Health insurer Centene Corp. announced plans on Monday to sell its Illinois health plan subsidiary to CVS Health to help secure state approval for its proposed merger with WellCare Health Plans.
Centene said its sale of IlliniCare Health Plan includes Medicaid and Medicare Advantage, but Centene will keep its Medicare-Medicaid Alignment Initiative business and a statewide foster-care contract set to begin in February. The sale does not affect Centene's Affordable Care Act exchange business in Illinois and is subject to the merger closing. Financial terms were not disclosed.
The IlliniCare divestiture brings Centene and WellCare another step closer to completing their proposed $17.3 billion marriage, which they expect to occur in the first half of 2020. Combined, Centene and WellCare would become one of the largest insurers of government-sponsored health programs in the nation, serving more than 22 million people.
The companies on Monday said they have secured approvals from insurance and healthcare departments in 26 states. Illinois was one of the final holdouts. Centene and WellCare had expected to have to divest certain businesses in various states to alleviate anti-competition concerns, and in September announced plans for WellCare to sell its Missouri and Nebraska Medicaid plans to Anthem in connection with the merger.
"The divestitures to this point have been consistent with expectations, seem reasonable and appropriate," Centene CEO Michael Neidorff said during a late October conference call with investment analysts to discuss third-quarter financial results.
Neidorff said the companies were also working with the Justice Department to close the merger and had started planning how they would integrate.
As of October, Centene's IlliniCare company served 345,000 of the 2.1 million people enrolled in HealthChoice Illinois, the state's managed Medicaid program. The state is projected to spend nearly $16 billion on managed-care organizations in 2020, according to the Illinois state comptroller.
Even with the IlliniCare divestiture, Centene would continue to serve Medicaid beneficiaries in Illinois, should the WellCare merger ultimately close. WellCare owns Meridian Health Plan, the largest provider of Medicaid managed-care services in the state, covering 774,000 enrollees.
Without the divestiture, a combined Centene and WellCare would rule 54% of the Illinois Medicaid market, giving it strong leverage over providers and the state, according to Crain's Chicago Business.
The IlliniCare Medicare-Medicaid Alignment Initiative that Centene would retain under the deal includes about 7,800 people.
Centene and Illinois regulators did not respond to request for comments.