Nonprofit health insurance company CareSource has invested more than $400 million to buy struggling nonprofit insurer Commonwealth Care Alliance.
The deal adds nearly 50,000 Dual Special Needs Plan members who are eligible for both Medicaid and Medicare to CareSource’s book of business, the companies said in a news release Wednesday. CareSource also acquired Commonwealth Care Alliance’s two primary care clinics and its home care practice through the transaction. CareSource counts 2 million Medicaid, Medicare and exchange plan enrollees across seven states.
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CareSource CEO Erhardt Preitauer will take over as head of Commonwealth Care Alliance, replacing current CEO Chris Palmeri, who will depart the company. Palmeri currently serves on the board of directors of the insurance lobbying group AHIP. At the start of the year, he stepped down from his role as board chair of the Association of Community Affiliated Plans, a nonprofit Medicaid insurer trade group.
The deal had not been previously announced. CareSource engaged Commonwealth Care Alliance about an acquisition in October, a CareSource spokesperson wrote in an email. Commonwealth Care Alliance did not respond to an interview request.
The Massachusetts Division of Insurance, Department of Public Health, attorney general and governor all worked to expedite the review and approve the acquisition to avoid a disruption in services for enrollees, a spokesperson for the state Medicaid program MassHealth said in a statement.
Last month, the disability advocacy group Health Law Advocates sent a letter to Gov. Maura Healey (D), calling on her to place Commonwealth Care Alliance in receivership after the insurer reported another year of multimillion-dollar losses. In November, MassHealth barred the insurer from enrolling new D-SNP members after its local reserves fell short of the state’s $100 million minimum requirement.
CareSource made the investment in Commonwealth Care Alliance to help the company regain compliance with the state funding requirement and provide "sufficient funding to invest in the future," a CareSource spokesperson said.
In October, Commonwealth Care Alliance announced it would stop selling Medicare Advantage plans in California, Michigan and Rhode Island. The company previously partnered with SCAN Health Plan to operate a home care division and Molina Healthcare to operate a care navigation service.
Commonwealth Care Alliance’s rapid expansion amid a challenging Medicare and Medicaid environment drove its losses, said Ari Gottlieb, an independent healthcare consultant. The acquisition adds to CareSource’s growing portfolio of struggling insurers, he said. “CareSource is becoming the nonprofit equivalent of Centene or Molina, buying subscale and distressed government programs assets,” Gottlieb said.
Last month, CareSource also announced it planned to assume control of RiverSpring Health Plans, a special needs plan in New York. Local regulators are reviewing the transaction.
At the start of the year, CareSource finalized its acquisition of Common Ground Healthcare Cooperative, one of the last remaining Affordable Care Act co-ops.
