Two "Blue" health insurers announced earlier this week a partnership intended to expand Medicaid insurance and services nationally through a combined acquisition of AmeriHealth Mercy, which serves nearly 800,000 Medicaid members in three states.
The partnership of Independence Blue Cross and Blue Cross Blue Shield of Michigan in AmeriHealth Mercy is a nod to the coming changes in the insurance landscape expected as a result of the Affordable Care Act – changes that are expected to add more than 16 million people to Medicaid rolls by 2019, according to a report from the Kaiser Family Foundation.
Independence Blue Cross has been a 50 percent owner of AmeriHealth Mercy for the past 15 years. Under the terms of the agreement, Mercy Health System subsidiary Mercy Health Plan will receive $170 million for its ownership interest in AmeriHealth Mercy. When the deal is completed, expected within 45 to 120 days, Independence will be majority owner with BCBS of Michigan holding a minority partnership.
"With the additional resources this transaction will bring, (AmeriHealth Mercy) is now better positioned to grow in the Medicaid market by offering turnkey, cost-effective, comprehensive Medicaid managed care coverage and services to Medicaid consumers nationwide and to the increasingly, financially strapped state governments that provide Medicaid coverage," said Independence Blue Cross president and CEO Daniel J. Hilferty in a press conference announcing the deal. "This agreement will also provide an opportunity for Blue health insurers nationwide to expand into the Medicaid market today and to take advantage of the enormous growth expected in Medicaid over the next few years."
Pictured above, from left to right: Daniel J. Hilferty, Independence Blue Cross president and CEO; Daniel J. Loepp, Blue Cross Blue Shield of Michigan president and CEO; and Michael A. Rashid, AmeriHealth Mercy Family of Companies president and CEO.
Bringing other Blues on board will be important as the company looks to expand its Medicaid insurance and service footprint nationwide.
Most Blues have traditionally eschewed the Medicaid market in favor of the more lucrative private group and individual insurance markets. But given the number of new Medicaid plan enrollees expected over the remainder of the decade, the market has simply become too big to ignore along with the significant potential to attract other Blues interested in entering the Medicaid market.
According to the companies, of the 39 Blues across the country, two-thirds of them do not participate in the Medicaid market in the states they serve.
For BCBS of Michigan, the path to owning a part of one of the largest Medicaid insurers in the country started at the beginning of the year when it began examining how to enter the Medicaid market. The deal for partial ownership of AmeriHealth Mercy will jumpstart this entry.
"With its 25 years of experience in Medicaid, AmeriHealth Mercy has Medicaid expertise, systems and processes that will reduce our learning curve in entering the Medicaid market," said Daniel J. Loepp, president and CEO of BCBSM. "AmeriHealth Mercy can provide us with experience in areas such as care management, behavioral health management, pharmacy benefits and other areas.
"This not only helps us in the Medicaid market but also can give us insight into serving non-Medicaid consumers who will receive subsidies in the future to purchase health care coverage under national health care reform."
Other conditions of the deal include a series of contributions by the new partners over seven years to the Mercy Health Foundation. Money from these contributions will be used to support Mercy Health System's charitable mission to deliver accessible and quality care and other health care initiatives. IBC and BCBSM have also agreed to provide additional capital to support AmeriHealth Mercy's expected growth and expansion.
In addition to its 800,000 members, AmeriHealth Mercy also offers services including pharmacy benefits management and behavioral health care serving an additional 3.2 million Medicaid, Medicare, and SCHIP beneficiaries in 11 states.
"We're excited about this development, because it brings us a step closer to realizing our vision of leading America in health care solutions for the underserved," said Michael A. Rashid, AmeriHealth Mercy's president and CEO in a press release. "The new ownership arrangement will allow us to serve more people who need access to quality care, enhance information sharing with doctors, hospitals, and other health care professionals,and expand products and services for our members."