New health merger in the works
Following in the mergers of Anthem and WellPoint and of UnitedHealth with MAMSI, a new deal in the health arena is in the final stages. Health insurer WellChoice plans to buy out Oxford Health Plans, in an all stock deal for an estimated $5 billion. The final deal has not yet been stuck, however.
The newly combined company would still be small compared to health insurance industry leaders like Aetna, UnitedHealth, or Cigna, but it will still give the new company some traction. The two firms are especially strong the New York City area. WellChoice operates Empire Blue Cross plans for almost 5 million members, while Oxford has about 1.5 million members in New York and Connecticut.
While both are health insurers, WellChoice falls more under the category of managed care, while Oxford is more of an HMO, the lines are blurry between those roles. Together the two companies would have over 40% of the metro New York market in the HMO/managed care segment, which might be a regulatory obstacle.
As a Wall Street Journal article puts it ("WellChoice Is in Talks To Buy Oxford Health Plans', 4/5/2004),
the pressure to consolidate is coming from managed-care companies' eagerness to boost enrollment at a time when the pool of new potential customers has been limited by employers cutting jobs and benefits over the past couple of years. Insurers also are trying to gain economies of scale and negotiating clout with health care providers as a way to help control medical costs.
As we've stated before,
- Mergers and acquisitions beget mergers. They create a feeling of desperation to not be dwarfed by rivals, so they cause more M&A activity. The New York Times ("Oxford Shares Rise in Anticipation of WellChoice Merger", 4/6/2004) points out that Well Choice is itself an acquisition target, and that rival Health Net may be the next to go.)
- Only big companies survive hard times.
- And only oligopsonies have even a chance to stand up to big hospital and drug oligopolies.
Of course, as the WSJ article points out, "employers worry that increasing consolidation among insurers will ultimately drive up their health cost." The Times article notes that "hospitals and doctors may fear the prospect of larger companies that will have great clout to push for lower charges."
Top private health insurers
|
Provider |
Enrollment 2003 (millions) |
| UnitedHealthcare |
18.7 |
| WellPoint |
15.0 |
| Aetna |
13.0 |
| Anthem |
11.9 |
| Cigna |
11.5 |
| WellShare/Oxford* |
4.2 + 1.5 |
| Humana |
3.9 |
| Health Net |
3.9 |
| PacifiCare |
2.9 |
| Coventry |
2.4 |
* proposed
Source: New York Times
6:54:20 PM 
|
|
