One California Health Deal Starts As Another Closes

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PacifiCare Health Systems Inc. has started an acquisition just as a neighbor, WellPoint Health Networks Inc., has completed a deal of its own.

PacifiCare, Cypress, Calif., is acquiring the group health operations of Pacific Life Insurance Company, Newport Beach, Calif., through a coinsurance deal. The price is not available.

The deal includes Pacific Lifes group health, medical stop-loss and short-term disability businesses, and it also includes much of Pacific Lifes group life and group dental operations. Pacific Life is keeping some small specialty lines, long-term disability operations and experience-rated life and dental accounts.

Pacific Life does not break out separate group health performance figures, but the group insurance unit as a whole generates about $1 billion in annual revenue from 140,000 health plan members. The unit has been selling group health through 11 regional offices, 110 group reps, and a network of 30,000 agents and brokers in 30 states. Many customers are small groups.

PacifiCare says it is making the deal to increase sales to individuals and small groups, and to take advantage of the shift toward account-based health plans and the relatively light competition in the individual and small group markets.

PacifiCare also is acquiring American Medical Security Group Inc., Green Bay, Wis., a carrier that caters to the individual and small group markets. AMS shareholders approved that deal shortly after PacifiCare announced the Pacific Life deal.

Pacific Life is selling the group health business because it wants to focus on its core life insurance, annuity and pension plan operations, according to Pacific Life Chairman Thomas Sutton.

Meanwhile, WellPoint Health, Thousand Oaks, Calif., has completed a $16.5 billion merger with Anthem Inc., Indianapolis.

Technically, Anthem acquired WellPoint. The headquarters of the combined company are in Indianapolis. But WellPoint has had more members, more revenue and more name recognition. The combined companythe biggest commercial health insurer in the United Stateshas adopted the name WellPoint Inc.

The executives who negotiated the WellPoint Inc. deal say one goal has been to make a better case to multistate employers, by creating a health carrier with substantial operations in more markets than Anthem or WellPoint Health had on its own.

The Pacific Life deal will fill some PacifiCare market gaps, but PacifiCare Chairman Howard Phanstiel says he likes the deal partly because heavy overlap between the companies health market areas should help lead many Pacific Life members to use the lower-priced PacifiCare provider network, Phanstiel says.

The deal also should be good for Pacific Life health brokers because “well be able to bring a lot of new products that they can add to their portfolios and start selling,” says PacifiCare spokeswoman Cheryl Randolph.


Reproduced from National Underwriter Edition, December 3, 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.