Amerigroup Corp was recently bought over by WellPoint which will advance the Government business - said BMO capital in a report.
WellPoint - the Indianapolis insurer had announced its intention to buy over Amerigroup Corp in July. It completed the $ 4.46 billion deal on Monday the 24th. Amerigroup Corp manages Medicaid a federally funded program for health cover for the poor and disabled residents above the age of 65. These people qualify for both Medicaid and Medicare and are moved into managed care programs.
These patients have chronic medical ailments and taking care of them is expensive, although insurers and analysts see this as rewarding business. By the next year more people will be entitled for Medicaid.
According to WellPoint its Medicaid business will serve 4.5 million people in 20 states.
After some research Shove felt his WellPoint earnings of 2013 would cover the deal including factoring in higher Medicaid enrollments and interest expenses for debt.
Shore wrote that "With the addition of (Amerigroup), WellPoint's business will likely be better exposed to government payments while fundamentals will likely remain intact,"
Shove lowered his expected earnings for the insurer by 4 cents per share in 2012 and raised it by a penny a share by 2013.
WellPoint Inc. runs Blue Cross Blue Shield plans in many states and is the nation's second largest health insurer.
Source: Associated Press December 27th