In a significant turn of events, the proposed merger between SCAN Group and CareOregon has been officially abandoned. This decision comes just over a year after the initial announcement of their intent to combine, both insurers confirmed to Healthcare Dive on Thursday. The planned union aimed to create HealthRight Group, a substantial $6.8 billion health plan focused on serving both Medicaid and Medicare Advantage populations. However, the merger faced increasing hurdles, particularly during the public comment phase and scrutiny from Oregon’s Medicaid Advisory Committee, ultimately leading to its termination.
Background on the CareOregon and SCAN Group Merger Plan
Announced in December 2022, the merger between SCAN Health Plan, known for its Medicare Advantage offerings across Arizona, California, and Texas, and CareOregon, a provider of Medicaid and Medicare Advantage plans to 500,000 Oregon residents, was set to establish a major player in the healthcare landscape. The combined entity, HealthRight Group, was projected to serve nearly 800,000 members and was initially expected to finalize in 2023. This ambitious plan, however, encountered significant headwinds as it progressed through regulatory review.
Growing Concerns and Opposition to the Merger
The proposed CareOregon scan merger quickly attracted scrutiny from various stakeholders, including politicians and Oregon’s Medicaid Advisory Committee. The committee voiced “serious concerns” regarding the merger, citing SCAN’s limited track record in addressing health inequities and anxieties about taxpayer funds leaving the state. These concerns were amplified by prominent figures such as former Oregon Governor John Kitzhaber, former Oregon Health Authority Director Patrick Allen, and current state Representative Travis Nelson, who publicly opposed the deal. The rising tide of opposition and persistent questions surrounding the merger made it increasingly challenging to move forward.
Mutual Decision to Withdraw Merger Application
Faced with ongoing questions and mounting pressure, SCAN Group and CareOregon jointly decided to withdraw their merger application. In a statement released to Healthcare Dive, both organizations explained, “Our intent in coming together was to support Oregon’s healthcare system and the people that CareOregon serves. However, despite our efforts, there are still questions about our combination. As a result, SCAN Group and CareOregon have mutually agreed to withdraw our applications with the Oregon regulatory agencies and to terminate our affiliation agreement.” This mutual agreement signifies the end of their pursuit to form HealthRight Group, highlighting the complexities of healthcare mergers in the current regulatory environment.
Implications of the Scrapped Merger in the Healthcare Landscape
The now-canceled merger was intended to capitalize on the growing popularity of government-sponsored health insurance plans, particularly Medicare Advantage. Medicare Advantage plans have witnessed a surge in enrollment, now covering over half of the Medicare-eligible population in 2023. Despite their popularity and generally positive member experiences and health outcomes, Medicare Advantage plans are facing financial headwinds. Recent reports indicate a decline in insurer earnings from MA plans, and potential further payment rate reductions in 2025 proposed by CMS could further impact profitability. The collapse of the CareOregon scan merger underscores the challenges and uncertainties within the evolving healthcare insurance market, even for strategic partnerships aimed at strengthening market position in government-sponsored programs.
