California Insurance Commissioner John Garamendi approved the proposed $9.1 billion merger of UnitedHealth Group, Minnetonka, Minn., and PacifiCare Health Systems, Cypress, Calif., after securing concessions from the health insurers. The companies pledged $250 million to fund state healthcare programs and $13.7 million in incentives for doctors based on quality improvements, under an agreement enforceable by court order. The insurers also promised that Californians would not shoulder any merger-related costs through higher premiums or reduced services. Garamendi said the investments were meant to match the "despicable" $300 million in compensation that PacifiCare executives are expected to receive through the merger. The agreement was based on a similar pact Garamendi reached with Anthem and WellPoint Health Networks last year. Garamendi single-handedly delayed Anthem's $16.4 billion acquisition of WellPoint for months until the insurers agreed to pledge $400 million to the state's public healthcare system.
Announced in July, UnitedHealth's planned acquisition of 3.2 million-member PacifiCare would be the second-largest merger in managed-care history, creating a national insurance powerhouse with 26 million members. The deal, which is expected to close by year-end or shortly thereafter, still requires approval from federal antitrust regulators, UnitedHealth shareholders and insurance regulators in three states. -- by Laura B. Benko