Insurer UnitedHealth To Purchase Oxford Health Plans for $4.9B

Minnesota-based UnitedHealth Group on Monday signed an agreement to purchase Connecticut-based Oxford Health Plans for about $4.9 billion in stock and cash, a move that will help the company "claw into the competitive Northeast" health insurance market, the Wall Street Journal reports (Berman/Fuhrmans, Wall Street Journal, 4/27). Under the agreement, which will establish one of the largest health insurers in the Northeast, UnitedHealth will purchase about 54.7 million shares of Oxford and pay $1.4 billion in cash (Coffey, AP/Boston Globe, 4/27). UnitedHealth will offer 0.64 of a share for each Oxford share, in addition to $16.17 in cash, with the merger expected to close in the fourth quarter. The price represents a 14% premium over the Oxford share price at the close of trading on Friday (Atlas, New York Times, 4/27). UnitedHealth and Oxford officials said that they expect the agreement to reduce annual expenses by $80 million to $100 million pre-tax over 12 to 18 months (Levick, Hartford Courant, 4/27). Under the agreement, UnitedHealth will continue to market the Oxford brand and retain Oxford CEO Chuck Berg as CEO of operations in Connecticut, New Jersey and New York (Wall Street Journal, 4/27). UnitedHealth also will retain most of the Oxford management team, and the Oxford headquarters will remain open. However, some job reductions in Connecticut are likely because "both companies have major operations" in the state, according to the Courant (Hartford Courant, 4/27).

Agreement To Increase Membership
The agreement will allow UnitedHealth, which currently serves more than 20 million members in 50 states, to increase membership by 1.5 million (New York Times, 4/27). According to the Journal, the agreement will help UnitedHealth and Oxford compete with Anthem and WellPoint Health Networks, which will have a combined 26 million members when they complete their $16.4 billion merger announced last October (Wall Street Journal, 4/27). Oxford, which has a large market share in the New York City area, has "long been considered a takeover target," according to the Times (New York Times, 4/27). On Thursday, Delaware-based WellChoice ended negotiations to purchase Oxford because of antitrust concerns (Kaiser Daily Health Policy Report, 4/23). The agreement between UnitedHealth and Oxford marks the "third in recent months involving U.S. health insurers, which are combining as employers fail to add enough jobs to make health plan membership grow as quickly as in the 1990s," according to Bloomberg/Los Angeles Times (Bloomberg/Los Angeles Times, 4/27).