The Centene-WellCare Deal Is a Bet on Obamacare

Buying WellCare cements Centene as the largest private Medicaid insurer. It would nearly double the firm's presence in the growing Medicare Advantage market, which covers over 20 million seniors, and makes it a big provider of drug benefits for seniors. More states are considering or beginning Medicaid expansions, and the combined company would be uniquely positioned to take advantage.

Of course, all of that relies on the notion that there will be only limited changes to current health policy. That could be the right call. President Trump's ACA challenge is unlikely to succeed, and a divided Congress won't come to broad health care consensus. A Medicare-for-All plan, if it happens at all, is years away, and some Democrats are in favor of incremental plans that retain a role for private insurers.

Centene is probably thinking back to the effort to pass the ACA. In the D.C. pressure-cooker, the legislation transformed from a plan that would force insurers to compete with a government-run public option to a more industry-friendly initiative that brought these two companies out of obscurity.

The deal could go wrong. The new business would have a hefty debt burden, which could leave it more exposed to government encroachment. There's support for a push for universal coverage, and any such effort will require a more active government role in insurance markets. But until any changes actually happen, the combined firm will be in a better position to compete against large and increasingly diversified rivals. It will be less dependent on any one program or region, which should offer some protection.

At the end of the day, betting against Washington's ability to fully follow through on big health care promises has usually been the right call.

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Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

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