Health insurance deals
UnitedHealth/Oxford
UnitedHealth, the health provider group, announced it would acquire managed care provider Oxford Health Systems in a nearly $ 5 billion deal. This comes after talks broke down between insurer WellChoice and Oxford, a pair that was recently planning a merger. Analysts said that the move was an attempt by UnitedHealth to get a foothold in the New York City area, an area it does not currently cover and where Oxford is strong. New York presence is a necessity for gaining some national corporate contracts, since many companies have large facilities in that area. That might let UnitedHealth bid more effectively against companies like Aetna and Cigna.
A New York Times article ("UnitedHealth Agrees to Deal for Oxford", 4/27/04) sees acquisitions as the only route to growth for health insurers,
"The economy just isn't adding jobs quickly very quickly," said Michael Obuchowski, principal of Altair Investments, which owns UnitedHealth shares. That is leading the larger insurers to try and add customers by making acquisitions, he said.
As with many announced deals, this one leads to speculation about the next merger. A Reuters story ("Location key to mergers like UnitedHealth-Oxford", 4/27.94)
Many analysts saw WellChoice's doomed bid for Oxford as a defensive move to avoid being taken out, and see WellPoint-Anthem as a likely acquirer since it will be the only other publicly-traded operator of Blue Cross plans.
Health insurers like WellChoice, Las Vegas-based Sierra Health and California-based Health Net Inc. are considered targets because they hold dominant positions in key geographic areas, analysts said.
Cigna and headquarters bingo
Speaking of major health insurer Cigna, the company received a nice gift from the city of Philadelphia, where its headquarters is located. We've written before about how large corporations gain because they threaten to remove their headquarters from the cities they are located in, since the cities are desperate to hold on, a classic oligopsony situation where there are lots of sellers of headquarters locations but few buyers.
Cigna was being actively courted by New Jersey to move out of Philadelphia and move its 1,500 jobs across the river to Camden. New Jersey offered a package totaling around $100 million, and Pennsylvania and Philadelphia countered with a deal, whose terms have not been fully revealed, but we know that the state tossed in at least $10 million in cash and loans plus some tax breaks. The commitment is to keep the headquarters in Philadelphia to at least 2016; that's may be a gooddeal, provided that Cigna I not itself swallowed up by a rival.
Both New Jersey and Pennsylvania, along with Philadelphia, are in the midst of budget crises. None of them can easily afford the, ahem, "contribution".
6:55:24 PM 
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