Nonprofit health insurers SCAN Group and CareOregon plan to merge and create a $6.8 billion company focused on government health programs, the companies announced Wednesday.
SCAN Group and CareOregon intend to join forces as HealthRight Group. SCAN Group CEO Dr. Sachin Jain would lead the combined company and CareOregon President and CEO Eric Hunter would be president of HealthRight’s Medicaid operation.
The SCAN Health Plan and CareOregon brand names would continue and CareOregon would retain its separate board, community advisory councils and employees. HealthRight Group would have approximately 3,000 employees and cover nearly 800,000 members, according to the companies.
The insurers expect the transaction to close next year, subject to regulatory approval. HealthRight Group would focus solely on covering Medicaid and Medicare beneficiaries and compete with for-profit insurers such as Centene, Molina Healthcare and Humana, Jain said.
“We think that we have landed upon something that is going to be a model for how regional nonprofits can compete,” Jain said. “There's increasingly strict scrutiny to the administration of Medicare and Medicaid programs, and there's a right way to do these programs and a wrong way. We're super-committed to being a forces for good in the healthcare industry.”
The proposed merger represents a proactive effort by both insurers to ensure sustainability against the growing threats of provider consolidation and investor-backed and for-profit insurers entering markets and seizing market share with low premiums, Jain said.
“Scale matters in healthcare. You see that with Bright and Oscar contracting their health plans," he said.
SCAN Group, which is the second-largest nonprofit Medicare Advantage insurer, would bring approximately 275,000 members to the combined company. SCAN Group attracted notice last year when it grew its Medicare Advantage membership 17% during open enrollment, far outpacing the 3% industry average and gaining market share from Alignment Healthcare, Humana and Bright Health Group.
CareOregon would bring approximately 515,000 members, most of whom are on Medicaid, to the deal. The insurer aims to integrate SCAN Group’s care models for LGBTQ and homeless populations into its insurance products, Hunter said. The CareOregon side of the business also would benefit from SCAN Group's experience negotiating with large health systems, he said.
“With added complexities coming from state governments and the federal government on regulations and bureaucracy, and the need for technology and data administration, this is an effort to say: How do we allow smaller organizations that that truly are linked to their communities to have the wherewithal to operationally stay in the game, and be a viable option for members and for regulators and state governments?” Hunter said.
Government-sponsored insurance is a bigger business than ever. The economic effects of the COVID-19 pandemic and states pausing redeterminations of beneficiaries' eligibility during the federal public health emergency has led Medicaid enrollment to swell, reaching 90 million in August, according to Centers for Medicare and Medicaid Services data compiled by the Kaiser Family Foundation. And nearly half of Medicare enrollees are expected to sign up for Medicare Advantage plans this year.
“There's a smaller and smaller number of these regional, community-based health plans,” Jain said. “We believe that the government program space, in particular, is a really important space for nonprofits because what people expect when they think of government programs like Medicare and Medicaid is the ethical administration of these programs.”
