WellPoint Buys Amerigroup For $4.9 Billion

A blog about business and economics.
July 10 2012 8:16 AM

WellPoint Gets Into the Medicaid Privatization Game With $4.9 Billion Acquisition of Amerigroup

WellPoint, America's second-largest health insurance company, is getting even bigger with a $4.9 billion acquisition of Amerigroup, a leader in the field of private administration of Medicaid benefits. 

Amerigroup's specialty has to do with providing care to so-called "dual eligibles," senior citizens who are old enough to qualify for Medicare but poor enough to qualify for Medicaid. That's an important group of people because even though Medicare offers very generous coverage of what it does cover, it doesn't do much for the long-term care needs that elderly people often develop. Into the breach comes Amerigroup in Texas, New York, Florida, and 10 other states with the promise of better consolidated management of patients' health care needs. With the population aging and Medicaid eligibility set to expand, this should be a growing marketplace. In their release on the deal yesterday, WellPoint bragged that "the combined company’s Medicaid footprint will include 19 states."

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For now the overall state of competition in the American health insurance industry is a bit weird. It's quite fragmented such that even a major insurer may have no presence at all in many or even most states. But in any given state, there tend to be only a small number of options to choose from.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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