Medica paid nearly $233 million for majority stake in Wisconsin health plan

Minnetonka-based Medica invested more than $200 million in 2021 to acquire a majority stake in Dean Health Plan, a Wisconsin-based health insurer that fits with Medica's push to sell more coverage by partnering with health systems in the Midwest and beyond.

Medica, which announced the deal in August, disclosed transaction details in a recent financial statement reviewed by the Star Tribune. The investment extends Medica's existing health insurance in Missouri and Wisconsin, while adding a few counties in Illinois near St. Louis.

With about 2,000 employees, Medica is one of the three largest nonprofit health insurers in Minnesota. It was founded in the mid-1970s and hasn't made many large acquisitions over the years, said Mary Quist, the health plan's senior vice president for finance.

Medica paid $232.7 million for a 55% stake in the Wisconsin-based carrier in a deal that closed Dec. 1. The acquisition "is substantially bigger than anything we would have done in the past," Quist said.

Dean Health Plan provides coverage to about 476,000 people overall, which is roughly half the size of Medica. The health insurer now puts its total membership at about 1.5 million people.

Separately, Medica began selling individual market coverage this year in Phoenix and a Medicare health plan in a few counties in Wyoming. The health insurer's overall service area now touches 12 states.

"Our ability to invest in Dean Health Plan is one way we are achieving our vision of serving more communities and demonstrating our unwavering commitment to high quality affordable health care," John Naylor, the Medica chief executive, said in a statement.

Previously, Dean Health Plan was solely owned by SSM Health, a Catholic nonprofit health system that is based in St. Louis and operates hospitals and clinics in Illinois, Missouri, Oklahoma and Wisconsin.

"I think the fundamental center point of this is really investing in the communities together for something we can improve and make a difference in," said Scott Reid, Medica's senior vice president for business and strategy development.

Medica entered the Omaha market several years ago in partnership with hospitals and clinics operated by Common Spirit, a large Catholic nonprofit health system. Common Spirit has operations in Phoenix, Reid said, so the product launch in Arizona this year extends the existing relationship with Medica.

Arizona is the seventh state where Medica is selling individual market policies that are subsidized by the federal government through the Affordable Care Act (ACA). When insurers five years ago were retreating from ACA markets, Medica held on as the last insurer selling coverage on government-run health exchange marketplaces for Iowa and Nebraska.

At the end of 2021, Medica's individual market business across six states included about 157,000 enrollees, according to a Star Tribune review of regulatory filings, with Nebraska providing the single largest chunk. The insurer's individual market enrollment peaked in 2020 at roughly 172,000.

Last year, Medica reported $126.9 million in operating income on $4.53 billion of revenue. The earnings were off by about 62% compared with 2020 when Medica, like many health insurers, saw higher profits with significant cuts in the use of non-emergency health care services due to COVID-19.

Operating income at Medica hit $336.2 million in 2020 and $466.6 million in 2019.

"Medica's strong balance sheet has allowed us to invest in capabilities and solutions to better serve our growing base of members," Naylor said. "Medica's strategy of partnering with providers to focus on delivering value-based care is working."