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Centene Corp. Readies to Take Over Health Net

Once Centene Corp. acquires Health Net next year in a billion dollar acquisition early next year, what’s likely to show up on its balance sheet? Centene could have its eyes on yet another coordinated care organization, after purchasing Trillium Community Health Plan in Lane County for $80 million in September, giving them 100,000 Medicaid members. Or, they might reach their tentacles into other markets in Oregon by appealing to self-insured employers and seeking government contracts.
November 20, 2015

Once Centene Corp. acquires Health Net next year in a billion dollar acquisition early next year, what’s likely to show up on its balance sheet?

Centene could have its eyes on yet another coordinated care organization, after purchasing Trillium Community Health Plan in Lane County for $80 million in September, giving them 100,000 Medicaid members. Or, they might reach their tentacles into other markets in Oregon by appealing to self-insured employers and seeking government contracts.

Whatever their intent might be, nothing was disclosed when Oregon Insurance Commissioner Laura Cali held a public hearing last week on the proposed $6.3 billion  acquisition. No one showed up to testify about the sale, but the public comment period is open until Nov. 26. Cali is expected to make a decision shortly thereafter.

Oregon was actually the first stop in a multi-state hearing process; California’s Insurance Commissioner has set a Dec. 7 date.

When asked about Centene’s expansion plans, a spokeswoman was quite vague, only saying, “Centene is currently in the process of reviewing the structure and product offerings in Oregon with respect to the Health Net acquisition.”

One thing is definitely known. No management changes are anticipated in Oregon, and Chris Ellertson will remain as CEO, the spokeswoman told The Lund Report.

Up until now, Health Net has not accepted Medicaid members or participated in a coordinated care organization. The insurer also dropped out of the individual exchange this year, spokesman Brad Kieffer confirmed, saying a thorough evaluation was done before making this “difficult decision,” while, at the same time, he declined to reveal precise enrollment numbers. Observers suggested Health Net only had attracted a few thousand people, which ultimately led to its decision.

On Sept. 30, Health Net had 78,438 members and reported a $1.2 million net loss, with $26.6 million in cash and equivalents on its balance sheet – but only after taking multiple cash infusions over recent years. The company received a $29 million capital contribution from its parent company on Dec. 19, 2014, followed by $10 million on June 11, 2014, $10 million on June 30, 2015 and $15 million on Sept. 29, 2015.

The risk corridor program also reduced its surplus by $2.1 million, and cut into its net premium income by $837,802.

For a look at Health Net’s overall balance sheet, click here

Meanwhile, Centene plans to release its 2016 financial guidance on Dec. 18 and host an investor meeting, including a question-and-answer session, to discuss the details of its guidance. Michael F. Neidorff, chairman and chief executive officer, and William N. Scheffel, executive vice president, chief financial officer and treasurer, of Centene will host the meeting, which will also be webcast live before an audience of institutional investors and analysts in New York City.

With $22 billion in revenue and 4.8 million members in 23 states, Centene is one of three publicly traded stand-alone Medicaid-focused insurers. Neidorff earned $19.3 million in 2014, including $13.9 million of stock. Over the past 30 years, Centene has grown from a single health plan in Wisconsin to become a $10 billion Fortune 500 company trading on the New York Stock Exchange. On Nov. 20, its stock price reached $58.66, a jump of 7.6 percent.

Diane can be reached at [email protected].

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