Blues plans spend $170M to expand into Medicaid

Hoping to significantly expand Medicaid coverage nationwide and increase the presence of Blues plans in the Medicaid market, Blue Cross Blue Shield of Michigan and Independence Blue Cross are jointly acquiring a top-ranked Medicaid HMO plan.

The two Blues insurers will spend $170 million, of which Michigan Blues initially will pay $135 million, to acquire AmeriHealth Mercy Family of Companies, a Philadelphia-based insurer providing Medicaid coverage to recipients in Pennsylvania, South Carolina, and Indiana. Independence Blue Cross already owns 50 percent of AmeriHealth, reports the Detroit Free Press.

The move is significant; despite covering about one-third of Americans, two-thirds of Blues plans don't currently offer Medicaid coverage. But roughly 16 million people could be entering the Medicaid market by 2019 as a result of the healthcare reform law, the Free Press notes.

Under the new arrangement, Independence will own 60 percent, and Michigan Blues will own 40 percent of the AmeriHealth, the Philadelphia Inquirer reports. The goal is to provide "turnkey managed-care solutions...to the increasingly financially strapped states that provide Medicaid coverage," said Independence's President and CEO Daniel Hilferty.

The chief executives of both Blues plans also said they want to create opportunities for other Blues carriers to join their Medicaid plan alliance, including allowing other Blues insurers to buy into Amerihealth at a minority level or creating a 50-50 partnership to develop a Medicaid managed care model for different states, according to Greenwich Time. "There is a lot of interest across the country," Hilferty said.

To learn more:
- check out the Detroit Free Press article
- check out the Philadelphia Inquirer article
- read the Greenwich Time article

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