United-Oxford merger still facing legal challenge

A state medical society trying to freeze Oxford's buyout in its tracks will argue its case in a New Jersey appellate court.

By Robert Kazel, AMNews staff. Sept. 27, 2004.

A judge refused UnitedHealth Group's request to dismiss a lawsuit filed by the Medical Society of New Jersey, which seeks to undo the company's multibillion-dollar merger with Oxford Health Plans.

For the Medical Society of New Jersey, the refusal to dismiss represents the first success in a case based on obscure state law that seemingly allows any "aggrieved" party to challenge a regulatory decision.

The law is so obscure, said Steve Kern, the society's lawyer, it's never been used in its 34 years on the books -- until Aug. 2. That's when the society cited it in its lawsuit against United, Oxford and the New Jersey Dept. of Banking and Insurance. The suit was filed three days after the department became the final regulatory authority necessary to approve the merger.

United says it is fighting the lawsuit and that the society's reliance on a law the health plan says violates New Jersey's constitution. United also disputes the medical society's notion that the lawsuit has legally stopped its merger with Oxford.

The New Jersey state law in question permits persons unhappy with an administrative agency's regulatory decision on insurers to seek help from a superior court judge.

The law provides that "any person aggrieved" by such an action can ask the court to reconsider an agency's decision in a trial.

In its case, the Medical Society of New Jersey argues that the state's Dept. of Banking and Insurance inadequately considered the effects a takeover of Trumbull, Conn.-based Oxford by Minnetonka, Minn.-based United would have on patients, doctors and competition among health plans. The department did its review of the United-Oxford deal in three days, which the doctors said was too little time for an adequate job.