On November 28, the DOJ Antitrust Division announced that it would not challenge WellPoint’s proposed acquisition of Amerigroup, paving the way for the parties to close their closely watched transaction on December 24. The deal -- valued at approximately $5 billion -- adds Amerigroup’s multi-state Medicaid insurance business to WellPoint’s existing portfolio of insurance products. WellPoint is the nation’s second largest health insurer.
The parties’ deal was initially announced in July, with the parties stating that they hoped to close the deal by year’s end. However, the Antitrust Division issued a “Second Request” for additional information from the parties in August, holding up the transaction while the Antitrust Division examined the potential competitive implications of the proposed deal. While both Amerigroup and WellPoint have operations in many states, the Antitrust Division’s concerns ultimately focused on the Northern Virginia Medicaid market, where both parties had operations. Despite the fact that Amerigroup’s Northern Virginia operations amounted to only approximately 55,000 of its total 2.7 million members, the Antitrust Division contended that the combination, if permitted to proceed as initially planned, “would have substantially lessened competition in the provision of Medicaid managed care plans in Northern Virginia.”
To address these concerns, Amerigroup subsequently announced that it would sell its Amerigroup Virginia subsidiary (which included its Northern Virginia Medicaid business) to Inova Health System, which operates five hospitals in Northern Virginia. Thereafter, Acting Assistant Attorney General Renata Hesse, who leads the Antitrust Division, announced that “the divestiture of Amerigroup Virginia will ensure continued competition in the markets for Medicaid managed care plans in Northern Virginia,” and that because the divestiture “addresses the department’s concerns,” the Antitrust Division would no longer object to the combination.
After receiving federal regulatory approval for the transaction, the parties were quickly able to gain approval from the necessary state regulators in over ten states, and closed the transaction on December 24. WellPoint has announced that, going forward, Amerigroup will be operated as an independent subsidiary.© Copyright 2013 Dickinson Wright PLLC