Health merger’s target date slipping by

By Marshall Allen

Thursday, Dec. 27, 2007 | 7:17 a.m.

For the past nine months officials from UnitedHealth Group and Sierra Health Services, the nation's and the state's largest health insurance providers, have claimed that their controversial plan to merge companies would be approved by the end of 2007.

Now, in the sleepy days between holidays, their timetable has changed. The deal - which has attracted a number of opponents - will probably not receive final approval from the Justice Department until January, said Sierra spokesman Peter O'Neill.

Antitrust experts following the $2.6 billion deal say the delay could be a sign that the Justice Department will approve the merger on the condition that the companies sell off some of their respective shares of the market.

Sierra insures about 630,000 Nevadans, most of them in Clark County. United provides health insurance for about 70 million Americans. It owns PacifiCare of Nevada, which insures about 70,000 people, according to filings with the state.

Critics of the merger say the combined companies would have such a dominant market share, and competition would be so stifled, that United could drop reimbursement rates for hospitals and doctors and raise premiums for consumers, leading to a higher number of uninsured Nevadans. Critics also point to United's string of regulatory violations and fines in dozens of states as reason to oppose the deal.

A Washington, D.C., antitrust attorney who's following the merger on behalf of investors predicted the deal will go through, but that United might have to sell its PacifiCare market share in a compromise with the Justice Department. Most of the people covered by PacifiCare are in Health Maintenance Organization (HMO) plans, so getting rid of this portion of holdings would lessen critics' concerns about a potential United monopoly, the attorney noted.

"That would be an easy solution," said the attorney, who asked not to be named.

United has been through this process in previous mergers. In 2006 the Justice Department required the company to divest holdings when it merged with PacifiCare Health Systems. The new company gave up about 6,000 members in Boulder, Colo., and 54,000 members in Tucson.

Opponents of the merger here have been growing in number since it was announced in March. The Clark County commissioners recently joined the Service Employees International Union Local 1107, which represents nurses and county workers, the Nevada State Medical Association and the Clark County Medical Society in hiring an antitrust attorney to lobby the Justice Department and Nevada Attorney General's Office.

The level of alarm rose in November when it was announced that United intends to acquire Fiserv, a Fortune 500 company that is hired to administer health plans for organizations and companies that handle their own insurance. Fiserv's Nevada clients include MGM Mirage, the Venetian, Station Casinos and the state government, said Larry Matheis, executive director of the Nevada State Medical Association.

"If there was any doubt that UnitedHealth intends to be the dominant health care provider, this move would seem to remove it," Matheis said.

Critics say the Fiserv takeover would further weaken competition by giving United inside knowledge of the rates that such health plans negotiate with doctors and hospitals, and that the information could be leveraged in United's negotiations with the same providers.

Sometimes self-insured plans can negotiate lower rates with doctors and hospitals because they are fast payers, said Bobbette Bond, spokeswoman for the Culinary Health Fund. Once United knows the self-insured rates, it can demand the same rates, she said.

The Justice Department's approval is the final regulatory hurdle to United's takeover of Sierra, but it's still possible the Nevada Attorney General's Office will fight the deal on behalf of Nevada consumers. It's also possible opponents will band together and file a lawsuit to try to stop the merger.

The Washington antitrust attorney said it's unlikely private parties will try to fight the acquisition in court. The deal would have already been approved by the Nevada insurance commissioner and the Justice Department, so the private parties would have to argue that the regulators made a mistake. The opponents, the attorney said, would also be squaring off against one of the largest companies in America, which has a well-funded team of expert lawyers.