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DMHC approves Centene’s acquisition of Magellan with conditions to protect consumers

The California Department of Managed Health Care (DMHC) announces approving Centene Corporation’s (Centene) acquisition of Magellan Health, Inc. (Magellan) with conditions to ensure the merger does not adversely impact enrollees or the stability of California’s health care delivery system.

“Our review of Centene’s acquisition of Magellan focused on ensuring compliance with the strong consumer protection requirements in the law,” said DMHC Director Mary Watanabe. “The conditions imposed on the plans by the Department will protect consumers, help control health care costs and support access to behavioral health care services in California.”

Any sale or purchase of a DMHC-licensed health plan requires approval by the DMHC. 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). HAI-CA and MHSC are specialized health care service plans, licensed by the DMHC to arrange for the provision of behavioral health care services throughout California.

The DMHC conducted a comprehensive review of the merger including obtaining an independent impact analysis that evaluated the impact of the merger on subscribers and enrollees, and the stability of the health care delivery system. As part of its review, the Department considered the findings and recommendations in the independent impact analysis. The Department also conducted a public meeting on the proposed merger to solicit input from the public.

With approving the acquisition, the DMHC has imposed several conditions on the plans, including:

  • The plans will continue Magellan’s market presence in California and HAI-CA will continue its existing contracts to provide behavioral health services at the same rates for at least two years.
  • The plans will help to control health care costs and keep premium rate increases to a minimum, including no increases in premiums as a result of acquisition costs.
  • A third-party monitor will be put in place to oversee the plans’ compliance with competition related conditions, including holding the Magellan and Centene plans separate to ensure the Magellan plans are run as a separate business.
  • The plans must invest $10 million to support the acceleration of behavioral health integration into primary care practices in California’s health care delivery system.

HAI-CA and MHSC filed notices with the DMHC outlining the proposed acquisition and change of control on January 12, 2021. The Department determined the transaction met the requirements of a major transaction in the law on March 12, 2021, requiring the Department to hold a public meeting and obtain an independent impact analysis on the merger. The DMHC held a public meeting on October 27, 2021.

This article was released by California Department of Managed Health Care.