Proposed UnitedHealth, PacifiCare Merger Subject of Public Hearing
The first of two public hearings on UnitedHealth Group's proposed acquisition of PacifiCare Health Systems was held on Thursday, with some consumers voicing concerns to state regulators about the potential for increased premiums, reduced competition and changes to health plan benefits, the Los Angeles Times reports (Girion, Los Angeles Times, 8/26).
Minnesota-based UnitedHealth on July 6 announced plans to acquire California-based PacifiCare for $9.2 billion in cash, stock and assumed debt. Thirty-nine PacifiCare executives would share nearly $230 million if the acquisition is completed.
The deal would provide UnitedHealth with access to the 716,000 PacifiCare members enrolled in Medicare plans and the 2.5 million members enrolled in commercial plans in California, Washington state, Oregon and Nevada. The acquisition would increase the membership of UnitedHealth, the second-largest health insurer in the nation, to 25 million (California Healthline, 8/2).
The hearing was held by the Department of Managed Health Care, one of three state agencies that must approve the deal in California. In addition, the merger requires federal antitrust approval.
Jerry Flanagan, an activist for Foundation for Taxpayer and Consumer Rights, said DMHC should not approve the merger unless both companies "guarantee that patients will not face rate increases to pay for any costs associated with the merger, including financing costs and executive bonuses."
Robert Sheehy -- CEO of United Healthcare, a subsidiary of UnitedHealth -- said all payments to PacifiCare executives would come from UnitedHealth's reserves.
James Frey, president of PacifiCare of California, said members would benefit from the introduction of electronic membership cards that instantly provide information on their eligibility for benefits. Beginning next year, the cards will facilitate access to patients' health records, Frey said (Galvin, Orange County Register, 8/26).
DMHC Director Cindy Ehnes said, "This is the second proposed merger of a major player in the California market in the past 18 months," adding, "Questions about ... consumers' ability to gain access to affordable health care products must be answered."
The second hearing is scheduled for Sept. 16 in Sacramento (Los Angeles Times, 8/26).