Centene Corp., a Medicaid plan manager that has beendoing well in the Affordable Care Act public exchange market, is expanding into NewYork state.

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The St. Louis-based company said Tuesday it will pay $3.75billion to acquire "substantially all of the assets" of New YorkState Catholic Health Plan Inc., which does business as Fidelis Care. Fidelis is a nonprofit healthcoverage provider based in New York.

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Fidelis was providing or administering health coverage for 1.6million people on June 30, and it generated about $4.8 billion inrevenue during the first half of the year. The company competes inthe Medicaid plan, Children's Health Insurance Program andindividual major medical markets in New York state.

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Fidelis has been selling commercial major medical coveragethrough New York's state-based ACA exchange, NY State ofHealth.

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Fidelis has faced big ACA risk-adjustment program bills inconnection with its individual major medical operation in recentyears: It owed about $57 million to the ACA risk-adjustment programfor 2015, and $72 million for 2016, according to the Centers forMedicare and Medicaid Services.

Essential plan coverage


Fidelis has also offered Essential plan coverage. The Essentialplan program is based on the ACA Basic Health Plan program provision. Theprovision lets states offer the lowest-income residents who couldbe eligible for public exchange coverage access to a state-managedalternative. The alternative program resembles a managed Medicaidprogram and lets participants choose between signing up for two ormore standard plans designed and organized by the stategovernment.

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Minnesota and New York state have been the only states withBasic Health Plan program plans. The emergency program Iowa hasbeen designing as a potential backup for ordinary individualcommercial health insurance market, in case the state's marketfails in 2018, appears to resemble a Basic Health Plan program.

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If many states suffer from sudden individual commercial healthmarket failure in 2018, they may follow Iowa's lead and try to fillin coverage access gaps by quickly setting up programs similar toNew York's Essential plan program. That could expand the market forEssential plan program administration services.

Centene's strategy


Centene has been providing public program or commercial coveragefor about 12 million people.

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Centene says it already has the cash it needs to complete theFidelis deal. The financing includes $2.3 billion in cash from theissuance of new equity and $1.6 billion in new long-term debt.

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Centene would keep the Rev. Patrick Frawley, the current chiefexecutive officer of Fidelis, as the head of the Fidelis Careoperations, it would keep the Fidelis Care offices in Queens,Albany, Buffalo, Rochester and Syracuse.

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Centene hopes to close on Fidelis by March 31.

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