The purchase will be for a reported $4.5 billion to play a bigger role in the expansion of Medicaid.
WellPoint Inc., the health insurance company, has announced that it will be purchasing its rival Amerigroup Corp., for $4.46 billion, in a play to take a bigger part in the Medicaid expansion.
This buyout was announced not long after the Supreme Court upheld the healthcare reforms
The Affordable Care Act is expected o increase the number of Americans covered by health insurance by an estimated 30 million people. According to a representative at WellPoint, once combined, these two insurers will have more than 4.5 million policyholders from state sponsored medical plans, including recipients of Medicaid in 19 different states.
WellPoint chief executive Angela Braly, said that “We’re confident that now is absolutely the right time for this compelling opportunity. First and foremost, there are significant growth opportunities ahead in the Medicaid marketplace resulting from economics, demographics, budgetary issues, as well as health care reform.”
Amerigroup health insurance will receive $92 per share from WellPoint.
This is a premium of approximately 43 percent over its most recent closing share prices. Following the announcement of the purchase, the shares for WellPoint rose by 4.5 percent, reaching $62.63 in the early trading. Other Medicaid plan administration specializing insurers also saw gains.
In fact, Wellcare Health Plans increased by over 12 percent, while there were increase of 15 percent at Centene Corp. Amerigroup’s own stock climbed by almost 38 percent, to reach $88.72.
Braly explained that it is WellPoint’s belief that by bringing these two health insurance companies together, the result will be an industry leader in the Medicaid and Medicare service sector. The insurer sees this as an opportunity to take advantage of the strengths presented by both firms “to better serve our members.”
Braly also stated that this will help to ensure that the level of service will continue to improve even as the health insurance environment changes along with the healthcare reform implementations. These changes should make another 16 million people eligible for Medicaid, depending on the number of states that choose to participate in this element of the reforms.