WellPoint's $4.9B Amerigroup buyout to double Medicaid business

With its newest deal, WellPoint will become one of the nation's largest Medicaid administrators, Reuters reported.

WellPoint announced Monday that it's buying managed care insurer Amerigroup for roughly $4.9 billion to almost double its Medicaid business. It will have more than 4.5 million members who belong to a state-sponsored program in 19 states, according to the Associated Press.

The deal represents the big insurer's move into the increasingly lucrative Medicaid market and demonstrates WellPoint's confidence in Medicaid profitability, despite the recent Supreme Court ruling's change to the Medicaid expansion provision. States now can refuse to participate in the planned expansion without losing federal funds.

"We have an expectation and a belief that the opportunities in Medicaid are going to continue no matter what," WellPoint CEO Angela Braly said on a call with analysts after announcing the acquisition, Bloomberg reported. "We're creating value for the states and beneficiaries and that is a compelling story no matter what happens."

In fact, Braly said, states increasingly are moving government-supported insurance to the private sector, Reuters noted. "We expect Medicaid spending under managed-care programs to increase by nearly $100 billion by the end of 2014. These opportunities will develop organically in addition to the Medicaid eligibility expansion under healthcare reform," she said.

Braly added that the Medicaid expansion provision "is only one element" involved in WellPoint's decision to buy Amerigroup. Rather, the company was motivated to gain access to dual eligible patients; it expects a $16 billion revenue boost from patients covered by both Medicare and Medicaid, the AP noted. "The dual-eligible expansion opportunity is tremendous and was a driving force for this transaction," Braly said.

To learn more:
- read the Bloomberg article
- see the Reuters article
- check out the Associated Press article

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