Although UnitedHealth Group got a green light from the Nevada Insurance Commissioner last week to acquire Sierra Health Services, the $2.6 billion deal could still be blocked by other regulatory officials or consumer groups.
The Nevada attorney general, for one, is looking closely at the merger and has the option of filing a lawsuit in state or federal court within 30 days of Aug. 27 on behalf of residents.
We are exploring our options, said Nicole Moon, spokeswoman for Nevada Attorney General Catherine Cortez Masto. We would have to find that the merger could result in consumer hardship.
Nevada Gov. Jim Gibbons said in a written statement that he is deeply disturbed by some of the monopolistic tendencies that can result from this merger, perhaps signaling that the state could take further action to block the deal. Las Vegas-based Sierra Health is Nevadas largest insurer.
We have a lot of the same concerns the governor has, Moon said.
The concerns, voiced by the attorney generals Bureau of Consumer Protection, providers and consumer groups, are that the combined organization would result in fewer choices and higher premiums over time.
The American Medical Association, which opposes the merger, estimates that Minnetonka, Minn.-based UnitedHealth would control 85% of the HMO market in Nevada and 95% of the HMO market in Las Vegas.
Nevada Insurance Commissioner Alice Molasky-Arman approved the acquisition with several caveats: not passing merger costs onto consumers or providers; not raising premiums or provider fees as a result of the acquisition costs; providing continuation of claims handlings; not changing management structures; and helping to curb the number of uninsured in Nevada.
William Plested, past president of the AMA, said those conditions wont protect providers or consumers in the long run. UnitedHealth has a stellar track record that when they get monopoly status, they act like a monopoly, Plested said.
Peter ONeill, spokesman for Sierra Health, said the two companies collaborated with the insurance commissioner to address all concerns. We have worked with all the various concerned parties and will continue to do so, ONeill said. He added that there is no merit in the AMAs claims that the merger will result in lower payments and higher premiums.
UnitedHealth and Sierra officials contend the HMO market constitutes just 18% of customers, and that the combined insurer would have just a 28% total market share statewide and 35% share in Las Vegas after the acquisition.
The U.S. Justice Department, which also must approve the merger, could require the insurer to divest from certain regions where it would have near-monopoly status, Plested said. The Justice Department required UnitedHealth to divest portions of PacifiCares commercial health insurance business in Tucson, Ariz., and Boulder, Colo., in that 2005 merger.
David Balto, an antitrust attorney who testified at the UnitedHealth-Sierra hearings in Nevada on behalf of the Consumer Federation of America and other consumer groups, said consumer groups could potentially bring an independent lawsuit to challenge the merger, but would not say whether his clients were considering that option.
If approved, the merger would set an amazingly low threshold for healthcare mergers, Balto said.
The Justice Department is expected to render a decision on the merger in late fall. As for the two other states with regulatory authority over the deal, Arizona deferred to Nevadas decision to approve the merger, and Californias approval is expected soon, ONeill said. No hearings on the merger have been scheduled in California and none are expected, he added.