New York State Regulators Examining Possible Oxford Health Plans, UnitedHealth Merger

The New York State Attorney General's Office is looking into the potential impact of the proposed merger between Minnesota-based UnitedHealth Group and Connecticut-based Oxford Health Plans, while the American Medical Association has asked federal regulators for an antitrust review, the New York Times reports (Abelson, New York Times, 5/1). UnitedHealth signed an agreement last week to purchase Oxford for about $4.9 billion in stock and cash. 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 for $1.4 billion in cash. The agreement will allow UnitedHealth, which currently serves more than 20 million members in 50 states, to increase membership by 1.5 million. Oxford, which has a large market share in the New York City area, has long been considered a takeover target (American Health Line, 4/27). Juanita Scarlett, a spokesperson for New York's attorney general's office, said that the office has already requested information about the pending merger, including membership data. She added that the merger "does raise concerns for our office." AMA cited what it views as "the increasing power of health insurance plans in markets across the country" as the reason for its call for a federal review of the merger, the Times reports. According to the Times, AMA President Dr. Donald Palmisano has made his own analysis and determined that the merger "would reduce the level of competition in the New York metropolitan area enough to warrant the attention of the Federal Trade Commission or the Department of Justice." Palmisano said, "All the red flags are up right now," adding, "We hope regulators will apply the antitrust laws to these giant mergers." He contends that doctors may not have enough leverage to negotiate with such large networks and that past consolidations have led to higher premiums.

Possible Federal Scrutiny
Federal regulators said that they could not comment on the UnitedHealth-Oxford merger. Sheryl Skolnick, a Fulcrum Global Partners analyst, said, "I wouldn't be at all surprised to see an antitrust review." According to the Times, it is "unclear" whether or not regulators will "find enough evidence of a possible problem ... given the variety of ways to look at markets and the ability to flex muscle." William Kopf, a lawyer for Epstein Becker & Green whose specialty is antitrust cases, said that he thought "regulators were unlikely to challenge the combination formally," adding, "Market share is not a very good predictor of market power in this particular industry. No one has loyalty to insurance companies. They hate them all" (New York Times, 5/1).