Health plan mergers: More oversight needed

While it was good to see the Justice Dept. put some conditions on a health plan merger, even stricter regulation is needed.

Editorial. Feb. 6, 2006.

The good news is, the Dept. of Justice for once didn't allow a health plan merger to go forward as intended. The bad news is, the merger still went through.

The Justice Dept.'s requirement that the UnitedHealth Group-PacifiCare Health Systems merger happen only under certain conditions is a tiny step toward what the AMA and physicians have been asking the government to do for years -- examine health plan mergers carefully so that plans aren't allowed an unfettered ability to impose their will on physicians and patients.

Aetna's 1999 purchase of Prudential's health insurance operation is the only other health plan or managed care organization merger that wasn't approved as submitted. That's out of the more than 400 such mergers that the Justice Dept. has reviewed,

In this instance, the Justice Dept. is forcing the newly combined United-PacifiCare to sell operations in Boulder, Colo., and Tucson, Ariz. The plan also must cancel a deal in which it has access to Blue Cross of California's physician network.

In doing so, the Justice Dept. offered what for it is a rare acknowledgment of the realities concerning health plan monopsony power. For example, in court papers filed as a formality when it seeks to impose conditions on a corporate merger, the government noted that in Boulder and Tucson, the newly merged plan would control more than 30% of the physician contracts and the small-group insurance market. In 1999, when the Justice Dept. forced Aetna to sell Prudential operations in Houston and Dallas, its threshold for market power was a 42% share.