(Reuters) - Health insurer Centene Corp (CNC.N) said on Monday it had entered an agreement to sell its Illinois unit to CVS Health Corp (CVS.N), moving a step closer to closing its $15.27 billion deal to buy smaller rival WellCare Health Plans Inc (WCG.N).
Centene expects to scale up its government-backed Medicare and Medicaid businesses with the WellCare deal, but in some states Medicaid divestitures may be required, such as Georgia and Illinois, Wall Street analysts had pointed out.
In September, following the U.S. Department of Justice’s demand for additional information regarding the merger, WellCare agreed to sell its Missouri and Nebraska Medicaid plan units due to significant overlap in business in the states with Centene.
The two health insurers expect their merger to close by the first half of 2020.
“We are continuing to make progress towards completing our transaction with WellCare and the divestiture of our IlliniCare Health plan is the next step in that process,” Centene Chief Executive Officer Michael Neidorff said in a statement.
Financial terms of the IlliniCare deal were not disclosed.
Centene would sell its Medicaid and Medicare Advantage lines of business in the Illinois unit, IlliniCare Health Plan Inc, the company said.
Illinicare’s Medicaid health insurance plans serve about 1.5 million enrollees, which also includes older adults who are dually eligible for coverage under Medicaid and Medicare.
Centene will retain the unit’s Medicare-Medicaid Alignment Initiative as well as a foster care contract, set to begin in February 2020, and said its Ambetter business would not be affected by the deal.
Reporting by Manas Mishra in Bengaluru; Editing by Shinjini Ganguli