US insurer WellPoint is to acquire managed care provider Amerigroup for approximately $4.9bn.
The acquisition is expected to close in Q1 2013 and is subject to certain state regulatory approvals and standard closing conditions and customary approvals.
Wellpoint said the acquisition will boost the companies’ capabilities to more effectively and efficiently serve the US’s growing Medicaid population. Medicaid is a national health care programme in the US, which helps pay for medical services for low-income people.
The development comes at a time when the US health insurance sector is set for major reform. This is because the US Supreme Court’s recent decision to uphold the Affordable Care Act (ACA) means that from 2014 the 30 million Americans who do not yet have health insurance, will have access to “affordable” private health insurance plans, according to President Obama.
Following the court decision, President Obama’s administration said it would step up its work with States to implement Affordable Insurance Exchanges.
According to Wellpoint, US states are increasingly looking increasingly looking to managed care as a solution to more effectively operate their Medicaid programmes because of its value proposition.
Wayne S. DeVeydt, WellPoint’s executive vice president and chief financial officer, said: “The acquisition of Amerigroup expands our scale and further diversifies our business mix by deepening our investment in the high growth Medicaid marketplace. It also increases our flexibility to serve customers across the economic spectrum.”
DeVeydt added: “We believe the acquisition is not only strategically important, significantly enhancing our future revenue and EPS growth opportunities, but will also provide an attractive return for our shareholders.”
After the acquisition is completed, WellPoint will have a presence in 13 US states.
For the year ended 2011, WellPoint delivered net income of $2.6bn, compared to $2.9bn in 2010 and $4.7bn in 2009.