UnitedHealth Group-Sierra merger a bad deal

In a decade, the Dept. of Justice has approved 400 mergers, and only two had conditions attached. It's time to stop health plan consolidation.

Editorial. April 16, 2007.

Even in Las Vegas, they've never seen odds like this. UnitedHealth Group is poised to be virtually the only HMO game in town, greatly increasing the probability that doctors, patients and employers will be dealt a losing hand. Meanwhile, what are the chances that the Justice Dept. will step in to stop it? Based on past performance: one half of 1%.

The March announcement that UnitedHealth Group plans to take over one of Nevada's few sizeable independent plans broke a year-long streak with no big announcements from health plans looking to consolidate.

In the $2.6 billion cash deal, United said it would buy Las Vegas-based Sierra Health Services. The purchase will create a dramatic change in Nevada's health care playing field.

The health plan would go from controlling 11% of the Nevada HMO market to controlling 78% of that market, according to American Medical Association estimates. It would dominate 95% of the HMO market in the Las Vegas-Paradise metropolitan area after a consolidation. Now, it has only a 13% share in that local market.

When PPOs are figured in, United would control 43% of the HMO/PPO Nevada market postmerger. That's up from the company's 14% share now. In LasVegas-Paradise it would control 56% of the HMO/PPO market, it now has 18% of the market.

That, in turn, leaves physicians at a huge disadvantage when trying to negotiate fair payment contracts. Patients would have far less choice when selecting a health plan. So would employers.