Officials postpone decision on merger of insurance firms

Michelle Swafford

Thursday, Aug. 25, 2005 | 11:18 a.m.

Nevada insurance officials postponed a decision Wednesday on whether to allow UnitedHealth Group to acquire PacifiCare Health Systems.

Both insurers operate in Nevada -- with nearly 300,000 people insured on a health or specialty plan between them -- and need the approval of state Insurance Commissioner Alice Molasky-Arman and nine other states' commissioners before they can join forces in a $9.2 billion deal that includes $1.1 billion in PacifiCare debt.

The deal also must be approved by PacifiCare shareholders and federal regulators.

Division of Insurance staff said they needed more time before they could make a recommendation on whether the commissioner should approve the merger.

Molasky-Arman recessed the hearing for 30 days to give her staff time to look through hundreds of papers filed by the insurers.

The recess came after UnitedHealthcare -- a subsidiary of UnitedHealth Group -- and PacifiCare executives testified that the merger would enhance the benefits of Nevadans who are insured by one of the companies.

The staff had originally requested an extension until November so they could review third-quarter financial results for the companies, but Molasky-Arman denied that request and said additional quarterly financial reports were not needed.

A few Las Vegas brokers traveled to Carson City to speak on behalf of consumers, but a public comment session was not held.

Bob Bishop was one of them and he had planned to testify that the merger could reduce plan choices and increase premiums for Nevada small-business owners, who are his primary clients.

He said that is what happened with other mergers, leaving small-business owners with fewer options at a higher cost.

UnitedHealthcare Chief Executive Robert Sheehy, UnitedHealthcare lawyer Mike McDonnell and PacifiCare lawyer Joseph Konowiecki said the deal would "not adversely affect Nevadans."

The combined companies would insure slightly more than 10 percent of Nevadans insured on commercial plans, while Sierra Health Services and Anthem Blue Cross and Blue Shield of Colorado and Nevada continue to be the dominant players in the market, Sheehy said.

The merger would create a broader network of doctors, hospitals and outpatient clinics for patients because PacifiCare has strong local provider networks, while United has a strong national network with 460,000 doctors and 4,200 hospitals, Sheehy said.

Broader provider networks create lower out-of-pocket costs for consumers, he said.

"Our goal is to give people a broader choice of doctors and hospitals by building out a national network if they are traveling, have employees out of state or kids in college," Sheehy said.

Once the merger is complete, the companies would continue to market and sell the health plans that are available in Nevada at a "vigorous" rate, Sheehy said.

In Nevada, PacifiCare focuses on small firms -- primarily through its health maintenance organization -- and private Medicare plans for seniors, while UnitedHealth focuses on large employer groups through preferred provider organizations, indemnity plans and administration of self-funded groups.

"We focus on selling to different types of customers and different types of plans," Sheehy said.

Nevadans insured by PacifiCare would also benefit from UnitedHealth's $2 billion investment in technology to improve health care quality through disease management, he said.

McDonnell said UnitedHealth is committed to promptly paying claims and providers would not be obligated to be part of all of the insurer's health plans.

PacifiCare's lawyer Konowiecki said his company is also committed to promptly paying claims and the timeliness should improve through UnitedHealth's technology.

Physicians would also benefit from improved patient outcomes through UnitedHealth's emphasis on disease management and a simpler claims administration process from the company's technology investment, Konowiecki said.

Jim Wadhams, a Las Vegas lawyer with Jones Vargas, said the acquisition does not directly affect PacifiCare of Nevada, which is based in Nevada and is the reason state officials must sign off on the deal.

The division would have to prove that the merger would be contrary to the interests of Nevada and its consumers.

Wadhams noted that Molasky-Arman already approved the acquisition of Nevada Pacific Dental by UnitedHealth in May.

He suggested that deal could be considered a parallel to the PacifCare acquisition.