Just 4 days after WellChoice Inc. said it was giving up on its effort to acquire Oxford Health Plans, UnitedHealth Group stepped up with a $4.9 billion cash and stock offer for Oxford.
Oxford, Trumbull, Conn., insures the health of 1.4 million residents of Connecticut, New York and New Jersey, and administers coverage for another 107,500 “tri-state area” residents. Minnetonka, Minn.-based UnitedHealths offer amounts to about $3,500 for each of Oxfords insured commercial members.
Now WellChoice, the parent of Empire Blue Cross Blue Shield, looks as if it could be either an acquirer or an acquiree, says Lindsay Resnick, a Chicago-based health insurance market expert.
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In fact, to Resnick, plenty of other managed care companies look as if they could be involved in deals: He is expecting to hear about 2 to 4 major new deals by the end of the year. “Were entering a period of renewed consolidation,” Resnick says.
“There are a lot of rumors,” agrees Edward Kaplan, national health practice leader at The Segal Company, New York.
Driving factors include pressure to spread administrative costs over a bigger customer base and competition from a Blue Cross and Blue Shield national coverage program.
Oxford itself is probably off the block: If it breaks up with UnitedHealth to take a better offer, it will have to pay a $212.5 million termination fee, according to the deal agreement.
UnitedHealth executives say they are making the Oxford deal partly to improve UnitedHealths appeal to employers based in New York and partly to increase its appeal to multi-site employers.