encompass 22 million members across all 50 states.

The combined company would operate 31 NCQA-accredited health plans across the country, and will have increased exposure to government-sponsored healthcare solutions through WellCare's Medicare Advantage and Medicare Prescription Drug Plans.

The combination would be expected to generate approximately $500 million of annual net cost synergies by the second year, and the new company will also leverage Centene's growing position in the Health Insurance Marketplace to include new markets.

The combined enterprise would also be used to enhance efforts to address the social determinants of health such as food insecurity, housing instability, homelessness, unemployment, lack of access to transportation and other non-medical barriers to health.

ON THE RECORD

"We are continuing to make progress towards completing our transaction with WellCare and the divestiture of our IlliniCare Health plan is the next step in that process," said Michael F. Neidorff, Centene's chairman, president and CEO. "Our employees in Illinois have done an exceptional job serving our communities in the state. We are pleased to enter this agreement with CVS Health, under which these employees can continue helping members achieve better health outcomes while delivering benefits to providers. We will work closely with CVS Health to ensure a smooth transition of this business for members, employees and providers."

"Expanding our Medicaid and Medicare Advantage presence in Illinois will allow us to serve more members with our proven holistic approach that addresses physical, behavioral and social determinants of care," said CVS Health Executive Vice President and Aetna President Karen S. Lynch. "We look forward to working with Centene on a seamless transition and developing a deeper relationship with the state and local providers."

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com