Scan Group and CareOregon merge, forming $6.8 billion healthcare plan

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diving letter:

  • Scan Group and CareOregon have signed an agreement to merge, creating a nonprofit healthcare organization that will provide coverage to nearly 800,000 members across five states.
  • The combined company will primarily focus on federally sponsored healthcare plans and cover them through its existing Medicare Advantage and Medicaid plans.
  • The combined company will be called HealthRight Group. The deal is expected to close next year and is subject to regulatory approvals. Scan’s current CEO, Sachin Jain, will serve as CEO of HealthRight Group.

Dive insight:

By coming together, the two will benefit from greater scope, executives said in a statement announcing the deal on Wednesday.

Scan Health Plan covers 270,000 Medicare Advantage members in Arizona, California and Nevada and is expanding into Texas next year.

CareOregon covers 500,000 Oregonians through Medicaid and Medicare Advantage plans, as well as its dental and home care organizations.

HealthRight signaled that it plans to use its size to take on rivals in the managed care space.

“For far too long, America’s nonprofit managed care organizations have operated at a disadvantage compared to their larger for-profit competitors,” Jain said in a statement.

Government-sponsored insurance is a competitive corner of the healthcare sector.

Centene is the largest player in the managed care space that caters to people who are eligible for government-sponsored plans like Medicaid.

The St. Louis-based insurer is the largest health insurance plan serving the lowest-income members through Medicaid and the marketplace. Centene covers more than 15 million Medicaid members and 2 million members through the Affordable Care Act marketplace.

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Centene posted nearly $126 billion in sales in 2021.

Molina, based in California alongside Scan, is another big player in the federally funded space. It includes more than 5 million Medicaid, Medicare and Marketplace members and generated nearly $28 billion in revenue last year.

Medicaid enrollment has skyrocketed during the pandemic as federal agencies eased enrollment restrictions a bit to protect consumers from losing health coverage during the COVID-19 crisis.

Medicare Advantage is growing in popularity with nearly half of the Medicare-eligible population enrolled in an MA plan. According to a report by the Medicare Payment Advisory Commission, the profitability of plans has also increased during the pandemic as health care utilization and, with it, plan medical expenses have declined.

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