House Majority Leader Steny Hoyer, D-Md., joined at right by Speaker of the House Nancy Pelosi, D-Calif., speaks at an event to announce legislation to lower health care costs and protect people with pre-existing medical conditions, at the Capitol in Washington, Tuesday, March 26, 2019. The Democratic action comes after the Trump administration told a federal appeals court that the entire Affordable Care Act, known as "Obamacare," should be struck down as unconstitutional. (AP Photo/J. Scott Applewhite)
Republished March 27, 2019 - 7:12 AM
Original Publication Date March 27, 2019 - 3:56 AM
Centene is spending more than $15 billion on rival WellCare to dive deeper into government-funded health coverage in the same week that President Donald Trump's administration renewed its attack on the Affordable Care Act.
The insurer said Wednesday that its cash-and-stock deal to buy WellCare will create an insurer that manages Medicaid coverage for more than 12 million people and covers several million more in the federal government's Medicare program for people age 65 and older.
The deal comes after the administration attacked the ACA in court Monday, saying that former President Barack Obama's health care law should be declared unconstitutional after Congress repealed one part of it — unpopular fines on people who remain uninsured. The 2010 Affordable Care Act expanded coverage to millions of people by creating individual insurance exchanges and increasing Medicaid enrolment in several states.
Centene Corp., based in St. Louis, has built its business around Medicaid, the state and federally funded program for people who are poor or disabled, and also has expanded aggressively on the exchanges.
The Wellcare deal could help Centene improve its profitability and protect against any risks that stem from threats to the ACA, SVB Leerink analyst Ana Gupte said in a research note.
Several GOP-led states are challenging the ACA in a federal court case that may head to the Supreme Court, and the Justice Department filed a letter with a federal appeals court in New Orleans supporting their case.
A Centene tie up with WellCare Health Plans Inc., based in Tampa, Florida, would create one of the biggest insurers in the country with 22 million customers and a dominating Medicaid presence in several states.
The transaction includes more than three shares of Centene stock and $120 in cash for each share of WellCare stock, or $305.39 per WellCare share. That's about a 32 per cent premium to WellCare's Tuesday closing stock price. The companies put the deal's value at $17.3 billion.
Centene Corp. shareholders will own about 71 per cent of the business, with WellCare shareholders owning approximately 29 per cent.
The board of the combined company will have 11 members, with nine from Centene's board and two from WellCare's board. Centene Chairman and CEO Michael Neidorff will serve in those roles after the combination.
The new company will be based in St. Louis. The deal is expected to close in the first half of 2020, but it still needs approval from Centene and WellCare shareholders, as well as regulators.
Shares of WellCare jumped 9 per cent at the opening bell Wednesday, while Centene went in the opposite direction by 9 per cent.
News from © The Associated Press, 2019