$820M Payer Acquisition Boosts Medicaid Portfolios Amid COVID-19

Molina Healthcare, Inc. announced that it will acquire Magellan Complete Care from Magellan Health, Inc. on April 30, 2020.

“We believe it will allow us to scale our enterprise-wide platforms and benefit from both operating and fixed cost leverage,” said Joe Zubretsky, president and chief executive officer of Molina, speaking of the acquisition.

“The acquisition plays to our strengths where our demonstrated operating capabilities put us in a unique position to improve the business’s margins. We will also intensely focus on maintaining the continuity of care for MCC’s members and stability for its state partners. These considerations have added importance in this current and challenging environment.”

The move will expand Molina’s Medicaid and Medicare offerings and bolster Molina’s services to dual eligible beneficiaries and managed long term services and supports.

Magellan Complete Care serves around 155,000 members in six states and brought in $2.7 billion in revenue for the health plan last year.

These members will be added to Molina’s 3.6 million Medicaid, Medicare, and dual eligible beneficiaries spread across 18 states.

The companies outlined four perceived benefits to the acquisition.

First, the acquisition expands Molina’s business portfolio by three states—Arizona, Massachusetts, and also Virginia, where Magellan Complete Care has a statewide presence.

It also brings Molina into New York City and expands the payer’s offerings in other states including Florida and Wisconsin.

Second, Molina stands to make significant revenue gains from this acquisition. By 2021, the Magellan Complete Care deal is expected to boost Molina’s revenue by $3 billion.

Third, the acquisition bolsters the payer’s portfolio. The expansion makes Molina’s business less susceptible to state requests for proposals cycles.

Finally, the deal bites off 30 percent of Molina’s 2019 revenue, but Molina stated the transaction will more than pay for itself.

Molina intends to make some changes to Magellan Complete Care, specifically adjusting its cost structure and operations. The payer believes this will improve the program’s margins.

The acquisition of Magellan’s Medicaid and Medicare plans comes at a time when Medicaid enrollment is expected to swell.

The coronavirus had already cost over 3.5 million American workers their employer-sponsored health insurance about two weeks into the US outbreak, experts estimated.

As a result, many who have become uninsured due to coronavirus are turning to Medicaid and ACA exchange plans for coverage. More than 14 million workers in especially vulnerable industries, such as retail, restaurants, and home health care services, are eligible for Medicaid or a subsidized ACA plan.

Molina expressed awareness of this trend as it took on its new Medicaid and Medicare plans.

“Molina’s strengths and capabilities will be critical to successfully serving new populations if a recession increases Medicaid membership,” noted the press release.

Earlier in 2020, Centene-WellCare announced the finalization of their own merger, which, like Molina’s and Magellan’s, was largely designed to bolster the plans’ Medicare and Medicaid portfolio.

The resulting combined company draws two-thirds of its revenue from Medicaid. Another 14 percent of its revenue comes from its Medicare and Part D plans.

Centene-WellCare emerged as one of the leading payers in government insurance programs markets nationwide.

The deal altered the ranks of Medicaid and Medicare payers in more than one state. Georgia’s Medicaid managed care landscape, for example, underwent a transformation with Centene-WellCare taking on around 61 percent of Medicaid business in the state.

The Molina transaction with Magellan Health has yet to be finalized. It still has to receive state and federal approval and undergo other typical regulatory processes. The press release projected that the $820 million deal would close in early 2021.