Just over a year after announcing their intent to merge, SCAN Group and CareOregon have officially abandoned their merger plans. The health insurers confirmed the decision to Healthcare Dive on Thursday, marking the end of their proposed union.
The two organizations initially revealed their merger agreement in December 2022, outlining the formation of HealthRight Group, a substantial $6.8 billion health plan designed to serve both Medicaid and Medicare Advantage populations. The deal, anticipated to finalize in 2023, encountered significant hurdles, most notably during the public comment phase where it faced considerable criticism. Adding to the pressure, Oregon’s Medicaid Advisory Committee formally recommended to the Oregon Health Authority that the merger be disapproved in December, casting further doubt on its viability.
Citing these persistent questions and regulatory headwinds, a spokesperson for the insurers stated that SCAN Group and CareOregon mutually decided to withdraw their merger application.
The proposed merger aimed to unite SCAN Health Plan, known for its Medicare Advantage offerings in Arizona, California, and Texas, with CareOregon, a provider of Medicaid and Medicare Advantage plans to 500,000 Oregon residents. The combined entity was projected to serve approximately 800,000 members, creating a significant player in the government-sponsored healthcare market.
However, the deal faced increasing scrutiny from Oregon politicians and the state’s Medicaid Advisory Committee. The committee voiced “serious concerns” regarding the merger, specifically pointing to SCAN’s limited track record in addressing health inequities and the potential outflow of Oregon taxpayer funds from the state.
Opposition to the merger gained momentum this winter, with prominent figures like former Oregon Governor John Kitzhaber, former Oregon Health Authority Director Patrick Allen, and current state Representative Travis Nelson publicly campaigning against it. Their collective opposition underscored the growing political challenges facing the deal.
Ultimately, the level of opposition proved insurmountable. In a joint statement released to Healthcare Dive, SCAN Group and CareOregon 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.”
The now-abandoned merger sought to leverage the increasing popularity of government-sponsored insurance programs, particularly Medicare Advantage plans. Medicare Advantage enrollment has surged in recent years, with over half of Medicare-eligible individuals enrolled in an MA plan in 2023. Beneficiaries often express satisfaction with their MA plans, and studies suggest they may experience better health outcomes compared to those in traditional Medicare.
Despite the popularity, recent reports indicate that insurers are facing diminishing returns from Medicare Advantage plans. Moody’s reported a 2% decrease in MA earnings for insurers in 2022 compared to 2019, despite membership growth. Furthermore, proposed CMS regulations could lead to further reductions in payment rates for health insurers in 2025, adding to the financial pressures in the Medicare Advantage market. This evolving financial landscape may also have contributed to the decision to call off the SCAN CareOregon merger, as the combined entity would have been significantly invested in this sector.
