UnitedHealth-PacifiCare deal approved, with conditions

Despite federal and state regulators' insistence on certain changes in the companies' makeup, physicians aren't encouraged by the merger.

By Jonathan G. Bethely, AMNews staff. Jan. 16, 2006.

UnitedHealth Group's $9 billion purchase of PacifiCare Health Systems Inc., in a rare case for a health plan merger, is not being approved carte blanche, but that doesn't mean physicians are happy the deal was approved, even with strings attached.

Federal and various state regulators are requiring the company to sell certain operations, contribute money to state-level health initiatives, and meet requirements for addressing physician contracting concerns.

The U.S. Justice Dept. filed legal papers informing United that the merger could take place only if the newly merged company sells operations in Boulder, Colo., and Tucson, Ariz., and within a year pulls out of a deal allowing United access to WellPoint-owned Blue Shield of California's physician network.

It is the first time the Justice Dept. has placed conditions on a health plan merger since it required Aetna to sell certain Texas operations upon its 1999 purchase of Prudential's health operations.

At the state level, regulators in California, where PacifiCare is based, approved the deal with the caveats that United spend $250 million toward health care for the poor, that it didn't pass along merger costs to consumers, and that its customer service remains unaffected by the deal.

Despite these conditions, the California Medical Assn. said it stands by its statements made during a Sept. 16 , 2005, regulatory hearing that the merger "runs the risk of putting patients in jeopardy of increased premiums and reduced access to health care in exchange for increasing profitability of the health plan."