UnitedHealth Bids For Oxford

UnitedHealth already provides or administers health coverage for 1.8 million tri-state residents, and it sells health coverage to 43 of the 91 Fortune 500 companies that have headquarters in the tri-state area, company executives said during an analyst conference held to discuss the Oxford deal.

But UnitedHealth has had trouble competing with the provider network that Aetna Inc., Hartford, has set up in New York, Kaplan says.

One open question is how the Oxford deal will affect coverage prices, Kaplan says.

UnitedHealth and Oxford both take a “disciplined” approach to pricing, and both have reported big increases in rates and profits at a time when many customers have been struggling.

UnitedHealth President Stephen Hemsley is telling employers his company will be generous with the $80 million in “operational synergies” it hopes to gain from the Oxford deal. “We plan to share a meaningful portion of these gains back to the customers that we serve in the form of greater affordability,” he said at the analyst conference.

Simply getting regulators and shareholders to approve the deal could be a challenge.

UnitedHealth recently completed a $2.9 billion acquisition of Mid-Atlantic Medical Services Inc., Rockville, Md., but SNL Financial L.C., Charlottesville, Va., points out that 2 of the 9 biggest proposed managed care deals failed.

If UnitedHealth completes the deal, integration could be another challenge.

“History tells us that acquisitions in the managed care industry have tended to be fairly painful,” says Richard Elliott, president of the Atlanta-based North American benefits unit at Willis Inc. In the long run, though, the Oxford deal should be good for UnitedHealth and good for the customers, he says.

Reproduced from National Underwriter Edition, April 30, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.