Aetna tentatively has agreed to divest its NYLCare Health Plans in Dallas and Houston as a condition of federal antitrust approval for its proposed $1 billion acquisition of Prudential HealthCare.
Prudential sources confirmed late last week that Aetna plans to accept the stipulation. However, final negotiations are still under way, and neither Aetna nor the U.S. Justice Department would comment on the talks.
Physicians in Texas are taking credit for the conditional approval, which came after the Texas Medical Association, the American Medical Association and local medical societies blasted the proposed merger as anti-competitive.
"We are cautiously optimistic that the monstrous Aetna U.S. Healthcare-Prudential merger, as originally proposed, has been dismantled," said TMA President Alan Baum, M.D., in a June 15 statement. "Texas physicians, working with the American Medical Association, occupied a pivotal role in raising the concerns of state and federal regulators."
Originally, the acquisition would have given Aetna a 50% share of the HMO market in Houston and nearly 40% of the HMO market in Dallas-Fort Worth, the TMA said.
In December, Hartford, Conn.-based Aetna agreed to purchase Newark, N.J.-based Prudential Insurance Co.'s 6.6 million-enrollee health insurance business. Aetna intends to merge those operations with its 16 million-enrollee unit. The acquisition would make Aetna U.S. Healthcare the largest managed-care company in the country, with a combined enrollment of more than 22 million.
The Prudential deal was announced five months after Aetna completed a $1.1 billion acquisition of NYLCare Health Plans in July 1998. NYLCare is the 2.2 million-enrollee managed-care unit of New York Life Insurance Co.
NYLCare in Dallas and Houston cover about 500,000 enrollees. But even without those enrollees, the Aetna-Prudential managed-care operation would boast more than 3.6 million enrollees in the state.
For federal regulators, Texas is the only trouble spot for the merger, according to Prudential sources.
Jill Griffiths, an Aetna spokeswoman, confirmed that negotiations with the Justice Department are in their final stages.