Tuesday, February 26, 2008

U.S., Nevada Condition Combination of Health Insurers on Divestitures

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

In order for UnitedHealth Group Inc. to proceed with its acquisition of Sierra Health Services Inc., United would be required to divest assets relating to its Medicare Advantage line of business in the Las Vegas area, under the terms of a proposed U.S. consent decree.

The consent decree, if approved by the federal district court in Washington, D.C., would settle Department of Justice Antitrust Division allegations that the transaction, as originally proposed, likely would substantially lessen competition in the sale of Medicare Advantage plans in the Las Vegas area. The complaint and proposed consent decree were filed with the court on February 25.

United and Sierra were the first and second largest sellers of Medicare Advantage plans in the Las Vegas area, according to the Justice Department. The transaction could have created a combined company controlling 94 percent of the Medicare Advantage health insurance market in the Las Vegas area and resulted in higher prices, fewer choices, and a reduction in the quality of Medicare Advantage plans for senior citizens, it was alleged.

The Justice Department announced that it had tentatively approved Humana Inc. as the acquirer and that United must first attempt to sell the assets to Humana before selling to another purchaser. Under the terms of the proposed settlement, current enrollees of United's Medicare Advantage plans will continue to have substantially the same access to providers, including doctors, hospitals, and other medical services, after the divestiture as before, according to the Justice Department.

Settlement with the State of Nevada

United and Sierra also agreed to settle a challenge to their transaction filed by the State of Nevada in the federal district court for Las Vegas. The state cooperated with the U.S. Justice Department in the investigation, and the state settlement requires the same injunctive relief. The state also required United to contribute $15 million to Nevada organizations and agencies to demonstrate that it will be a good corporate citizen, and that it is dedicated to improving the quality of and access to health care in Nevada, Nevada Attorney General Catherine Cortez Masto announced on February 25. Additionally, United agreed to reimburse the state attorney general $875,000 for attorneys fees and costs.

The Justice Department complaint and proposed consent decree in U.S. v. UnitedHealth Group, Inc. and Sierra Health Services, Inc. will appear in the CCH Trade Regulation Reporter. Further details regarding the State of Nevada settlement appear here on the website of the Nevada Attorney General.

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