The proposed managed-care mega-merger of United HealthCare Corp. and Humana isn't likely to face regulatory opposition nationally, but it could run into problems in specific geographic markets, experts say.
Potential antitrust problem areas include Chicago, Miami and South Florida, and possibly Missouri, Ohio and Texas. But it's far too early to tell whether the Federal Trade Commission, U.S. Justice Department or state attorneys general will raise significant objections to the merger.
"It's going to be a bump in the road," wagered Bob Atlas, senior vice president for managed care at the Lewin Group in Fairfax, Va.
Under the deal, valued at $5.5 billion, United will acquire Humana, creating the nation's largest managed-care plan with more than 10.4 million managed-care enrollees (June 1, p. 2). The sale is expected to close in the third quarter.
Clearing antitrust hurdles will depend on the merging plans' political savvy and relationships in those markets and on their ability to get regulators to define markets as broadly as possible, diluting their market share in theory, analysts said.
"The way United will approach it will be to look at a more regional service area, to the degree that they can," said Tom Hodapp, a healthcare analyst at BancAmerica Robertson Stephens in San Francisco.
The proposed consolidation would create large numbers of Medicare HMO enrollees in certain geographic areas, but analysts say that hasn't stopped similar mergers, including last year's huge combination of Medicare risk leaders PacifiCare Health Systems and FHP International.
"If they let PacifiCare-FHP go, they're going to let this go," predicted Robert Mains, an Albany, N.Y.-based managing director and healthcare analyst for Advest, a financial services firm.
The merged company would boast more than 250,000 Medicare HMO enrollees in South Florida alone, nearly 430,000 in the Atlanta metropolitan area, close to 200,000 in Chicago, and more than 105,000 in the Dallas area, according to HCFA.
Of all the cities where each company has a sizable book of business, Miami and Chicago might pose the biggest problems.
In Dade County, Fla., where Miami is located, United and Humana at year-end 1997 had a combined Medicare HMO market share of nearly 52%, according to data compiled by the Florida Hospital Association.
They also held a joint 29.4% of the commercial market in the county, along with United's 25% of the Medicaid managed-care market.
In Chicago, United HealthCare of Illinois would become the city's largest HMO by a broad margin, with about 800,000 enrollees, or about 85,000 more than its leading competitor, Blue Cross and Blue Shield of Illinois, which operates the HMO Illinois and Blue Advantage plans in the area.
United spokesman Phil Soucheray said that nearly all the filings that need to be made have been made.
The merging companies don't expect antitrust obstacles, "but if the government has their issues, they'll let people know," he said.