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PacifiCare Buys Into National Small Group Market

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PacifiCare Health Systems Inc., Cypress, Calif., is jumping into the national health insurance market.[@@]

The West Coast managed care company has agreed to pay $502 million in cash for American Medical Security Group Inc., Green Bay, Wis.

American Medical has been one of the most visible players in the national individual and small group health insurance markets. The company, which reported $712 million in premium revenue in 2003, has 314,000 commercial preferred provider plan members and a network of 32,000 independent agents in 33 states that have what it sees as having favorable regulatory climates.

Completing the American Medical deal would increase PacifiCare’s membership about 13%.

The American Medical deal also “will provide us with an efficient and scalable operations platform for our rapidly growing individual and small group customer segments,” PacifiCare Chairman Howard Phanstiel says in a statement.

PacifiCare will be getting health savings account-compatible products as well as conventional health insurance and group life products, Phanstiel says.

PacifiCare hopes to complete the deal by early 2005. It and American Medical first must get approval from insurance regulators in Georgia and Wisconsin.

“Fitch believes that the acquisition of AMS makes good strategic sense given PacifiCare’s stated goal to grow its individual and small group membership,” Fitch Ratings, New York, says in a comment praising the deal.