Two major health plans to merge

UnitedHealth Group Inc. and PacifiCare brands will remain seperate for the foreseeable future.

By Denver Post staff and wire reports



UnitedHealth Group Inc. said Wednesday it will buy PacifiCare Health Systems Inc. for $8.1 billion, gaining the biggest manager of plans subsidized by the U.S. Medicare program.



The deal would also create Colorado's largest health care provider, with 834,254 members in the state. That would outstrip Anthem Blue Cross Blue Shield, which has 684,088 members.



"This means that the three largest health plans now represent over 2 million lives in a state that has approximately 4.6 million people," said Jim Hertel, publisher of Colorado Managed Care newsletter. "It represents a huge consolidation in terms of the health-plan choices that will ultimately be available to consumers and employers."



Aetna Inc. will be the third-largest provider in the state with roughly 663,000 members, after its acquisition of HMS Healthcare later this year.



Colorado Insurance Commissioner David Rivera said he was told by a UnitedHealth representative that the UnitedHealth and PacifiCare brands would remain separate for the foreseeable future. Regulators in states where the two companies do business will have to approve the deal, which is expected to be completed later this year.



"Whatever they do we will review it to make sure ... they are not overpriced," Rivera said. "We're going to keep a pretty close eye on it to make sure consumers aren't adversely affected."



Prices for health-care services have risen almost twice as fast as consumer prices in general over the past decade, according to the National Center for Policy Analysis, a nonprofit research institute with offices in Dallas and Washington, D.C.



Minnesota-based UnitedHealth Group operates UnitedHealthcare of Colorado, which has 535,286 members. PacifiCare, based in Cypress, Calif., operates PacifiCare of Colorado with 298,968 members, according to Hertel's website, www.hmo-info.com.



The acquisition would bolster UnitedHealth's position as a prescription drug provider in a new benefit program under Medicare, the U.S. health plan for the elderly and disabled. Medicare may spend $60 billion through private health plans on medicines for 30 million Americans next year, according to the government.



PacifiCare will offer a range of Medicare drug plans and has developed a network of 30,000 insurance brokers to help enroll patients. It also has its own drug-benefits management company, which fills prescriptions for 5.6 million people, including 2.5 million who don't belong to PacifiCare plans.



That may make it cheaper for UnitedHealth, the nation's No. 2 medical benefits provider behind Wellpoint Inc., to expand its prescription-drug business.