AMERIGROUP (AGP)

 

On October 23, 2009, AMERIGROUP Corporation and AMERIGROUP New Jersey, Inc. settled litigation with Centene and its wholly-owned subsidiary, UHP, regarding AMERIGROUP New Jersey, Inc.’s termination of an agreement to purchase certain assets of UHP. Pursuant to the terms of the confidential settlement, the parties dismissed the litigation with prejudice and an amended and modified asset purchase agreement was reinstated. The parties will move forward with the transaction contemplated by the amended and modified asset purchase agreement, as modified in connection with the settlement, and expect the transaction, which is subject to regulatory approval and other closing conditions, to close in the early part of 2010. Costs associated with the transaction and the effect of this settlement are not expected to be material to our results of operations, financial position or cash flows. We can make no assurance that entry into such business will be favorable to our results of operations, financial position or cash flows in future periods.

 

 

On November 19, 2008, AMERIGROUP New Jersey, Inc., entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Centene Corporation (“Centene”) and its wholly-owned subsidiary, University Health Plans, Inc. (“UHP”), whereby AMERIGROUP New Jersey, Inc., would purchase certain assets of UHP related to its Medicaid business, including the right to serve UHP’s members who are beneficiaries of the New Jersey Medicaid program. Prior to the execution of the Purchase Agreement, the State of New Jersey announced that it would begin using periodic risk scores to establish the premium rates to be paid to managed care organizations with respect to their TANF and CHIP Medicaid members effective as of January 1, 2009. Prior to the execution of the Purchase Agreement, the State had neither disclosed its methodology for calculating the periodic risk score for TANF and CHIP beneficiaries applicable to each managed care organization nor the date on which the periodic rate scores would be announced.

 

Following execution of the Purchase Agreement but prior to closing, the State notified UHP of (a) its final periodic risk score for its TANF and CHIP Medicaid members; and (b) the amount of the corresponding premium rate reduction effective January 1, 2009. Upon learning of UHP’s final periodic risk score and the amount of the rate reduction, AMERIGROUP New Jersey, Inc., notified Centene and UHP in writing that: (i) the rate reduction constituted a Material Adverse Effect, as defined in the Purchase Agreement; (ii) the occurrence of a Material Adverse Effect was a breach of the representations and warranties of Centene and UHP in the Purchase Agreement; (iii) the absence of any Material Adverse Effect was a precondition to the obligation of AMERIGROUP New Jersey, Inc. to proceed to closing under the Purchase Agreement; and (iv) pursuant to the terms of the Purchase Agreement, Centene and UHP had ten days to cure the breach or AMERIGROUP New Jersey, Inc., would terminate the Purchase Agreement in accordance with its terms. Centene and UHP failed to cure the breach within the ten day period, and, on December 30, 2008, AMERIGROUP New Jersey, Inc. notified Centene and UHP in writing that the Purchase Agreement was terminated.

 

On January 8, 2009, Centene and UHP filed a civil action complaint (the “Complaint”) against AMERIGROUP New Jersey, Inc. and the Company in the Superior Court of New Jersey, Essex County, Chancery Division, Docket No. C-8-09. The Complaint asserts breach of contract and tortious interference with contractual relations claims against AMERIGROUP New Jersey, Inc. and the Company. The Complaint seeks specific performance compelling AMERIGROUP New Jersey, Inc. to perform its obligations under the Purchase Agreement, consequential and incidental damages to be determined at trial, and other relief as the court may deem just and proper.

 

On February 10, 2009, the Company and AMERIGROUP New Jersey, Inc. filed a Motion for Partial Dismissal of the Complaint and to Transfer Venue, seeking the dismissal of the tortious interference claims against both the Company and AMERIGROUP New Jersey, Inc., and the transfer of venue of the remaining cause of action in the Complaint from the Superior Court of New Jersey, Essex County, to the Superior Court of New Jersey, Middlesex County, the latter being the location of the executive offices of both AMERIGROUP New Jersey, Inc. and UHP.

 

The Company and AMERIGROUP New Jersey, Inc. believe that they have substantial defenses to these claims and will defend against them vigorously. While the results of this litigation cannot be predicted with certainty, we believe the final outcome of such litigation will not have a material adverse effect on the financial condition, results of operations or liquidity of the Company.

 

 

On November 19, 2008, AMERIGROUP New Jersey, Inc., entered
into an Asset Purchase Agreement (the “Purchase
Agreement”) with Centene Corporation (“Centene”)
and its wholly-owned subsidiary, University Health Plans, Inc.
(“UHP”), whereby AMERIGROUP New Jersey, Inc., would
purchase certain assets of UHP related to its Medicaid business,
including the right to serve UHP’s members who are
beneficiaries of the New Jersey Medicaid program. Prior to the
execution of the Purchase Agreement, the State of New Jersey
announced that it would begin using periodic risk scores to
establish the premium rates to be paid to managed care
organizations with respect to their TANF and CHIP Medicaid
members effective as of January 1, 2009. Prior to the
execution of the Purchase Agreement, the State had neither
disclosed its methodology for calculating the periodic risk
score for TANF and CHIP beneficiaries applicable to each managed
care organization nor the date on which the periodic rate scores
would be announced.

 

Following execution of the Purchase Agreement but prior to
closing, the State notified UHP of (a) its final periodic
risk score for its TANF and CHIP Medicaid members; and
(b) the amount of the corresponding premium rate reduction
effective January 1, 2009. Upon learning of UHP’s
final periodic risk score and the amount of the rate reduction,
AMERIGROUP New Jersey, Inc., notified Centene and UHP in writing
that: (i) the rate reduction constituted a Material Adverse
Effect, as defined in the Purchase Agreement; (ii) the
occurrence of a Material Adverse Effect was a breach of the
representations and warranties of Centene and UHP in the
Purchase Agreement; (iii) the absence of any Material
Adverse Effect was a precondition to the obligation of
AMERIGROUP New Jersey, Inc. to proceed to closing under the
Purchase Agreement; and (iv) pursuant to the terms of the
Purchase Agreement, Centene and UHP had ten days to cure the
breach or AMERIGROUP New Jersey, Inc., would terminate the
Purchase Agreement in accordance with its terms. Centene and UHP
failed to cure the breach within the ten day period, and, on
December 30, 2008, AMERIGROUP New Jersey, Inc. notified
Centene and UHP in writing that the Purchase Agreement was
terminated.

 

On January 8, 2009, Centene and UHP filed a civil action
complaint (the “Complaint”) against AMERIGROUP New
Jersey, Inc. and the Company in the Superior Court of New
Jersey, Essex County, Chancery Division, Docket
No. C-8-09.
The Complaint asserts breach of contract and tortious
interference with contractual relations claims against
AMERIGROUP New Jersey, Inc. and the Company. The Complaint seeks
specific performance compelling AMERIGROUP New Jersey, Inc. to
perform its obligations under the Purchase Agreement,
consequential and incidental damages to be determined at trial,
and other relief as the court may deem just and proper.

 

On February 10, 2009, the Company and AMERIGROUP New
Jersey, Inc. filed a Motion for Partial Dismissal of the
Complaint and to Transfer Venue, seeking the dismissal of the
tortious interference claims against both the Company and
AMERIGROUP New Jersey, Inc., and the transfer of venue of the
remaining cause of action in the Complaint from the Superior
Court of New Jersey, Essex County, to the Superior Court of New
Jersey, Middlesex County, the latter being the location of the
executive offices of both AMERIGROUP New Jersey, Inc. and UHP.

 

The Company and AMERIGROUP New Jersey, Inc. believe that they
have substantial defenses to these claims and will defend
against them vigorously. While the results of this litigation
cannot be predicted with certainty, we believe the final outcome
of such litigation will not have a material adverse effect on
the financial condition, results of operations or liquidity of
the Company.

 

 

On November 19, 2008, AMERIGROUP New Jersey, Inc., entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Centene Corporation (“Centene”) and its wholly-owned subsidiary University Health Plans, Inc. (“UHP”), whereby AMERIGROUP New Jersey, Inc., would purchase certain assets of UHP related to its Medicaid business, including the right to serve UHP’s members who are beneficiaries of the New Jersey Medicaid program. Prior to the execution of the Purchase Agreement, the State of New Jersey announced that it would begin using periodic risk scores to establish the premium rates to be paid to managed care organizations with respect to their TANF and CHIP Medicaid members effective as of January 1, 2009. Prior to the execution of the Purchase Agreement, the State had neither disclosed its methodology for calculating the periodic risk score for TANF and CHIP beneficiaries applicable to each managed care organization nor the date on which the periodic rate scores would be announced.

 

Following execution of the Purchase Agreement but prior to closing, the State notified UHP of (a) its final periodic risk score for its TANF and CHIP Medicaid members; and (b) the amount of the corresponding premium rate reduction effective January 1, 2009. Upon learning of UHP’s final periodic risk score and the amount of the rate reduction, AMERIGROUP New Jersey, Inc., notified Centene and UHP in writing that: (i) the rate reduction constituted a Material Adverse Effect, as defined in the Purchase Agreement; (ii) the occurrence of a Material Adverse Effect was a breach of the representations and warranties of Centene and UHP in the Purchase Agreement; (iii) the absence of any Material Adverse Effect was a precondition to the obligation of AMERIGROUP New Jersey, Inc. to proceed to closing under the Purchase Agreement; and (iv) pursuant to the terms of the Purchase Agreement, Centene and UHP had ten days to cure the breach or AMERIGROUP New Jersey, Inc., would terminate the Purchase Agreement in accordance with its terms. Centene and UHP failed to cure the breach within the ten day period, and, on December 30, 2008, AMERIGROUP New Jersey, Inc. notified Centene and UHP in writing that the Purchase Agreement was terminated.

 

On January 8, 2009, Centene and UHP filed a civil action complaint (the “Complaint”) against AMERIGROUP New Jersey, Inc. and the Company in the Superior Court of New Jersey, Essex County, Chancery Division, Docket No. C-8-09. The Complaint asserts breach of contract and tortious interference with contractual relations claims against AMERIGROUP New Jersey, Inc. and the Company. The Complaint seeks specific performance compelling AMERIGROUP New Jersey, Inc. to perform its obligations under the Purchase Agreement, consequential and incidental damages to be determined at trial, and other relief as the court may deem just and proper.

 

On February 10, 2009, the Company and AMERIGROUP New Jersey, Inc. filed a Motion for Partial Dismissal of the Complaint and to Transfer Venue, seeking the dismissal of the tortious interference claims against both the Company and AMERIGROUP New Jersey, Inc., and the transfer of venue of the remaining cause of action in the Complaint from the Superior Court of New Jersey, Essex County, to the Superior Court of New Jersey, Middlesex County, the latter being the location of the executive offices of both AMERIGROUP New Jersey, Inc. and UHP.