Department of Managed Health Care Approves Centene Acquisition of Magellan Health

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By William Espinosa

On December 30, 2021, the Department of Managed Health Care (DMHC) announced that it had approved Centene Corporation’s acquisition of Magellan Health, Inc. (Magellan), with certain conditions. Magellan is the parent entity for two DMHC-licensed plans: Human Affairs International of California (HAI-CA) and Magellan Health Services of California, Inc.–Employer Services (MHSC). The acquisition is contingent on Centene and Magellan’s (“the plans”) compliance with conditions made by DMHC “to ensure the merger does not adversely impact enrollees or the stability of California’s health care delivery system.” Among several other financial and competition-based conditions, the plans will be required to help to control health care costs and must keep premium rate increases to a minimum. Specifically, the plans will not be allowed to increase premiums as a result of acquisition costs. Magellan must also continue its market presence in California, and HAI-CA must continue to fulfill its existing contracts to provide behavioral health services at the same rates for at least two years. Furthermore, Centene must invest $10 million “to support the acceleration of behavioral health integration into primary care practices in California’s health care delivery system.” A third-party monitor will be set in place to ensure compliance with competition-related conditions, including that the plans continue to operate as separate businesses. Centene must reimburse DMHC for the cost of the third-party monitor.

Magellan will continue to operate independently under Centene’s Health Care Enterprises umbrella, and the Magellan leadership team will continue to lead the organization.

On January 12, 2021, Magellan filed notice with DMHC outlining the proposed acquisition. After determining the proposed acquisition met the requirements of a major transaction, Deborah Haas Wilson, PH.D., was retained by the Office of the California Attorney General on behalf of DMHC, to conduct an independent analysis of the anti-competitive impact on subscribers and enrollees as a result of the proposed acquisition. On October 27, 2021, DMHC held a public meeting to address the proposed acquisition. The public comment period for this meeting concluded on November 3, 2021.

Representatives from Centene and Magellan accepted and signed the DMHC conditions on December 28, 2021.

 

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