Harris sale to PacifiCare set to be announced

Sunday, Oct. 31, 1999 | 10:37 a.m.

The buyout of Harris could help the Arlington-based HMO end two years worth of legal headaches made worse by huge financial losses.

It also frees Harris' parent company, Texas Health Resources, to complete its alliance with Dallas-based Baylor Health Care System - creating the largest hospital system in the state.

Insurance Commissioner Jose Montemayor said Friday the acquisition of Harris is expected to cost PacifiCare, based in Santa Ana, Calif., more than $100 million. Officials with both companies refused to comment on the price or to confirm the deal.

But Montemayor said representatives from Texas Health Resources and PacifiCare presented their proposal to him Friday in Austin, with a final OK to come in the next few days.

And sources said the sale had already been approved by the Texas Health Resources board, though some details remain to be worked out. The deal would require approval from state and federal regulators.

"We're in very serious negotiations and there is hope that an agreement is going to be completed," said Texas Health chairman Andy Thompson.

The Harris sale would complete a trio of major mergers already reshaping the state's insurance market.

Last month, the parent of Blue Cross and Blue Shield of Texas agreed to pay Aetna Inc. $500 million to acquire 551,000 Texas members of NYLCare Health Plans. In August, Aetna paid $1 billion to acquire 5.5 million members of Prudential HealthCare, including more than 1 million Texas enrollees.

Harris has about 350,000 members in its various plans in North Texas but has been on the auction block for more than two years.

The HMO's situation worsened last year when it was forced to rewrite its physician contracts and pay out about $10 million after regulators determined the arrangements were illegal.

Harris also reported operational losses of $49.6 million last year and has seen North Texas enrollment drop as the HMO raised prices.

PacifiCare has 3.7 million members and operations in nine states and Guam. It reported net income of $202 million on sales of $9.5 billion last year and stands to gain about 314,000 Harris HMO members in the buyout.

Experts said Harris' products would likely be integrated into PacifiCare's operations.